Thomson Learning: Let the Auction Begin

Now that the year end numbers are out of the way, expect to hear more frequent discussion about the sale of the Thomson Learning unit of Thomson. Full year results were summarized by Reuters and the Thomson web site has more detailed information. Once the Learning segment is sold it will be interesting to see where Thomson spends the expected $5.0billion proceeds. It just means more deals to come as the company already has free cash over $1.obillion. They should be able to splurge and we may see them to execute a rights issue if they find something especially expensive (Bloomberg for example).

The Learning segment has been classified under discontinued operations and the overview comments are as follows:

Thomson Learning accounted for the majority of results in Discontinued
operations, with revenues of $672 million in the fourth quarter and $2.4 billion
for the full year of 2006. Thomson Learning’s operating profit was $161
million in the fourth quarter and $383 million for the full year. The
majority of Learning’s results were generated by the higher education, careers
and library reference businesses as well as NETg and Prometric, which were
announced for sale in the fourth quarter of 2006.

In their executive presentation the detailed results for Learning show decent results as compared with industry leader Pearson. Top line gained 5% and Operating Profit of $359MM was 6% better than prior with a very slightly higher operating margin. Pearson which will report at the end of February has consistently grown a 1-2pts better than Thomson over the past five years and their operating margin has steadily improved over the same period. It will be interesting to see the comparison at the end of the month.

It would be a big surprise if Thomson Learning does not go to a private equity buyer; there has been a lot of interest thus far.

Thomson Reports 1st Q

Thomson reported an 11% top line gain and an 8% operating profit gain to start off the year. Organic revenue growth was 6% led by the Legal, Tax and Accounting unit. Diluted EPS was up 14c to 35cents versus the same period last year. The quarterly operating results encourage the notion that this is a very financially strong business with cash flow up 25%, significant investments being undertaken in new intitiatives and a closely managed cost structure. Furthermore, Thomson are bullish on the future:

The business outlook for 2007 that was provided on February 8, 2007 remains unchanged. Revenue growth is expected to be at the high end of the company’s long-term target range of 7%-9%, prior to the deployment of the proceeds from the sale of Thomson Learning. Operating margin is expected to be at or above 2006 levels, despite increasing investments in efficiency initiatives. Cash generated by continuing operations is expected to grow, excluding cash generated through deployment of the Thomson Learning sale proceeds.

Thomson expects its performance to further strengthen in 2008. The company expects to sustain its long-term revenue growth rates; operating margin is expected to increase to above 20%; and free cash flow is expected to strengthen, as improvements in operating performance are projected to more than offset the loss of Thomson Learning’s free cash flow, even before deployment of the Thomson Learning sale proceeds.

Here is the press release.

In discussing the pending sale of the learning unit CEO Harrington said:

"The Thomson Learning sales process is on schedule and has attracted a very high level of interest from prospective buyers. We anticipateannouncing a buyer at the end of the second quarter and closing thetransaction in the third quarter. We will use the proceeds from the sale topursue opportunities aligned with our growth strategy and business model.We will be disciplined in reinvesting the proceeds and will focus onopportunities that drive growth and create value for shareholders."

The company did not break out financial results from the Learning group which is classified as discountinued operations other than to show consolidates earnings up $82mm over last year. It is hard to draw any conclusions from this given the limited detail however.

Here are the slides from their financial presentation.

Apax Appoints Shaffer Exec Chairman and Dunn CEO of Thomson Learning

I could have titled this Groundhog day since there was a rumour going around yesterday about Dave Shaffer returning to Thomson and today it was confirmed. More interesting was the appointment of Ron Dunn as CEO to replace the incumbent Ron Schlosser. On completion of the deal last week, Schlosser's internal memo to staff wasn’t particularly inspiring – more stay the course – than anything, and I guess he knew what was coming. Dunn’s departure from Thomson Learning at the end of 2006 was always a mystery to me since he had been a tireless worker for the business and had been a major factor in the growth of the education business particularly internationally. It will not be the first time Shaffer and Dunn have teamed up and they know each other very well having worked together at Thomson, Macmillan and McGraw Hill. From the press release:

Jackie Reses, Partner at Apax Partners, said: "The Thomson Learning properties
are unique, global media franchises that hold strong positions in their respective markets and have delivered stable and predictable growth. We look forward to working in close partnership with Ron Dunn and Dave Shaffer, two proven media executives who are intimately familiar with the Thomson Learning businesses. Ron and Dave are extremely well suited to lead the newly independent Thomson Learning organization as it builds on its positions within its individual market segments, continues to expand internationally, and captures the enormous potential we believe exists in the evolution to digital content distribution in
post-secondary education."

Both executives will have their work cut out for them, since as I have commented before the Thomson Learning company while possessing significant assets has been left in the dust by Pearson. Pearson has led in growth rate, operating performance and strategic acquisitions over the past three years. Coupled with the importance in migrating content to the web which Pearson has also started to do well with and there will be challenges a plenty. Each of these executives know this business and industry well so they should not be short of ideas or action plans to make the necessary changes.

It should be said also that this will be somewhat a vindication for Ron Dunn in returning to Thomson. I understand that Shaffer was none too pleased with Harringtons decision to part ways with Dunn in 2006.

Thomson Reuters Update

Some say discussions have been going on for years and some say they only got serious in the past few months but nevertheless Thomson and Reuters have admitted that Thomson will acquire Reuters in an $18billion deal. Strategically important for Thomson in competition with Bloomberg, the deal should pass the requisite government inquiries. Tom Glocer maybe the big winner having been inserted into the CEO role of Reuters when the company's future was far from guaranteed. He will now assume the CEO role of combined entity when Richard Harrington retires when the deal is completed. From the press release:

Under the terms of the proposed deal, Reuters CEO Tom Glocer would become chief executive of a dual-listed group to be called Thomson-Reuters, the companies said in a joint statement.

Thomson will have a slightly higher market share as a result of this deal; however, the developing market is international and the 'pie' is growing larger by the day. Reuters is a far stronger name internationally than 'Thomson financial' or Bloomberg' and from this stand point Thomson will be in a strong position to further leverage the brand internationally as internationally markets grow and develop and thereby need more sophisticated information and workflow products.

Thomson Corporation Reports Strong Results

The Thomson Corporation reported their second quarter results on July 27th which reflected strong organic revenue growth and flow through profit. Among the highlights, revenues increased 7% (organic growth was 6%) and operating profit increased 15% versus the prior period. The operating profit improvement was both the result of higher revenues and also represented the results of a corporation wide cost improvement initiative. Earnings on an adjusted basis were $0.34 per share versus $0.23 per share in the period a year ago. Thomson also said the growth was broad based across all four business units.

Thomson President and CEO Richard J. Harrington commented on the results:

"We are pleased to report strong results for the second quarter. Our performance reflects our continued ability to execute against our three strategic priorities - driving organic growth as well as business and portfolio optimization. Notably, Thomson achieved another solid quarter of organic growth, up 6% over the prior-year period, with each market group contributing to the increase. Further, Thomson continued to translate revenues into profits, growing operating profit margin 100 basis points over the second quarter of last year.”

The company said their full year revenue estimate will be in line with their goal of 7-9% revenue growth. Full-year 2006 revenue growth will continue to be driven primarily by existing businesses, supplemented by tactical acquisitions. Thomson expects continued improvement in its operating profit margin in 2006. Thomson also expects to continue to generate strong free cash flow in 2006.

More information as follows for each of the business units:

Legal & Regulatory
- Revenues increased 9%, to $923 million, and segment operating profit grew 13%, to $277 million. Organic revenue grew 8% and growth from acquisitions was 1%.
- Organic revenue growth was largely driven by strong double-digit global online solutions, software and services, as well as the timing of certain bar review courses that were recognized this quarter versus the third quarter in 2005.

Learning
- Revenues were $456 million, a 5% increase over the prior-year period. Excluding the effects of currency exchange, revenues grew 4%, virtually all of which was organic.
- Revenue growth was driven by a 6% increase in the global higher education businesses, particularly custom publishing services, and Arts & Sciences and Business & Economics textbook sales.

Financial
- Revenues increased 6%, to $499 million, and segment operating profit increased 23%, to $92 million. Organic revenue growth was 5% and growth from acquisitions was 1%.

Scientific & Healthcare
- Revenues were $229 million, up 6% from 2005, and segment operating profit increased 9%, to $47 million. Organic revenues grew 5% and growth from acquisitions was 1%.

Here is a link to their webcast details.

Thomson Agrees Sale of Learning Unit for $7.8Bill

It is hard to fathom this price. Bids and intentions were due last Wednesday and I thought I would have some time to comment on the status of the sale, but clearly the size of this offer required no deliberation. (Other than confirmation that it was what it was). Just as industry followers found it hard to explain the Riverdeep/Houghton Mifflin deal this one raises many eyebrows in the industry for the multiple paid for the business.

It was approximately 1o months ago that Richard Harrington causually mentioned to the FT that they would consider selling the Learning unit. By October the divesture was confirmed and the sale process started once the final year end numbers were finalized. Any observer of the manner in which Thomson spoke and presented its business would have seen strong indications that Learning did not feature in their plans. The detail and excitment given over to Thomson Financial during the analysts calls was indication enough. Speculation suggested that a price between $5.5 and $6.0billion would be good news for Thomson. As it turns out, Thomson management has kept one step ahead of everyone with some suggesting that the recently announced merger with Reuters has been in the works for two years and their post merger plans indicate that the merger with Reuters has indeed been long in the planning. The extra billion they are getting for Learning will really help out the Reuters deal which looks increasingly cheap.

The consortium includes Apax partners and a Canadian Pension fund name the Ontario Municipal Employees Retirement Service. Apax has invested in other educational properties before but not to this extent. Thomson CEO Harrington has suggested that financially the Learning business was sound - although performance did not match that of Pearson - but they were frustrated at the slow pace of migration to on-line products. This deal could be viewed as an endorsement of the Thomson Learning management and I wouldn't expect significant changes at the higher levels. If anything, management will be given a freer reign to excellerate their online and electronic product offerings.

The transition to the close of the deal is expected to take 60 days and the company is understood to have plans in place to speed this process. The company also expects to re-name/brand itself by the end of the year.

It will be very interesting to see how this sale multiple impacts the other crop of publishing assets that are for sale.

Reuters

Thomson and Harcourt Reunited Again?

There was an interesting suggestion doing the rounds in London this week (Reuters) suggesting that the prospects for Thomson Learning and Harcourt Education would be better if the businesses were combined by one purchaser. The discussion started in an article in the UK Sunday Telegraph which pointed out that the businesses were once part of the same operating company and that at least two of the private equity groups looking at these companies are looking at both of them.

Thomson Learning and Harcourt were part of the same group until 2000, when Harcourt General was bought by Reed. Reed kept the school textbook and testing division and Harcourt's science and medical titles but sold the higher education arm to Thomson Corporation, the Canadian publisher.

The combination could result in additional competition for Pearson and McGraw Hill which retain both School and Higher Ed businesses. While the school and college businesses operate in definably different environments and are generally managed separately within the larger organizations, the scale opportunities could generate millions in additional operating profit were the businesses combined. Coupled with the imperative to create digital delivery platforms for their content and this combination may make some sense.

It will be interesting to see the strategy employed by the bidders. The Thomson auction is expected to be completed first but would one firm try to preempt the bid process for Harcourt to secure that company in advance of the Thomson process? Having secured Thomson, will Reed benefit financially if the sale price for Harcourt contains some 'combination' bonus based on savings the purchaser expects to receive with a combined business? Regardless, it will be a long while until the opportunity to combine two educational publishers of this size comes again so I suspect some pencils are being sharpened as we speak.

Private Equity Deals

If you have the cash to invest in publishing company why not go for the best one. Which in my opinion would be Pearson.

With Thomson Education on the market, Houghton Mifflin sold, Wiley purchasing Blackwell Publishing, Wolters Kluwer Education for sale, there is a lot on offer and this week the rumors were flying around Pearson. Pearson has made no public comments regarding selling any of the company yet the PE bankers and the equity analysts think something is a foot. The Pearson stock closed at a four year high today (CNN). No doubt this is very pleasing to all the management options holders.

Last week, Reed Elsevier was also touted as a non-too-obvious PE candidate and it would seem you are not worth your salt as an equity analyst in the media industry if you don't declare one of these conglomerates as an ideal candidate for Private Equity players. Reed have a complicated ownership structure which, while simpler than when Reed and Elsevier were put together, seems to be a concern. When (or if) it comes down to it I doubt this will be an issue. As with Pearson, I suspect that the managers with options will be very happy with the stock price escalation. Last week the stock was at 600p now it is at 611p. When I was at Reed in 2000, the stock was over 700p and this was before they purchased Harcourt and the significant slump in advertising revenues that hit their trade publications business. Point is, I wonder if a valuation will push the share price up a lot higher?

In recent years Pearson has been chastised for under-managing a collection of valuable publishing assets but this died down a little over the past 12 months. Their financial results and forecasts have been on target and results in the Education group have been particularly strong. This is especially true when Pearson education is compared to Thomson in terms of acquisitions made, growth rate and operating margin. In Thomson's defence, I am sure that it has been difficult operating in within the Thomson corporate environment when reservations may have been expressed about Education for a while. Thomson relative to Pearson has probably lost momentum which a sale will quickly fix and we will see a renewed Thomson Education as a result.

Currently, the PE bankers see an opportunity to buy a large 'holding company' put some lipstick on it and sell parts off in short order. In selling the parts - The Financial Times, Pearson Education - they would expect to make a killing. (Pearson Education could be split into College and School). Management is clearly not happy with the current debate but if an offer is made then they obviously need to consider it. What may result is some appeasement resulting in the sale of one of the tastier chunks. As I predicted for 2007: Murdoch will buy The Financial Times.

Thomson Reuters Up in the Clouds

Almost 10 years ago, Thomson Reuters embarked on the development of their Elektron Data Platform and sold it as a mechanism to get faster as a data provider and closer to their customers.  As part of this effort they built data centers around the world to support their objectives and the efforts were highly successful.  That said, the rapidity by which technology advances is now encouraging the company to place their financial data into the cloud supported not by their own technology but by Amazon and the AWS products.

Financial data is highly transacted and Thomson Reuters counts as clients most financial companies of any consequence.   As a result of this implementation to AWS, their clients will gain increased flexibility in how they use data and how clients can develop new products based on this data.   Not only do clients not have to build and maintain their own data centers (obviously they can if they want) but they can build their own applications on AWS which in turn will allow them to be more flexible in how they service their customers.  The model Thomson Reuters is establishing could be revolutionary in the manner in which users manage financial data and service customers. 

"The enhancement to the Elektron Data Platform will initially provide access to real-time data on the secure and scalable Amazon Web Service (AWS) Cloud in North America, with plans to expand to Europe and Asia later this year. With the cloud API, data can be consumed natively on AWS, directed to applications based in other cloud environments, or to an on-premise environment.

As a simplified, conflated real-time service, the real-time in the cloud service can power up to three client applications at three updates per second across 50,000 instruments at the same time, which can be selected from the full universe of over 70 million instruments covered by the Elektron Data Platform."

No less important from this announcement is that by using AWS, Thomson Reuters will be buying in to a set of standards and protocols which will encourage application development, experimentation and likely broader usage.  This will lower the barriers to entry for many existing and new customers.

As the sheer amount of data increases and complexity grows, Thomson Reuters have taken the view that making data accessible can reduce complexity and help companies focus more on the delivery of analytics, machine learning applications and other innovations.   Enabling this without a cumbersome back end technical architecture will be the strategy all data managers will begin to execute.

(Press Release)

Michael Cairns is a business strategy consultant and executive.  He can be reached at michael.cairns@infomediapartners.com for project work or executive roles.  See here for examples of recent work.

12/5/97: Dialog, Tribune, Thomson, Reuters, Reed Elsevier

Summary:
Dialog To Offer Free Services To Investors
Tribune-Review Publishing Company Acquires North Hills News Record And Valley News Dispatch
Advance Publications Inc Newspaper Purchase
United News Considers Selling Regional Papers
Thomson Financial Services' Asian Publishing Business Acquires Philip Jay Publishing
Newspapers Expecting 'Strongest Year In A Decade'
L.A. Daily News Goes To Denver Post
Reuters Reorg Big Payday For Shareholders
Simon & Schuster To Feature New Authors On Authorlink.Com
Ziff-Davis
Reed Elsevier

RECENT NEWS:

DIALOG TO OFFER FREE SERVICES TO INVESTORS
DIALOG CORPORATION, the online information company, is to offer some of its services free to armchair investors through a deal with Institutional Investor International (III), the Website operator. The venture, which was planned before MAID and Knight-Ridder Information merged to become Dialog, will give III's 100,000 Internet users free access to headlines and summaries from 4,000 news sources. The limited service, which will include share prices, will be freely available through III's Internet site, http://www.iii.co.uk. Full articles will be available for a £1 charge, with the proceeds split between the two companies. From February, the Website will offer real-time prices from London, New York and Nasdaq, fuelling a free sector which analysts say could challenge the lower end of the market held by the likes of Bloomberg and Reuters. The enlarged Website should be complete within two weeks, when it will become the first service in the world to combine information about pensions, life insurance and stock market prices. Dialog, which draws its customers almost exclusively from large institutions, hopes the move will give it access to small-time investors who may not be willing to pay the basic £6,000 annual subscription for its full service. MAID's new subscriptions tailed off while it was discussing the merger, leading to a third-quarter pre-tax loss of £592,000 (£2.42 million loss), it said yesterday. Sales were £7.37 million (£5.18 million). The loss for the quarter was 0.33p (2.62p loss) per share. NEW YORK, Dec. 1 /PRNewswire/ -- BY SUSAN EMMETT AND FRASER NELSON

TRIBUNE-REVIEW PUBLISHING COMPANY ACQUIRES NORTH HILLS NEWS RECORD AND VALLEY NEWS DISPATCH
PITTSBURGH, Dec. 1 /PRNewswire/ -- On the heels of the opening of its $43 million NewsWorks production center in Marshall Township last month, the Tribune-Review Publishing Company has announced an agreement to acquire two newspaper properties from Gannett Publishing Co., Inc. The North Hills News Record and the Valley News Dispatch, both of which publish evening and Sunday newspapers, join the growing list of newspapers owned by the Tribune-Review Publishing Company. (Three former Thomson newspapers joined the Company in May of this year.) Effective immediately, the newspapers will become subsidiaries of the Company, and Larry Jock, formerly publisher of the Valley News Dispatch, will serve as general manager of both publications. The purchase includes a long-term agreement under which the regional editions of USA Today and Baseball Weekly will be printed at the Company's NewsWorks production center. The Tribune-Review Publishing Company publishes the Tribune-Review, Pittsburgh Tribune-Review, Standard Observer, The Daily Courier., The Valley Independent, Leader Times, and The Dispatch (Blairsville). Source: Tribune-Review Publishing Company

ADVANCE PUBLICATIONS INC NEWSPAPER PURCHASE.
Advance Publications Inc. plans to acquire 23 weekly Ohio newspapers from Sun Newspapers for an undisclosed amount, reported the Associated Press. The deal is to close in January. Advance's newspapers include the Star-Ledger in Newark, NJ. The company also publishes consumer magazines including the New Yorker and Vogue, 36 weekly business journals and owns book publisher Random House.

UNITED NEWS CONSIDERS SELLING REGIONAL PAPERS ----
LONDON -- United News & Media PLC may sell its U.K. regional newspapers, fetching an estimated (STG)400 million ($674 million) or more. United News confirmed that prospective buyers have approached it, but said it may also retain the newspapers, which include the Yorkshire Post. "The board confirms that it has received a number of approaches from third parties indicating their interests in acquiring these businesses," United News said. "The board is considering a range of alternatives, including the further development of its regional newspaper businesses." WJEviaNewsEDGE Copyright (c) 1997 Dow Jones and Company, Inc.

THOMSON FINANCIAL SERVICES' ASIAN PUBLISHING BUSINESS ACQUIRES PHILIP JAY PUBLISHING BUSINESS
(BUSINESS WIRE)--Dec. 3, 1997-- Thomson Financial Services today announced the acquisition of Philip Jay Publishing, which will be folded into its Asian Publishing business. Terms of the agreement were not disclosed. "The acquisition of Philip Jay Publishing is part of our strategy to become Asia's leading financial publisher," said Adam Bryan. "Philip's titles can capitalize on the marketing opportunities presented by our regional and international titles. It also provides us with expertise to create a new range of print-based products to serve our growing customer base in Asia's financial sector. Philip has been very successful in developing a strong client list among the local finance houses, thus providing a good complement to our current customer base in the international financial sector." Reporting into Adam Bryan, newly appointed managing director of Thomson's Asian Publishing business based in Hong Kong, the Philip Jay acquisition provides strong growth opportunities and expanded market reach for the Asian publishing group. Run by local Hong Kong entrepreneur, Philip Jay, the company has been successfully publishing directories on the Asian financial sector for more than seven years. Its core products include The Asia Pacific Securities Handbook, The Greater China Banking Directory, The China Securities Handbook and The Asia Pacific Fixed Income and Debt Securities Directory. Thomson's Asian Publishing operations include such prestigious titles as IFR and IFR Asia, Finance Asia and Thomson Bankwatch. Its offices are located in Tokyo, Hong Kong, Singapore and Malaysia.

NEWSPAPERS EXPECTING 'STRONGEST YEAR IN A DECADE'
Total newspaper ad revenues rose 8.9%, to $29.31 billion, for the first three quarters of 1997 compared to the same period last year, according to an announcement made Tuesday by the Newspaper Association of America. By sector, national ad spending was said to be up for the nine months by 13.48%, to $3.956 billion; retail was up 6.25%, to $13.673 billion; while classified was up 10.72%, to $11.681 billion. "Third quarter growth (7.84%) was slower, as expected, due to the stronger growth in the second half of last year," acknowledged Miles Grove, the NAA's chief economist. "However, when coupled with a longer Christmas season for '97 we can expect the strongest year in a decade," he added. Last year 21.88% of all advertising dollars were spent on newspapers, compared to television's 20.7% share of the market. Mediacentral – Cowles Business Media

L.A. DAILY NEWS GOES TO DENVER POST
The Los Angeles Daily News has been acquired by MediaNews Group, the parent company of the Denver Post. The purchase price was not disclosed. The newspaper had been put up for sale in October by the family of its former owner, the late Jack Kent Cooke, who died in April. The acquisition makes MediaNews the eighth-largest newspaper publisher with 35 dailies and 106 nondailies. The Daily News, which has a circulation of 203,000 weekdays and 218,000 on Sundays, is MediaNews' 12th Californian daily. Observers expected the sale to fetch as much as $200 million to $250 million. At the time the prospective sale was announced, potential buyers were thought to be MediaNews, Rupert Murdoch's News Corp., Orange County Register-parent Freedom Communications and Toronto-based publisher Thomson Corp.

REUTERS REORG BIG PAYDAY FOR SHAREHOLDERS
Reuters announced on Thursday its plans to reorganize the company and return US$2.52 billion in surplus capital to shareholders. In addition the company said it would return up to another $336.2 million in an ongoing stock buyback plan through 1998. The reorg will result in the creation of a new holding company, Reuters Group PLC, which will acquire the existing Reuters Holdings PLC. Separately, in an interview with a Reuters reporter, company CEO Peter Job dismissed industry speculation that he might make an offer for the ailing Dow Jones Markets information services group. "First of all, there is probably a considerable anti-trust problem that would arise ... Secondly ... there is a great overlap in the two businesses," he reportedly said. The shareholder windfall was said to reflect the company's continued success.

ONLINE PUBLISHING NEWS:

FOR ALL YOU BUDDING AUTHORS…..SIMON & SCHUSTER TO FEATURE NEW AUTHORS ON AUTHORLINK.COM
NEW YORK, Dec. 2 /PRNewswire/ -- Simon & Schuster Online has become a key sponsor of Authorlink! (http://www.authorlink.com), the online information service for writers, editors and literary agents. One of the first major book publishers to partner with an online writers' service, Simon & Schuster will create a special section on the Authorlink's site to showcase new book releases, especially those by first-time authors. Authorlink! kicked off the program's first phase in November, with a live link to Simon & Schuster's Consumer Publishing website (http://www.SimonSays.com). Authorlink! is also featuring the newly released, revised edition of JOY OF COOKING through the holidays, to be followed by the special new author section. The 18-month-old Authorlink! has a loyal annual readership of more than 60,000 writers, editors and agents. In addition to featuring major publishing industry news, the site showcases and markets ready-to-publish manuscripts to the publishing industry. The service is currently sponsoring its first International New Author Awards Competition, in which nine New York editors and agents are finalist judges. Simon & Schuster Online, was formed in January 1996, to create a strategy for Simon & Schuster's consumer books and authors on the web. Simon & Schuster Online launched SimonSays.com, (http://www.SimonSays.com), in June 1996. The site, which provides an unparalleled level of reader interaction, is home to Simon & Schuster's Consumer 11,000+ titles and has successfully launched fan areas for many authors and brands including Star Trek Books, Mary Higgins Clark, Clive Cussler, Frank McCourt and most recently Joy of Cooking. SOURCE Simon & Schuster

PEOPLE IN THE NEWS:

Ziff-Davis today announced the promotion of Michael J. Miller to Executive Vice President and Editorial Director of ZD Publishing. Miller, who has been named one of the top computer journalists by Marketing Computers for three years in a row, will also retain his position as the Editor-in-Chief of PC Magazine. At the same time, Ziff-Davis announced the promotion of Kathleen Goodwin to Vice President of Marketing for ZD Publishing, and the expansion of the responsibilities of Tom McGrade, Executive Vice President, Business Operations, to include ZD Publishing's circulation and production departments. Michael Miller Claude Sheer, the President of ZD Publishing, said, "Michael is not only a leader among his peers within Ziff-Davis, he is also a well-respected journalist and industry advocate. PC Magazine has grown to a paid circulation of more than 1,175,000, more than any other computer publication or business magazine. SOURCE Ziff Davis

REED ELSEVIER
Reed Elsevier Inc. named Hans Gieskes president and chief executive of Lexis-Nexis. Reed Elsevier is jointly-owned by Reed International PLC (RUK) and Elsevier NV (ENL). In a press release Monday, Reed said Gieskes has been with the parent company for 19 years, most recently serving as vice chairman of the legal division. Gieskes will continues to lead Lexis Nexis' operations in Europe. DOW JONES NEWS

12/10/97: Reader's Digest, Reed Elsevier, Kluwer, Thomson

Summary
Shareholder Unrest Brewing At Reader's Digest
Dow Jones Teams Up With NBC: Companies Hope to Stem Losses Abroad With TV-Internet Partnership
Wolters Plans Acquisition Of Thomson Publications
Penguin Putnam Inc. Announces Publishing Partnership With DreamWorks SKG
Thomson Financial Publishing to Expand Electronic Commerce Initiatives
Harcourt General Announces Results For Fourth Quarter And Full Year
Reed Elsevier: Update on Trading and on Progress on Proposed Merger with Wolters Kluwer:
National Geographic Chief Quits: John Fahey Moves Up in Society as Reg Murphy Suddenly Moves Out
Wolters Kluwer Reed Elsevier
New York Times Says It Plans Acquisition In 1999

RECENT NEWS

Shareholder Unrest Brewing At Reader's Digest
(Book Publishing Report) A minority shareholder is going forward with its bid to place two candidates on the Reader's Digest board of directors, despite the fact that the company has politely refused its request. Making matters worse for Reader's Digest-which will hold what could be a fractious annual meeting this Friday (12th)-is the fact that shareholder Corporate Value Partners has chosen to conduct its efforts publicly. The shareholder discord is just the latest problem to beset Reader's Digest, which has been struggling to reverse an alarming drop in its financial performance caused by a steadily eroding customer base (BPR, Aug. 18). BPR has learned that Barbara Morgan, senior vice president and editor in chief of the company's Books and Home Entertainment Products division, is leaving the company. The division's operating income sank 37.5% to $201.1 million on revenues that fell 11.9% to $1.85 billion in fiscal 1997, ended June 30. Morgan is the latest in a series of executive departures that began with chief executive officer James Schadt's forced resignation in August. Since then, CFO Stephen Wilson, senior VP of strategic planning Glenda Burkhart, senior VP and general counsel Paul Soden and RD Europe president Martin Pearson have also left.

Dow Jones Teams Up With NBC: Companies Hope to Stem Losses Abroad With TV-Internet Partnership
After a year of talks, media giants Dow Jones & Co. and General Electric Co.'s NBC division announced today that they will form a global television and Internet partnership cementing the brands internationally and tempering losses both companies are experiencing in their overseas operations. The merger will consolidate the two companies' business-news channels in Europe and Asia -- cutting costs and expanding each side's distribution -- while also adding Dow Jones news, and perhaps interviews with its Wall Street Journal reporters, to CNBC's programming in the United States. Dow Jones lost $48 million in its television ventures last year, while NBC 's subsidiary CNBC lost $15 million in Asia. NBC will pay a licensing fee to Dow Jones but did not disclose how much. CNBC will now be known both domestically and internationally as "a service of NBC and Dow Jones. For Dow Jones, the alliance comes at a time when Kann is under intense pressure from the company's board to curtail money-losing operations. Revenue from this deal, as well as the cash from several recent deals to license the well-known market barometer Dow Jones industrial average as a vehicle for the trading of futures and options contracts, will enhance the company's bottom line. But Kann's larger problem, analysts said, is Dow Jones Markets, the real-time news and data service formerly known as Telerate, which is losing market share to competing services run by Reuters Holdings PLC and Bloomberg Financial Markets. Kann announced a controversial plan in January to spend $650 million to revive the ailing unit, which drew the ire of shareholders and certain members of the Bancroft family, which controls 70 percent of the voting shares of Dow Jones stock and has four of the 15 seats on the company's board of directors. After pressure from outsiders and a fresh look at the plan by Dow Jones's board, the company changed course and announced it was "exploring options" regarding Dow Jones Markets, including the sale of the unit. "It has got to be sold," said Michael Price, the influential money manager who holds 4.1 million shares of Dow Jones stock and has been pushing the company since January to sell the flagging unit. Still, one of the things Kann has been criticized for is not doing enough to leverage the Dow Jones franchise as a premiere provider of financial news. Today's deal will help give the company a worldwide television platform to showcase its stories. CNBC will have worldwide television rights to Dow Jones stories and plans to set up studios at the Wall Street Journal's headquarters in the World Financial Center in downtown Manhattan. For NBC , the move strengthens its CNBC subsidiary, which is accessible in 65 million households and is projecting a $100 million profit this year. On the Internet, the Web site run by MSNBC -- an existing NBC -Microsoft Corp. joint venture -- will provide highlights from the Wall Street Journal, flagged under the CNBC/Dow Jones logo. As part of today's deal, Dow Jones acquired a third of MSNBC Business Video, which delivers video clips from corporate speeches and conferences to clients' computers. Both NBC and Dow Jones acknowledged that fourth-quarter earnings may be pinched by restructuring costs related to today's announcement. December 10, 1997 Copyright (c) 1997 The Washington Post Received via NewsEDGE

Wolters Plans Acquisition Of Thomson Publications
AMSTERDAM -- Dutch publisher Wolters Kluwer NV said it agreed to acquire scientific and medical publisher Thomson Science from Thomson Corp. of Canada. Wolters Kluwer didn't provide financial details of the planned transaction. However, the company said it expects the deal to be completed around the end of the year. Wolters said a significant number of Thomson Science's medical publications fit well with those of Wolters' U.S. medical publisher Lippincott-Raven, while its general scientific publications complement those of Wolters Kluwer Academic Publishing. Wolters said the acquisition won't include the German medical and scientific publications of Thomson Science. Wolters Kluwer's core activities include the legal, medical, educational, and other scientific and professional fields. Its principal operations are in the U.S. and eight European countries including Spain, Italy, Germany and France. Copyright (c) 1997 Dow Jones and Company, Inc.

Penguin Putnam Inc. Announces Publishing Partnership With DreamWorks SKG
NEW YORK, Dec. 9 Penguin Putnam Inc. has signed a multi- year strategic license agreement with DreamWorks Consumer Products, it was announced today by Douglas Whiteman, Executive Vice President of Penguin Putnam. The deal grants Penguin Putnam publishing rights for at least the first five animated feature films for DreamWorks Pictures, as well as the option to propose publishing programs for other DreamWorks properties, including live action motion pictures, animated and live action TV programs and direct-to-video films. Penguin Putnam's rights encompass most book formats with a suggested retail price of $4.00 and above. Penguin Putnam is currently working on more than two dozen titles in support of the 1997-1998 motion pictures set for release from DreamWorks Pictures. The first four books shipped in early November and are based on the film Amistad, directed by Steven Spielberg. Penguin Putnam is also developing a range of titles and formats for Small Soldiers (Summer 1998). Directed by Joe Dante (Gremlins, Innerspace) and with special effects from Stan Winston Studio and Industrial Light & Magic (The Lost World: Jurassic Park), the film tells the story of a small town that is overtaken by artificially intelligent toys. Grosset & Dunlap plans six titles, including a movie storybook and a top secret dossier, all capturing the innovative look of the film. In support of DreamWorks' first animated film The Prince of Egypt (Holiday 1998), Penguin Putnam is developing titles in at least a dozen formats, with age-appropriate content for both adults and children, and honoring the ground-breaking animation style of the film. SOURCE Penguin Putnam Inc via Businesswire

Thomson Financial Publishing to Expand Electronic Commerce Initiatives
Thomson Financial Services announced today the acquisition of The EDI Group, Ltd. by its Thomson Financial Publishing unit. Terms of the agreement were not disclosed. The EDI Group is a professional services organization specializing in providing the highest quality research, publication and education services to companies participating in the EDI and Electronic Commerce marketplace. The EDI Group also offers public and private courses in EDI, EC and financial EDI/EFT. In addition, The EDI Group publishes quarterly a professional journal; EDI FORUM: The Journal of Electronic Commerce. Source Businesswire

Harcourt General Announces Results For Fourth Quarter And Full Year
Harcourt General, Inc. (NYSE:H) today reported that its Harcourt Brace publishing businesses achieved strong year-over-year gains in the fourth quarter of fiscal 1997, resulting in a record full-year performance by the Company before non-recurring charges and amortization associated with the acquisition of National Education Corporation (NEC). For the full year, Harcourt General reported that revenues rose 12.2 percent to $3.69 billion from $3.29 billion in 1996. Before NEC-related amortization of goodwill and acquired intangibles and non-recurring charges, operating earnings for the year were $375.7 million, a 9.0 percent increase from $344.7 million in 1996. After $104.1 million in NEC-related amortization of goodwill and acquired intangible assets and $277.2 million in non-recurring charges, the Company had an operating loss in 1997 of $5.7 million. The Company reported a net loss of $115.1 million, or $1.64 per share, for the full year, compared to net income of $190.9 million, or $2.62 per share in 1996. Revenues in the Harcourt Brace publishing operations increased 12.8 percent in the fourth quarter to $398.0 million, while operating earnings were up 22.3 percent to $97.0 million. For the full year, Harcourt Brace publishing revenues increased 14.5 percent to $1.25 billion, with operating earnings before non-recurring charges rising 13.3 percent to $223.1 million.

Reed Elsevier: Update on Trading and on Progress on Proposed Merger with Wolters Kluwer: Reed Elsevier today issues a brief status report on the progress of the proposed merger of Reed Elsevier with Wolters Kluwer and, in line with the practice introduced last year, an update on recent trading and some other material issues. Proposed Merger with Wolters Kluwer: "On 13 October 1997, the Boards of Reed International P.L.C., Elsevier NV and Wolters Kluwer NV announced that they had agreed in principle to propose to their respective shareholders a merger of their businesses. Progress continues to be made in developing the detailed merger proposals. The major steps implemented so far have included relevant employee consultation processes in the Netherlands, as well as the filing of necessary information with the competition authorities in various jurisdictions. "It is expected that, subject to receiving certain regulatory clearances, a circular to the shareholders of Reed, Elsevier and Wolters Kluwer, setting out details of the proposed merger will be issued on 27 March 1998 together with the respective 1997 annual reports. IPC Magazines: "On 27 October 1997, Reed Elsevier announced the possible divestment of IPC Magazines, its UK consumer magazines business. Review of the available options is continuing and if it is decided to pursue such a divestment, it is intended that any transaction would be concluded early in 1998. Update on Reed Elsevier’s Trading: "In September we completed the $447 million acquisition of the Chilton Business Group, a major US business to business publisher. Also, in October, we agreed a merger between Utell, our hotel reservation and representation business, and the US company, Anasazi Inc., which is the leading supplier of technology solutions to the hotel and hospitality market. "Reed Elsevier’s 1997 preliminary results will contain a number of exceptional items, the most significant of which will be substantial provisions in respect of the Reed Travel Group. Since the announcement, on 26 September 1997, of irregularities in circulation claims made by the Reed Travel Group, considerable progress has been made in determining the extent of the misstatements and in developing recompense plans for advertisers in the affected publications. Revised sales and marketing practices have already been introduced and circulation claims are now being rigorously controlled. "It is not possible at this stage in the process to quantify either the full financial effect of the recompense plans or the impact on the future profitability of the Reed Travel Group and the related value of its intangible assets. The exceptional charges will be in relation to the recompense plans, together with a non-cash write-down of intangible asset values. Source: Reed Elsevier

National Geographic Chief Quits: John Fahey Moves Up in Society as Reg Murphy Suddenly Moves Out
The National Geographic Society's chief executive resigned yesterday, only 18 months after taking the top job at the venerable Washington educational and publishing organization. Reg Murphy said he had been planning the move all along and dismissed any suggestions of dissension in his departure. He had been the society's No. 2 executive since 1993. During his tenure, Murphy, 63, a former newspaper publisher, aggressively cut costs and steered the nonprofit society toward profit-making ventures, such as producing dramatic TV movies and starting a chain of National Geographic stores. He also launched new foreign-language editions of the society's famed yellow-bordered magazine in one of the biggest expansion pushes in the publication's 109-year history. The strategic changes made Murphy a controversial figure within the society, a genteel, tradition-bound outfit that has long projected a semi-academic air. Murphy's successor, appointed by the society's board yesterday, is John Fahey, who joined National Geographic just 20 months ago from Time-Life, the direct-marketing arm of Time Warner . Fahey, 45, was recruited by Murphy from Time-Life in Alexandria to run National Geographic Ventures, the for-profit subsidiary Murphy started in 1995. The management changes represent a swift transition at an institution not known for moving quickly. They underscore the ascendancy of executives who've come from outside the organization and have a keener eye on the bottom line. Fahey takes over at a time when the society is in relatively strong shape. Circulation of its flagship magazine, which lost readers throughout much of the 1980s, has stabilized at about 9 million subscribers, who receive the magazine by becoming dues-paying "members" of the society. Its major growth area is its television operations. National Geographic Television produces documentaries and nature programs appearing on NBC and the TBS and Disney Channel cable networks. It has also moved into making dramatic movies for theatrical and broadcast distribution. Its first dramatic offering, "Forbidden Territory: Stanley's Search for Livingstone," was broadcast on ABC Sunday. Copyright (c) 1997 The Washington Post Received via NewsEDGE

Wolters Kluwer Reed Elsevier
The European Union Commission Friday opened a detailed four-month inquiry into the planned merger of Anglo-Dutch publisher Reed Elsevier (N.ELS, U.REE) and Dutch publisher Wolters Kluwer NV (N.WOK), an E.U. source said. Via Newsedge

New York Times Says It Plans Acquisition In 1999
The New York Times Co. said Thursday that it was ``counting on an acquisition to provide considerable future growth'' sometime in 1999. The company also predicted increases in revenues and operating profits, and its stock rose to a 52-week high. ``The next step in our external development plan is to bring an investment banker on board'' to examine potential properties, the company's president and chief executive, Russell T. Lewis, said at a New York conference of investors, sponsored by Paine Webber. But Lewis added that he did not ``anticipate any significant developments in this area until 1999.'' The Times also disclosed that it planned a new section of technology news called Circuits in February and that it would publish seven to nine special one-time sections in 1998. In addition, the company made its earnings predictions, reporting that operating profit for the newspaper group, its largest division, was expected to rise 35 percent from last year to between $430 million and $440 million. The Times also said that earnings before interest, taxes, depreciation and amortization were expected to rise 30 percent, to between $590 million and $600 million. The Times Co., which had revenues of $2.6 billion in 1996, publishes The Boston Globe and 21 regional newspapers in addition to The New York Times, as well as three magazines. The company also operates television and radio stations
Copyright (c) 1997 The New York Times Co. Received via NewsEDGE from Desktop Data, Inc.

Bid Rumors: Reuters & Thomson

The markets are in a tizzy this morning with rumors of PE bids and or approches for AOL, Time Publishing, EMI and Reuters. Even in Australia where media deregulation has just occured media stocks prices are up and will Microsoft buy Yahoo?

Reuters has confirmed that they have been approached by an unnamed third party about a bid for the company which they say may or may not lead to a bid. The most likely 'third-party' is Thomson which would like to add the news and information provider to their existing information (Legal & Regulatory, Financial) platforms. Given the sale of the Learning division - and some announcement about finalists should be imminent - Thomson is itching to spend the money and have been more than forthright about investing in expanding businesses that fit with their long term goals. Reuters does that and more importantly after a troubling effort early in the decade to harness the web and migrate their products to a new platform, Reuters appears to be in an upswing. This must be good news to Thomson.

Reuters shares were up sharply this morning placing a market valuation of over $15bill. While Thomson is expected to get $5.5bill for the Learning division their balance sheet is more than strong enough to complete this acqusisition with relative ease. It is a good job that Reuters CEO Tom Glocer was able to spend some time at Singita recently since he is going to be busy for the next six months.

Reed Elsevier Most Obvious Buy-Out Candidate?

The Times is reporting that Deutsche Bank called Reed Elsevier the publishing sector’s “most obvious buyout target”. The bank has raised its recommendation on the stock to buy. This is how they see it:

The broker argued that Reed shares could be worth up to 780p to a financial buyer. Sums involved in the Thomson Learning deal also suggested that Reed’s sale of its education business could raise £2.2 billion, up from its previous forecast of £1.8 billion, it said. Reed finished up 16p at 675½p.

Certainly the rules have changed somewhat but applying the multiple paid for Thomson Learning to all of Reed is not quite appropriate. Other analysts have suggested that Reed will escape their education foray successfully and the share price for the balance of Reed will escalate because it is currently weighted down by the educational unit. Reed will certainly benefit from the Thomson Learning sale but if you look at the multiple paid for Reuters (an information business) by Thomson the picture is not as glaringly bright if you are concerned with relative price multiples. Either that or Thomson got a real bargain.

DB may have a vested interest here because Pearson has been consistently touted as the most likely PE target. No doubt there is more action to come in this arena.

Thomson Reports Second Quarter

It is reporting day today for a number of publishing companies. Earlier Reed reported decent gains in revenues and profit across business units and later in the day Thomson does the same.

• Revenues increase 11%; organic revenue up 6%
• Operating profit grows 15%; operating profit margin increases in all segments
• Diluted EPS increases to $0.58, from $0.26 a year ago
• Proposed acquisition of Reuters progressing

With the divestiture of Learning Thomson now divides itself into five operating units: Legal, Fiancial, Tax & Accounting, Scientific and Healthcare. Revenues were up sustantially in all segments with the big units Legal and Financial up 9% and 8% respectively. (Organic growth was up 6% and 4%). Double digit gains were seen in Tax (+23%) and Healthcare (+43%) indicating that while much smaller than the larger two units their revenue growth paths will soon materially impact topline revenues.

For the full six month period, revenues are up 11% and operating profit is up 12%. The company also stated that they continued to make significant product line investments and that these results included those investments. Additionally, the company expects to continue to make material improvements to operating margins into the future. CEO, Harrington:

"Building on a solid start to the year, the business continued to gain momentum in the second quarter. We achieved solid growth in revenues, operating profit, margins, and earnings. Organic revenue was up 6%, led by our Legal and Tax & Accounting business segments. “We also continued to make significant progress driving operational efficiencies throughout our company, resulting in a 15% increase in operating profit. Our success was reflected in substantial increases in operating profit margins in each of our business segments, which included the benefits of our THOMSONplus initiatives. THOMSONplus remains on track to generate run-rate savings of $150 million by the end of 2008,”

The company beat by 2cents the prevailing analyst forecast for EPS. The company is not making any detailed forecasts on performance until the Reuters deal is completed only to say things look good.

With respect to Reuters, the company detailed the deal and also noted the regulatory hurdles that the company must make both in the US and Europe.

“Given the complementary nature of the two companies’ businesses and the highly competitive nature of the financial information services industry, we remain confident that the transaction will be approved,” Mr. Harrington said. “Upon completion of the transaction, Thomson-Reuters will be well positioned to capitalize on the positive trends driving growth in our markets. The combined business will also benefit from significantly greater global diversification and a broader and more deeply integrated product mix. We are confident this combination will equip us to meet our customers’ growing needs in an expanding and dynamic worldwide market translating into faster growth and higher profitability.

Thomson Press Release
Bloomberg

Publishing News: Ken Thomson, John Cleese, John Steinbeck, WorldCup

The News:

Ken Thomson dies at 82.
Just a week after Thomson head Richard Harrington suggested the company would consider divesting its educational publishing assets, the company patriarch and son of the founder has died. The company under Mr. Thomson was transformed into a content and electronic publishing giant and both culled low growth assets and added new companies with regularity. The comapny also owns the Global and Mail in Toronto. No news on what his passing will mean for Thomson.

Penguin loose one to the Steinbecks.
Who knew Steinbeck's novels were still in play. Today a judge in California has ruled that the rights to Steinbecks novels should revert to the family. Here is the news report from the LATimes. Additionally, here is a review of what this decision means from a legal perspective.


US World Cup Talking Heads are Horrible.
The US broadcasters are spending a lot of money this time around to broadcast every World cup game. Nevertheless, they still haven't got it right. The broadcasters on ESPN and ABC have been horrible and have rightly come under attack from viewers. Apparently, the NYtimes WC blog is the second most visited part of the times site and the post about the announcers received incredible response. Here is the blog That is not withstanding an hilarious Stephen Colbert report on his expectations for the Worldcup.

I am an England fan and my work days for the next four weeks are organized around the games. Last time in 2002 during a business trip, I watched games in Canada, US and Australia but thankfully this time I am not traveling so much. Univision has announced early viewing figures for the Worldcup and they say it is on track to be the biggest ever - possibly double the level last time. Given the appalling US announcers I would rather listen to the German commentary on Setanta than the US commentary on ABC. Apparently, you can hack the UK websites so you can get the blacked out UK commentary. I haven't tried it.

Cleese to Write History of Comedy;
John Cleese has announced he is retiring from performing and will instead work on writing a history of comedy and teaching as a this one myself.

Borders Announces Lay-Offs:
Their results just aren't good enough.

11/28/97: Thomson, Barns&Noble

Summary:
Thomson Purchases Idd Print Publishing Assets
Comments From Online Bookselling Forum
Matthew Benber Is For Sale
Harold Evans Will Join Mort Zuckerman At Daily News
Barnes And Noble & Amazon.Com

RECENT NEWS:

THOMSON PURCHASES IDD PRINT PUBLISHING ASSETS:
NEW YORK--(BUSINESS WIRE)--Nov. 19, 1997 Thomson Financial Services announced today that it has acquired the print publishing assets of IDD Enterprises, L.P. (IDD), which will be folded into its Securities Data Publishing (SDP) unit. Terms of the agreement were not disclosed. The purchase includes the flagship publication Investment Dealers' Digest, the premier magazine which has covered Wall Street, financial techniques, and organizational strategies for professional financiers for more than 60 years; Mergers & Acquisitions Journal; nine newsletters: Private Equity Week; Private Placement Letter; Mergers & Acquisitions Report; Bank Loan Report; Going Public: The IPO Reporter; Eliot Sharp's Financing News; Web Finance; Asset-Backed Securities Week; and Mortgage-Backed Securities Letter; and two directories: Mutual Fund Directory and Corporate Syndicate Personnel. "The acquisition of this venerable product family complements our existing publishing portfolio and fills out our coverage of the capital markets. This acquisition also provides SDP with significant leverage for expansion in the institutional asset management and equity and debt underwriting markets," stated SDP President and CEO, Bruce Morris.

Part of The Thomson Corporation (TTC), a $7.7-billion company based in Toronto, Thomson Financial Services employs more than 5,500 people in nearly 40 offices around the world. The principal activity of TTC is specialized information and publishing worldwide. In addition, TTC has important interests in newspaper publishing in North America and in leisure travel in the United Kingdom. The Corporation had sales of US$7.7 billion in 1996 and has some 50,000 staff members.

COMMENTS FROM ONLINE BOOKSELLING FORUM (Mediacentral-Cowles Business Media)
Internet bookstores are helping to deliver purchase information to the marketplace, and could soon be wreaking havoc on the concept of foreign rights. But whether they are expanding the customer base for books or simply stealing sales away from other channels is still up in the air, according to panelists at a public forum held last week in New York. Random House president Phil Pfeffer said he sees the emergence of Internet bookselling as "expanding opportunities, not cannibalizing opportunities." Mary Engstrom, VP of publishers affairs for Amazon.com, argued that the Internet is expanding the U.S. book market by providing access to three attractive audiences: customers outside the U.S., consumers living in remote areas of the country where there is no local bookstore, and the new generation of computer-literate and book-shy adults.

Pfeffer said Internet bookstores, as well as the sites operated by publishers themselves, "have a significant influence" on book sales by providing information consumers need to make purchase decisions. At this early point, those sales "more often than not" are still being realized at traditional bricks and mortar bookstores, he said. Engstrom said; at the end of 1996, overseas sales made up 33% of total sales. Online selling and its need for speedy delivery has also expedited the migration toward drop-shipping, a concept that many bookstore owners had heretofore been disinclined to adopt (preferring instead to bring their customers back to the store to pick up orders). Panelists also agreed that Internet bookselling will cause a "major upheaval" in the rights market. "What we have come to know is going to change significantly," Pfeffer said.

The problem has already arisen in the U.K., where "U.S. books are now available next to the U.K. versions, and at lower prices," Freeman noted. And U.K. publishers who "paid a certain fee thinking they own that market" have every reason to be disturbed by the prospect, Freeman said. According to Engstrom, Amazon.com sold at least one copy of more than 80% of all in-print lists at several major publishing houses in the third quarter of 1997. One audience member called the figure "astounding." Amazon.com's commission-based "Associates Program" has 15,000 members that include a variety of small publishers but is comprised mostly of companies outside the book industry, she said.
(Mediacentral-Cowles Business Media)

MATTHEW BENBER IS FOR SALE:
Times Mirror is evaluating business options for legal publisher Matthew Bender & Co and the medical professional publisher, Mosby Inc. Alternatives under consideration include a sale, a spinoff to shareholders and/or swaps for other strategic assets.

ON THE MOVE

HAROLD EVANS WILL JOIN MORT ZUCKERMAN AT DAILY NEWS (Mediacentral – Cowles Business Media)
Harold Evans, the colorful president and publisher of Random House's trade group, will leave the publishing house to head up Mortimer Zuckerman's publications, which include The Daily News of New York, U.S. News & World Report and The Atlantic Monthly. Zuckerman, in naming Evans editorial director and vice chairman on Tuesday, said that Evans would essentially take over a large portion of his duties at the various publications. Evans will have a say in everything from hiring to story ideas to design at the magazines and at The Daily News. The appointment of Evans, a 69-year-old London native, signals that Zuckerman is stepping up efforts to take on The News's tabloid rival, The New York Post, particularly after recent declines in the circulation of The News' thick Sunday paper.

The arrival of Evans into the battle between the papers has the added intrigue of putting him head to head with an old enemy, Rupert Murdoch, who owns The Post. Evans resigned as editor of The Times of London in 1982 after resisting efforts by Murdoch, the newspaper's owner, to force his removal. "I think it tells you that Mort wants an impact player," said Mitchell Moss, the director of the New York University Urban Research Center. "He wants to put The News on the map." Evans leaves Random House, where he ran some of the publisher's most prestigious imprints, with a somewhat uneven seven-year record. While credited with significantly raising the profile of the publishing house, some publishing executives say he lacked the management and business skills required to run an imprint. Several executives said Evans lacked an increasingly essential understanding of the bottom line. Worrying about the business side, industry insiders say, simply was not Evan's strength, though he brought a passion and glamour to the position, enhanced in part by his wife, Tina Brown, the editor in chief of The New Yorker.

"It was not fully understanding the chemistry of the business, rather than not caring," said another executive who also spoke on condition of anonymity. At Random House, Evans was replaced by Ann Godoff, editor in chief of Random House Adult Trade Books and executive vice president of the Random House Trade Publishing Group which includes Random House Adult Trade Books, Villard Books and the Modern Library. Ms. Godoff, who was promoted last summer from editorial director to editor in chief -- a position Evans had previously held -- will carry out Evan's same responsibilities under a different title, president and editor in chief. Net traffic for small bookstores

AND DID YOU KNOW:

Barnes and Noble reported that purchases from the top 10 US publishers had declined to 46 percent from 74 percent three years ago. This represents a significant shift to independents, small publishers and university presses and is reflective of a broadening of consumer interest to what used to be 'fringe' subjects.

Amazon.com and BarnesandNoble.com are competing for an estimated $156MM in on line booksales for the fourth quarter.

8/30/97: KnightRidder, ReedElsevier, John Wiley, Pearson, Thomson, SimonShuster,

Summary:
Petersen Publishing Opens Trading With Strong Day
Knight Ridder sells Dialog:
Reed Travel Launches Probe Into Circulation Overstatements
JOHN WILEY & SONS INC.: Announcing Wiley InterScience
Pearson Appoints Peter Jovanovich to Head Addison Wesley Longman
Anthea Disney named Chairman and CEO of News America Publishing Group
THOMSON Corp
Simon & Schuster
Digital Object Identifier (DOI)

Recent News:
Petersen Publishing Opens Trading With Strong Day:
(Folio: First Day) In its first day of trading as a public company, Petersen Publishing Co.'s stock
closed Thursday at $20.25 per share after opening at $17.50 and hitting a high of $20.625 on the
New York Stock Exchange.

The opening price was barely half the original filing price floated by Claeys Bahrenburg and his fellow investors, who purchased the Los Angeles-based consumer magazine publisher last year for $400 million-plus (Bahrenburg was a former president of Hearst Magazines.) Registration papers filed with the Securities and Exchange Commission underline the 78-title publisher's reliance on its three top publications: For the 12 months ended Dec. 31, 1996, the 1-million circulation Motor Trend, 1.8-million circulation Teen and 800,000-circulation Hot Rod, brought in $32.5 million, $25.8 million and $19.3 million respectively -- combining for 50.1% of Petersen's operating "contribution."

Knight Ridder sells Dialog:
(Media Daily) Knight-Ridder has agreed to sell its database unit, Knight-Ridder Information Inc. (KRII), to London business information publisher M.A.I.D. for $420 million. The sale, expected to be completed in November, would create the world's largest online information service.

KRII's final price tag turned out to be 15% lower than the $500M the unit had been expected to go for (MD, 8/25/97). "This is a business we did not want to lose, but in light of our recent acquisition of four newspapers from the Walt Disney Co., the sale is necessary," said Tony Ridder, chairman and CEO of Knight-Ridder Inc. The Disney newspaper deals had reportedly cost the company a total of $1.65 billion.

Reed Travel Launches Probe Into Circulation Overstatements:
(Folio: First Day) Reed Travel Group company announced that it had detected "irregularities" in RTG circulation statements -- overstatements to advertisers -- dating back to 1991 for its hotel and airline directories, and that this discovery has moved the company to begin "a full investigation."

LONDON (AP-Dow Jones)--Reed Elsevier PLC has appointed Freshfields to lead the team investigating the irregularities at Reed Travel Group. The company had said it discovered irregularities in circulation statements at its Reed Travel Group unit that affect some 500 million GBP ($800MM) in advertising revenues between 1991 and 1996. The Anglo/Dutch publishing company said it will make an unspecified charge against 1997 earnings to meet the cost of compensating advertisers in the affected Reed Travel Group publications.

It will also make a 'substantial' write down of intangible asset values at Reed Travel group.

ONline/New Media News:

JOHN WILEY & SONS INC.: Announcing Wiley InterScience:
(Wall Street Journal) New York, N.Y., September 9, 1997. Charles R. Ellis, President and Chief Executive Officer of John Wiley & Sons, Inc. (NYSE: JW.A and JW.B), the global publishing company, today announced the launch of Wiley InterScience, a service which will provide access to nearly all of the company's more than 400 scientific, technical, medical, and professional journals over the World Wide Web. Searchable contents listings, abstracts, and informative Web sites for the majority of Wiley's journal program, together with open access to the full-text electronic files of 50 journals, are scheduled to go online October 1 in the pilot phase of this initiative. Other journals will have full-text presentation phased in through 1997 and 1998. The company will continue to publish its journals in print as well, and is embarking on this electronic publishing initiative to augment its strengths in scientific, technical, and medical publishing.

Wiley has been collaborating with Zuno, a Mitsubishi Electric Company based in London and Boston, which developed the innovative software application Wiley has used to create Wiley InterScience. Zuno Digital Publisher (ZDP) is a component-based software system for organizing, managing, and publishing information and journals over the Web and gives publishers tools to create new and dynamic electronic products and services for their customers. ZDP is customizable, meaning Wiley has developed its own "look and feel" for the service and has implemented numerous business models for different types of customers and content.

Executive Changes:

Pearson Appoints Peter Jovanovich to Head Addison Wesley Longman:
Pearson plc, today announced the appointment of Peter Jovanovich as chairman and chief executive of Addison Wesley Longman, Pearson' s educational publishing business. He will succeed J. Larry Jones, who is stepping down from the post after 30 years with the company.

Since 1995, Mr. Jovanovich, 48, has been president of McGraw-Hill's Educational and Professional Publishing Group, which comprises all of the company's book publishing worldwide. Under his leadership the company has grown rapidly to become the largest school and college publisher in the world, with a 29% increase in operating profit in the second quarter of 1997.

Anthea Disney named Chairman and CEO of News America Publishing Group
New York, N.Y. -- September 23, 1997 News Corporation has formed a new U.S. publishing entity called News America Publishing Group that will combine HarperCollins Publishers and the Companys U.S. magazine and on-line publishing divisions and has promoted Anthea Disney as its Chairman and Chief Executive Officer, it was announced today by Rupert Murdoch, News Corporations Chairman & Chief Executive, and Peter Chernin, President & Chief Operating Officer.

Disney will oversee the Companys U.S. print and on-line publishing operations, including HarperCollins; TV Guide, the countrys highest circulation weekly magazine; the opinion-leading highly influential political magazine The Weekly Standard; the electronic publishing business including TV Guide Entertainment Network; and new business development in all of these areas.

THOMSON Corp. (Toronto) -- Richard Harrington, 50 years old, was named president and chief executive officer of this publishing and travel-services concern, three months ahead of schedule. Mr. Harrington was expected to assume the new positions Jan. 1, but the appointments were pushed ahead because of Mr. Harrington's success in the temporary position of chief operating officer, a job created in July specifically to groom him for the positions of president and chief executive. The job of chief operating officer no longer exists. Mr. Harrington, who has held several executive positions with Thomson since 1982, succeeds Michael Brown, 62, who becomes deputy chairman at Thomson. Mr. Brown will hold this new position jointly with John Tory, 67, through the end of December, when Mr. Tory will step down. Mr. Tory will remain on Thomson's board after Dec. 31.

Did You Know....

Simon & Schuster is the world's largest English-language, educational and computer book publisher, distributing products to more than 150 countries through an international 25,000-title catalogue handled by sales offices and subsidiaries in 43 countries. Simon & Schuster has international operations in Europe, Asia, Australia, South Africa and Latin America.

The Digital Object Identifier (DOI) is a digital 'License plate number' for intellectual material proposed by the Association of American Publishers. Use of this identifying number will help users track down who owns an item and access whatever further information the owner (publisher) would like to provide. Customers can them purchase the requested information on-line. The DOI consists of three parts:
1. Two part identifying number identifying the publisher and the document
2. An automated directory composed of a computer system that will accurately link an object, be it a book, picture, etc to whomever owns it
3. The databases maintained by the publisher that provide further information (meta data) for the user.
The goal is to create a global internet based system in which publishers and other owners of copyright(s) will regularly tag their peices of intellectual property with DOIs in the way that publishers now use ISBN numbers. The AAP will be presenting their recommendations on the proposed adoption of the DOI standard at the Frankfurt Book Fair in late October. Simon & Schuster among others are expected to trial these recommendations.

End of Newsletter.

MediaWeek (Vol 3, No 5): Google Wave, Reed Elsevier, Lexis/West, Elsevier,

Google Wave could be part of Google's plan to enter the educational market: eSchool News

Raymond Schroeder, director of the University of Illinois’s Center for Online Learning, Research, and Service, said an instant replay of students’ waves answers “the age-old question posed to faculty members: How do you know that everyone contributed to the project?”

“With playback, you can view the wave in time-lapse, blip by blip—even those that are deleted. You can see who contributed what at what time to the wave,” said Schroeder, adding that free access to Wave could be a fiscal godsend for IT officials whose budgets have dwindled over the past two years. “Free is very good,” he said. Schroeder became one of the country’s first campus IT officials to use Google Wave last month when he connected Illinois’s Internet in American Life course with a class from Ireland’s Institute of Technology at Sligo, participating in a wave that focused in the internet’s role in energy sustainability.

Setting Reed Elsevier to rights may mean break up (Times):

Sales remain weak and margins are heading south. Reed urgently needs to catch up on the investment it should have made in its information tools years ago. LexisNexis, its database for lawyers, is losing market share in the giant US legal market to Westlaw, owned by Thomson Reuters. Only Elsevier, its science and healthcare arm, is still growing. Thomas Singlehurst at Citigroup thinks the group as a whole will not return to topline growth until the end of the year.

Reed shares rallied 13% in December but have trailed the wider market by 26% in the past year. Trading at 13 times this year’s forecast earnings flatters its weak earnings profile. What is Erik Engstrom, Smith’s replacement, to do? In these cases, the kitchen sink is the favoured option. Engstrom is not ready with a revival plan yet, so painting a bleak picture of the trading environment and writing off lots of good will should do the trick. The nettle he has to grasp is closing down the remnants of business publisher RBI, where trading is in freefall, and selling off its exhibitions arm. It could raise £1.2 billion and it is essential to pay down its £4 billion debt pile.

With a lack of ideas coming from Reed, analysts are coming up with their own. Claudio Aspesi at Bernstein thinks a complete break-up becomes an option if LexisNexis cannot fight back against Westlaw. That plan has plenty of merit. Selling databases to lawyers and journals to academics has as much in common as the meat trays and cigarette filters that were demerged from each other when Reed chairman Anthony Habgood ran packaging combine Bunzl.

More of the revamped Lexis and West legal database products (Law Tech News):

Online legal research is not an easy activity. An entire industry has grown up around interpreting research needs and finding information for lawyers and their clients. Researchers have to remember where information resides, e.g., which database, and extract relevant documents in a compressed amount of time using Boolean or natural language search strategies, prayers, and perhaps a Ouija board.

Last year, Google Scholar and Public.Resource.Org made legal information more available and easier to search. This year at LegalTech New York, LexisNexis and Thomson Reuters aim to change the way users interface legal research tasks. And these changes, at once, appear to make legal research easier and more effective.

LexisNexis and Thomson Reuters are putting their best assets forward with Lexis for Microsoft Office and WestlawNext, respectively, to bring value to the legal information stored in their repositories and make search easier and more effective for legal professionals. LexisNexis draws on its experience in enabling content-related workflows and the IP in LSA to put legal research in Microsoft Office and SharePoint Server. Thomson Reuters incorporates its work product in digests, headnotes, indices, and more into WestSearch.

ImageSpan teams with Arvato Finance to create a global clearinghouse for digital content (MarinIJ)

ImageSpan connected with Arvato, a Dublin, Ireland-based subsidiary of media giant Bertelsmann, to streamline its LicenseStream service, which wraps a photo with tracking information that allows its owner to identify who is using it on the Web. Arvato operates Payment Lounge, a payment system that takes the money from a licensee and then distributes the proper share of the revenues to the different parties that created or distributed it. "By joining LicenseStream with Arvato Finance's PaymentLounge services we are creating a new category of infrastructure that addresses a monetization gap - an automated content clearinghouse - and generates revenues for content producers and owners in several significant ways," said Iain Scholnick, ImageSpan's chief executive officer.

The company launched LicenseStream in 2008 and it has inked deals with a number of large digital content owners, including the Chicago Tribune newspaper and McEvoy Group, publisher of media properties such as Spin magazine and Chronicle Books. ImageSpan tracks how many times a photo is viewed and thereby can figure out how much money the news site would have to pay the owner of the content.

From the @twitter:

Amazon Said to Buy Touch Start-Up (NYTimes)

Pearson buys Medley to aid FT's move to digital (EveningStandard) Adds more 'premium services' for FT subscribers.

Hachette tells US court: revised Settlement worse than first: (Bookseller)

ScrollMotion tapped by publishers to develop textbook apps for iPad (AppleInsider)

CQPress/Sage launches custom textbook publishing operation for professors. (CQPress) (LibreDigital platform).

Elsevier announce Pageburst (Elsevier)

Thomson Reuters to Divest Health Business

Thomson Reuters announced their intention to divest their $450mm healthcare business yesterday. The business provides data, analytics and performance benchmarking solutions and services to companies, government agencies and healthcare professionals. From their press release:

With leading assets and solutions such as MarketScan, Advantage Suite, Micromedex, CareDiscovery and ActionOI, coupled with expert services and analysis, the Healthcare business provides its customers with solutions to identify savings, improve outcomes, fight fraud and abuse and more efficiently manage their healthcare operations.

The Healthcare business in 2010 had revenues of approximately $450 million and an operating margin comparable to the company’s consolidated margin of 19.3%. Following adjustment for this divestiture by removing Healthcare’s results from ongoing businesses, no material impact is expected to the company’s previously announced 2011 outlook. The company expects the divestiture to close before the end of the year.

This divestiture will result in a realignment of the company’s existing Intellectual Property and Science businesses into a single operating unit of the Professional division. Both are global and support scientific research, discovery and innovation. Details related to the realignment can be found in the “Investor Relations” section of the Thomson Reuters website. Thomson Reuters will provide restated historical financial information on its website, which reflects this realignment and which excludes results from the Healthcare business, early in July and its second quarter reported results will reflect these changes.

Potential acquirers are likely to include private equity backed companies but operating companies interested in the business will include IMS Health, Wolters Kluwer, Reed Elsevier and others. With an operating margin close to 20% and revenues of $450 mm the acquisition is likely to be expensive.

Confusing a Silo with a Business

The strategy of organizing content around a common topic such as legal or medical information is mature in information publishing. As other publishers mimic the strategy of organizing their content into silos they would be wise not to confuse their efforts with community building or market making. Users are interested in accessing validated, useful and important topical information but this could just as easily be web based content as it is published content. Often it is just that.

Whereas information companies formally organized their businesses around topics (medical, tax, legal, etc.) more than 15 years ago they quickly understood that their customers needed more. Initially, it was often the integration across what had been independent databases that produced the most utility for their users and, their early work led to the development of taxonomies, search techniques and applications which enabled work flow integration. But nothing stands still and as the information business continues to evolve what is happening currently in information should be of interest to all publishers. In short, their experience suggests it may be simplistic to believe establishing a silo of content will produce a community of willing publishing consumers.

Having built platforms supporting information products, information companies now recognize that their customers are looking for integration across subject areas. Importantly, the customers are looking for ways to validate a much wider pool (ocean) of potentially useful and important information. To Thomson Reuters (and others) the silo increasingly looks like a pyramid and they have have begun to conceptualize the management of information and data using this framework. In part, this has to do with the excessive growth of information: Increasingly information providers are as useful to their customers as filters of a vast catalog of information as they are providers of tools, techniques and proprietary data. Consequently, information providers are beginning to see themselves providing access to as much content and information as possible - available on their platforms - and then progressively adding value to the consumer as they move up the pyramid in terms of need and application.

At the top of the pyramid are those publisher specific technologies and content that provide the most value to customers. Companies like Thomson Reuters recognize customers have broad needs and thus there is business logic to providing different services at each level of this pyramid as well as integration points with companies outside the Thomson Reuters family. Inherent in this approach is the recognition by Thomson Reuters and others that it may not be possible to operate in a closed environment any longer. The information space is simply too large to organize in the manner in which information aggregated content in the 1990s. The more addressable issue is to provide consumers with the information critical to their needs and filter that information or content such that it is unambiguous.

The lesson for less advanced publishers is that building a concentration around siloed content is not enough; in-fact, aggregating consumer interest and appeal around publishing content will fail unless that concentration includes content from the web, television, radio, newspapers, magazines, etc. which is also organized, validated and served up in the most effective manner for the consumer. Information publishers have been able to evolve their model to support the needs of their professional customers but the consumer market is more anarchic and it remains to be seen whether trade publishers can pull it off. Silos may not be worth the effort.