Class Action Suit: Amazon & Publishers Face Price Collusion

Attorney's Sperling & Slater acting on behalf of three eBook buying plaintiffs are suing Amazon and the "big 5" publishers (Hachette, Macmillan, Penguin Random House, Simon & Schuster, Harpercollins) for eBook price collusion in the Southern District Court in Manhattan.  These plaintiffs are deemed representative of the following class:  

All persons who, on or after January 14, 2017, purchased in the United States one or more eBooks sold by the Big Five Publishers through any other retail e-commerce channel in the United States other than the Amazon.com platform.

The filing alleges that Amazon.com employs anticompetitive restraints to immunize its platform from the negative effects of the Big Five’s inflated eBook prices and that these 'inflated prices' are a result of the imposition by publishers of the agency pricing model.

There are several exhibits in this filing including the following:

As the following chart shows,15 the Big Five’s eBook prices decreased substantially from 2013-2014, as long as the consent decrees prevented the Big Five from interfering with retailer discounts, but they immediately increased their prices again in 2015 after renegotiating their agency agreements with Amazon and have continued to maintain supracompetitive prices

What the above chart seems to be suggesting is that eBook prices from the big five are now at a level comparable to the 2014-15 time period which is when they were lowest.

In their argument the attorneys focus on the use of 'most favored' pricing models which Amazon requires of its vendors. Basically no other vendor (including the publisher) can offer better prices to consumers. Due to this according to the suit, Amazon removes any opportunity for price competition and therefore perpetuates higher (anticompetitive) pricing of eBooks. As follows:

27. Amazon’s and the Big Five’s continued anticompetitive use of MFNs in the United States is astonishingly brazen, given the DOJ’s high-profile enforcement against Apple and the Big Five in 2012 and the EU’s own proceedings against the Big Five and Apple in 2011 and subsequently against Amazon in 2015 for its own use of anticompetitive MFNs in eBook sales. Despite multiple investigations and censure, Amazon and the Big Five have engaged and continue to engage in a conspiracy to fix the retail price of eBooks in violation of Section 1 of the Sherman Act.

28. Amazon’s agreement with its Co-conspirators is an unreasonable restraint of trade that prevents competitive pricing and causes Plaintiffs and other consumers to overpay when they purchase eBooks from the Big Five through an eBook retailer that competes with Amazon. That harm persists and will not abate unless Amazon and the Big Five are stopped; Plaintiffs seek a nation-wide injunction under the Clayton Act to enjoin Amazon and the Big Five from enforcing this price restraint.

29.Amazon’s conduct also violates Section 2. Amazon has obtained monopoly power in the U.S. retail trade eBook market, where it accounts for 90% of all eBook sales. Through its conspiracy with the Big Five Co-conspirators, Defendant Amazon has willfully acquired its monopoly power in the U.S. retail trade eBook through anticompetitive conduct, fixing the retail price of trade eBooks and causing supracompetitive prices for eBooks sold by or through Amazon’s eBook retailer rivals. Such conduct is an abuse of monopoly power in violation of Section 2 of the Sherman Act.

In stating thie case, the attorneys believe that Amazon and its co-conspirators (Big 5 publishers) did not act unilaterally or independently, or in their own economic interests, when entering into these agreements, which substantially, unreasonably, and unduly restrain trade in the relevant market, and harmed Plaintiffs and the Class thereby.

They seek damages in the case due to the higher costs of eBooks purchased.

MediaWeek Report (Vol 13, No 16): Big Mergers - Simon & Schuster, S&P Global, Copyrights & Libraries, Pearson

Bertelsmann buying Simon & Schuster.

No doubt you've read about this acquisition and here are some of the articles.  Many are taking 'it's the Amazon problem' approach:

In The Atlantic: The merger isn't the gravest danger to the business.

NYTimes: The biggest publisher is about to get bigger

The Economist: A biblio-behemoth 

The New Republic: Heading towards monopolistic singularity

In other big media merger news:

WSJ - S&P Global agrees to buy IHS Markit for $44Billion combing two of the largest data suppliers to wall street firms.

Also Benzinga - The merger of the two companies will create a financial data behemoth.

I'm sure that's fine. 

According to Fortune a new copyright champion has arrived from the Internet Archive.  Are publishers on board with this I ask?

For Bailey, the debate is personal. Growing up in an artistic family of modest means on Long Island, she never encountered the Internet until arriving at Brown University in 1995. There, Bailey made friends with a circle of creative types thrilled by the culture and community they discovered on web, from the music-sharing bazaar Napster to blogging platform LiveJournal.

"The Internet seemed like this amazing new thing to distribute knowledge and information," she recalls.

After college, Bailey landed in the midst of New York's cultural elite with a job as an executive assistant to a creative director at magazine giant Conde Naste. But she soon became disillusioned, concluding the publishing industry prioritized money over artistic ideals.

 (Yes, Nast is incorrectly spelled).

Speaking of Random House, here is a good obit of Harold Evans - The Economist

People looked pityingly on him now. That was unbearable, so he left for the United States and a teaching job. His second wife, Tina Brown, soon joined him as editor of Vanity Fair, and he too took up the pen again, editing US News & World Report and founding Condé Nast Traveller before becoming, in 1990, president of Random House. There the copy on his desk was by Gore Vidal and Norman Mailer, William Styron and Richard Nixon, as well as the businessmen, artists and poets he added to the list. The glittering Manhattan literary scene revolved around their garden brownstone, enjoyably so. America performed its reinventing magic, and in 1993 he became a citizen. Yet the country’s deepest effect on him had happened years before, when he visited on a Harkness fellowship in 1956. He was already in love with newspapers; with the smell of printer’s ink, and with Hollywood’s depiction of brave small-town newspapermen standing up to crooks. Papers in America might be slackly edited and poorly designed, but they showed a crusading desire for openness that was still rare in Britain.

Bookstores are struggling but rich folk are buying first editions (Bloomberg)

The market for extremely rare books has been healthy for years, dealers say, but quantifying its ups and downs is difficult, because “if you’re talking about a book with many comparables over time, you’ve missed the top of the market,” says Darren Sutherland, a specialist in Bonham’s rare books department in New York.

“It’s so anecdotal,” agrees Christina Geiger, the head of the books and manuscripts department at Christie’s New York. “Everything depends on the quality of the material.” 

Still, consensus among dealers is that the overall market has sustained itself even as the rest of retail has been thrown into turmoil, and that the peak of the market has soared past many participants’ expectations.

UK University staff urge probe into e-book pricing 'scandal' (BBC)

"It's a scandal. It's public money," she said. "Students are shocked when I tell them just how much it costs to get them their texts.

"People just assume we can get books for the prices they see on Amazon and Kindle. It just doesn't work like that for universities.

"The academic publishing business model is broken, and as you can see from the number of people who have signed the letter we think it is time for an investigation," she said.

Lectures are increasingly having to be designed around what texts are available and affordable, not what is best for learning, Ms Anderson said.

Pearson Creates New Direct-to-Consumer Division (Pearson)

Pearson, the world's leading learning company, today announces the creation of a new direct-to-consumer division as it looks to further strengthen its focus on building a direct relationship with learners around the world.

The new division will be co-led by two senior executives: Ishantha Lokuge joined Pearson from Shutterfly last year and now steps up to the role of Chief Global Product Officer and co-President, Direct-to-Consumer.

 As always, more in my flipboard magazine.

MediaWeek (Vol 6, No 14): Window Cleaners, Museum Stores, Goodreads, Media News + More

Confessions of a window cleaner now back in print and coming from Harpercollins. (Independent):

While the films quickly ran out of steam, the books that inspired them didn't. Written by a former advertising executive called Christopher Wood under the pseudonym Timothy Lea, they ran to 19 titles, and Wood penned a further eight under the name of Rosie Dixon. They were overwhelmingly of their time (and there can be no better excuse), but it seems they are about to have their time again. Over the next 18 months, HarperCollins imprint The Friday Project will reissue all of them as e-books.
Good god, but why?
...
The cast of that film might well wish to quickly forget their involvement in it, much as many associated with the Confessions… films do today. Tony Booth, who played Timothy Lea's brother-in-law, declined an interview (much, you suspect, to his daughter Cherie Blair's relief); likewise Lynda Bellingham and Jill Gascoine, both presumably reluctant to revisit their early, naked screen appearances. Robin Askwith, for whom Confessions… proved a career high point, was prepared to give us an interview, but offered us just 20 minutes of his time in exchange for £500 – a figure greater than he would ever have received for cleaning windows.
There is, however, somebody happy to talk, for free – and that is the author himself. I meet Christopher Wood on a cold Thursday morning in a chic London restaurant. Now 77, Wood, elegant in his tweed jacket and wispy white beard, is terribly well spoken (he pronounces "off" as "orf"), and emits the kind of carefree air so common in older people and so envied by younger ones.

In the not really news category - The Observer notes the success of Museum stores that are popping up everywhere selling all kinds of things. (Observer):

Some of the more creative items appear to have been thought up in several eureka moments. St Paul's Cathedral harvested some of the rubble from recent refurbishments and set it into cufflinks. For £210 owners can now decorate their shirt cuffs with marble from the starburst under its famous dome.

Over at the National Theatre shop, the success of Warhorse – turned into a film directed by Steven Spielberg – led to the offer of a £2,500 half-size replica of the geese puppets used in the stage show, created by the puppeteers who made the originals.

At the Science Museum, shoppers can buy vases shaped as Thomas Edison's iconic light bulb, made from recycled incandescent bulbs. The museum has asked its inventor in residence, Mark Champkins, to create more unique items for it to sell.

However, perhaps leading the way in terms of creativity is the London Transport Museum in Covent Garden. To celebrate London Underground's 150th anniversary, the creative heads there have salvaged luggage racks from old Metropolitan line trains – selling them for £250.

At The Atlantic Jordan Weissmann opines why he thinks Goodreads is so valuable to Amazon.

So Amazon has just bought the ecosystem where many of America's most influential readers choose their books. How exactly they'll use it isn't entirely clear yet. Some have suggested they'll integrate Goodreads into the Kindle experience. Others think that, given the problems Amazon has had with writers buying friendly reviews, they might use the site as an a big cache of trustworthy opinions. As David Vinjamuri put it at Forbes, "Goodreads offers Amazon the ability to transmit the recommendations of prolific readers to the average reader." In any event, there's plenty of value for Amazon to unlock. Assuming, of course, they don't do anything to muck up their new purchase.

The Economist as a quick look at news organizations and concludes:

Where is the good news? Last year local TV stations, especially those in swing states like Florida and Ohio, got a welcome boost from the $3 billion spent on TV advertising during the election. And newspapers are now starting in large numbers to demand payment for their digital content. Pew reckons that around a third of America’s 1,380 dailies have started (or will soon launch) paywalls, inspired by the success of the New York Times, where 640,000 subscribers get the digital edition and circulation now accounts for a larger portion of revenues than advertising.

Boosting circulation revenue will help stem losses from print advertising, since it has become clear that digital advertising will not be enough. For every $16 lost in print advertising last year, newspapers made only around $1 from digital ads. The bulk of the $37.3 billion spent on digital advertising in 2012 went to five firms: Google, Yahoo, Facebook, Microsoft and AOL. Not much Gandhian equality there.

From my Twitter Feed this week.

Scholarly Publishing: Project Muse and Highwire Press Announce Partnership PressRelease
In digital age, library finds difficulty attaching numbers to its value. Topeka CapitalJournal (They buried the lead).
CourseSmart Analytics Is a Bad idea | Inside Higher Ed InsideHigherEd
Amazon Takes on Dropbox With New Desktop File Syncing Wired
Rosetta Stone acquires Livemocha for $8.5m (Nick Summers/The Next Web) TNW
BBC News - Judge rules digital music cannot be sold 'second hand' BBC

Random House: In Dreams of My Data

It would be hard to imagine that a less equal business relationship exists than that between publishers and libraries.  Without even the semblance of discussion, negotiation or consultation Random House did what HarperCollins did last year and imposed a solution to mitigate a problem no one can even prove exists.  The problem: That loaning eBooks from a library is so easy that retail sales will be destroyed.  Curiously, Amazon and Barnes & Noble, both of whom would naturally have a problem with free books, have always been fairly mute about how libraries retain a competitive advantage over these retailing behemoths.

Random House’s solution is to triple down on the price of the book; the logic of the tripling is just as opaque as Harpercollins choosing 26 loans until their books ‘expire’.  As a cop out, Random House suggests that more data is needed and on the delivery of said data they may adjust their pricing accordingly.  Those with rose colored glasses will want to view that as a possibility that they will bring their pricing downwards; but, really?  The whole notion of use-data is both a canard and disingenuous.  For one, I’m not aware of any publisher sponsored research or collaboration (with ALA, OCLC, etc.) where the purpose was to define the library patron and their purchasing behavior.   
It’s not like the behavior hasn’t been there to study for 100 years.   In fact the data is available – certainly not in one database but in three or four; for example, circulation data from an OPAC, bibliographic information from OCLC, psychographic information from GfK Group and retail sales information from BookScam.  What’s missing is the willingness to do the hard work.

Sadly, libraries have very little negotiating leverage or power.  And it’s not like they can go to their cities or states for more money so that they can buy these more expensive eBooks.  What’s the last public sector anything that had their budget raised 300%?  So, libraries are dependent on public outrage and even there most people will shrug their shoulders and move along.  Current ALA President Molly Raphael's statement was part cajoling, part plea – and who can blame her?  There aren’t that many options:

“While I appreciate Random House’s engagement with libraries and its commitment to perpetual access,” Raphael said, “I am deeply disappointed in the severe escalation in ebook pricing reported today. Calling on our history together and our hope to satisfy mutual goals moving forward, the American Library Association strongly urges Random House to reconsider its decision. In a time of extreme financial constraint, a major price increase effectively curtails access for many libraries, and especially our communities that are hardest hit economically.

“Also, ALA appreciates the data gaps that exist, and we commit to work quickly and collaboratively to address this concern. We must have better data to inform decisions that have such wide and deep implications.

Random House did not jump on the band wagon with the other large trade houses when they all went over to the agency model but with this unilateral action they probably have every trade house cheering them on.  Random House is unlikely to ‘make it up in volume’ because most libraries are simply going to buy other publisher’s eBooks (until they go up as well), and I can say categorically – because I have no data to back this up – that they won’t see a corresponding increase in retail sales either.

Any willingness y publishers to really work with public libraries to work out a solution has been spotty at best.  The fact that the prime distribution avenue into the public library segment seems to act as much like a bumbling doofus as it does a concerned partner probably serves the publishers perfectly.  Fellow traveler Eric Hellman perfectly numbers the real issues associated with eBook distribution into public libraries but resolving these to any degree is probably beyond expectation.

MediaWeek (Vol 4, No 52): Year in Review

Looks like I only missed three editions this year:

Week 51: ChromeBooks, Durrell eBooks, Hitchens & Dogs, Unbound & Vogue

Week 50: Khan Academy, Academic Libraries, Harvard Business School, Consumer Reports + More

Week 49: Revamping GED, HS Corporate Marketing, Book Blogging, Pretty Books + More

Week 48: Orwell on Police Actions, Dickens and Economist Book Festival + More

Week 47: Lobbying for On Line Learning, Loan Bubble + More

Week 46: WW I Archive Goes Online, Mrs Beeton's 150, Silicon Valley's Daily, Cookbook Aps +More

Week 45: The New A&R, Problem Biographies, Scan your Books, Education, Libraroes + More

Week 44: Books in Browsers, Photography, Drivel + More

Week 43: Tom Waits, Children's Books, The Booker, "Close the Libraries", Textbooks & Education + More

Week 42: Frankfurt, CS Forester, Martin Amis + More

Week 41: Frankfurt 2011, Indian Authors, Digital Rights,

Week 40: Scholarly Models, Literary Translations, Library usage Data, Fading Creative Class +More.

Week 39: Robert Harris, Dickens, Cultural Decline (or not), Colm Toibin + More

Week 37: Scholarly Publishing, Project Gutenberg, Literary Festivals, Lawsuits, + More

Week 36: Amazon Digital Library, Piracy, Newspaper Disruption, Private Blackboard + More

Week 35: Distance Learning, Libraries and E-Books, Digital Textbooks + More

Week 34: Content Management Systems, Student Knowledge, Textbook Rentals, Archives + More

Week 33: The Chronicle of Higher Ed on the 10th Anniversary of 9/11

Week 32: Digital Storytelling, Report on Graduate Earning Power, Citation of Wikipedia, Forsyth's Jackal + More

Week 31: Financial resutls: Pearson, Wiley, Wolters Kluwer, Reed Elsevier

Week 30: Arundhati Roy, JSTORE Illegal Downloads, Kaplan's $1.6mm Bill, High Journal Prices, Three Rules of Reviewing + More

Week 29: Library of Congress, Bertelsmann, Michelin Guides, Bookstores, P.G. Wodehouse, Education Funding Report + More

Week 28: Hacking May Cost $100mm, Potter's Last-Not so Fast, Blackboard, Harvard & Social Hot water, Catch22 + More

Week 27: ProPublica's Newspaper Apps, Hemingway, EMI + More

Week 26: Books In Print, Journal Publishing, Joyce, Education and Technology, Area 51 and more.

Week 24: Georgia Copyright Case, Blackboard, HW Wilson, David Mamet's PR Campaign + More

Week 23: Romance or Not, Grief in The Killing, The Value of College, Nordic Crimewave + More

Week 22: Patriot Act, ALA Preview, Revolution Writing + More

Week 21: End of World Edition - An Essay on Privacy, Books & Marketing, Libraries + More

Week 20: Ebooks in the Classroom, Writers Life, Libraries Matter, Bob Marley

Week 19: EBooks on Campus, Jeffrey Archer, LexisNexis Sued, Archiving the Web

Week 18: Higher Ed, Author Promotion, Harper Lee, Libraries + Others.

Week 17: Morrissey, King James, Big Content, Sneering at Genres, Hitch, + More

Week 16: Alberto Vitale, Arab Market eBooks, B2B Magazines.

Week 15: Borders, Indigo

Week 14: Long Distance Learning, OpenSource Textbooks, CCC, Harpercollins

Week 13: Bookclub for the Homeless, Plagiarism or "Creative Reuse", Hollywood, Gallimard, Jean Auel

Week 12: Hay Festival, Reviewers, Heart of Darkness, Alice in NYC,

Week 11: UK Copyright, The Killing, History in the UK.

Week 10: Spy Magazine, Hiaasen, Casino Royale, Curious George and Ryan Giggs

Week 9: Information Concierge, Future of Education Publishing, Blackboard, The $16K/mth Sideline, Blurbs,  Marilyn Monroe

Week 8: Demise of Research Libraries, Online Education, Sir John Soane, Cuban Bookfair

Week 7: Underused eBook features, UK Tuition, Mills&Boone, Coin Art

Week 5: Eadweard Muybridge, Open Courseware, Education Aps, Lexis, Mother Russia, Taschen

Week 4: Changing Higher Ed. Book Awards, Pippi, 007, Forecasting Technology, Michael Lewis

Week 3: UK Libraries, Perceptions of US Libraries, Pearson Acquires, Wolters Kluwer Partner, Libraries in the Cloud

Week 2: ISBN Identification, UK Libraries under threat, Historian Hobsbawm, The Internet and Authors

Week 1: Digital Media Experiments, Murakami, Literary Illusion and Political Correction, Predictions, Cliche

MediaWeek (Vol 4, No 40): Scholarly Models, Literary Translations, Library usage Data, Fading Creative Class +More.

Inside Higher Ed interviews author Kathleen Fitzpatrick about her views on scholarly publishing (IHEd):

Although peer review is often portrayed as an institution that arose with the scientific method, Fitzpatrick suggests the roots of peer review were “more related to censorship than to quality control,” serving mainly to concentrate academic authority in the hands of journal editors and, later, their expert reviewers.

While this system created an effective supply-side filter, it was also susceptible to bias, as Douglas Peters and Stephen Ceci demonstrated in a 1982 experiment. Peters, of the University of North Dakota, and Ceci, of Cornell University, took already-published articles in 12 esteemed psychology journals and resubmitted them, changing only the authors’ names and affiliations and the phrasing of the opening paragraphs. Three of the 12 articles were caught by journal editors as duplicates. Of the nine that were not, one was published. The other eight were rejected, most on methodological grounds.

In the days when ink was permanent, printing was expensive, and redressing the flaws of a shoddy published article was tedious, prepublication vetting by a cloister of gatekeepers made more sense, Fitzpatrick argues. These days, technology makes it possible to tap a larger crowd of academics to assess the merits of individual articles. Instead of assigning a few cops to guard the door, Fitzpatrick argues that journals should throw the door open to all comers, then deputize their readers to usher sound articles to a pedestal and banish bad ones to the margins. Scholarly journals would serve their constituencies better “by allowing everything through the gate, and by designing a post-publication peer review process that focuses on how a scholarly text should be received,” she writes, “rather than whether it should be out there in the first place.”

For those interested in literary translations, The Spectator reviews a new book on the world of intepreting and translating (Spectator):

This book fulfils a real need; there is nothing quite like it. Why Translation Matters, by Edith Grossman, is equally well written, but it is limited to the field of literary translation. Steven Pinker’s books about language have been highly praised, but they leave me wondering how closely the author has ever wrestled with any language other than English. And ‘Translation Studies’ as taught in universities is a highly theoretical discipline that is beyond the understanding of most practising translators — let alone of the general public.

Bellos spends a lot of time demolishing misconceptions. Speakers of English tend to think that being monolingual is the norm, and that being bi- or tri-lingual is something rather remarkable. In reality, there are vast areas of the world, e.g. most of India, where it is normal to speak several languages. There has always been surprisingly little translation between the country’s many languages; most people simply learned the languages spoken by their neighbours.

OCLC and OhioLink are doing some interesting things with usage data and also letting interested parties get their gear-head out by playing with the data (PR):

The data used in the report was from a collaborative OCLC-OhioLINK Collection and Circulation Analysis project that joined OhioLINK circulation data with WorldCat bibliographic records to produce a base file of circulation records for nearly 30 million different books. Ninety institutions participated in the study, including 16 universities, 23 community/technical colleges, 50 private colleges and the State Library of Ohio. The size of the combined collection and the number and diversity of participating institutions make this by far the largest and most comprehensive study of academic library circulation ever undertaken.

Perhaps the most fascinating result of the study was a test of the “80/20” rule. Librarians have long espoused the belief that 80 percent of a library’s circulation is driven by approximately 20 percent of the collection. The analysis of a year’s circulation statistics from this study indicates that 80 percent of the circulation is driven by just 6 percent of the collection.

The dataset generated by the project has also been made publicly available under the Open Data Commons Attribution license (an open license) to download for study and research. It is the largest and most diverse set of academic usage data for books ever collected. Because the data analysis described in the report represents only a fraction of what might be done with the data, OhioLINK and OCLC Research made the data publicly available so it could be studied to its full potential and other libraries could correlate it against their own data to determine how it compares with their individual use patterns.

Are we living a fading of the creative class?  Or is this a catalog of woes?  Scott Timberg in Salon takes a look:

A fading creative class — experiencing real pain but less likely to end up in homeless shelters, at least so far, than the very poor — may not offer sufficient drama for novelists, songwriters or photographers.

But journalists themselves have also ignored the human story all around them. In fact, the media — businesses that have been decimated by the Internet and corporate consolidation — have been reticent at telling the tale of this erosion. Good newspapers offer responsible coverage of the mortgage meltdown and the political wars over taxes and the deficit. But it’s easier to find a story about a plucky worker who’s risen from layoff to an inspiring Plan B than it is the more typical stories: People who lose their livelihood, their homes, their marriages, their children’s schooling because of the hollowing-out of the creative class and the shredded social safety net. Meanwhile, luxury coverage of homes, fashions, watches and wine continue to be a big part of magazines and newspapers.

MoneyBall is getting some good press and the people at Slate dig up some of Michael Lewis' articles for the magazine. (Slate)

From the twitter:

Our Ebook Future: The Digital Shift:  PW interviews Random House, Harpercollins and Melville House (PW)

How the Kindle Moved From BlackBerry to iPad: NYT

And in Sport, Lancashire County Cricket club win their first league trophy in 77 years.  Note the one with the big smile holding the cup.  (MEN)  Nice one!

MediaWeek Report (Vol 3, No 45a): Recent Publishers' Financial Headlines- Peason, Hachette, Simon & Schuster

The past few weeks have seen a resurgence of sorts in the fortunes of some of publishing's biggest players. Here is a summary: Pearson noted that their markets were 'subdued' however they continued to produce market gains their competitors probably envy (Press Release):

Demand in some of our markets remained subdued in the third quarter, and the macroeconomic outlook is still uncertain. Even so, Pearson increased sales by 7% and adjusted operating profit 15% in the first nine months of 2010*. All parts of the company continued to perform strongly, with sales growth of 5% in Penguin, 7% in education and 11% at the Financial Times Group. ...

In North America, this strategy enabled us to gain share and grow faster than our market, with sales growth of 5% in the first nine months. Our Higher Education business grew strongly once again. Its market remains healthy (industry sales up 10% in the first eight months, according to the Association of American Publishers) and our leadership in digital learning continues to produce market share gains. More than 3.5m students have enrolled in an online course provided by eCollege in the first nine months, an increase of almost 39% over last year. More than 6.5m college students have registered for our subject-specific digital learning tools (MyLabs), an increase of almost 34%. Our Assessment and Information business remained resilient as we won or renewed a number of contracts including a teacher certification contract in Pennsylvania and student data systems in Utah. The breadth of our School Curriculum business and its strength in digital is enabling us to grow despite weakness in state and local funding and uncertainty around the impact of new Common Core standards. We are planning on the basis that school funding remains under pressure in 2011 and that the total new adoption opportunity will be lower than in 2010. We are accelerating the transformation of our School business, investing to broaden the range of products and services we offer to schools to help them boost student performance and institutional efficiency. Sales in International Education are up 8% after nine months. We are benefiting from strong demand in developing markets and for assessment services, English Language learning in China and digital, while developed markets and school publishing are generally soft. In the first nine months, MyLab registrations outside North America were up almost 40% on the same period last year to more than 460,000. ....

At Penguin, sales are up 5%. Physical retail markets are tough, but are offset for Penguin by strong publishing and rapid growth in eBook sales (which have increased threefold). Penguin continues to lead the industry in innovation in digital publishing, with 16,500 eBook titles now available and a number of children’s apps for bestselling brands. The Fry Chronicles by Stephen Fry became a bestseller in five formats (hardback, ebook, enhanced ebook, app and audio), a publishing first. The fourth quarter is an important selling season in consumer publishing and Penguin has a strong line-up of bestselling authors including Tom Clancy, Patricia Cornwell, Barbra Streisand and Nora Roberts in the US; and Michael McIntyre and Jamie Oliver in the UK.

Hachette (Grand Central Books) reported declines attributed to reduced sales of the Stephanie Meyer 'saga' (Press Release):

As expected, the erosion in sales of Stephenie Meyer's Twilight saga (Twilight, New Moon, Eclipse and Breaking Dawn) had a marked impact on revenue trends not only in the United States, but also in France and the United Kingdom. In France, the postponement of deliveries of secondary school textbooks from the third quarter to the fourth quarter (due to the late announcement of new curriculums) also had a temporarily negative effect. And in Spain, the Education market was more challenging than last year.

After a like-for-like revenue fall of just 4.5% in the first half of 2010, there was a more marked fall (of 6.8%) in the nine months to end September; this was largely due to the sharp decline in the Stephenie Meyer phenomenon and the non-recurrence of the sale of the international rights to the saga, booked in the first half of 2010.

However, revenues for the first nine months of 2010 are slightly ahead of those for the comparable period of 2008, demonstrating the remarkable resilience of the Lagardère group. Numerous literary successes - James Patterson and Nicholas Sparks in the United States, David Nicholls and Sarah Waters in the United Kingdom, and Jacques Attali and Erik Orsenna in France - are testimony to the dynamism of our publishing houses.

Sales of e-books remain strong, accounting for some 9% of revenues in the United States in the first nine months of 2010.

Simon & Schuster (Part of CBS)

For the three months ended September 30, 2010, Publishing revenues decreased 6% to $217.7 million from $230.4 million for the same prior-year period reflecting lower book sales in the adult group from the soft retail market, partially offset by growth in sales of digital content. Best-selling titles in the third quarter of 2010 included The Power by Rhonda Byrne and Obama's Wars by Bob Woodward. For the three months ended September 30, 2010, Publishing operating income increased 11% to $29.4 million from $26.6 million and OIBDA increased 10% to $31.1 million from $28.4 million for the same prior-year period reflecting the impact of cost containment measures, lower royalty expenses and lower production costs from a change in the mix of titles. Nine Months Ended September 30, 2010 and 2009: For the nine months ended September 30, 2010, Publishing revenues decreased 3% to $559.1 million from $573.5 million for the same prior-year period reflecting the soft retail market, partially offset by growth in digital sales of Publishing content. For the nine months ended September 30, 2010, Publishing operating income increased 47% to $44.9 million from $30.6 million and OIBDA increased 36% to $49.9 million from $36.6 million for the same prior-year period reflecting the impact of cost reduction measures and lower production expenses from a change in the mix of titles, partially offset by higher royalty expenses. Restructuring charges of $1.8 million incurred during the nine months ended September 30, 2010 reflect severance costs associated with the elimination of positions.

NewsCorp is done separating out the Harpercollins unit from their other publishing assets. (SeekingAlpha)

McGraw-Hill Education and Professional publishing reported as follows (Press Release):

Education: Revenue for this segment increased by 5.5% to $1.1 billion in the third quarter compared to the same period last year. Including a $3.8 million pre-tax gain on the divestiture of a secondary school business in Australia, the operating profit for the third quarter grew by 19.9% to $357.5 million. Cost controls contributed to the increase in the segment's operating margin to 33.9%, the best third-quarter performance for McGraw-Hill Education since 2007. Foreign exchange rates had an immaterial impact on revenue and operating profit in the third quarter. Revenue for the McGraw-Hill School Education Group increased by 6.7% to $534.7 million in the third quarter versus the same period last year. Revenue for the McGraw-Hill Higher Education, Professional and International Group grew by 4.3% to $520.0 million in the third quarter, compared to the same period last year. A strong performance in the state new adoption market was the major factor in McGraw-Hill School Education Group's third quarter results. The McGraw-Hill School Education Group is on track to capture approximately 30% of the estimated $825 million to $875 million state new adoption market in 2010. In 2009, the state new adoption market was about $500 million. ... In professional publishing, online sales of books and digital products produced solid growth in the third quarter. Double-digit e-book sales were a bright spot in the sluggish retail book market, which continues to be buffeted by difficult economic conditions. More than 5,000 McGraw-Hill professional titles are now available to customers as e-books.

Harlequin a division of TorStar is often beset by forex changes (PR)

Book Publishing operating profit was $23.0 million in the third quarter of 2010, up $0.1 million from $22.9 million in the third quarter of 2009, as $1.4 million of underlying growth offset a negative $1.3 million from the impact of foreign exchange. Year to date, Book Publishing operating profit was $66.1 million, up $3.0 million from $63.1 million last year as $6.2 million of underlying growth more than offset a negative $3.2 million from the impact of foreign exchange. In both the quarter and the year to date, operating results were up in the North America Direct-To-Consumer and Overseas divisions and down in the North America Retail division.

Earlier this month Wolters Kluwer reiterated their full year guidance (PR)

In the third quarter, growth in online and software solutions continued in all divisions. With improving retention rates across the business, subscription revenues, which represent 72% of total revenues, showed improvement over the prior year, especially for electronic revenues. This growth helped to offset the impact of print publishing declines and the continued pressure on advertising and pharma promotional product lines. Book performance improved in the third quarter driven by strong results in legal education and health book product lines. The Health & Pharma Solutions division performed well, with strong growth noted at Clinical Solutions, Ovid, and books. Within Tax & Accounting, new sales and retention rates for software solutions grew at a solid rate which helped offset pressure on print-based publishing. Financial & Compliance Services saw double-digit growth in its audit risk and compliance product lines and cyclical revenues associated with mortgage lending improved in the third quarter. In the Legal & Regulatory division, transactional revenues at Corporate Legal Services continued to grow, reflecting the steady economic recovery underway in the U.S. While online and software products grew globally within Legal & Regulatory, macro economic conditions continue to put pressure on publishing and cyclical product lines such as training, consulting and advertising, particularly within Europe, offsetting the positive trends for electronic revenues.

Repost: Digital Platforms & Distribution

Originally posted April 12, 2007

Over the last 100 years (probably) US publishers have dithered over whether to use their facilities for the exclusive warehouse, fulfillment and distribution of their books or to offer 'publisher services' to other publishers. In recent years we have seen as many large publishers give up publisher services as adopt them. Some publishers think the headaches out weigh the potential marginal income and others in turn believe these publisher service functions to be core strengths and tasks they can leverage.

Recent announcements by Random House and Harpercollins indicate that there will be an application of the physical 'publisher services' model in the digital world. Clearly here the opportunity and the economics will be significantly different than in the physical world. Other players are entering the market as well: Both Ingram and Gardners (UK) have or are entering this segment. Gardners announced today, and will expand on this business opportunity at London Bookfair, a 'digital warehouse' which is "designed to provide a comprehensive range of e-commerce services for booksellers and publishers." Further,

Gardners Digital Warehouse will supply the capability for Publishers to link their existing digital files, eBooks, Audio Downloads, and extended bibliographic content such as ‘search inside’ to Gardners Books range of Internet and high street retailers. Publishers can also utilise a range of digitisation services designed to enable any size of Publisher to create digital content economically and to use it for publicity and eBook sales with all of Gardners customers.

The vast majority of publishers in the UK and US are small and do not have the depth of experience or financial capacity to support their own back office functions which is why 'publisher service' programs by larger publishers and companies like NBS and PGW exist. Similar issues will exist in the digital world and perhaps the financial aspects and the knowledge gap will be even more stark as processes and applications become more technology driven. Regrettably, as digital distribution becomes a basic service it will simply be out of the reach of the less sophisticated publisher. And this is where Harpercollins, Random House and others will step in to offer a range of digital services to support this market.

The issues these publishers will face will be different than those they faced as physical distributors but intuitively I have to believe the margins will be greater and the services they can offer the publishers and authors will be materially better. It is early days yet and the current offerings are fairly basic (not to be critical) but there are some tantalizing possibilities.

Other than the big fiction authors who get loads of attention, marketing money and have brand equity the vast majority of titles go unsupported almost immediately after launch. Successful titles in this environment are often driven by the desire and resourcefulness of the author. Imagine in a digital world where the author can use the digital platform to create their own marketing program, interact with stores and buyers, build communities with consumers and in many ways manage the sales and marketing for their own titles. It will happen. Adding social networking and other interactive 'modules' to the platforms offered by Harpercollins, Random House, Ingram and others will achieve this and I suspect some derivation of these ideas are in the works. The advantages for smaller publishers and authors is the scale that these platforms will offer both in terms of financial considerations and that they will become destination sites for consumers of books.

Agatha Christie

A visit to Hatchards on Piccadilly is always an expensive one. A narrow crowded space with creaky floor boards and a wide curved set of front windows it looks right out of central casting as the quintessential representation of what an old victorian bookstore might have been like. A complete nonsense of course but Hatchard's remains one of the few constant destinations in our infrequent trips to London. The store has a very well curated collection of books and their buyers go deep into categories despite the small location.

Had it not been for Hatchards I wouldn't have seen the collection of Agatha Christie titles that began to trickle out from Harpercollins in 2008 (I think). These 'new' hardcover titles recreate the original published covers and trim size and are now a wonderful 38 volume set. There are more to come I think but he lies a frustration. As far as I can tell the no one is offering to sell the entire set: A consumer has to buy them individually - gambling somewhat that they have them all. Now really, with an author that maybe the world's most popular wouldn't it make some sense to market to this expansive audience a bit more aggressively. These titles are even hard to find on the HC web site. Here would be some examples:

• a complete boxed set
• a mail order version - a new title delivered by mail each quarter from the publisher
• individually boxed titles (sold as a set or separately)
• inscribed editions that allow you to gift the books with an inscription

These are books that are read and re-read and there is no question that some one who buys one of these titles couldn't be induced - without too much difficulty - to buy all of them. Interestingly, I intended to write this post last year after I visited Hatchard's but this year I was again reminded of the continued frustration at not being able by buy all of the titles in one go and the obvious lack of creativity on behalf of the publisher.

MediaWeek (Vol 2, No 45): Money Issue

Several publishers reported earnings this week.

Simon & Schuster (CBS)

Publishing revenues for the third quarter of 2009 increased 2% to $230.4 million from $225.0 million for the same prior-year period reflecting the timing of the release of titles. Best-selling titles in the third quarter of 2009 included Arguing with Idiots by Glenn Beck and Her Fearful Symmetry by Audrey Niffenegger. In constant dollars, Publishing revenues increased 4% over the same prior-year period.

OIBDA for the third quarter of 2009 increased 10% to $28.4 million from $25.8 million for the same quarter last year and operating income increased 14% to $26.6 million from $23.4 million for the same prior-year period primarily due to revenue growth, partially offset by higher write-offs of advances for author royalties.

Hachette (Reuters) and The Bookseller:

Publishing revenues for the nine months to end September 2009 were €1,694m, up 8.3% on a reported basis and 8.8% on a like-for-like basis. Sales grew again in the third quarter of 2009, rising by 5.1% on a like-for-like basis. Other "main growth drivers" in the US included True Compass by Edward Kennedy, Say You're One of Them by Uwem Akpan, Lies My Mother Never Told Me by Kaylie Jones and Malcolm Gladwell's Outliers.

There was further sales growth in the United Kingdom but Spain reported a slight dip, mainly due to lower sales in education, Lagardère said. Lagardère said its publishing business faced "a particularly challenging fourth-quarter comparative", as the success of the Stephenie Meyer saga drove like-for-like sales growth to 6% in the fourth quarter of 2008.

ThomsonReuters (Press Release):

Glocer commented that 'the worse may be over'
Revenues from ongoing businesses were $3.2 billion, a decrease of 2% before currency and 4% after currency. IFRS revenues were down 4% after currency against the prior year period.

Underlying operating profit was up 3% to $711 million, with the related margin up 140 basis points, driven by the benefit of currency, integration-related savings and a continued commitment to strong cost management.

Adjusted earnings per share were $0.43 compared with $0.47 in the third quarter of 2008. The decline was due to higher integration-related spending, which is included in adjusted earnings but not underlying operating profit.

Borders announced that they would close the remaining mall stores by early 2010 (PR):

As part of Borders Group's ongoing strategy to right-size its Waldenbooks Specialty Retail segment and emerge with a smaller, more profitable mall chain in fiscal 2010, the retailer will close approximately 200 mall stores in January, leaving approximately 130 mall-based locations open. The list {of closures} is not final and is subject to change pending finalization of agreements over the coming weeks. Importantly, today's announcement regarding the mall business does not include Borders superstores or the company's seasonal mall kiosk business, which includes over 500 Day by Day Calendar Co. units, among other mall-based retail concepts.

Newscorp reported their results including improved results at Harpercollins (PR):

HarperCollins operating income of $20 million increased $17 million versus the same period a year ago due to higher sales at the Children's and General Books divisions, as well as reduced operating expenses from restructuring efforts in the prior year. First quarter results included strong sales of Where the Wild Things Are by Maurice Sendak, The Vampire Diaries by L.J. Smith and the paperback edition of The Story of Edgar Sawtelle by David Wroblewski. During the quarter, HarperCollins had 47 books on The New York Times bestseller list, including four books that reached the number 1 spot.

Torstar the parent of Harlequin reported (PR):

Book Publishing operating profit was $22.9 million in the third quarter of 2009, up $4.2 million from $18.7 million in the third quarter of 2008, including $2.0 million from the impact of foreign exchange. Year to date, Book Publishing operating profit was $63.1 million, up $9.9 million from $53.2 million in the first nine months of 2008, including $5.1 million from the favourable impact of foreign exchange. Underlying results were up in North America Direct-To-Consumer and down in North America Retail for both the third quarter and year to date. Overseas was down in the quarter but up year to date.

MediaWeek (Vol 2, No 20): Harpercollins, NYTimes, Long Tail,

In the NY Observer this week Debbie Stier from Harpercollins and Harper Studio is asked about social and digital media (Observer):

“Change is easier for some people than for others,” she said. "You know how some people are hoarders and they don't like to throw anything out? I'm the opposite: I get this weird thrill from throwing everything out and having nothing." Ms. Stier is the head of digital marketing at HarperCollins, as well as the associate publisher of HarperStudio, the small imprint there whose stated mission since it formed last spring has been to question conventional industry wisdom concerning advances and returns, and to experiment with untested methods of promotion. Ms. Stier is among the most visible and energetic believers in the idea that publishers must stop relying on critics, journalists and talk show hosts for coverage, and instead start finding creative ways of reaching readers directly through emerging social media tools like Facebook, Twitter, Tumblr, etc.

“I’ve been running down the halls screaming ‘fire’ for a couple of years now, and you know, I feel like it’s only recently that people are starting to hear me,” Ms. Stier said. “It’s hard for me because I’m up here in my own little beehive of exciting stuff, and I forget that there’s a world of people out there in the rest of the industry who don’t believe. But there are definitely pockets of people who do, and those pockets are growing more and more, faster and faster, which is good.”

There is a lot of debate about the merits of the central arguments made by Chris Andersen in The Long Tail - that is, whether there is one. A new report (summarized here) looks at P2P and appears to debunk the Long Tail concept:

A study of P2P music exchanges to be revealed this week suggests that the ailing music business is shunning a lucrative lifeline by refusing to license the activity for money. Entitled "The Long Tail of P2P", the study by Will Page of performing rights society PRS For Music and Eric Garland of P2P research outfit Big Champagne will be aired at The Great Escape music convention tomorrow. It's a follow-up to Page's study last year which helped debunk the myth of the "Long Tail".

Page examined song purchases at a large online digital retail store, which showed that out of an inventory of 13 million songs, 10 million had never been downloaded, even once. It suggested that the idea proposed by WiReD magazine editor Chris Anderson, who in 2004 urged that the future of business was digital retailers carrying larger inventories of slow-selling items was a Utopian fantasy.

Via Mr Nash, here is the link to the whole document. (Link)

The brianiacs at the NYTimes are showing off some of their toys. (Nieman)

The R&D group is obsessed with the ability to seamlessly transition among web-enabled gadgets. They’re not convinced that the future will land on a single, multipurpose contraption — like some sort of Kindle meets Chumby meets Minority Report. Instead, they predict consumers will connect to the Internet through their cars, on their televisions, over mobile networks, and in traditional browsers, while expecting those devices to interact and sync with each other.

Reports in the Guardian from the Journalism Enterprise and Experimentation unconference in sunny Birmingham looked at hyper-local success stories (Guardian):

A session in a break-out room featured James Hatts talking about the London SE1 Community website. James was quite candid about getting different levels of support for the initiative from different organisations. Their patch covers Southwark and Lambeth. Southwark Council have, it seems, for years treated them as a news outlet on an equal footing with the traditional local media. By contrast, SE1 have found it difficult at times to even get Lambeth Council to send them press releases. Similarly, Hatt said that whilst Scotland Yard were forthcoming with information about serious crime in the area, the local police forces were more cagey.

The International Coalition of Library Consortia has weighed in on the OCLC data usage guidelines (ICOLC):

The member consortia endorsing this ICOLC statement add our recommendation to others in the library community calling for OCLC to withdraw the proposed policy and start anew to formulate a record use policy. Most notably we add our support to the January 30, 2009 Final Report to the ARL Board by the Ad Hoc Task Force to Review the Proposed OCLC Policy for Use and Transfer of WorldCat Records. It includes an extended review of the policy and six recommendations. We concur with the ARL report that OCLC develop a new policy based on widespread member library participation with a clear set of goals and explanations as to how the policy will achieve these goals and how member libraries will be affected operationally and legally.

Caroline Pittis from Harpercollins uses BookBusiness magazine to argue publishers must be less reclusive in order to thrive in the social economy (BookBus):

So, how do book publishers add visible value for their authors and consumers in new ways? What needs to change, and perhaps more importantly, what needs to stay the same? As both a publishing “insider” and a frequent reader of publishing’s critics, I am often struck by how the public discussion of these questions is fundamentally different than private ones, how the focus of those inside publishing houses is different from those in the blogosphere. Beyond publishers’ walls, the tremendous value editors and their publishing colleagues provide in helping an author create a publishable work is often unknown. Yet, the vast majority of publishing time and energy go into just this activity—the core of what publishers do.

In the blogosphere, some opine about how hidebound and irrelevant publishers now are, how slow to change and resistant to risks. It makes good copy sometimes—I know I always bite on the most critical headlines first! Rare are the critics, however, who have concrete, insightful, specific suggestions of how to evolve publishing without throwing the baby out with the bathwater. Black-and-white thinking and talk of violent revolution distract many from the natural evolution that is both occurring and will likely be more sustaining for the “book” economy in the long run.

Murdoch on the Kindle and Paid Content

From their earnings conference call yesterday (SeekingAlpha):

If it is possible to charge for content on the web, it is obvious from the Journal’s experience. We are now in the midst of a [proper] debate over the value of content and it is clear to many newspapers the current model is malfunctioning. We have been at the forefront of that debate and you can confidently presume that we are leading the way in finding a model that maximizes revenues and returns for our shareholders. I can assure you we will not be feeding our content rights to the fine people who created the Kindle. We will control the prices for our content and we will control the relationship with our customers. Any device maker or website which doesn’t meet these basic criteria on content will not be doing business long-term with News Corporation.
Too many content creators have been passive in the face of obvious violations of intellectual property rights. We rightly hold China and other countries accountable on this important issue. But the violation of these rights is rampant on the web in our own country. Our content is extremely valuable and the violators have recognized that value.
Within the company itself, the very bright people we have at our Slingshot Laboratories are devising clever ways to monetize the content of some of our long established print properties. We will be matching their contemporary expertise and the creation of communities within our traditional -- with our traditional expertise in the creation of content. The [current days of the Internet] will soon be over.

PS: Barely a mention of Harpercollins. A tough 3rdQ means HC will need a very strong 4thQ to finish the year in positive territory. (PublishersWeekly)

Personanondata in Book Deal

A three book deal.

Word on the street has it that the blog Personanondata has signed a three book deal with Harpercollins which is described as a “pretty awesome” deal by company CEO Brian Murray. With details sparse, the person at PND is expected to rehash much of what he has repeatedly written in at least one of the volumes with a study of the etymology of the brand personanondata slated for a later book. “The subject of the second volume is controversial and sometimes subject to embarrassment,” said the author. “Many people are embarrassed to ask about the genesis of the brand Personanondata and simply smile knowingly as though they are in on the joke. Of course this is impossible as no one really knows anything”.

The last volume – which could be completed first – may become the blue print for all introverted children who, when finding themselves intensely interested in reading end up as adults swimming with the big sharks of publishing if only to get their hands on free books. This deal will be remarked upon by all in the industry as a true rule and model breaker that could also revolutionize the supply chain. In contrast to expected industry practice Personanondata will pay Harpercollins an advance of several hundred thousand dollars, “This is a pretty awesome deal”, said Murray. “At this point we just need the cash.” One of the books is scheduled for release in November 2011.

News Corp Reports 2Q

Suggesting headcount reductions were on the way, Rupert Murdoch commented that they don't run fat during their presentation of the company's second quarter numbers. Speaking about cost cutting,

We are taking them out everywhere. I mean, I am at Australia at the moment and the local management is in the process of combining all their back offices between the States and (Inaudible). There are many different processes we are doing. That goes right across the company, which is going to save a lot of people and a lot of money. And there are little things, the Wall Street Journal, there are so many numerous small things. We are combining in the back office, the Wall Street Journal and New York Post, which will eventually save about $7 million, certainly $4.5 million in the immediate future. We have also negotiated -- nearly renegotiated nearly all of our delivery contractors across the whole of United States with a saving just starting now of $5 million a year. And it goes on and on. It seems like we are chiseling away at small things, but they do add up to a lot of money.

Due to a non cash impairment write down the company reported a operating income of loss of $7.6billion versus operating income of $1.4billion in the same quarter last year. Without the impairment charge operating income of $818million was 42% lower than the same period last year. Results were off in all divisions except magazines and inserts.

Commenting specifically on publishing,

Turning to the book publishing segment, second quarter operating income contributions were down $44 million compared to last year. This decline reflects the weaker retail book market, the lack of comparable strong releases versus a year ago and a charge of $6 million for the bankruptcy of a customer.

Conf Call Transcript: SeekingAlpha.

From the company's press release:

BOOK PUBLISHING

HarperCollins operating income decreased $44 million versus the same period a year
ago due to lower sales driven by the weakening retail market as well as a difficult
comparison to a year ago that included strong sales of The Daring Book for Girls by
Andrea J. Buchanan and Miriam Peskowitz, The Dangerous Book for Boys by Conn and Hal Iggulden and Deceptively Delicious by Jessica Seinfeld. In addition, segment profits for the quarter were down due to charges related to the bankruptcy of a major UK distributor.

Second quarter results included solid sales of The Hour I First Believed by Wally Lamb, A Lion Among Men by Gregory Maguire, If You Give a Cat a Cupcake by Laura Numeroff and Multiple Blessings by Jon and Kate Gosselin and Beth Carson. During the quarter, HarperCollins had 50 books on The New York Times bestseller list, including six books that reached the #1 spot.

(The $6mm charge for the bankruptcy would be related to Bertram in the UK).

First half revenues for the publishing group were $620mm versus $736mm in the prior year and operating income was $26mm versus $103mm.

NY Times article on News Corp/Dow Jones.

Fishing Where There's Fish

The news that Nintendo will add book content to their DS product platform may have publishing executives humming the refrain from the King and I - Getting to Know You - as they jet off to Tokyo. I wonder if this isn't an ominous event for content owners: Content producers may run the risk that their content won't be valued adequately by the target users. While the content will be paid for, it is very cheap. The content on offer isn't new (frontlist) but the aggressive pricing will establish a price expectation in the minds of the consumer. It reminds me of the inclusion of 'free' encyclopedia content on early personal computers which destroyed the market for paid versions. Remember, the content at the heart of Encarta didn't approach that of WorldBook or Brittanica but it didn't matter to the users.

The deal with the company that bought us DonkeyKong and SuperMario will deliver the Harpercollins 100 classic book collection. The package of titles includes titles from Shakespeare to Jane Austin and will be sold for £20. (As an experiment, I can't help wondering how successful/indicative this is going to be since the titles are available universally for free download and the target market will know that).

The Nintendo platform has more in common with the iPhone than it does with the dedicated e-Book readers from Sony or Amazon. No one is likely to buy a Nintendo DS for the book content alone but the addition of book content supports Nintendo's strategy for broadening the possible audience for their products. My complaint is that the typical Nintendo user will attribute value to the console and the purchased games but not to the other stuff - even if there is a patry entry fee.

My argument doesn't preclude delivering content via the Nintendo platform (or similar) and I think in the right circumstances it should be encouraged as another distribution option. In truth, while I second guess the tactical implementation I don't disagree with the strategy. Assuming there is a 'phase 2' of the Harpercollins experiment I hope value is communicated effectively in the offfer.