Wednesday, April 14, 1999

4/14/99: Reed Elsevier, Pearson,

Publishing News: April 14th, 1999
Reed Elesevier: No CEO
Pearson Seeks Legal Aid
WH Smith: Web Fever
American Booksellers Association Internet Commerce Look For Distribution Improvements
CMP Media: On the Block?
Magazine Sell Through Keeps Falling

Reed Elsevier: No CEO
Reed Elsevier announced this week that the search for a new CEO to replace the two men who currently hold the position is going to have to continue. Rumors had it the company was close to announcing a replacement – rumored to be Jon Newcomb - a few weeks ago when they announced their quarterly financials. There are no indications how long the search will take or who maybe under consideration. Also, the company said two of its directors, Pierre Vinken and Loek van Vollenhoven, have resigned ``following differences of opinion over the management of the recruitment board.'' Both were to have retired from the board in the next few weeks. In the days since the report surfaced other rumors about Reed’s future have also come out. Wolters Kluwer is said to be interested in revisiting the merger discussions which were put on ice last year when the European commission indicated they would have monopoly concerns regarding any combinations of the two companies. Reed Elsevier later said released a statement saying that there were no plans to de-merge the company and that publishing and information were key components of the company’s strategy.
Source: Reuters April 6, 1999.

Pearson Seeks Legal Aid
Pearson has launched a multimillion dollar lawsuit against venture capital group Hicks Muse Tate & Furst for alleged breach of contract and fraud. Pearson alleges in a suit filed in a New York state court that Hicks Muse misled Pearson into thinking it would complete a $860 million (£525 million) deal to acquire two publishing businesses put up for sale as part of Pearson's $4.6 billion acquisition of the Simon & Schuster educational business. Pearson is seeking both compensation and punitive damages.
Source: Reuters 4/6/99

WH Smith: Web Fever
Shares of WH Smith, which have languished in recent years due to poor financial performance, saw their largest one day gain last week when the company announced it was establishing a free internet service similar to Dixon’s Freeserve. (Dixon’s is an electronics retailer like Circuit City but with prices like Harvey Electronics). The service will be established in collaboration with Microsoft and British Telecom. According to sources familiar with the product it will use BT telecoms service and Microsoft software to offer Internet access to anyone with a home computer and a modem. In June, WH Smith paid £8.8 million for, Britain's largest on-line bookseller.

American Booksellers Association to Launch Web siteApparently after several months of speculation, the American Booksellers Association (ABA) announced last week that they would develop an e-commerce site to support bookselling on the web by independent booksellers. The sight will be called and will support up to 1.6 MM titles contained in the MUZE data base. Independent booksellers will be able to establish and use their own Web site as the front end or design a site based on one of several templates that will be provided by the ABA. Baker & Taylor will be the association's fulfillment partner and (it is assumed) will also supply the required bibliographic information for all titles. There was no immediate word of other partners however depth of information such as reviews would be required to compete with and The site is expected to be launched sometime this summer and currently the ABA is in the initial stages of setting up the business unit required to manage the operation.
Source: Publishers Weekly, 3/22/99 Look for Distribution ImprovementsAccording to filings made by Amazon, the online retailer plans to open one or more distribution centers in the year and to increase investment in developing its existing infrastructure to increase efficiency. There is obvious concern regarding the planned acquisition by Barnes and Noble of Ingram Distribution and these infrastructure investments should be seen as a recognition of this concern. Amazon has been successful in the last year in decreasing their reliance on Ingram from 60% of orders in 1997 to 40% in 1998. Whether the company actually makes these investments remains to be seen however, the company reported that it expected to "significantly" increase its investment in this area in 1999. On a run rate basis sales have surpassed $1.0Bill and while this is based somewhat on the busy forth quarter all forecasts for full year sales made at the same time in prior years have been exceeded.
Source: Publishers Weekly 3/22/99
CMP: For Sale?
CMP Media the publisher of a number of computer industry related magazine titles has announced that it is open to the idea of a sale of merger. President and CEO, Michael Leeds, who’s family owns 75% of the stock, has retained Lazard Freres & Co to explore strategic alternatives. Potential buyers include Ziff Davis, Primedia or Penton Media. Also a potential would be an investment firm from outside the industry. Those rich folk who cashed out of Petersens when the company was purchased by Emap have announced they would like to do the same thing again so they should also be considered potential purchasers.
Source: Folio 3/98

Magazine Sell Through Keeps Falling
Average industry sell through rate has fallen to 38% from 43% a few years ago according to the Magazine Publishers Association (MPA). Arthur Andersen has undertaken a study of magazine sales and returns on behalf of the Book Industry Study Group – Partner Peggy Smyth commented that she is surprised at the number of publishers who are unconcerned about their returns and puts it down to the current robust advertising climate. She also said that a growing number of magazine publishers are beginning to develop data warehouses to enable deeper analysis of data on sales and returns. Of those surveyed, by far the most popular reaction to increasing levels of returns was to spend more money on research – identifying why purchasers bought magazines at retail. This was followed in popularity by cutting print volume.
Source: Folio Magazine March 1999