Wednesday, March 28, 2007
My post from earlier this week.
Here were some other blog posts:
The Publishing Contrarian
If you saw the movies 21 days or Omega Man or Plant of the Apes you will know that in the post apocalyptic world we will be separated into two classes. Those that remain human and those that have become something terribly mutated. So it goes with The Road by Cormac McCarthy.
The book is immediately powerful because the reader sees this post-Armageddon future as entirely likely and the ravages forced on society as absolutely plausible. There are two characters in the book - father and son - and so depraved are the antagonists that the father concentrates on retaining one remaining bullet for his gun so he can shoot his son should they be captured. He cannot let the son become victim to a certain end that is revealed episodically until a climatic moment near the middle of the book. As they stumble along the road in a daily struggle for food the possible future is horrifyingly recounted when they nearly interrupt a cannibals smorgasbord replete with cauldron in the yard.
The book depicts a greyed out world where nothing apparently grows, all structures have been stripped by some locust of human desperation and death is found everywhere even in the tarmac of the the road they are travelling. It is not entirely clear where they are travelling or what has lead them to make this journey - there are several explanations which adds to the mystery. The book is riveting and is a stylized conversation between father and son which flows fast and sure. The Road, which I read in two days will live in my mind for a long time, but as horrific as this story is, I am sure the real thing will be worse and that is saying something.
I am (unsurprisingly) in complete agreement with Michael’s comment in his thought-provoking piece on metadata that publishing businesses “must continue to focus on product information”. No one would seriously argue with his assertion that the quality of metadata has risen in recent years.
Several factors have influenced the improvements we have seen. International standards, notably ONIX, have been helpful to this process and many publishers, booksellers and data aggregators have adopted it to organize and communicate information in a standardized way. Practical guidance has also been made available. The Book Industry Study Group has prepared Product Metadata Best Practices, a set of voluntary guidelines that aims to help publishers improve the quality of their product information throughout the supply chain and speed the delivery of that information to the vendors’ trading partners. Innovative services from companies like Quality Solutions and Netread have also played their part.
I think also the general level of awareness in the book industry of the role product information plays in selling books has risen substantially. This has been helped by leaders like David Young at Hachette, Joe Gonnella at Barnes & Noble, and many others evangelizing on the subject for many years.
Under normal circumstances when improvements like those we have seen are made there is a danger of complacency setting in, but I see encouraging signs that this is being avoided. In many of the larger publishing houses, where investment in quality metadata has already been significant, I find abundant evidence of a commitment to raise standards even further. Many examples of high-quality data can be found outside these large houses, but I think it remains true that many smaller companies, working with fewer resources, have a lot to do raise their game. Organizations like BISG must face the challenge of how to reach these companies with clear, straightforward advice and with tools to help them deliver good metadata. We will be announcing some initiatives in this area shortly.
More work is certainly needed in the standards area and much of this is underway. A new release of ONIX is expected later this year which, among other things, will improve its handling of digital publications. An entirely new standard now under development, the International Standard Party Identifier (ISPI), will in time establish a unique identifier for authors, composers, performers and others in the creative supply chain. We are all aware of how unreliable personal names are as a means of identifying individuals, especially when we consider how many people share the same name and how many authors use pseudonyms. The adoption of a standard ID for personal and corporate names will be a big step in eliminating ambiguity when searching and in facilitating transactions such as the remittance of royalties.
RFID also appears to offer interesting opportunities. As the price of tags continues to fall we are beginning to see some large-scale adoptions in libraries, notwithstanding well-documented concerns about privacy issues. In bookselling, at least so far, the response has been more cautious. The adoption of RFID by the leading Dutch bookshop chain, BGN, has certainly stimulated interest among American booksellers but at the moment most of them appear to be waiting for more compelling cost benefits to emerge.
As we look further ahead into a future in which more fragmented content is sold, distributed and traded digitally, whether it’s cookery recipes or individual chapters from textbooks, one key question is how the industry will cope with the metadata challenge. If publishers are finding it demanding today to provide comprehensive, accurate and timely product information to support a universe of more than 3.0 million US titles and 200,000 new books a year, what happens in a market where available product is set to grow exponentially?
Michael can be reached directly at CCC.
Links: Metadata: What does it all mean
Tuesday, March 27, 2007
According to the article the dd meetings are underway and a deal is expected in the next two months. It seems likely that the Reed/Harcourt divestiture timetable may be set back into the third quarter due to this activity. Now that the WK education deal is done activity and attention will move to Thomson so look for more articles.
Globe & Mail
Monday, March 26, 2007
Sunday, March 25, 2007
At the store, I also found out for the first time that a number of local West Village stores are attempting to designate the area bordered by W14th, Greenwich Avenue and W10th as “Little Britain”. The campaign was undertaken by Tea and Sympathy (a tea shop) and is also supported by Virgin who bring loads of us back and forwards from the UK. There does seem to be some support for the idea. If you navigate to the ‘map’ segment on the web site you will find all the local ‘little Britain’ attractions. Highlights are Myers, A Salt and Battery and The Spotted Pig.
Following my shopping visit to Myers, I wandered around the west village neighborhood and at one point joined a crowd outside a full pub named The Red Bull where the group were watching South Africa attempt to match the incredible 40 over total of Australia (377 and they won). Standing outside in a group of about 20 were people from England, South Africa and New Zealand all joined by their interest in Cricket. At the same time on a TV screen further inside the bar England were dismally performing something closely resembling football. I love New York.
Friday, March 23, 2007
"Ms. Reynolds also said Harlequin, which typically relies on a male protagonist of chiselled physique for its titles such as Slow Hand Luke and Jack & Jilted, is often looking for more muscular models that her agency typically wouldn't carry. "It's difficult because we only have a limited pool of guys who might be able to--even if they're slightly augmented -- look right. It's easier for us to provide the James Bond guy or the New York, sophisticated-businessman guy."
"Peter Duck, a professor in Ryerson University's School of Fashion, said he was not surprised to learn Harlequin is facing a shortage of manly models, given trends in the fashion industry. "The agencies, I'm sure they're getting this look that's been popular for the last few years, which is very skinny, tall and young."
I swear that was the first cover I came across.
Lecture and Test Prep videos for seven additional Martin-Gay titles from Pearson Prentice Hall will be available for download by summer 2007, covering basic college mathematics, introductory algebra, and, intermediate algebra. Students can purchase sections of the Lecture Videos for $0.99 each; a chapter of the Test Prep videos for $1.99; and a full chapter of the Lecture Videos for $3.99.The quick video content is designed to support in class and text material and a 'great way to get extra support'. Parents may anti-up for the videos but I wonder whether the kids will. How soon will the videos be available for free on YouTube? You do have to recognize that Pearson comes up with these interesting ideas to extend content into different distribution channels and to go where the customers are.
Also, it being Friday and there being excitment over Wolters Kluwer, the Pearson plc stock is up (again) this morning on speculation of a break-up.
The IHT is also reporting that the unit will be sold for as much as €775million. First out of the gate with a sale agreement, this sales price sets a high mark that may lead to high sales values for Thomson Learning and Harcourt.
Thursday, March 22, 2007
Here is the press release
Here is a financial chart reflecting their performance
Here is my prior post on this subject
Here is a webcast
Management at Borders is also an issue and has been over the past ten years or so. New management is installed and the announcement of the web site is a representation of the new regimes strategic plan for the next several years. There have been several regimes installed in recent years with grand plans (category management anyone?) but while the ideas had merit the execution left something to be desired. Building a new web presence is not something that they can do on the cheap which means they are going to have to have the right people in place to get the job done. If it were me, I would take the entire web initiative out of Ann Arbor and set it up from scratch in India. There is just too much baggage in the home office.
Elements of the announced strategic plan are as follows from the press release:
Revitalizing the domestic Borders superstore business to achieve, by 2009:
- Consolidated EBIT margins of 5% to 6% compared to 1.8% in 2006, driven by sustained same-store sales growth in the low- to mid-single digits at domestic superstores.
- Improved inventory turns of 2 times compared to 1.6 times in 2006.
- Refocusing investments toward transforming domestic superstores while significantly reducing investment in segments that have not provided a satisfactory return, including the International segment and Waldenbooks
Specialty Retail segment.
- The company will explore strategic alternatives for the majority of its International segment, including its U.K., Ireland, Australia and New Zealand superstores and Books etc. business, and will look toward its successful franchise model for future international expansion in new markets.
- Highly aggressive efforts, which began in the fourth quarter of 2006, to right-size the Waldenbooks Specialty Retail segment will continue in 2007 with the goal of reducing the number of Waldenbooks stores from 564 at the close of 2006 to approximately 300 by the end of 2008.
- Reinventing the company by leveraging innovation, technology and strategic alliances to differentiate Borders in the marketplace, including the debut of a new proprietary e-commerce site in early 2008
In discussing the web site the company says the following:
As part of the development of Borders.com, the company is consolidating its Web properties into a single infrastructure. This will facilitate a seamless cross-channel experience that will integrate the in-store and on line experiences. The addition of new "Digital Centers" in Borders stores will enable customers to learn about, interact with, and purchase new digital products-- such as audio books, e-books, MP3 players -- and services such as down loading and personal publishing that complement the Borders brand. The company is in the process of exploring several potential arrangements for key partnerships with respect to its digital offerings. The digital services can be made available both in-store and online as a result of the Web initiative.
Lastly in signing off the CEO George Jones is quoted as follows:
"We need to reinvent our business to exploit the rapid changes taking place in how consumers access information and entertainment," Jones said."Our ultimate goal is to make Borders a vital community gathering place where people come together to see, touch, interact, and learn -- online and in- store."
Gosh, that about sums it up. Good luck with that.
From the press release this morning:
The company recorded a consolidated loss in the fourth quarter of $1.25 per share, which compares to consolidated earnings per share of $1.78 for the same period in 2005. For the full year, on a GAAP basis, Borders Group posted a consolidated loss of $2.44 per share compared to consolidated diluted earnings per share of $1.42 for the prior year. Excluding non-operating charges, primarily comprised of asset write-offs, the company recorded consolidated diluted earnings per share of $1.61 for the fourth quarter, which compares to operating consolidated earnings per share of $1.87 one year ago. For the full year, on an operating basis, Borders Group posted consolidated earnings per share of $0.39 compared to $1.57 consolidated earnings per share in 2005.
Most of the EPS loss is attributed to asset impairment related to the UK operations (although they don't discuss exactly what the reasoning is here) but even without the write-downs which were probably necessary the full year operating results versus a mediocre last year are pretty dire.
Full year results were announced as follows:
- For the full year 2006, consolidated sales increased by 0.8% to $4.06 billion.
- The company recorded a net loss of $151.3 million in 2006 compared to net income of $101.0 million in 2005 on a GAAP basis.
- Excluding non-operating charges, net income decreased by 78.3% from $112.0 million in 2005 to $24.3 million in 2006.
- Borders stores comparable store sales in the segment decreased by 2.8% in the fourth quarter and declined by 2.2% for the full year.
- International segment comparable superstore sales increased by 0.3% for the fourth quarter and decreased by 0.4% for the year in local currency
- Walden comparable store sales in the segment decreased by 6.2% in the fourth quarter and declined by 7.5% for the full year.
Here is the full press release and an excerpt:
Results in the third quarter were generally positive. Strong sales in the core clubs and improved efficiencies sustained an impressive profit turnaround in School Book Clubs and drove higher margins in the Children's Book Publishing and Distribution segment. Robust technology sales also improved results and margins in Educational Publishing. In addition, the Company's cost reduction efforts remained on plan," commented Richard Robinson, Chairman, CEO and President. "While customer acquisition through the Internet remained strong in Continuities, higher bad debt and promotion amortization hurt the quarter's results and have caused us to reduce our outlook for the fourth quarter and full year.
Results for the quarter:
- Company now expects full year earnings in the range of $1.40 to $1.60 per diluted share on revenues of $2.1 to $2.2 billion
- Free cash flow for the fiscal year is now expected to be between $50 and $70 million
- Childrens segment revenues in the third quarter of fiscal 2007 were $280.1 million, up 3% from $270.9 million in the prior year period
- Educational segment revenue increased slightly to $74.6 million from $73.5 million in the prior year period, and operating results improved to a loss of $3.0 million from a loss of $3.5 million in the year-ago period.
- International segment revenue rose 5% (or 1% in local currencies) to $101.5 million from $96.9 million in the prior year period and operating profit improved to $3.5 million from $2.3 million a year ago, primarily as a result of higher export profits.
- Media, Licensing and Advertising revenue in the segment declined 12% to $40.8 million from $46.4 million in the prior year period.
- Corporate Overhead declined 20% to $15.7 million from $19.7 million in the prior year period.
Blurb now has fans among architects, real estate agents, photographers, cookbook authors, museum archivists and others who have used it to print bookstore-quality editions. It takes orders for thousands of books daily, up from hundreds just a few months ago.A basic hardcover Blurb book is adorned with a full-color, glossy dust cover that looks like it belongs in a bookstore, not on a standard $29.95 homemade project. "We live and die on … quality," says Gittins. "That's what's really gotten people's attention."
Most Blurb customers (Gittins calls them Blurbarians) order books of 100 to 120 pages, and the cost is $37.95. A similar book from Shutterfly or the Kodak EasyShare Gallery would cost upwards of $100. Gittins says Blurb makes money
on every book, and can afford the lower prices thanks to automation.Blurb's Booksmart software is a free, fully functional layout program. Designing your book — if you are so inspired — can take many hours. But once it's finished and uploaded to Blurb, there's very little human interaction. "We're the cleanest business (that) printing has ever seen," Gittins says. "There are no proofs, just finished books."
Wednesday, March 21, 2007
The NYSE is suspending trading because the Company now anticipates it will not file its Annual Report on Form 10-K for fiscal year2005 (2005 10-K) with the Securities and Exchange Commission (SEC) by April2, 2007 and is therefore not in compliance with NYSE Rule 802.01E. The NYSE stated that an application to the SEC to delist the Company's shares from the NYSE is pending the completion of applicable procedures.
The company is obscure about when it will be in compliance indicating it will be sometime in the second quarter.
Bertelsmann said the initiative would allow it to take minority stakes in businesses and decide after three to five years, when its partners are seeking an exit, whether to take full control. The initiative comes just 10 months after the Mohn family, which controls the group, engineered the buyout of Groupe Bruxelles Lambert, its only external shareholder. The deal increased Bertelsmann's debt by €4.5bn to €6.8bn and lowered expectations that one of Europe's most conservative media groups would be able to take on any large deals in the short term.
Analysts also state that the low cost of capital and the readily available funds that PE has access to poses a significant advantage for the banks versus operators. (This may be the case with Wolters Klewer Education). In this case they suggest that the fund would easily finance acquisitions up to five times the funds value. Clearly this is a shrewd move by Bertelsmann. Rather than watch PE pick-up some potentially prize assets out of sheer financial muscle they are choosing to join in with the bankers and see how it plays out.
Tuesday, March 20, 2007
Monday, March 19, 2007
Sunday, March 18, 2007
Any reader who sticks with the program and absorbs the wealth of material that Mr. Shapard offers will, insofar as such a thing as possible, read “Pride and Prejudice” as it was read and understood at the time of its publication, with all the period details in place and correctly interpreted. But the novel, in most respects, remains the same. The reader who does not know a farthing from a guinea, it’s safe to say, will nonetheless grasp the great drama of attraction and repulsion that plays out between Darcy and Elizabeth. The cut and thrust of their conversation is timeless. Generations of young women who do not know the first thing about an entailed estate or a quadrille will recognize in Austen’s heroine a kindred spirit, a contemporary, a valued ally in the eternal war between the sexes.
These books fill an important need for some readers who really want to understand the world that the writer lived and the one that the characters inhabit. From the article,
That’s why there’s a niche market for annotated editions and period guides. A while back Daniel Pool responded to a crying need with “What Jane Austen Ate and What Charles Dickens Knew,” a whirlwind tour of day-to-day life in 19th-century England, with plentiful examples from Trollope, Thackeray, Eliot and Hardy. It tilts heavily toward the Victorians, whose world, with its railroads and factory towns and gaslighted streets Austen would not have recognized.
The next step would be to take this material to a more interactive level so that a reader could do their own research and navigate up and down and side to side in terms of contemporary history, politics, recreation, language, etc. Although admittedly that is going to be too much for the casual reader.
1 Vernon God Little, DBC Pierre
2 Harry Potter and the Goblet of Fire, JK Rowling
3 Ulysses, James Joyce
4 Captain Corelli's Mandolin, Louis De Bernieres
5 Cloud Atlas, David Mitchell
6 The Satanic Verses, Salman Rushdie
7 The Alchemist, Paulo Coelho
8 War and Peace, Leo Tolstoy
9 The God of Small Things, Arundhati Roy
10 Crime and Punishment, Fyodor Dostoevsky
Clearly length of book has nothing to do with completion. In reading the comments, I was reminded that I also had the same experience having finished The Hobbit and attempting to read The Lord of The Rings. Regardless of my experience, one of those pointless best of lists places TLTR at number 2 in a most popular list. Here is the full list of fiction titles:
1. Pride and Prejudice, Jane Austen (20%)This is clearly as list conducted in Greater Britain since I am sure if this were done in the US that The Bible would be number one.
2. Lord of the Rings, JRR Tolkien (17%)
3. Jane Eyre, Charlotte Bronte (14%)
4. Harry Potter books, JK Rowling (12%)
5. To Kill a Mockingbird, Harper Lee (9.5%)
6. The Bible (9%)
7. Wuthering Heights , Emily Bronte (8.5%)
8. Nineteen Eighty Four, George Orwell (6%)
8. His Dark Materials , Philip Pullman (6%)
10. Great Expectations , Charles Dickens (5.5%)
In a split second of inspiration (now I have a headache), I took a look at the top ten authors and titles at librarything and here is the list by number of copies:
- J.K. Rowling (86,828)
- Stephen King (67,781)
- Terry Pratchett (67,253)
- Neil Gaiman (55,061)
- J.R.R. Tolkien (51,560)
- C. S. Lewis (48,761)
- William Shakespeare (35,905)
- Isaac Asimov (29,170)
- Jane Austen (28,822)
- Douglas Adams (27,633),
- Harry Potter and the sorcerer's stone (13,366)
- Harry Potter and the Half-Blood Prince (13,064)
- Harry Potter and the Order of the Phoenix (12,259)
- Harry Potter and the goblet of fire (11,792)
- Harry Potter and the prisoner of Azkaban (11,678)
- Harry Potter and the Chamber of Secrets (11,612)
- The Da Vinci code (10,572)
- The Hobbit (9,248)
- 1984 (9,182)
- The catcher in the rye (8,954)
- Pride and prejudice (8,398)
- To kill a mockingbird (7,715)
- The great Gatsby (7,494)
- The lord of the rings (6,660)
- Jane Eyre (6,292),
Saturday, March 17, 2007
To my mind what has been ignored through out the subsequent depressed drunken discussions about our heritage is why on earth our ancestors migrated from Northern Spain. What were they thinking? Why once they suffered through the first dank, dark and damp winter/spring/autumn didn't they high tail it back? We deserve ancestors so dumb. So anyway, in celebration of Sts Patrick, Andrew, George and David day, Mrs. PND dutifully got the corned beef, potatoes and leeks and made dinner. She did not however take my advice and deep fry the meat, boil the crap out of the potatoes and vegies, serve it lukewarm and knock it back with a few tumblers of Laphroaig. All for the best.
Nevertheless, this concatenation of nationalities has its benefits because it will give the English (who remember as a nation rarely win anything of note) that many more chances at glory. And as if to underline the potential rampant opportunities in store, the "Irish" Cricket Team beat Pakistan yesterday in perhaps one of the more noticeable victories ever in a World Cup. Go "Ireland" "Scotland" "Wales" and England!
Friday, March 16, 2007
Wednesday, March 14, 2007
It is hard to see which way this one will go. My guess is on one of the operators rather than PE. The unit is small relative to the other companies on the market and has some fairly specialized publishing programs which could limit effective cost restructuring and limit the potential for closer integration with a second follow-on acquisition. The integration with an existing publisher, such as Pearson, could be similar to a list acquisition meaning they could effectively eliminate all expenses other than those directly attributable to content development.
The company purchased a large events business in 2005 and 2006 was the first year revenues both included the full year impact of all recent acquisitions and did not include any material partial year acquisition revenue. In 2006 full year revenue was up over 40%. The company also said they are off to a fast start for 2007 but have ruled out any immediate additional acqusitions.
Here are their bullet point headlines:
- Revenue up 42% to over £1 billion
- Adjusted operating profit3 49% higher at £219 million
- Total dividend increases 40%
- Strong trading across all three divisions (Academic & Scientific, Professional and Commercial) and all three business streams (Publishing, Performance Improvement (PI) and Events)
- Return on IIR acquisition exceeds cost of capital
- Adjusted operating margin rises above 21%
- Cash conversion more than 100% of adjusted operating profit
- Confident of 2007 outlook
Tuesday, March 13, 2007
- Textbooks should be produced and priced to be as inexpensive as possible without sacrificing educational value.
- New textbook editions should be produced only when educationally necessary; each book should be kept on the market as long as possible, with preference given to paper or online supplements over a whole new edition.
- Faculty should have the option to purchase textbooks unbundled; whenever a textbook is sold with additional materials, it also should be available without the extra materials.
- Publishers should provide faculty with more information on each book’s price, intended length of time on the market and substantive content differences from previous editions. Faculty want, and have the right to know, how their textbooks choices will affect their students. They should have easy access to information about all of the publisher’s products, low cost formats, options for bundling, and corresponding price information, voluntarily provided at the start of any sales transaction and on desk copies provided by the publisher.
- All textbooks should be available in a genuine low cost edition that contains comparable content in a low cost format. Information about these options should be easily available.
- Faculty should give preference to least cost options when choosing their books.
- There should be many avenues for students to access used books including rental programs, online bookswaps and bookstore buy-back.
There are more reports on this site and I suspect that this report and others will be circulated and placed on similar web sites to the maketextbooksaffordable site. Perhaps more worrying is that some state legislators are jumping on the band wagon and are proposing legislation to limit the ability of publishers to act in their commercial interest. In Minnesota for example, legislators are discussing legislation to regulate publishers and make faculty more accountable, "This is the hidden cost to higher education," said Democratic Rep. Frank Moe, the Minnesota's bill sponsor, who also teaches at Bemidji State University. "Reasonable profit makes sense. But the margins they are making on these textbooks is just absurd." (Lansing State Journal) Governments have looked at this issue before but there are currently more than 12 legislatures that are taking up this issue.
The legislation suggested in Alabama is typical:
The legislation would regulate the use of textbooks in state schools with the goal of keeping the cost of students’ required reading down.It would require that college classes use the same version of a textbook for at least two years “unless there are substantial differences] between the old and new edition," he said.It would also prohibit state college instructors and book-buyers from getting any kind of compensation for their choices, meaning it would become illegal for them to accept incentives and promotional gifts from book publishers. (Tuscaloosa)
On top of these state lead efforts, there is also a federal advisory board that is in the process of collecting information and feedback in a series of meetings around the county. From the Gainesville Sun:
The idea is to prod professors to take advantage of articles, lecture notes, study guides and other materials available for free on the Internet.That suggestion, and several others, were aired during a 3 1/2-hour meeting in Santa Clarita, Calif., where the Advisory Committee on Student Financial Assistance heard from college administrators, textbook publishers and other higher education leaders and advocates.The meeting - the second of three field hearings the panel will hold around the country before it delivers a congressionally requested report in May - didn't produce any consensus. And neither did it answer a question that seemed to be a subtext of the proceedings: Who is to blame for textbooks that cost more than $100?
This recent effort to manage textbook prices goes back to a report from GOA two years ago that, despite its flaws, is now regarded as the bible for all those addressing this issue. Unfortunately, the publishing industry was not well represented in that report and continue to be on the defensive on this issue. This will be monitored closely by all of us in the business.
Monday, March 12, 2007
Robert E. Smith comes to Knovel asthe Vice President of Information Technology, John Dooley has joined Knovelas the Vice President of Sales and Delores Meglio has been promoted to VicePresident of Content Management.
Here is the press release.
This is a very real issue and the article does a good job of reflecting the issues. I am reminded of something I read years ago in relation to content digitization along the lines of 'only 10% of the content will be used in electronic form the problem is you never know which 10%'.
Friday, March 09, 2007
Stifel Nicolaus believe the company could perform better than management is suggesting and could be a PE target. Strictly speaking an MBO with management currently owning 20+% of the stock. Schecks' target price for the BN stock is in the low to mid $40's. After a dip early in the week, the stock is trading today at just under $38.00 and has a market cap of $2.5billion.
With the over-bearing requirements of financial reporting - evidenced by an on-going investigation at BN - the Riggio's may decide to bail out and indeed go private. While there are peaks and valleys in book retail, BN has been able to remain fairly consistent in delivering top line growth, strong operations and resulting good net income. Additionally, the capital requirements for this business wouldn't be onerous and as such it would make a safe place to put PE dollars for a decent return. Certainly one to keep watch of.
BN Press Release
On a less realistic note, George Gutowski on SeekingAlpha suggests that Jeff Bezos get out his check book and buy BN to consolidate the industry. He makes some interesting claims:
- Barnes & Noble has announced that its best customers are its worst financial problem. Most other industries make the most profit on their best customers, but not in this case.
- The book industry has not been able to sell itself other than through price competition. They all seem to offer the same book by the same author as their competitor (either retail or internet) and therefore have not been able to develop additional value added propositions.
- Acquisition allows the combination of best of breed in both the internet and retail categories. Barnes & Noble can entirely close down poorly performing internet distribution.
Thursday, March 08, 2007
I have mentioned my own experience with Blurb.com, but there are others including Shutterfly, Picaboo, Sharedink, Ipagz and Ourstory who are probably just as good. Each of these has established printing relationships with printers other than Ingram and are delivering thousands of units per week to happy customers. They are PUBLISHING. And more importantly they have already tapped into a massive (apparently $1.0bill market) which might not be readily apparent at least as the Ingram news was reported. The curious aspect of the Ingram publicity is that we seem to focus on the fact that it is Ingram and that this must be somehow revolutionary. Wags might ask why color wasn't already something Ingram were doing and why do they want to draw attention to the fact they don't. But that wouldn't be fair (or nice) since they are printing over a 1mm books a month in b/w which is just a phenomenal number.
Publishing is changing (if that isn't obvious) and I recently suggested to one of the traditional organs of the industry that they conduct a case study using several of the 'photo-book' printers (in quotes because they expand their capabilities all the time) and report on the experience in the magazine (ooops that gives it away). Evidently advice not taken. Like I said, perhaps it's just me.
The company had a lot of debt, began selling off assets, were hit with accounting irregularities, became embroiled in a subsequent SEC investigation, before they closed the sale to CIG the company announced that the Chairman (Aldworth) was leaving and some pundits said they sold the wrong business. This is were we pick up the story.
- The company is moving all operations to Dallas where the Education division is located which should be completed by the end of 2007. Most staff functions will be eliminated in Ann Arbor with the exception of staff for transition and (presumably) accounting staff needed to deal with legacy issues (like SEC reporting and the investigation)
- Corporate functions transferred to the education unit are expected to be $4-5mm per year.
- They have two buildings with long term leases in Ann Arbor which will soon be surplus to their needs. It is assumed that they will attempt to buy-out the remain lease term but that will be discussed in a subsequent update.
- The company had a significant capital gain on the sale of the business solutions segment to Snap-On tools resulting in capital gain taxes of $60-65mm.
- The company had a significant capital loss on the sale of the information and learning segment to CIG and they will carry-back this loss against the gain in 2005 and they think that $40-45mm will come back as a refund in 2008.
- There is some class action suit stuff going on related to the accounting issues.
- Proquest Education includes Voyager Expanded Learning (acquired 1/31/05), Explore Learning (acquired 2/25/05) and LearningPage (acquired in 2004). Partial year 2005 revenues for the segment are expected to be $91million, EBIT of $7.4mm and EBITDA of $27.7mm.
- Education segment results for 2006 are projected to be Revenues of $117.3mm, EBIT of $12.0mm and EBITDA of $34.5mm.
- Guidance for 2007: Education segment revenues of $116-124mm, EBIT of $10-13mm and EBITDA of $32-35mm.
- 2007 Corporate expenses are expected to be between $30-32mm excluding taxes and interest. They note interest income of $4-5mm but don't project taxes and interest expense.
- There is no note about any subsequent debt repayments, write-downs, or other mitigating factors (like rent buy-outs) that could influence the 2007 results.
- The company still has a lot of financial reporting to do and risks being delisted if they miss an April 2, 2007 due date.
That's the update so far. Stay tuned for more.
Wednesday, March 07, 2007
On February 6th, Google announced that the Princeton University library system agreed to participate in their Book Search Library Project. According to the announcement, Princeton and Google will identify one million works in the public domain for digitization. This follows the January 19th announcement that the University of Texas libraries, the fifth largest library in the U.S., also climbed on board the Library Project. Very quietly, the number of major research libraries participating in the project has more than doubled to twelve in the last two years. The seven new libraries will add millions of printed items to the tens of millions already held by the original five, and more fuel to the legal fire surrounding Google’s plan to scan library holdings and make the full texts searchable on the web.
The public discussion has been mostly one-sided, with Google supporters trying to hold the high moral ground. Their basic argument goes something like this: The universe of published works in the U.S. consists of some 32 million books. They argue that while 80 percent of these books were published after 1923, and, therefore, potentially protected by copyright, only 3 million of them are still in-print and available for sale. As a result, mountains of books have been unnecessarily consigned to obscurity.
No one has yet challenged the basic assumptions supporting this argument. Perhaps they’ve been scared off by Google’s reputation for creating clever algorithms that “organize the world’s information”. This one, though, doesn’t stand up to serious scrutiny.
The figures used by supporters of the Library Project come from a 2005 study undertaken by the Online Computer Library Center (OCLC), the largest consortium of libraries in the U.S. According to the OCLC study, its 20,000 member libraries hold 31,923,000 print books; the original five research libraries participating in the Google library scanning project hold over 18 million.
OCLC did not actually count physical books. They searched their massive database of one billion library holdings and isolated 55 million catalog records describing “language-based monographs”. This was further refined (eliminating duplicates) to 32 million “unique manifestations”, not including government publications, theses and dissertations. The reality of library classification, however, is such that “monographs” often include things like pamphlets, unbound documents, reports, manuals, and ephemera that we don’t usually think of as commercially published books.
The notion that 32 million U.S. published books languish on library shelves is absurd. Just do the math. That works out to more than 80,000 new books published every year since the first English settlement in Jamestown in 1607. Historical book production figures clearly show that the 80,000-threshold was not crossed until the 1980’s, after hovering around 10,000 for fifty years between 1910 to1958. The OCLC study showed, moreover, that member libraries added a staggering 17 million items (half of all print collections) since 1980. That averages out to 680,000 new print items acquired every year for 25 years, or more than the combined national outputs of the U.S., U.K., China, and Japan in 2004.
Not only will Google have to sift through printed collections to identify books, and then determine if they are in the public domain, but they will also have to separate out those published in the U.S. (assuming that their priority is scanning U.S.-based English-language books) from the sea of books published elsewhere. The OCLC study clearly showed that most printed materials held by U.S. libraries were not published in the U.S. The study counted more than 400 languages system-wide, and more than 3 million print materials published in French and German alone in the original Google Five. English-language print materials accounted for only 52% of holdings system-wide, and 49% in the Google Five. Since more than a few works were probably published in the United Kingdom, the total number of English-language books published in the U.S. will constitute less than half of all print collections, both system-wide and in Google libraries.
So how many U.S.-published books are there in our libraries? Annual book production figures show that some 4 million books have been published in the 125 years since figures were regularly compiled in 1880. If, very conservatively, we add an additional 1.5 million books to cover the pre-1880 years, and another 1.5 million to cover books published after 1880 that might have been missed, we get a much more realistic total of 7 million.
Using the lower baseline for published books tells a very different story than the dark one (that the universe of books consists of works that are out-of-print, in the public domain, or “orphaned” in copyright limbo) told by Google and their supporters. With some 3 million U.S. books in print, the inconvenient truth here is that 40% of all books ever published in the U.S. could still be protected by copyright. That would appear to jive with the OCLC finding that 75% of print items held by U.S. libraries were published after 1945, and 50% after 1974.
If we’re going to have a debate that may end up rewriting copyright law, let’s have one based on facts, not wishful thinking.
Andrew Grabois is a consultant to the publishing industry. He has compiled U.S. book production statistics since 1999. He can be reached at the following email address: email@example.com
Clarification update from Andrew: My post is not intended to be a criticism of the OCLC study ("Anatomy of Aggregate Collections: The Example of Google Print for Libraries") by Brian Lavoie et al, which is a valuable and timely look at print collections held by OCLC member libraries. What I am attempting to do here is point out how friends of the Google library project have misinterpreted the paper and cherry-picked findings and conclusions out of context to support their arguments.
Google Book Project (3/6/07)
Qualified Metadata (2/22/07)
Tuesday, March 06, 2007
Publishers have elected to sue Google to protect their content rights and the content rights of their authors. At the same time, publishers have engaged with Google in participation in the Google Scholar program. Here publishers are equal partners and (I assume) negotiations for the acquisition of content by Google was negotiated in good faith and the results have been good to great for both parties. (Springer, Cambridge University). It is also no bad thing that Google’s content (digitization) programs have spurned other similar content initiatives particularly those of some of the larger trade and academic publishers.
The continued area of friction is the digitization project that Google initiated to scan all the books in as many libraries willing to participate. This is where publishers got upset. They were not consulted nor asked permission, they cannot approve the quality of the scanning, they will not participate in any revenue generated and they can not take for granted that the availability of the scanned book will not undercut any potential revenues they may generate on their own. The books in question are the majority of those published after 1925 or so (It's actually 1923: thanks to Shatzkin for noticing my error) and which are still likely to be under copyright protection of some sort.
Having said that, lets get one thing straight; having all books which exist in library stacks (or deep storage) available in electronic form so that they can be indexed, searched, reassembled, found at all and generally resourced in an easy way is a good thing and an important step forward and opportunity for libraries and library patrons. Ideally, it would lead to one platform (network) providing equal access to high quality, indexed e-book content which any library patron would be able to access via their local library. Sadly, while the vision is still viable the execution represented by the Google library program is not going to get us there.
Setting aside the copyright issue, the Google library program has been going on now for approximately 24mths and results and feedback is starting to show that the reality of the program is not living up to its promise. According to this post from Tim O’Reilly, the scans are not of high quality and importantly are not sufficient to support academic research. Assuming this is universally true (?), the program represents a fantastic opportunity lost for patrons, libraries and Google. BowerBird via O’Reilly states:
umichigan is putting up the o.c.r. from its google scans, for the public-domain books anyway, so the other search engines will be able to scrape that text with ease. what you will find, though, if you look at it (for even as little as a minute or two) is that the quality is so inferior it's almost worthless
Ironically, the lawsuit by the AAP could actually have a beneficial impact on the process of digitization. As some have noted, we may have underestimated the difficultly in finding relevant materials and resources once there is more content to search (this assuming full text is available for search). Initiatives are underway particularly by Library of Congress to address the bibliographic (metadata) requirements of a world with lots more content and perhaps the results of some of these bibliographic activities will result in a better approach to digitization of the more recent content (post 1923). Regrettably, some believe that since there may be only one opportunity to scan the materials in libraries that we may have lost the only opportunity to make these (older) materials accessible to users in an easy way.
Tomorrow, just what is the universe of titles in the post 1923 ‘bucket’? The supporters of the Google project speak about a universe of 30million books but deeper analysis suggests the number is wildly exaggerated.
From the press release:
Chris Forbes, CEO of Knovel said: "David brings Knovel years ofexperience in managing companies that have successfully delivered highvalue information and productivity solutions to end users. We look forwardto his guidance as Knovel takes the next steps to dominate the engineeringinformation market." David Shaffer continued: "I am excited to join acompany that is a passionate leader in driving value for end users in thislarge and important market. This new role is a natural extension of mycareer at Thomson."
Monday, March 05, 2007
Moodys - 10am. Webinar
Meridith - 11.00am. Webinar
CBS - 12.20pm. Webinar
Thomson - 2.40pm. Webinar
McGraw Hill - 3.20pm. Webinar
NYTimes - 9.25am. Webinar
Primedia - 10:05am Webinar
Dow Jones - 10:40am Webinar
Scripps - 2:40om Webinar
Press Releases: Berner, Deal
Sunday, March 04, 2007
Amazon visitors have not taken to tagging Amazon's books in significant numbers. With thousands of times the traffic, Amazon produced a tenth as many tags as LibraryThing. What's going on?
He goes on to talk about the power of numbers that inevitably feeds on itself; as more people tag more people find it useful which leads to a larger community. Passion also plays a part because the overwhelming number of active 'taggers' also have more books. Those that have less than 200 titles rarely tag books. (Since fees kick in over this number the users are also more financially committed to librarything).
Critical mass is important, even if we can't pinpoint the line. Ten tags are never enough; a thousand almost always is. Unfortunately, Amazon's low numbers translate into a broader failure to reach critical mass. With ten times as many tags overall, LibraryThing has fifteen times as many books with 100 tags, and 35 times as many with over 200 tags.
It is a very interesting article on the power of community and worth a read.
Lorcan Dempsey suggests these types of sites also represent examples of the 'Network effect':
Regular readers of this blog will not be surprised to hear me say that they also highlight a structural issue for libraries, how to provide services at the network level. These new services are network level services. They are aimed at the general user, not an audience circumscribed by region, or funding or institution. And, additionally, they provide an integrated service, moving the user quickly through whatever steps are needed to complete a task.
The other component of interest to me is that sites like librarything are becoming sources of viable bibliographic information and indeed the NY times article suggests that Librarything maybe selling or licensing some of its tagging data:
For example, he is in the process of selling some of his recommendations data, which is based in part on tagging statistics, to other sites that sell books and book information.
At Bowker one of our most important and costly editorial tasks was to assign subject classification to titles so that they could be found either in our own products or in the products of our customers. With well over 200,000 titles per year this is an expensive excercise and while it can be automated (and was) the process suffers from obvious limitations. Firstly, the subject classification methodology is quite rigid and is not always intuitive. Secondly, subjects change over time and books previously categorized could benefit from additional or changed subjects. Thirdly, the application of subjects is subjective and can pose a limitation on the subjects applied to the title. A subject expert wants to be as accurate as possible in applying the subject classification for relevancy and integrity. In BooksinPrint, we had an average of slightly more than two subjects per title over approximately five million records. Many had more and a few had more than 15 but the average was two. Many users of Librarything, myself included, have placed more than two tags against most titles.
The ability of a community to supply a range of subjects that reflect the work, what's important about the book and what becomes important in the wider world may provide a vast addition to traditional bibliographic database work. I believe the social network applications and the structured approaches will work in concert but increasingly it is the social aspect that needs to be actively solicited for inclusion into the traditional bibliographic databases.
Friday, March 02, 2007
Neil Blair, Rowling’s legal adviser at the Christopher Little Literary Agency, said that she welcomed the court order. “Over the years eBay has appeared to be unwilling to control sellers on their site offering pirated or forged Harry Potter items for sale to innocent fans,” he said. “We have asked eBay on numerous occasions to assist by taking preventative steps to avoid these sales – steps that we are aware they can introduce. As these requests were not heeded we had no choice but to seek judicial intervention.Ebay has played the innocent in other similar cases - Tiffany in NYC and Dior in Paris - suggesting that it isn't partical for them to monitor every sale to ensure that the goods are legitmate. They just don't want to do the work.
Thursday, March 01, 2007
On full year revenue:
Book Publishing revenue was $471.8 million in 2006, down $49.3 million from $521.1 million in 2005. Underlying revenue growth of $9.4 million was more than offset by a $30.0 million decline from the strengthening of the Canadian dollar during the year and $28.7 million from lower gains on U.S. dollar hedges year over year.
and on Operating Profit:
Book Publishing reported operating profit was $56.3 million in 2006, down $39.1 million from $95.4 million in 2005. Underlying operating profit was down only $2.5 million in the year while the strengthening Canadian dollar decreased profits by $7.9 million and lower gains on the U.S. dollar hedges decreased profits by $28.7 million year over year. Underlying results were up for North America Retail and Overseas but were more than offset by lower North America Direct-To-Consumer results.It is difficult to discern the true impact here as there may have been some currency impact in the operating profit in 2005. Nevertheless, taking the numbers at face value, underlying revenues were up $9.4mm versus 2005 but operating profit was down $2.5mm.
Here is the short version and the long version of the press releases.
Further detail on the publishing units performance is summarized as follows:
- North America Retail increased book sales in 2006 after stabilizing in 2005. Significant efficiency improvements were made to the series business in 2006 as fewer books were printed and distributed and more books were sold.
- The North America Direct-To-Consumer revenue decline in 2006 was due to both fewer shipments of a children’s direct-to-home continuity program and from shipping disruptions experienced early in the year associated with the bankruptcy of a key supplier. Improved sales through the Internet channel partially offset this decline.
- Overseas markets had mixed results in 2006 with improvements in the United Kingdom and the Nordic Group offset by lower results in Germany. Brazil, a joint venture launched in 2005, showed improvement in 2006 selling more books and making progress towards break-even.
- The outlook for 2007 is for stability. Harlequin has stabilized the total number of books sold over the past three years despite difficult trends in its direct-to-consumer operations.
- Investment will continue in innovation and new products including digital initiatives in 2007.
- Cost savings of approximately $3.0 million are expected from the restructuring undertaken in late 2006.
- Harlequin will continue to be subject to the impact of changes in the value of the Canadian dollar relative to the U.S. dollar and other currencies.
Following is are highlights from the company press release:
- Revenues increased 9% to €3,693 million (2005: €3,374 million)
- Organic revenue growth of 3%, in line with full-year outlook
- Ordinary EBITA increased 16% to €618 million (2005: €533 million)
- Ordinary EBITA margin of 17% (2005: 16%)
- Investment in product development reached €272 million (an increase of 9% over 2005)
- Structural cost savings of €128 million (an increase of 28% over 2005)
- Strong free cash flow of €443 million (2005: €351 million)
- Ordinary diluted EPS increased 16% to €1.23 (an increase of 15% at constant currencies)
- Selective acquisitions to strengthen leading positions and enter high-growth adjacent markets
- Revenues increased 8% to €1,003 million (2005: €932 million)
- Organic revenue growth of 6% (2005: 3%) Ordinary EBITA increased 17% to €173 million (2005: €148 million)
- Ordinary EBITA margin of 17% (2005: 16%)
- Investment in product development reached €74 million (an increase of 7% over same period 2005)
- Structural cost savings of €37 million (an increase of 32% over same period 2005)
- Strong free cash flow of €204 million (2005: €208 million)
- Ordinary diluted EPS increased 9% to €0.34 (an increase of 15% at constant currencies)
A more detailed review is in the press release. Most of the business units are doing OK with Corporate and Financial Services showing the largest percentage revenue growth. Of Education they say the following:
Organic revenue growth of 2% with particularly strong performance in the United Kingdom following new product introductions. The review of strategic alternatives for Education announced in 2006 is expected to be completed in the first half of 2007.
The company has announced that this group may be sold and the statement seems to indicate that will be completed by the middle of the year.
The company is looking to build on the gains they have made over the past two years to migrate revenue to online, attack their cost structure and reinvigorate product development. Margin improvement was seem 2006 vs 2007 - of 1.0pt - but they are suggesting their EBITA margin will grow from 17% to closer to 20% which is significant progress.