Monday, March 31, 2008

Five Questions with Exact Editions

Exact Editions has developed a seemingly simple aggregation service for magazine publishers so that exact replicas (editions) of their print magazines can be viewed online. No doubt there is a lot more behind the scenes which is why I asked Adam Hodgkin my Five Questions.
1. Tell us about how Exact Editions started and what you set out to do?

Exact Editions was founded by Daryl Rayner, Tim Bruce and me three years ago. We incorporated the business at the end of May 2005. But we didn't have anything to show or sell until March 2006, which is when our service went live with just four magazines. The idea was to provide an aggregation service for magazine publishers and a way for consumers to buy individual subscriptions to consumer magazines. Magazines exactly as they are. As glossy as possible, with the ads in place, and with no 'messing about' or 'repurposing' of the material. We realised that there was an opportunity to add value to the publishers' existing content by working with archives, rather than single issues. When new subscribers sign up they get immediate access to at least a year's worth of back issues - in some cases three years, depending on the title. Our search tool works across all issues and all titles by default, so the archives are a really useful resource.
Daryl, Tim and I had previously worked together for five years at xrefer a business which provided aggregation services for reference book publishers. We knew each other well and that is important in a startup, but we all saw the new business as a completely fresh venture. From the outset we had a very different concept for the kind of service that Exact Editions would provide -- that it would be much more consumer oriented, that it would be providing a service for publishers and that it would be a pure web operation. If possible everything would be automated and would work through the web. xrefer made its sales through subscriptions to libraries, we felt that this would be very much a secondary market with consumer magazines. However it is now looking more important and we are selling subscriptions to libraries -- this is working rather well.

2. Describe the process of loading the content: Can any publisher participate and are there any special considerations that publishers must take into account?

It was important to us to make the import process as straightforward for the publishers as possible. In most cases, we work directly from the same PDFs they send to their printer.

The publisher just has to send a copy to our upload service and tell us the publication date. All the enhancements (phone links, contents page links, ISBN resolution) are added in our import process, and we ensure subscribers receive a notification when the issue goes live. We don't generally charge the publishers up front fees (we may need to if the circulation is very small or we are providing additional promotional services to the publisher) and this makes it easy for publishers to try our service. They can only gain from the digital edition and the new subscriptions that will come in. We take a small commission from the digital subscriptions that we sell. So our rewards are 'success-based'. The publishers get the bulk of the subscription revenues and they set the prices, we will probably only make a decent return once a magazine title is selling 50 or 100 subscriptions a month. But we are now hitting these levels and the growth rates are encouraging, especially since December last year.
We probably would not take on a magazine which we thought could only have 1000 digital subscriptions, but most consumer magazines can work well as digital offerings. We started with magazine publishers based in the UK but we are now looking to add magazines from the consumer sectors in the USA, France, and Australia. We would like to offer and work with Canadian magazines (French and English). We get a lot of Canadian subscribers. In principle, we could now add consumer magazines form other language markets, German, Spanish, Arabic etc, but I suspect that this will wait until we have scaled up our coverage in France, USA and Australia. As it happens I live mostly in Italy, which has a healthy consumer magazine market, but I don't fancy doing the Italian language customer support at this stage of my Italian.

3. You have experimented with some interesting applications such as executable phone numbers and ISBN’s. How are these being used by subscribers? Are you seeking to leverage these applications in additional ways? Are there any results that The Bookseller has seen that you can discuss?

We certainly see the addition of this type of interactivity as very important. We think the iPhone is hugely important. Important in its own right and important because other phones will be like it; and being able to click on emails, urls, ISBNs and phone numbers from your web page is a crucial asset. Especially when your web page is in the palm of your hand. I am amazed that more websites and web resources do not make phone numbers clickable as a matter of course. As an inveterate Skype user I find this slowness even on good web sites quite incomprehensible. Yes the ISBNs are definitely being used.
We only have a couple of months of usage to consider, but I am surprised how much they have been clicked. This page had more ISBN clicks than any other last month. And a lot more for Catherine Alliott and Elizabeth George than for Jeffrey Archer or John Grisham. I don't know why! And yes we will be leveraging this function. Book publishers catalogues -- exactly as in print -- should be on the web as navigable and searchable resources. We will encourage that and facilitate it. PDFs are a very poor way of putting them up.

4. You have experimented with Books. Your approach offers a strong alternative to wholesale programs like Google Book. Do your publisher clients see it this way? How do you pitch the product?

We are working with book publishers and expect this business to grow strongly, because our platform works well for three key functions which book publishers increasingly need to address (1) sampling through the web (2) licensing digital editions to individuals (3) licensing to institutions. We pitch the service as being technologically similar to Google Book Search but as being at the disposal, if you like at the beck and call of, the publisher. Google has positioned its Book Search service as an alternative and a potential competitor to the role of the publisher. That may well have been a mistake. We think book publishers can use our platform to provide their own aggregation service and we are enabling that to happen. Google Book Search also has a great role to play and we think it will be very successful, but in many cases the publishers need to run their own show.

5. What is next for Exact Editions?

Our biggest challenge is to automate more of the key processes involved in 'signing up' to the business proposition. The one bit of our process which is still rooted in paper is the simple contract. We need to have that process completely web-based. And I don't just mean a click-through contract, I mean a click-through process for testing, for uploading content, for defining samples and customisation. Daryl and I still spend a lot of time talking to publishers and even visiting them. We like doing this, but its not strictly necessary. We are on the road to automating all these steps, but there is still a way to go.
Adam is available here:

Thursday, March 27, 2008

Territorial Rights Aren't Fair (Dinkum)

Henry Rosenbloom is an Australian publisher as well as well known commentator on media and publishing matters impacting the Australian publishing market. As a publisher in a market which has traditionally represented the icing on the cake for many UK based publishers he has a perspective on the manner in which territorial rights are auctioned. The entire system is an anachronism based on the pseudo-political "commonwealth" but finally leaks are starting to appear in the edifice.

It is an interesting post and perhaps his most interesting point is that he blames the current territorial rights framework for harming the Australian publishing market. No doubt the real changes will occur when e-Book versions are universally available; that will make traditional 'territorial' right hard to sustain. From his post:
In recent years, despite the continuation of neo-colonial rule from London, an insurgency has emerged: Australian publishing has developed a rights-buying culture. Many houses, large and small, now look to acquire local rights in US titles. (Our own company has been prominent in this area.) Often, the books they’re interested in are of relatively little interest to UK houses; but, equally often, the UK refuses to abandon its hard-line position, because it doesn’t want to set an unwelcome precedent.

The galling thing is that Australia often understands US books better than UK publishers do — and that, when Australian houses do manage to acquire local rights, they often publish the books with verve and commercial success. They print substantial quantities, publicise the books professionally (sometimes bringing the author out for a publicity tour), and often create a market for an author that would otherwise never have existed. And they do this while paying a market price for the rights, and higher, domestic royalties to the US publishers and their authors.

(Thanks to my Australian Stringer for the lead).

Clipping Service

NY Magazine takes a look at British author/artist Graham Rawle who has constructed a book entirely from the clippings of Women's World magazine. The concept wouldn't be unfamiliar to a six year old but his application is sophisticated and impressive. In reading his noted points to the image, you get a glimpse of his process. Some of the plot characteristics were a direct result of what elements (words and phases) were in the text of the articles. For example, he picks 'Hands' as a surname because the word is frequently used in the magazine.

A mash up of the first order: One wonders how something like this could be constructed in a web environment.

In my comment to the article I said the following:

What about copy editing? Reading this I was amused by the thought of some exasperated editor trying to reword or add punctuation. Would they need their own inventory of clippings? Not something the average six year old would be unfamiliar with but a really interesting application

Wednesday, March 26, 2008

Gaming the Library

Big, Stuffy, Parental New York Public Library is counter to expectation a big gamer. A recent article in the NYT tells how the library is far more with it and in tune with a segment of its target audience than we might otherwise believe.
Under the Beaux-Arts arches of Astor Hall at the New York Public Library’s flagship building on Fifth Avenue and 42nd Street, thumping hard-rock beats mixed with tennis-ball thwacks and the screech of burning tires late Friday afternoon, as the library showed off the latest addition to its collections of books, films, music and maps: video games. Beneath the engraved names of august benefactors like John Jacob Astor and Simon Guggenheim, several hundred children, young adults and the people who love them virtually jumped, drove, battled and rocked out as the library celebrated its burgeoning “Game On @ the Library!” initiative.

The library has been loaning out games since 2006, but they are expanding the program in a big way. It is all to reach out to that illusive audience that in the words of one attendee "you don’t see too many kids my age in a place like this to check out a book." He's fifteen.

Borders UK

There seems to be a revolving door at the offices of Borders UK. Last week the company announced that Commercial Director David Kohn, who was bought in from W H Smith at the end of 2006 would leave the company in April. Kohn's had responsibility for buying and marketing and hence this is possibly a more critical loss than the loss several weeks ago of the CEO David Roche.

Borders UK was purchased last year (from Borders US) by ex-Pizza Express founder Luke Johnson. Johnson is also currently chairman of UK's Channel four television. It is probable that philosophical differences with the Chairman on store merchandising, negotiation and store closings have had something to do with both departures.

Tuesday, March 25, 2008

Bertelsmann Is Cautious

The Times Online takes a critical view of Bertelsmann's strategic vision but does note that since they are a family owned business maybe the criticism doesn't matter:
All this is a far cry from the swashbuckling days of Thomas Middelhoff, the Anglophile chief executive who was booted out after thinking that he might persuade the Mohns to float. Mr Middelhoff bought Random House, did the deals that made RTL, now the best business, and made a ridiculous sum, $7 billion, on a half-share of AOL Europe. Now, there is a cosier approach, where keeping the family happy matters too much. Remarkably, there is almost no Asian business and not much internet to talk about, although Hartmut Ostrowski, the new chief executive, talks about changing that. Yet a limited appetite for risk is already being seen in limited rewards, with profits up by only 3.4 per cent last year.

Monday, March 24, 2008

Google Print Integration

I always wondered at my own immediate need for 10,000 e-book titles available on things like the Kindle and Sony e-Reader. Give me an e-Book library of my titles then I might be interested. The idea that I could browse the full text of my collection on librarything has far more relevance for me than a e-Book catalog that's just BIG. And what do you know? We are almost there because announced an integration with Google Book Search several weeks ago and on the site a user can link to the text of many of the titles in their collection. The links aren't universal but as a taste of what is surely inevitable it is a great step forward.

Other companies are jumping on the API bandwagon. ExLibris announced they have integrated a link to 'About this Book' pages on Google Book Search. From their press release:
Using a new “viewability” application programming interface (API) supported by Google Book Search, library patrons can now enhance their findings with Google Book Search features such as full text, book previews, cover thumbnails, and a mashup from Google Maps linking pages in a book describing a specific place to its location on the world map. Use of this “viewability” API has been added to the Ex Libris Primo® discovery and delivery solution, SFX® context-sensitive link resolver, and the Aleph® and Voyager® integrated library systems.

In the ILS world everyone plays follow the leader so the links should start appearing in all the other vendors products if they haven't already. Libraries have long had the ability to gather content in a similar manner (not full text) from Many have done this successfully to augment (prettify) their catalogs, but the Google option will prove to be compelling both because of the potential breadth of content in the 'About the Book' package but also the limited commercial nature of the Google Book Program. The Google Book Program could become the primary distribution mechanism for publishers into libraries: Imagine every ILS using the Google API and publishers making their titles available via a subscription/lending module. All of this at very low capital expense for publishers.

The other interesting aspect of the Exlibris implementation is the integration with the SFX link resolver. How this will develop could also be interesting for the discovery of journals and articles.

Over on Exact Editions, Adam had some related thoughts on this.

Also, I had an additional thought that it may be Microsoft that has the better Publisher workbench/toolkit for managing access to their content from what I saw at their presentations last year. Where they are in their relationships to library intermediaries is anyone's guess however.

Sunday, March 23, 2008

Book Expo America

I have been shanghaied into arranging a panel discussion at Book Expo in LA. It will be interesting and I am looking for several more panelists. Please let me know if you would like to participate and or if you have any recommendations as to who I could ask to participate.

The following is a draft of the panel discription:

Digital Bundling: Considerations, Combinations & Costs
Most publishers are committed to allowing consumers access to electronic versions of their books whether on their own account or via programs such as the Google Book program. Some publishers are going a step further and are allowing consumers to interact with and create their own products using the publisher’s content. As publisher’s build their content databases, digital bundling will become a significant part of the product mix and will change the concept of the customer – from bookstore to consumer - and the concept of the product – from book to service. Rapid improvements in technology will enable ‘mass customization’ of publishing products and will fundamentally change the relationship with customers.
While many publishers are still tentative in their e-book experiments others are already experimenting with digital bundling. As these publishers experiment, what are their experiences, what are the issues and what costs exist as these publishers engage their customers in new and revolutionary ways? Hear from publishers who are experimenting or are contemplating launching making their content available to consumers for new and exciting products.

Moderator: Michael Cairns, Information Media Partners
Thursday May 29th: 11am - 12pm

Saturday, March 22, 2008

Penguin Redux

Email subscribers may not have been able to view the Penguin newstory from Reuters that I noted last week.

Here is the link:

Friday, March 21, 2008

Penguin On the March

Penguin continue to innovate and experiment. Last year they launched wiki-novel idea "A Million Penguins" which generated over 85,000 visitors and this week they announced a collaboration project between authors and game producers. This Video from Reuters explains all.

Thanks to April for the link.

Borders' Punished: Not a Pretty Picture

After yesterday's announcement of their 'refinancing' package from current 18% shareholder Pershing Capital, Borders shares fell over 28% yesterday. The company began the day with a market cap over $400mm - and at that level a poor reflection of the value of the company - and ended the day at a value of $297mm.

On a day when the company could have touted the upswing in 4th quarter results as proof their strategic plan was on track they decided instead to concoct a deal that on the surface appears to have been conceived over pizza the night before. Even the analysts who remain closely familiar with the company questioned the immediate need for the capital infusion. Matthew Fastler from Goldman Sachs noted in reviewing their balance sheet he saw no cause for concern. "What's the urgency," he asked.

A believer in conspiracy theories might conclude this stock price has been beaten down to cheapen an acquisition price. A offer at the closing price on Wednesday would give shareholders a 40% premium on Thursdays close.

Barnes & Noble, who's stock has been heavily purchased by insiders (primarily Len Riggio) was up 8% yesterday. Even Books A Million was up 4%. On their conference call yesterday, B&N were asked whether they would be interested in buying Borders and while they said they haven't been contacted they did say it would be something they would consider. Of course they would take a look, they're a competitor! I maintain B&N would not want to be saddled with the headaches and would rather take share the old fashioned way; that is, better store merch, better store location, better negotiation and better logistics. The likely scenarios are: 1. Purchase by Pershing, 2. Purchase by unknown PE, 3. Purchase by competitor or 4. Purchase by a Canadian. 5. Purchase by an Australian (wouldn't it be funny if they offered to buy everything).

I've always thought that a far better combination all around would be Borders and Books A Million. (Borders A Million?) Another interesting combination would be Indigo Books and Borders. Indigo is the combination of the two largest book retailers in Canada and there were rumours of some cross border combination with either Borders or B&N. These have died down in recent years but the Borders Indigo combination could be interesting. The owner of Indigo is married to one of the richest men in Canada and money to acquire the business (at $300mm come on!) wouldn't be a problem.

Heck, I'm going to go out and play the lotto and when I win I might take a shot.

Thursday, March 20, 2008

Borders Conference Call Update

After this morning’s conference call I was still as much in the dark as to the reasoning behind the rapid run for cash at Borders. In discussing the funding deal on the call both CEO Jones and CFO Wilhelm commented they saw business was falling off late in the fourth quarter which, coupled with the failure to sell the Australian/New Zealand operations led them to believe vendors (in particular) would be worried about their financial health. There is no reason to believe the latter would have happened. When asked directly they admitted this has not been a factor in their dealings with publishers. They also noted that there are other organizations interested in purchasing the Australian operations and they are confident that they will consummate a deal in the short term.

They spent a lot of time on the call congratulating themselves that the basic elements of their strategic plan is going according to plan such as STS have improved 2.1% at Borders and 1.2% at Walden. The international stores improved 7% - possibly partly due to currency.

So to recap: They think there is a little market slow down, they had a hiccup in realizing a $120mm asset sale but they mortgaged a quarter of the value of the company to gain some short term cash when it isn’t clear they needed it. The company plans to sell parts or all of itself to maximize shareholder value but there is no timetable set against that pledge (other than that tied to the loan conditions).

Jones did emphasize that they continue to operate in a highly promotion driven environment and this impacts gross margin. One analyst asked where the balance existed between continuing to drive top line revenues (comp store growth) and gross margin erosion. Jones said they do want to improve gross margins but they won’t be doing it via a reduction in promotion spend or a reduction in the rewards program. Perhaps holding back on some of this spending, further reducing their capital spending and slowing some of the web role out would have eliminated the need for the capital infusion.

Other items of interest from the call:

Jones announced the web site is set to launch May 3rd and the integration with stores - ‘cross brand strategy’ – will also roll out to in-store kiosks.

Aside from the financing they believe there exist other operational improvements that will lead to cash generation

EBITDA from Paperchase and the A/NZ operations is about $30mm

Asked whether Pershing is an insider, Wilhelm quickly said they have a representative on the board but did not affirm whether they should be considered an insider. They said they reviewed other financing options before setting on Pershing and the package had the approval of the board.

Asked about full year performance Wilhelm said they wouldn’t give guidance but that there were many opportunities available to them to improve results. He believes they will improve but perhaps not as fast as anticipated earlier in 2007.

Speaking about the margin Jones said that they were “absolutely paying attention to margin”. He noted favorable things happening in the sales mix: Paperchase, café, bargain books: Music falling but it is low margin. He said they are “still playing with promotional mix” and that the market very promotional.

Borders Seeks "Strategic Review"

The long wait is over. Borders has announced they are seeking advice from Merrill Lynch and J.P. Morgan to seek alternatives that will "maximize shareholder value." The company has been preparing itself for this moment for the past year or so since George Jones became CEO and began dismantling the international operations and conducting a wholesale review of the Borders and Walden operations. Over the past year, Pershing Capital Advisors, an investment firm, has purchased 18% of the shares of the company and with today's announcement they are also bailing out Borders with a loan of $42.5million to shore up the company's finances. Earlier this month, the company announced that they had failed to agree terms with Pacific Equity Partners to sell the Australian and New Zealand store operations. The sale was widely expected to generate over $100mm in purchase price.

This capital commitment comes at quite a price. Firstly, they will be paying 12.5% interest. Secondly, Borders has agreed to sell them the Paperchase and Australia and New Zealand operations and the 17% interest they hold in the UK operation if Borders is unsucessful in selling them to a third party. CEO Jones has been consistent in viewing Paperchase as important to the growth of Borders and a key component of their evolving merchandising strategy. To consider selling it appears a sign of desperation. As mentioned the A/NZ operations may have been worth $100mm but there was only one real buyer. Without competition how much is this operation worth? The UK interest is essentially worthless given the sale price of the whole business. If worse comes to worse and Pershing ends up buying these assets for $125mm they will appear to have gained a bargain since even Borders management state that they believe the value of the assets is far in excess of the $125mm. (If I read the press release correctly, on receiving the $125mm Borders immediately must pay back the $42.5mm loan: that nets to $82.5mm). Pershing is likely to prefer the whole company rather than the parts.

In addition to the capital commitment Pershing is also gaining warrants that equate to 19% of the company's shares. This amount plus the shares they already own (and Jones' shares) must mean they will effectively control the company once the deal is finalized on or before April 4th. (They would have to exercise the warrants).

Shares in the company closed just above $7 which values the company at $400mm. Pennies really considering managements belief in the value of the pledged assets (Paperchase etc.). Investors are expecting something to happen to the stock as it has ticked up $1 in pre-open trading.

The company also announced full year results with total consolidated sales from continuing operations of $3.8 billion for the full year 2007. On an operating basis, Borders Group posted full-year consolidated income from continuing operations of $9.2 million, or $0.16 per share, compared to $33.0 million, or $0.53 per share a year ago. The company has previously noted write-offs associated with the sale of the UK operation and non-operating investments in their web relaunch that total $125mm and $28mm respectively. On a GAAP basis the full year net income loss was $157.4mm.

Their fourth quarter numbers with revenue up almost 3% and net income flat with last year should give investors some belief that operating changes put in place by CEO Jones may be working. However, it is early in his term and he has only recently filled all his key executive positions. With a volatile economic situation it remains to be seen how successful the company will be over the medium to long term. Certainly operating outside the glare of the financial markets will help turn Border's around and it seems to me that that is where the company is headed.

More from the press release.

Tuesday, March 18, 2008

Bertelsmann Reports

Media giant Bertelsmann reported their annual results this morning with net income dropping significantly versus 2006 due to the performance of the Direct Media Group. CEO Ostrowski indicated that Bertelsman would concider selling the Direct group and indeed has taken the decision to dispose of the US segment of this business. Globally the unit operates book, DVD and music clubs as well as bookstores and online shops.

Top line revenues at Bertelsmann dropped nearly 3% due to the strong dollar and the sale of their Music publishing business. Total revenues were €18.8bill.

At Random House they noted the following:
  • U.S.: more than 200 titles on New York Times bestseller lists
  • Winner of Pulitzer Prize in four literary categories
  • Record revenues generated by audio book "Harry Potter and the Deathly Hallows"
  • U.K.: nearly one third of all titles on Sunday Times bestseller lists
  • Germany: level of growth ahead of market (strong paperback book business)

RH revenues of €1,837mm fell 5.6% with organic revenue growth lower by 1.4%. Operating income was €173mm versus €182mm in 2006.

  • At the Direct Group operating income fell from €110mm in 2006 to €10mm. They noted the following
  • Western Europe: book clubs, book retail and Internet combined in several markets (multi-channel), positive stabilization of Club Germany, good earnings in France and Spain
  • Eastern Europe: successful publishing operations
  • North America: remaining shares of Bookspan acquired, result significantly impacted by decline of CD and DVD business
  • Reorganization of operations: Direct Group (except North America) under F. Carro, North America operations under P. Olson

Link to their management discussion. In this document they discuss 'expanding the definition' of their markets so that they can exploit big business opportunities. This is essentially the strategy that the larger information and professional publishing companies have been following for several years. (I discussed this concept in a speech I gave last week).

More from their full press release on Random House:

In the U.S., Random House published a record 230 New York Times bestsellers, including “Playing for Pizza” by John Grisham; “On Chesil Beach” by Ian McEwan; “Clapton” by Eric Clapton; “Giving” by Bill Clinton and Suze Orman’s “Women & Money”. Among other major bestsellers were the movie tie-in editions of “No Country for Old Men” by Cormac McCarthy, Robert Ludlum’s “The Bourne Ultimatum”; “The Golden Compass” by Philip Pullman and Ian McEwan’s “Atonement.” The Grammy-winning audio edition of “Harry Potter and the Deathly Hallows” by J. K. Rowling became the fastest-selling audiobook of all time. In the U.K., Random House Group U.K. outperformed all other publishers in the Sunday Times bestseller lists, accounting for nearly one-third of the year’s overall rankings. “Nigella Express” by Nigella Lawson has sold over one million copies in its hardcover edition. The Group acquired a majority stake in Virgin Books and established several new publishing ventures, such as Transworld Ireland, which is dedicated to Irish authors. In Germany, Verlagsgruppe Random House recorded significant growth in revenues and earnings, which were driven by the success of bestsellers by authors such as Leonie Swann, Dieter Hildebrandt and Eva-Maria Zurhorst, as well as its paperback program and its self-help and religion publishing. In Spain, “La Catedral del Mar” by Ildefonso Falcones, published by Random House Mondadori, continued to enjoy excellent sales. Random House expanded its online marketing capabilities in 2007, launching digital platforms with book-content search-and-browsing capabilities in the U.S., Canada, and Germany. Random House authors won many prestigious awards around the world in 2007: Doris Lessing, published by Random House in Germany and Spain, won the Nobel Prize for Literature, and Al Gore, who publishes with Random House in Germany, Japan, and Korea, received the Nobel Peace Prize. Four Random House, Inc. titles won Pulitzer Prizes, a record for a single year.

Wednesday, March 12, 2008

Golden Moment In The History Of TV News

There will be more no doubt, but imagine waking up Monday morning as Governor and going to bed on Wednesday as Citizen Schmuck. There again every cloud has a silver lining: waking up Monday morning as Citizen Afterthought and going to bed on Wednesday as Governor of New York ain't so bad.

Little noted was that the tri-state areas has hit the trifecta in disreputable governorship. In CT the past Governor is in jail, McGreevy in New Jersey resigned in disgrace as a "gay American" (every time I hear that it makes me laugh) and now Eliot Mess.

The whole wife thing continues to amaze me. My wife doesn't attend my business meetings and as Sam Bee on Comedy Central said last night if as wife you do attend one of your husbands meetings you might want to miss the one that is a festival of your own humiliation. She also said, if anything he should have brought the hooker to the conference after all that's who we all want to see.

Isn't it ironic that as the publishing world was navel gazing about the latest plagiarist, this story broke with a plot so outlandish that even Jeffery Archer couldn't have come up with it. Imagine an agent trying to sell this to a publisher; - No really, this is absolutely true. We've done all the checks. I know the guy. - They would be laughed out of the office - I think.

Presentation at Book Publishing Conference

I presented the following deck as part of a keynote panel discussion on Publishing in the Digital Age. Others on the panel included Mike Shatzkin (IdeaLogical), Carolyn Pittis (Harpercollins) John Morse (Merriam Webster) and Peter Osnos (Public Affairs).

There are comments on each slide but can only be seen if the file is downloaded.

A podcast is now available here and my section for which the above presentation refers is Publishing in the Digital Age Part Four.

The Future Of Touch Screens

Apropos of nothing, but at a conference this week someone showed a video that shows an impressive future for touch screen interfaces.

Here is the link.

Wiley Post Large Gain

From the John Wiley conference call (transcript) yesterday, CEO Will Pesce summarized their results as follows:

Year-to-date revenue of $1.2 billion increased 47% over prior year. Excluding Blackwell year-to-date revenue increased 6% or 4% excluding favorable foreign exchange. EPS for the nine months of $2, exceeded prior year by 36%, excluding certain one-time tax benefits and Blackwell, adjusted EPS increased 9% for the nine months. The Blackwell acquisition contributed revenue of $115 million in the quarter and $347 million in the year-to-date period. The acquisition was accretive to EPS by $0.9 per share in the quarter and $0.18 per share in the year-to-date period excluding certain tax benefits. Wiley's top line growth continues to be driven primarily by Blackwell, Professional/Trade revenue increased modestly in the quarter, but year-to-date results remain well ahead prior year and industry performance. US scientific, technical and medical revenue increased slightly in the quarter while global revenue advanced 5%. Higher Education showed signs of recovery in the quarter, bringing year-to-date revenue essentially on par with prior year.


Borders Australia Sale Off

Apparently after proceeding through several rounds of regulatory review, Pacific Equity Partners the owner of New Zealand retailer Whitcoulls and Australian retailer A&R has backed out of the deal to buy the Borders stores in Australia. It seems that PEP shareholders aren't comfortable with the part cash part equity deal that would have had them partner with Borders in a potentially larger retailing group. This seems to be a strange turn-around for Borders that they would be even negotiating an equity/cash deal with a potential purchaser when they have seemed intent on running for the hills from any international entanglements. Perhaps, Borders has a much more expansive notion of the value and prospects for the Australian & NZ Borders stores and their pricing was not reflected in all cash offers. This could have set them down the road to consider an equity and cash deal.

The Age notes Whitcoulls as saying they were "comfortable negotiations had reached a natural conclusion." I doubt that is the same sentiment in Ann Arbor where they have made international retrenchment a focus. The company releases their full year numbers in a week but here is what they said about the international operations in their most recent (holiday period) release:
Total International segment sales from continuing operations for the period, at $109.3 million, increased by 36.3% compared to last year. Excluding the impact of foreign currency translation, total segment sales from continuing operations would have increased by 26.9% over the same period last year. Comparable store sales for International increased by 10.8% over the same period last year driven by strong performance in Australia.
So far no word from Borders.

Monday, March 10, 2008

Espresso Book Machine Perks Up in Canada

John Mutter at Shelf-awareness has a great 'real-life' article about the implementation of the Espresso Book machine at the University of Alberta bookstore. From his article:
Although the cost has been significant, the University of Alberta Bookstore, Edmonton, Alberta, which installed an Espresso Book Machine last November, has found the POD machine to more than meet expectations, according to Todd Anderson, director of the Alberta Bookstore, who spoke at a seminar at the CAMEX show and National Association of College Stores meeting in San Antonio, Tex., last week.The benefits of the Espresso machine have been both tangible and intangible. "The machine is a symbol of change for a lot of our professors and students," Anderson said. "They are very excited."At the same time, the store printed more than 50 titles in the first three months of operation, saved students buying some of the textbooks significant amounts of money and has kept the machine humming. The production model that the Alberta store has is "a workhorse and just what we need," Anderson said. "We are running flat out."
The article goes on to endorse the use of the machine as a tourist attraction but more importantly as an important new tool for the bookseller. They do suggest there are some issues with the work-flow particularly the binding process but the store appears convinced that the machine will be an important part of their customer service delivery.

BTW: Todd Anderson was head of the Canadian Booksellers Association and is one of the best advocates for the retail book industry and an all around good guy.

Sunday, March 09, 2008

Just Excepting The Facts Ma'Am

The fake memoir crime wave in the publishing ghetto would have kept Sgt. Joe Friday in business for years. Sadly, the system is still broken, the system did not 'work' when the perp was caught after publication and sadly the whole thing will be repeated in weeks or months or years from now.

Perhaps the dumbest thing said about the whole episode was that to fact check every book would cause no book to be profitable. If that's the case, the industry has some bigger issues.

There are several articles about fake memoirs this weekend. Here is a selection:

Mendelsohn in the NYTimes:
But then, we all like a good story. The cruelty of the fraudulent ones is that they will inevitably make us distrustful of the true ones — a result unbearable to think about when the Holocaust itself is increasingly dismissed by deniers as just another “amazing story.” Early on in my research for my book, another very old woman suddenly grew tired being interviewed. “Stories, stories,” she sighed wearily at the end of our time together. “There isn’t enough paper in the world to write the stories we can tell you.” She, of course, was talking about the true stories. How tragic if, because of the false ones, those amazing tales are never read — or believed.
Tim Martin in The Telegraph:
Mis lit is, after all, literature's largest growth industry: W H Smith recently added to its Fiction and Biography shelfmarks a new one bearing the legend Tragic Life Stories, and the temptation to creative writing students must be great. Who says there's no future in fiction? Fake memoirs of the less pernicious kind, however, belong to a literary tradition that goes back through Defoe to Mandeville and beyond. It also comprehends some astonishing characters, particularly when the fakers were forced to appear in person.
The Los Angeles Times:
It should have been obvious, perhaps, but it wasn't. Certainly it never occurred to her publisher, Riverhead Books, to make even the most rudimentary check into her background, which would have quickly revealed Margaret Jones to be a character created by one Margaret Seltzer. Seltzer, who as Jones claimed to have entered the foster system after a sexual assault at age 5 and went so far as to invent an ethnicity for herself -- half Native American and half white -- is in fact all white and grew up with her biological family in Sherman Oaks.
Almond in The Trib:

But Seltzer became convinced that only by presenting the story as autobiography would anyone "listen to it." The sad truth is she's probably right. Over the past few years, publishers have responded to declining readership by developing an insatiable hunger for books that come with "author survivors" attached.Why? Because they know that such books are about 100 times more likely to get reviewed and featured on National Public Radio and anointed by Oprah. It's not enough anymore simply to offer besieged publishers a nuanced work of imagination. They need an inspirational figure the marketing people can dangle as interview bait. They need a pitch dramatic enough to resonate within the frantic metabolism of our perpetual news cycle.

I'd be willing to bet that if Seltzer (like Frey) had shopped her book as fiction, editors would have taken a pass. They might have even complained that the plot twists felt clichéd or unrealistic. But presented as a work of nonfiction, her editors knew they'd struck gold. They wanted to believe her story, so they did.

Lastly this one from NYTimes suggesting Kafka was lying
In a telephone interview, Mr. Kafka was contrite and tearful. “I know what I did was wrong,” he said. “I’m very alienated from myself, but that’s no excuse to lie. I took someone’s life and selfishly turned it into an enigmatic literary parable.”

Friday, March 07, 2008

Reed Business Information Sale

Various private equity firms are believed to be actively interested in the Reed Business Information group which was put on the block several weeks ago. If you recall Reed Elsevier announced the acquisition of Choicepoint at the same time. The list of firms interested includes Apax, Permira, Guardian Media, Candover, Cinven and Providence Equity Partners. According to several sources the sale price could exceed $2.obillion; however, this valuation may be too much for the debt markets to support. With several operating companies ruling themselves out, including United Business Media as the most notable, there are several interesting scenarios that may emerge.

Clearly one of the equity companies can buy the entire offering and at $2bill+ this would be an ideal outcome for Reed Elsevier. If the recent sale of EMAP's b2b division is anything to go by then the chances of a single buyer and a big price seems unlikely.

Apax and Guardian Media could combine an offer and seek to integrate the RBI titles into the existing businesses that each currently owns. When these companies agreed to buy the Emap titles there was some discussion of consolidation within the existing properties they own but they seem to have cooled to this strategy. Why that is may have something to do with the chance that they end up acquiring the RBI titles. Strategically Apax/GM could have significant repercussions because they would be in a position to collectively own the top 1 or 2 (or both) titles in numerous segments. They could subsequently discard any titles that don't fit that positioning and end up with a formidable trade publisher. Opportunities to consolidate across several market segments don't come up in bulk like this very often.

Reed Elsevier, in holding out for a high valuation, may also opt to retain an ownership position in one of the outcomes. If the scenario above holds up for example, Reed could end up owning 10% of a business with far better prospects than the trade business they already have and also get to pocket a lot of cash from the proceeds.

Once a deal is done (and my expectation is that there is no cherry picking to be had in advance of a sale), the acquirer will be looking to make some divestitures. Among the notable sales that could happen would be Variety which could gain a high price as a 'trophy' asset and the publishing titles Publisher's Weekly, LJ and SLJ. Bowker, Nielsen and several others would be interested in these titles so interest wouldn't be hard to find. New Scientist could also be considered a trophy title with Macmillan as a potential buyer.

Immediately after the announcement of the sale, there was some questions raised about the timing of the sale and whether anyone would be interested. It seems that these worries may have been pre-mature, but time will tell whether Reed Elsevier are as successful in selling these assets as they were selling their education division.

Thursday, March 06, 2008

Sharing a Stage

Is it me or was it weird that B&N Chairman Len Riggio backed out of participating in yesterday's AAP annual meeting? Could it have had anything to do with Amazon's Steve Kessel also sharing the limelight? If there was something to this - and personally I never enjoyed participating in events with my competitors so I empathize - one wonders why the handlers didn't realize the possible problem and point it out a little further in advance of the meeting. No matter, George Jones, CEO of Borders seized the opportunity to speak to a room full (presumably) of publishers. According to Publisher's Lunch, he noted the initial success of the new store concept in Ann Arbor:
Borders CEO George Jones led off the APP's meeting this morning, saying that early indications from their new concept store are encouraging. Though the store carries twenty percent fewer titles than a typical superstore, "the number of titles selling has doubled" according to Jones, who calls the change "dramatic." The store has only been open two and half weeks, but Jones says "sales have been way better than expectations."

And according to people in attendance that was about it.

Laura Bush also spoke about the lack of reading in the US and specifically among the young. A particularly disingenuous speech given a) she said virtually the same thing in 2002, b) she was a librarian (of what level is suspiciously vague) and this shouldn't be a surprise and c) we are at a point where her administration can't do anything about it. (A little like Africa but on a smaller scale).

Wednesday, March 05, 2008

For the Supply Chain Guy Who Has Everything

So adaptable and cheap are RFID tags that supply chain gurus are mailing them to themselves. This is a pretty cool idea noted in Pop Science described as "mail that never gets lost". While the title is not entirely accurate - it can still get lost but you will eventually know where it has been - the use of this technology is really quite practical. Just slap one of these puppies in an envelop and you can analyze your entire supply chain. The chip enables analysts to trace the location and time spent at each step of your process thereby giving you valuable information about blockages and bottlenecks. It could become a standard management tool used to monitor supply chains.

From the article:
The technology lets users track a letter’s every move. A vibration- and tilt-sensitive motion detector determines whether the Logger was sitting idle, being sorted, or bumping along in a truck. This data syncs with the GPS locations via Google Earth, allowing officials to spot places where mail lingered too long.

Tuesday, March 04, 2008

Jones'n for Truth

At Least Bulworth Was Funny

Remember the Warren Beatty movie where his character ends up in South Central LA basking in some street cred as he attempts to avoid an assassination plot (which he instigated). Well that has nothing to do with the latest fiction posing as non-fiction but at least the fictional movie made some strong and resonate points about politics and media. If you read, as I did, the profile of author Margaret B. Jones in The NYTimes last week you will have been mesmerized by the story of her life as a human castaway adopted by a foster family in South Central, running drugs for the bloods, learning to sleep on the floor every night to dodge bullets and then emerging to actually complete college and then end up marrying an ex-gang member.

Turns out (and it's getting so that we will need to change the sections in the bookstore) it is all fake. She's but a simple, upper middle class 30 something writer, with a very vivid imagination. From the LATimes:

The author of "Love and Consequences," a critically acclaimed autobiography about growing up among gangbangers in South Los Angeles, acknowledged Monday that she made up everything in her just-published book."Jones" is actually Margaret Seltzer. Instead of being a half-white, half-Native American who grew up in a foster home and once sold drugs for the Bloods street gang, she is a white woman who was raised with her biological family in Sherman Oaks and graduated from Campbell Hall, an exclusive private school in the San Fernando Valley.
Even in the face of complete disaster and shame (perhaps she understands that redemption in America is always just around the corner), it is interesting that her reaction and that of her recent fact-starved compatriots blend self-righteousness and penance. At the outset these writers seemed to have weighed the consequences and decided that they'll make a name for themselves either way; they seem to know that any news is good news and that the notoriety is in itself valuable. From the NYTimes:

Ms. Seltzer, 33, who is known as Peggy, admitted that the personal story she told in the book was entirely fabricated. She insisted, though, that many of the details in the book were based on the experiences of close friends she had met over the years while working to reduce gang violence in Los Angeles. “For whatever reason, I was really torn and I thought it was my opportunity to put a voice to people who people don’t listen to,” Ms. Seltzer said. “I was in a position where at one point people said you should speak for us because nobody else is going to let us in to talk. Maybe it’s an ego thing — I don’t know. I just felt that there was good that I could do and there was no other way that someone would listen to it.”
Are all the books fakes? I'm going to start my memoir: In it I'm Howard Hughes, mixed with Archie Leach, Basil Fawlty, Biggles and Roy of the Rovers.

Monday, March 03, 2008

Barnes & Noble Launches Studio

Barnes & Noble announced the launch of a multimedia site on B& that will feature a range of original content about books, readers and writers, and showcase web video series and other multimedia content about varied aspects of literature, complemented by user-generated material. Barnes & Noble Studio will launch with Barnes & Noble Tagged! and Book Obsessed as the first in a series of original productions and content initiatives.

From the press release:
Barnes & Noble Tagged!, hosted by Molly Pesce, is a magazine-style weekly web series that takes an upbeat look at what’s happening in the book world. The five-minute weekly show will let book-loving viewers know what new titles to look out for and will reveal the stories behind recent book news. The show will also feature an interactive poll where viewers can cast their vote on the chosen topic of the week. Ms. Pesce is a book lover herself with a penchant for real-life adventure books. She is currently writing her own account of modern motherhood and will be familiar to viewers from her role as the host of shows on Animal Planet and NBC’s iVillage Live. The program is produced for Barnes & Noble by Allen/Nee Productions.

Book Obsessed takes a five-minute look at passionate readers and their world through the books they love. The first episode in the weekly documentary-style series spends a day at the home of Laurie Gold of Dallas, Texas, who loves romance novels – and only romance novels. The second episode features Joe Perlman, a man who has a mere 35,000 books in his Long Island home. The third features a married couple that met at a mystery novel convention. To complement these portraits of book aficionados, Barnes & Noble Studio will invite viewers to upload short videos about their own book obsessions for inclusion into the Book Obsessed channel. Submissions can be made starting March 10. Book Obsessed is produced for Barnes & Noble by City Lights Media and is shot on location around the USA.

The company states that at launch there will be approximately 700 video and audio pieces on the site and that the new slate of programming will join the already considerable content on the B&N site. This existing content includes interviews and live in-store presentations from stores around the country.

Pearson Post Record Results

Pearson shares fell this morning despite posting financial gains across the board. The company increased top line revenues by 6% to £4.2bn and adjusted operating profit by 14% to a record £634m. The profit increase was supported by all segments of the Pearson group with Pearson Education up 9%, Penguin up 20% and the FT Group up 30%. Press release.

Investors are concerned that Pearson's results are weighted to reliance on the US market both in education and advertising revenues and as a result the company's share price fell despite the results. Pearson is generally conservative about forecasting their full year revenues and profits and underplay the impact of their acquisitions. If past year's performance is any indication the underlying businesses will continue to drive growth in excess of competition and the recently acquired companies/operations will further support growth. This is particularly the case in Education where the company has spent heavily in recent years. Additionally, across the company, management continues to transform revenues from annual one-off sales to subscription (i.e. recurring) based models. This supports annual revenue, profit and cash generation growth.

Typically (in recent years), the company sets aside £500m for acquisitions which enables them to acquire without dilution. With markets depressed it will be interesting to see how they are able to stretch this number during 2008.

Other highlights:
  • The company spent £472m for 2007 acquisitions which added £90m of sales and £13m of operating profit to 2007 results
  • The Government Solutions business was sold to Veritas Capital for $560m in cash, $40m in preferred stock and a 10% interest in the company
  • The newspaper Les Echos was sold to LVMH for €240m in cash
  • A 50% stake in FT Deutschland to Gruner + Jahr was sold (no terms noted)
  • The Data Management (Scanners) business to M & F Worldwide Corp for $225m in early 2008

Their outlook for 2008.

  • Penguin (20% of sales; 12% of operating profit) expects to improve margins further and into double digits. Penguin's good publishing and trading performance has continued into the early part of 2008.
  • Higher Ed will continue to build on operating efficiencies and beneficial recent acquisitions. As in recent years they expect to grow 1-2% better than the industry
  • In School the company expects the integration of Harcourt to progressively build margin improvement with material benefit to show in 2009
  • At the FT, the company expects to continue to broaden their revenue base and continue to reduce the reliance of advertising revenues. Ad revenue is 30% of group revenues versus 52% in 2000.

Marjorie Scardino, chief executive, said: "This is another record set of results and an excellent performance from every part of Pearson. We continue to reshape Pearson into a more digital, more international and more efficient company, and those changes make us confident that 2008 will be another good year."