MediaWeek Report (Vol 5, No 22a): Pearson Buys Global English + McGraw-Hill, Cengage, Wiley Education News

Getting to be a recurring story: Pearson buys a language learning company this time Global English located in California.  Pearson paid $90 million.  From the press release:

Founded in 1997 in California, GlobalEnglish is a leading provider of cloud-based, on-demand Business English learning, assessment and performance support software. It serves more than 450 corporate customers, including 20 per cent of the Forbes Global 2000 companies, including General Electric, HSBC, Tata Consultancy Services and Unilever. Its product suite is uniquely suited to serve the needs of global professionals with a comprehensive offering - formal Business English learning coursework, informal and social learning capabilities, performance support tools, an enterprise collaboration platform, a mobile app, assessments and a premium one-on-one coaching service. GlobalEnglish’s Business English content is also entirely focused on the application of Business English to real life business situations such as composing emails and participating in conference calls, and its efficacy is highly rated by global companies and their employees. Approximately 75 per cent of GlobalEnglish’s more than 200,000 active subscribers are in fast growing economies in Latin America and Asia

McGraw Hill announced some executive changes in advance of their Education spin-off (Press Release):

To continue the process of building a world-class team to lead the new education company, the Corporation is appointing Patrick Milano, currently Executive Vice President and Director of the Program Management Office of the Corporation's Growth and Value Plan, to the new position of Chief Financial Officer and Chief Administrative Officer of McGraw-Hill Education.  Mr. Milano, a multi-year veteran of McGraw-Hill, including in the education segment, has successfully led the separation phase of the Growth and Value Plan since last year.  In this new role, he will be responsible for Finance, Manufacturing, Distribution and IT, reporting to Jack Callahan, Chief Financial Officer of The McGraw-Hill Companies, until the new Chief Executive Officer of McGraw-Hill Education is appointed.  Joe Micallef, currently Senior Vice President, Finance and Operations, will work closely with Mr. Milano on standing up McGraw-Hill Education before retiring following a very successful career at the company.  (More)

Cengage announced their Q3 results last month (Press Release)

Revenue for the third quarter 2012 is estimated to be between $335 million and $340 million as compared to $319 million for the same period in the prior year. Excluding National Geographic School Publishing (“NGSP”), acquired on August 1, 2011, revenue for the third quarter 2012 is estimated to be between $325 million and $330 million driven by growth in the higher education market. Domestic Learning revenue, excluding NGSP, is estimated to be $205 million to $210 million, as compared to $194 million for the same period in the prior year.
Adjusted EBITDA for the third quarter 2012 is estimated to be between $67 million and $72 million. The prior year third quarter Adjusted EBITDA of $89.7 million did not include an accrual for incentive compensation, but did include a credit related to a reversal of an accrual for incentive compensation accrued during the first half of fiscal 2011. On a comparable basis to this year‟s third quarter, Adjusted EBITDA for the third quarter of the prior year would have been $65 million.
Excluding NGSP, Adjusted EBITDA for the third quarter 2012 is estimated to be between $70 million and $75 million. Adjusted EBITDA for NGSP is negative for the quarter primarily due to seasonality as well as one-time costs related to achieving synergies from the integration of NGSP into Cengage Learning.

Here is the full 3Q report

In their investor presentation Cengage also provided this update to their debt refinancing effort:

We completed the previously announced amendment and extension of our Credit Agreement whereby we:

• Extended the maturity of $1.3 billion of our existing Term Loan, net of a partial pay down, to July 2017
• Provided for new commitments to maintain the existing $300 million of revolving credit facility availability until April 2017 resulting in a total extended and non-extended revolving credit facility of up to $525 million until July 2013, $300 million thereafter. We also completed our previously announced private placement of $725 million senior secured notes due in April 2020. These notes bear interest at a coupon rate of 11.5% and were issued at par. We used a portion of the proceeds from these notes to pay down $489 million of the extended term loan.

Anyone interested in how the education business is doing will be disappointed in the deck.

In case you missed it Harcourt's "Official Statement" on their bankruptcy (Press Release):

Today, Houghton Mifflin Harcourt filed a “pre-packaged” comprehensive financial restructuring plan that will strengthen the Company financially so we can continue to invest in our business and ensure we are well positioned for the future. This plan, which is supported by the vast majority of our key financial stakeholders, will eliminate $3.1 billion of debt through a debt to equity transaction, and reduce our annual cash interest costs. The Company today lodged voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York. With a more appropriate capital structure to support our strategic plan and business objectives, we will have greater financial flexibility to pursue growth opportunities.

John Wiley released their 3Q results earlier in the month (Press Release):

John Wiley and Sons, Inc. (NYSE: JWA and JWB), a global provider of content and workflow solutions in areas of scientific, technical, medical, and scholarly research; professional and personal development; and education today announced results for the third quarter of fiscal year 2012:

• Revenue growth of 1% including and excluding foreign exchange (or "FX")
• Revenue by segment, including FX:  STMS +3%, P/T -6% and Education +2%
• Adjusted EPS grew 8% to $0.91, or 6% excluding FX.  Growth was driven by top-line results, prudent expense management and lower interest expense and income taxes.
• Shared Services and Administrative Costs excluding FX, were up 3% to $91 million, driven principally by technology spending to support investments in digital products and infrastructure.   
• Outlook:  Reaffirming FY12 revenue guidance of low single-digit growth excluding FX and EPS guidance in a range from $3.15 to $3.20 including the effect of FX and excluding the unusual tax benefits.  
• Acquisition:  In February, Wiley acquired Inscape Holdings, a leading global provider of workplace learning solutions, for $85 million in cash. Inscape will be integrated into Wiley's Professional/Trade business where it will combine Wiley's extensive reservoir of valuable content and its global reach in leadership and training with Inscape's technology, distribution network, and talent expertise, including the innovative EPIC online assessment-delivery platform and an elite network of nearly 1,700 independent consultants, trainers, and coaches. Annually, Inscape generates approximately $20 million in revenue.
• Divestment:  On March 7, 2012, Wiley announced that it intends to explore opportunities to sell a number of its consumer print and digital publishing assets in its Professional/Trade business as they no longer align with the company's long-term business strategy.  Fiscal Year 2011 revenue associated with the assets to be sold was approximately $85 million with a direct contribution to profit, before shared-service expenses, of approximately $6 million.  Assets include travel (including the well-known Frommer's brand), culinary, general interest, nautical, pets, crafts, Webster's New World, and CliffsNotes.  Wiley will re-deploy resources in its Professional/Trade business to build on its global market-leading positions in business, finance, accounting, leadership, technology, architecture, psychology, education, and through the For Dummies brand. 
• Share Repurchases: Wiley repurchased 520,000 shares this quarter at a cost of $23 million.  The Company has 2.9 million authorized shares remaining in its program.

MediaWeek (Vol 2, No 31): Education, Oxfam, e-Readers, Journals

Some of these were on the twitter (@personanondata) this week.

The NYTimes looks at digital content in schools and recognise it is going to come faster to college level than school. (NYT):

Whenever it comes, the online onslaught — and the competition from open-source materials — poses a real threat to traditional textbook publishers.
Most of the digital texts submitted for review in California came from a nonprofit group, CK-12 Foundation, that develops free “flexbooks” that can be customized to meet state standards, and added to by teachers. Its physics flexbook, a Web-based, open-content compilation, was introduced in Virginia in March.
“The good part of our flexbooks is that they can be anything you want,” said Neeru Khosla, a founder of the group. “You can use them online, you can download them onto a disk, you can print them, you can customize them, you can embed video. When people get over the mind-set issue, they’ll see that there’s no reason to pay $100 a pop for a textbook, when you can have the content you want free.”

Publishing sales into the California educational market are way off given the state's budgeting issues (LAT):

California school districts spent at least $633 million on new books in 2007, according to the Assn. of American Publishers. More recent numbers are not available, but a representative of one publishing house who asked not to be named because of proprietary concerns said sales in the state -- the nation's biggest textbook market -- are off by 50% or more.

"We're all seeing a precipitous drop," said John Sipe Jr., vice president of K-12 sales in California for Houghton Mifflin Harcourt.

Fewer than 200 California districts have bought reading/literature texts this year, compared with publishers' typical expectation of 600 to 700, he said.

"This is a staggering difference for our industry," Sipe said.

Long running controversy over high street bookshops run by Oxfam which receive their stock for free. The business also has antiquarian experts on staff who identify the gems that are unknowingly donated to the shops (Telegraph)

It has been estimated that 15 years ago, there were about 3,000 second-hand and antiquarian bookshops in Britain. By 2004, there were only about 1,500 left. Everyone in the trade knows someone who has had to close. In contrast, Oxfam opened its first bookshop in St Giles, Oxford, in 1987. Today, it has 130 outlets in Britain, which make an average of 21 per cent more than the regular Oxfam charity shops.
Working in a second-hand bookshop, it is hard not to be at least a little envious. Last year, Oxfam made £19 million from selling books. Its website boasts that it is the largest retailer of second-hand books in Europe, selling around 11 million books a year. As a charity, it gets an 80 per cent reduction in business rates. It has a slick PR team, it doesn't have to pay for stock and it attracts thousands of volunteers – some of them even celebrities. It can even afford to open shops in prime retail locations: it is common to see bookshops snuggled next to major high street brands, on the Royal Mile in Edinburgh, or in Marylebone in London. The rest of us usually have to make do with less glittering locations.

Video interview with Larry Kirshbaum and Jane Friedman (GalleyCat):

Publishing giants Jane Friedman and Larry Kirshbaum shared a long, candid web video interview with Samantha Ettus--taking a blunt look at the future of publishing.
On the web show, Obsessed with Samantha Ettus, both publishing executives were frank about their leadership. "The truth is I always thought bigger was better. That was one of my mantras. Now what's happened is publishers have a bottom line to protect," explained Friedman, the former CEO of HarperCollins Publishers Worldwide. "And to protect that, they have to publish more and more books just to get that top-line revenue. That is so unhealthy."

Mediapost notes an NPD study on e-Readers:

The study found that 40% of those surveyed were only "somewhat interested" or "not interested at all" in buying an e-reader. How come? Of those who don't want one, 70% said it was because they prefer the feel of an actual book.
Among the 37% who were either "very" or "somewhat" interested in obtaining an e-reader, one of the main factors was the ability to buy and store multiple books, magazines, and newspapers. More than half of consumers were interested in features already offered in current devices like the Kindle's wireless capability and the Sony's Reader's touchscreen.
"Today's e-reader offerings are delivering capabilities that are in demand by consumers," said Ross Rubin, director of industry analysis at NPD, in a statement. "However, some features that could enhance the appeal of more popular content, such as color, remain on the drawing board."

An archived version of a PW hosted discussion on the Google Book Settlement is available (PW):

In a webinar first, the leaders involved with the crafting of the Google Library Project Settlement will share with the publishing industry the benefits of the agreement for publishers and authors. If approved by the Court in October, the agreement will create one of the most far-reaching intellectual, cultural, and commercial platforms for access to digital books for the reading public, while granting publishers unprecedented opportunities and protections. Presented in collaboration with Google, The Association of American Publishers, and Publishers Weekly, the web session is a must-attend event for publishers everywhere.

Ghostwritten scholarly 'research' papers may be a larger issue than first thought. Afterall, its not something you would promote (NYT):

The ghostwritten papers were typically review articles, in which an author weighs a large body of medical research and offers a bottom-line judgment about how to treat a particular ailment. The articles appeared in 18 medical journals, including The American Journal of Obstetrics and Gynecology and The International Journal of Cardiology.
The articles did not disclose Wyeth’s role in initiating and paying for the work.
Elsevier, the publisher of some of the journals, said it was disturbed by the allegations of ghostwriting and would investigate.The documents on ghostwriting were uncovered by lawyers suing Wyeth and were made public after a request in court from PLoS Medicine, a medical journal from the Public Library of Science, and The New York Times.