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.

The Baked Beans Are Off - Ideas on What Scale Means (And reference to Simon & Schuster/Penguin Random House)

One of the themes at BookExpo 2013 is about scale in publishing and how this concept has and is changing within our industry.  I was reminded of this post from July 2010 on that topic:


When I joined Macmillan, Inc in 1989 the company was rounding out the decade nicely having gone from losing over $1mm per week and a share price less than $2 in 1980 to one sold to Robert Maxwell for 19x earnings and $92 per share. Application of economies of scale helped build Macmillan to a $2billion publishing conglomerate where each newly acquired publishing company was just ‘more beans for the baked bean company’ which was how senior executives referred to their “factory acquisition” process. In fact, some of the executives, notably CEO Bill Reilly, had come from industrial manufacturing and had a deep understanding of how to effectively apply scale economies to operations.

All the largest publishing companies were following a similar ‘baked bean’ approach as the industry consolidated: Publishing lists were separated from their original companies and progressively (sometimes immediately) overhead expenses were eliminated as the acquired company was absorbed. At one point, I was tasked with following up on the ROI for a slew of companies acquired over a two year period. This proved difficult because their operations had been so effectively integrated into the parent company that constructing a post-acquisition income statement proved virtually impossible.

Fast forward 20 years and the scale economic model is falling apart for trade publishing. So effective at applying scale to accounting, manufacturing, management, production and other overhead, it is ironic that in the internet world everyone now has access to similar scale benefits. Publishing companies now realize they have achieved scale advantages in the wrong functions. Scale advantage in editorial, marketing, promotion, and content management is almost non-existent to the degree that will ensure competitive advantage, yet these are the functions important to future success. (As an isolated example, I would argue that authonomy.com by Harpercollins represents an attempt to build scale into the editorial process).

We all know seismic change – prevalent everywhere - has to come to the cost structures of publishing companies. Squeezed by downward pricing and potential revenue share models that provide more to authors and contributors, publishers will wonder where the money is going to come from. The scale model that built companies like Macmillan, Inc. is irreparably dead to anyone thinking about the future of publishing. The only way out – and it’s not an easy suggestion – is to recognize that those functions that used to provide scale benefits are no longer doing so and need to be carved out. Some of this has happened in manufacturing where companies like Donnelly and Williams Lea have taken over the manufacturing and production function for companies: Those departments no longer exist at the publisher. Decisions to outsource non-value added functions such as accounting, distribution and fulfillment and information technology must be made as the publisher contemplates their future. Once unencumbered, the real test will be whether publishers can re-work their structures so that they build scale economies in those functions that do provide value: Content acquisition, editorial, marketing & promotion and content licensing and brand building.

There is little evidence that this is happening or that the realization has set in. Instead of seeing a publishing company improve their performance over ten years as Macmillan did in the 1980s, we are likely to see many examples of the exact opposite over the next ten. Will companies rise to the challenge or are they so wedded to the old ‘baked bean’ model that they expect it to go on forever? Clearly, it won’t.

The Baked Beans Are Off

When I joined Macmillan, Inc in 1989 the company was rounding out the decade nicely having gone from losing over $1mm per week and a share price less than $2 in 1980 to one sold to Robert Maxwell for 19x earnings and $92 per share. Application of economies of scale helped build Macmillan to a $2billion publishing conglomerate where each newly acquired publishing company was just ‘more beans for the baked bean company’ which was how senior executives referred to their “factory acquisition” process. In fact, some of the executives, notably CEO Bill Reilly, had come from industrial manufacturing and had a deep understanding of how to effectively apply scale economies to operations.

All the largest publishing companies were following a similar ‘baked bean’ approach as the industry consolidated: Publishing lists were separated from their original companies and progressively (sometimes immediately) overhead expenses were eliminated as the acquired company was absorbed. At one point, I was tasked with following up on the ROI for a slew of companies acquired over a two year period. This proved difficult because their operations had been so effectively integrated into the parent company that constructing a post-acquisition income statement proved virtually impossible.

Fast forward 20 years and the scale economic model is falling apart for trade publishing. So effective at applying scale to accounting, manufacturing, management, production and other overhead, it is ironic that in the internet world everyone now has access to similar scale benefits. Publishing companies now realize they have achieved scale advantages in the wrong functions. Scale advantage in editorial, marketing, promotion, and content management is almost non-existent to the degree that will ensure competitive advantage, yet these are the functions important to future success. (As an isolated example, I would argue that authonomy.com by Harpercollins represents an attempt to build scale into the editorial process).

We all know seismic change – prevalent everywhere - has to come to the cost structures of publishing companies. Squeezed by downward pricing and potential revenue share models that provide more to authors and contributors, publishers will wonder where the money is going to come from. The scale model that built companies like Macmillan, Inc. is irreparably dead to anyone thinking about the future of publishing. The only way out – and it’s not an easy suggestion – is to recognize that those functions that used to provide scale benefits are no longer doing so and need to be carved out. Some of this has happened in manufacturing where companies like Donnelly and Williams Lea have taken over the manufacturing and production function for companies: Those departments no longer exist at the publisher. Decisions to outsource non-value added functions such as accounting, distribution and fulfillment and information technology must be made as the publisher contemplates their future. Once unencumbered, the real test will be whether publishers can re-work their structures so that they build scale economies in those functions that do provide value: Content acquisition, editorial, marketing & promotion and content licensing and brand building.

There is little evidence that this is happening or that the realization has set in. Instead of seeing a publishing company improve their performance over ten years as Macmillan did in the 1980s, we are likely to see many examples of the exact opposite over the next ten. Will companies rise to the challenge or are they so wedded to the old ‘baked bean’ model that they expect it to go on forever? Clearly, it won’t.

Jonathan Galassi Interviewed By Haaretz

Want to know more about Jonathan Galassi and the Macmillan/FSG company then read this article published in Haaretz

"It's really about cutting through the miasma of information to grab the reader's attention. And that is getting harder and harder to do."

Galassi bemoans the way nearly all American papers have cut back their coverage of books. This past Sunday, The Washington Post published the last edition of its Book World as a stand-alone section, leaving The New York Times and the San Francisco Chronicle as two of the few remaining U.S. papers printing separate book-review sections. (In Israel, Haaretz publishes a weekly book review in its Hebrew edition, and the monthly Books supplement in the English edition.)

Galassi suggests that the move is "short-sighted": It may be that book publishers have reduced their newspaper advertising, lowering the profitability of book sections for newspaper publishers, "but you know, a book review is not just about books, it's a forum for discussing ideas, for discussing culture in a different kind of way than you do in other pages." He notes that consumers these days turn to newspapers less for hard news, because they have other sources for immediate news delivery. So newspapers "are much more about context and interpretation." Which is what a good book review section has to offer.

Digital Stuff: Random House, Macmillan, Penguin

On Monday Random House UK announced that they will make as many as 5,000 titles available for previewing on their web site. The application is available currently on everytitle that has an "open the book" icon over the cover image. Random House like other large trade publishers has been in the process of building a digital warehouse of their content for a number of years. This process looks to be well in hand and at RH and other publishers we are likely to see new and interesting applications appear with regularity. The link for the Wingfield title is here. RH has also said the tool will be available to other sites. The Guardian noted that Play.com as well as bloggers and book fans will be able to use the widget.

Other publishers with digitial news includes Penguin who let it be known they will adopt the .epub IDPF standard for ebooks and release all their titles in this format beginning later in the year.

Over at Macmillan they are experimenting in a number of different ways to create extra value with an e-version of a printed work. (At some point they become entirely different of course). This notion is similar to my suggestions in what to do about Amazon.com but the nice people at Thedigitalist actually have an example:

The idea that a special edition eBook can contain marginal material produced before, during, or after a print edition features in two other eBooks to be published by Picador this year. Sid Smith’s China Dreams, which we published in hardback in January 2007 and in paperback in January 2008, will be issued in a uniquely up-to-date edition, in the author’s latest version, with corrections, changes, and new material, and a foreword in which he considers the process of composition and revision. Cliffhanger, by T. J. Middleton (the alias of our established Picador author Tim Binding), takes this idea in the opposite direction: alongside the print edition, which we publish in October 2008, will be an urtext: a composite version of the novel as it was before it was edited here at Picador, with the text in its original form, reinstated and modified scenes and characters, and a radically different ending, also with a foreword by the author explaining the urtext’s conception and the editing process that turned it into Cliffhanger.

I am sure much more to come.

Beah Strongly Denies Any "Poetic License"

Ishmael Beah strongly denies any of the assertions raised in The Weekend Australian's about the accuracy of his memoir/autobio A Long Way Gone. Here is the text of his statement released yesterday on his website.

FARRAR STRAUS AND GIROUX, BOOK PUBLISHERS
19 Union Square West
New York,
NY 10003
January 22, 2008
For immediate release

For months I told Bob Lloyd and The Australian’s reporter, Shelley Gare, through my publisher, my agent, and my adoptive mother, that unfortunately they were wrong, that the man they claimed was my father was not my father, and that my mother and brothers were not alive, as Lloyd claimed. Last week, when The Australian sent reporters to my home in Sierra Leone, they were forced to cknowledge that this has been a hoax.

Now The Australian’s reporters are trying to raise questions about the dates in my book, A Long Way Gone, regarding when the war came to my village. They offer as "proof" a man named Mr. Barry who claims to have been the head of the school I attended when I was young. I have never heard of a Mr. Barry. The principal of my school was Mr. Sidiki Brahima.

The war in Sierra Leone began in 1991. My story, as I remember it and wrote it, began in 1993 when rebels “attacked the mining areas” (my words from the book) in my village while I was away with friends. I never saw my family again. The Australian, presumably, is basing their defamation of me on reports that the Sierra Rutile Mine was closed down by rebels in 1995. But there were rebels in my region, my village, and my life in 1993. They attacked throughout 1993 and 1994 before closing down the mine.

Others from Sierra Leone can bear witness to the truth of my story.

Leslie Mboka, National Chairman of the Campaign for Just Mining in Freetown, was a counselor at Benin Home, the rehabilitation center in Freetown, Sierra Leone, which I entered in January 1996. He told this to my publisher, Sarah Crichton, on the telephone today:

“A gentleman named Wilson was here investigating regarding Ishmael Beah’s book, and I told him emphatically - emphatically- that Ishmael’s accounts are accurate and correct. Wilson was going to Mogbwemo to find out if Ishmael Beah’s family was alive. When he came back to Freetown, he said he couldn’t find anyone alive, and the man who said he was Ishmael’s father was actually just a relative. But then he asked, what about confusion with the dates? And I said, there is no problem with the dates.

The rebels made sporadic attacks on the mining communities between ’93 and ’94, leading up to and in preparation for the major assault in ’95. In fact, military personnel were deployed to the area because there were these sporadic raids. Ishmael was caught in one of the earlier attacks. I told all this to Peter Wilson. I told him everything that Ishmael wrote is accurate and completely factual, and I explained to him what was confusing him. I do not understand what his paper’s agenda is. I do not understand why they are trying to blackmail this brilliant and honest young man.”

Mboka was contacted by The New York Times when they fact-checked the excerpts of my book which they published. His testimony did not appear in The Australian’s reporting.

Beah and Publisher Sticking to it

As noted on Saturday, The Australian newspaper is asking some very pointed questions about material facts in the A Long Way Gone memoir/autobiography written by Ishmael Beah. Reports today in Publishers Lunch and Publisher's Weekly have not shed anymore light on the issue. Beah has written to the editor of The Australian (but it hasn't been printed) and the author, publisher and agent all stand by the story.

This article takes the questions minutely forward from the earlier two articles noted in the post below and also contains a quote from the creative writing professor who helped Beah write the book:

Creative writing professor Dan Chaon, who helped Beah produce the book, told The
Australian: "If it turns out there are factual errors, I wouldn't necessarily be all that concerned about it."

In his book, Beah says his home town, the mine where his father worked and his mother's town were all attacked in January 1993. He and a group of friends were then waiting in Mattru Jong for news when a Catholic priest was ordered by the rebels to deliver a message telling people in the town to co-operate with the rebels. Many people fled immediately; two weeks later, the rebels attacked from a surprise inland route, leaving only one unanticipated escape route on a footpath through a nearby swamp.

That is exactly what happened in 1995, according to the adult witnesses, internal records at the mine and numerous published sources.

More than likely there is more to come of this and there is more news expected today from the publisher.

Post: A Thousand Little Pieces?

Is A Long Way Gone Just A Thousand Little Pieces?

An investigation into some of the key facts underlying Ishmael Beah's autobiography A Long Way Gone suggests that his experiences in war torn Sierra Leone may not have happened the way they are described in the book. Among the assertions that The Weekend Australia raises are that Beah was two years older when he went to war than he states in the book (15 versus 13) and instead of being in the army for 2 years it may have been only 2-3mths. There are other factual details that on investigation by The Weekend Australian tend to undercut critical and important facets of Beah's story.

Thus far, there has been no response from Farrar, Straus and Giroux the US publisher and I hope there is some reasonable explanation for the identified problems in this book. Beah has gone on to become a United Nations advocate for children affected by war as well as a frequent spokes person in support of his book. This is important work and it would be horrible if this work were impacted. The Australian is an important news organization in Australia so they will not have taken this story lightly.

The disparities in Beah's account came about through some very elemental research by someone who had just read the book and then found themselves working in Sierra Leone. It doesn't appear that it took too much effort to find these errors. It remains to be seen if this escalates into a Frey type melt down or the record is corrected in some minor inconsequential way.

More from The Australian: Here

Monday Update: Here

Cruising for a Lawsuit

Readers in Australia, UK and New Zealand will not be able to read the new Tom Cruise bio written by Andrew Morton. Fearing a threatened $100mm lawsuit, the Pan Macmillan business units in those countries are backing off. According to the book, Cruise is not gay, is second in command of the church of Scientology and (more bizarrely) his current wife was impregnated with the sperm of Scientology founder L. Ron Hubbard. Through a combination of web reports and Youtube, readers in the UK, Australia and New Zealand will be able to get the essential elements of the book without actually having to buy it. In that respect, they might have an advantage. Having said that, there is so much 'leakage' in the antipodean market that booksellers will continue to import the title direct from the US. The Dymock chain said earlier this week that they would not stock the title but many other retailers are likely to order it.

SMH

Edge Boston (Where they name the author 'Thomas' Morton).

Charkin Goes to Bloomsbury: But What About My Link?

The famous CharkBlog published by Richard Charkin - CEO Macmillan Publishers UK - will be coming to an end as he moves to Bloomsbury Publishing. There he will be executive director responsible for all their operations and he will be a board member. From the press release on his site:

“It is exactly ten years since I accepted the job as Chief Executive of Macmillan and it has been the best ten years of my career. I have been able to work in a company with strong values and traditions owned by a family committed to quality, innovation and autonomy. The decade has seen significant growth in all our diverse areas of publishing and we have been able to do this mainly organically but also with some excellent acquisitions. We are in the middle of a digital revolution and Macmillan has embraced the changes without losing sight of the importance of our authors, our staff, our customers and our history.

He had a link on his site to Personanondata to which I very grateful. I am sure someone else will pick up the Macmillan drum and bang away like Richard and I also believe Richard will start another Blog at Bloomsbury.

5/6/99: BookExpo99, St. Martins, Amazon.com, Primedia, Reuters, Barnes&Noble

Publishing News: May 7, 1999
BookExpo 1999
NuvoMedia, Announces RocketPress
St. Martin's Press Provides Golden With Parachute
Yahoo Life did it now eBay tries the Newstand
Amazon Buys Three Companies
Primedia for Sale
Newspapers are Dead
Fast Company Sale
Reuters Job Action
Miller Freeman Inc. Acquires CMP Media For $920 Million
Selling Books from Vending Machines
Barnes and Noble the Publisher
Economist Privacy Article

This is the last issue of Publishing News. Anyone interested in developing something similar should contact Ian Krantz. Anyone needing to get hold of me can e-mail me at mpcairns@sprintmail.com. Thanks for your support.

BookExpo 1999
At the BookExpo show in Los Angeles, the Book Industry Study Group (BISG) reported that last years trade sales declined for the first time in seven years. This information was in contrast to the popularly held belief that internet or online sales had expanded the market for books generally and further the report indicated that affluent educated readers are buying fewer titles. In the day prior to this announcement, I asked Peter Olson CEO of Randon House (who was participating in a panel discussion) that if the market share of online booksellers was to grow to 20-25% of the market by 2003 as is predicted by BCG and Jupiter Communications where he thought this additional share was going to come from. He responded by saying that he believed online sales were incremental to existing book sales and therefore there would occur limited shift from other traditional outlets. The BISG reported that online selling accounted for 2% of total sales last year and as has been the case over the past five years independent book store sales declined and chain stores saw their share of the market increase.

During the same panel discussion, Michael Lynton – CEO of Penguin Group commented that the current price model for online book selling would almost certainly change and that the biggest risk would be the negative gross margin model. “If someone were to take all front list titles and sell them at a loss this would radically change the model for selling publishing product online.” Such companies sell ‘below the line’ products such as credit cards, services and advertising as sources of income. Priceline.com is the most recent example of a model that didn’t really exist on the web six months ago.

While at the show I also had a conversation with Mike Lovett who is the CEO/President of the Ingram Distribution Company. We spoke about the proposed purchase by Barnes and Noble of the company and he is convinced that the merger will go ahead. “They have interviewed – which is a polite way of saying deposed – many, many B&N and Ingram people over the past six months as well as others in the industry” he commented and that the Justice department he believed were ‘trying their best to understand the publishing industry.’ At this point he thinks that the original issues with the merger have been answered and that there may be some request to reduce operations in certain areas but for them it wouldn’t be a big deal. I would think that the transcripts from this review would be interesting reading for anyone interested in this industry.

At the BookExpo show, a company named On Demand Machine Corp displayed a book printing system that can print and bind a standard trade paper back in a machine which measures eight feet by four feet. This machine is designed to fit in a bookstore and can both store electronic titles in its memory and call up additional titles from the company head office via satellite. Customers can order the books, confirm the title is the one they want and purchase using a credit card. The transaction takes a little more than five minutes. The first full implementation is scheduled to take place in June at The Tattered Cover in Denver. My guess is you will see similar machines at Kinkos, Airports and other public places in the not too distant future.

Other interesting comments from panel discussions at BookExpo:
The traditional book distribution channel poses too many problems for some publishers particularly those which are smaller. The difficulty they face is not the risk people will copy their books rather that customers couldn’t find them in the first place. Placing content on the web actually increased sales of the printed product by 30%. National Academic Press and Rough Guides are examples of this. Additionally, McGraw Hill’s Beta Books have been so successful on line (while still generating bookstore sales) that the company is expanding the availability on the internet of non technical titles as well.

Many people commented that the highest risk job in publishing is ‘International Rights Manager.’

Xerox has developed a product that allows the production of a book anywhere in the world via web ordering. There will be literally 100,000’s of titles which were previously ‘out of print’ available via print on demand to individuals over the next five years. Additionally, what are now considered ‘non viable’ titles by publishers will also be made available as publishers make publishing investments without the huge investment in large volume printing. Coupled with this, some projections assume that front list sales will decline as a percentage of total sales as back list sales increase.

NuvoMedia, Announces RocketPress NuvoMedia, Inc., the creators of the Rocket eBook, announced the introduction of RocketPress(TM), a turnkey solution that provides a full spectrum of publishing services for RocketEdition(TM) content. With the announcement of this free Web-based feature, publishing companies as well as self-publishing authors can become publishers of RocketEdition titles. The easy-to-use RocketPress works as a free Web-based interface that allows publishers and individuals to control and monitor the publishing process of RocketEditions from end to end. Users can upload manuscripts into RocketEdition format for distribution over the Web; set the price of a publication; determine the timing of a RocketEdition release; list, preview, edit, and withdraw titles; and view and change title information and status. The service also lets users view or download a record of all transactions associated with a RocketEdition title, while affording state-of-the-Web security protection. As with all aspects of the Rocket eBook System, the RocketPress fits into the existing publishing business model, including full support of such necessary details such as territorial rights.
Source: PRNewswire 4/28/99

St. Martin's Press Provides Golden With Parachute Golden Books Family Entertainment and St. Martin's Press last week announced the acquisition of Golden Books Adult Publishing Group by St. Martin's Press. Golden Books has been beset by financial problems recently and this sale required the approval of a US Bankruptcy Court Judge. The transaction will include the Golden Field Guides, Whitman Coin Guides and such successful titles as Stephen R. Covey's "The Seven Habits of Highly Effective Families", Maria Shriver's "What's Heaven?" and "Parents' Magazine Parents Answer Book." Terms of the transaction were not disclosed. St. Martin's Press is one of the seven largest trade publishers in the United States. Based in New York, it publishes more than 1,800 new titles per year through its five publishing divisions. Golden Books Family Entertainment, Inc., is the leading children's book publisher in North America. The Company owns one of the world's largest libraries of family entertainment copyrights and creates, publishes and markets entertainment products for children and families through all media.
Source: Business Wire 4/26/99

Yahoo Life did it now eBay tries the Newstand
In July you will be able to read eBay, the magazine. Krause Publications, a Wisconsin-based publisher, plans to start publishing a monthly magazine planned to help readers navigate the ins and outs of online auctions. Although the name of the magazine is yet to be decided, the name and brand cachet of eBay will be prominent, says the publication's executive editor, Kevin Isaacson. Its tagline will be: Your roadmap to treasures on the Internet. Isaacson says his initial circulation goal is 400,000. Isaacson says Krause has a marketing partnership with eBay, but eBay hasn't invested in the launch of the magazine.
Source: Business Week, 4/22/99

Amazon Buys Three Companies
Amazon.com Inc has agreed to buy three closely held online companies, including rare book and music seller Exchange.com, for a total of $645 million, mostly in stock – don’t ya love that! The site is home to bibliofind.com, which allows users to buy and sell rare books, and musicfile.com, which provides the same service for fans of recorded music and memorabilia. The company employs about 40 people and had secured about $16 million in venture capital, according to an April 5 article in the Boston Business Journal. The two other companies are Accept.com, which is developing ways to simplify online transactions, and Alexa Internet, which offers a free service to help people navigate the Web. The purchases are the latest by Chairman and Chief Executive Jeffrey Bezos to expand Amazon.com's selection of products and services and draw more customers to its Web sites. The retailer two weeks ago agreed to buy LiveBid.com to add live events to its fledgling auction business and recently bought stakes in Drugstore.com and Pets.com, two retailers that operate Web sites.
Source: PRNewswire 4/22/99

Primedia for Sale
Primedia plans to sell its supplemental education group to streamline operations and reduce debt. The company expects to receive $500MM for the group. There was also speculation the company will sell other units separately. In other news Primedia announced it was setting up two autonomous internet companies to deliver integrated consumer and business oriented content derived from their consumer and trade publications. In addition to the content from the existing 350 titles the company plans on using content from its existing 180 print linked web pages. Details of the plans were sketchy with no indication as to how these companies will operate with the existing Primedia properties; however, the company has indicated tha these new internet companies will be entirely separate from Primedia with their own boards of directors and new senior management. Primedia is actively searching for CEO’s for these businesses. The model appears to be the VerticalNet.com model which offers information and business solutions to subscribers across the value chain. Primedia’s stock price rose dramatically on the news at one point going from $13.56 to $18.69.
Newspapers are Dead
Andy Grove, after being invited to speak at the National Association of Newspaper Editors, told them that ‘newspapers are close to death’ – seems a bit harsh given they were paying for his expenses. Grove believes that because the internet offers instant access to the days events that the traditional role of newspapers has disappeared coupled with emerging problems with advertising – particularly classified – newspapers will be out of business in three to five years.

Fast Company Sale
Appears Fast Company is for sale. The company is shopping the title to Conde Nasty, and a couple of other unnamed companies. Mort Zuckermann is looking to reduce his financial commitment to the three year old magazine, which despite being one of the hottest properties in the business is still not making money. (This is not unusual as it generally takes five years for an new publications to turn a profit). Which reminds me… is there any saving the New York Daily News? They have had major problems transitioning to a new printing plant in Brooklyn which is by some counts a year behind schedule, the color presses at said plant don’t work after an investment of $100MM and now a Brooklyn judge has award a union group millions in accrued back pay at a time when new negotiations are to start with journalists over their contracts. The union award (which could cost over $100MM) is being appealed. Stay tuned.

Reuters Job Action
You will not read this on Reuters newswire: Reuters staff (600 of them) recently voted to strike by a 10 to 1 margin. No word on when this would take place.

Miller Freeman Inc. Acquires CMP Media For $920 Million United News plc unit Miller Freeman announced the purchase of CMP, a leading US technology media company, for $39 per share, a net total cash consideration of $920 million. Rumors about the future of CMP have circulated for months and as a result of this sale CMP will become a division of Miller Freeman Inc. Ad pages in the technical pubs sector are declining and are down 14% for the first quarter this year versus last year and according to AdAge CMP’s pages are down 27%. The combination of Miller Freeman's trade show and publishing businesses and CMP's publishing and internet assets will transform Miller Freeman Inc. into one of the leading market-focused business media groups serving the U.S. and global high-tech sector. It will represent over 300 publications, 480 trade shows and conferences, 250 web sites and revenue approaching $1.5Bill. The acquisition also represents a major step forward in Miller Freeman's strategy to become a leading online provider of business-to-business products and services for the technology market. The merged online businesses are expected to achieve revenues of $35 million in 2000, and to grow rapidly thereafter. The acquisition represents a continuation of the consolidation taking place in the trade magazine publishing business. AdAge also commented that Miller Freeman may also IPO the web site CMPnet before the year is out and it seems clear that without the web sites CMP may have been sold for less than $400MM.
Source: PR Newswire 4/29/88

Selling Books from Vending Machines
A proposal I presented five years ago at Berlitz; a company in the UK will begin selling trade paperbacks from vending machines in the next few months. The machines will be located at Airports and Rail Stations in the UK. Heck, if you can sell bait and beer out of them you certainly should be able to sell books. (I only put this in to show how brilliant I am).

Barnes and Noble the Publisher
An original Barnes and Noble publishing title will be reviewed by the New York Times Book Review; a first. Barnes and Noble your everyday publisher, distributor, book retailer – isn’t this illegal in the US? No wonder they are being circumspect about it; apparently the book is not in Books and Print – so booksellers can’t find it and they have not offered it for sale to Ingram (gee I wonder why). At this point the book is only available in Barnes and Noble stores.

Economist Privacy Article
Anyone interested in the issue of privacy on the internet should read the article in this weeks (May 1st) Economist. Scary stuff.

11/7/97: MacmillanUK, Primedia, Reuters, Amazon.com

Summary:
Macmillan, Ltd (UK) name new CEO:
Newspaper Circulation Figures Down
Outlook for Contract (Magazine) Publishing
Expectations for Professional Publishing
K-III Begins New Era; Reports Record Third Quarter; Announces Name Change and Growth Strategy
Charles Siegel Named Chief Operating Officer of K-III Consumer Magazine Division Search Continues for President of Media Group:
Another Celebrity Book Bites (the Dust)
News Corp. Posts a 9.5% Profit Boost For 1st Quarter, Topping Expectations
The Mouth Strikes…TED TURNER
Reuters and Chutzpah:
Amazon.com biggest Penguin Customer
Publish Your Own Book
Golden Books and Disney Licensing
Leading Online News Delivery Services Merge as NewsEdge
Interactive Journal Exceeds 150,000 Mark In Paid Subscribers:
Technology Brief: Easing of Indian Internet Rules

Recent News:

Macmillan, Ltd (UK) name new CEO:
RICHARD CHARKIN, former chief executive of Reed International Books, is to return to mainstream publishing as chief executive of Macmillan, Ltd. Mr Charkin, who will be responsible for all Macmillan companies apart from St. Martin's Press and Macmillan Magazines, succeeds Nicholas Byam Shaw, who is 64 and has worked at Macmillan for 34 years. Mr Byam Shaw will act as deputy chairman of the company and Mr Charkin and John Sargent, chief executive of St. Martin's Press and Ray Barker, managing director of Macmillan Magazines, will report to him. Dieter von Holtzbrinck, of Holtzbrinck, the privately-owned German publishers that bought Macmillan two and a half years ago, will become chairman of Macmillan. (The London Times)

Newspaper Circulation Figures Down:
Circulation figures released on Monday show Sunday sales dropping at many of the biggest Sunday papers. Five of the top eight Sunday editions showed declines according to ABC figures -three of them, The Washington Post, NY Daily News and The Chicago Tribune showed large declines. The Daily News sold 80,000 fewer newspapers for the prior six months than in the year before. Sunday circulation is important to newspapers because a Sunday paper reaps about three times the advertising revenue of a weekday paper. The Daily News, which has the country's sixth-largest weekday circulation, attributed the drop in Sunday readership to a price increase in April, to $1.50 from $1. (Editor and Publisher)

Outlook for Contract (Magazine) Publishing:
USA Today reported on the rise in the number of "lifestyle" magazines with "splashy graphics" that are sponsored by companies like Mercedes-Benz (Momentum) or Philip Morris (Unlimited) Land Rover (LandRover Journal). According to USA Today, "These magazines are a booming business for mainstream publishers. Magazine Publishers of America estimates that contract publishing generates more than $1.3 billion in annual revenue for publishers. There are some ethical issues as these corporate magazines increasingly look like independent magazines. Also, the report says, "Media watchdogs grumble about cozy relations between marketers and publishers." (USA Today, 12B, Nov. 1997)

Expectations for Professional Publishing:
The latest media industry mega-deal between Dutch giant Wolters Kluwer and Reed Elsevier, two of the leading publishers in legal, medical, scientific/technical and business markets, is another sign of strength in one of the segments of the publishing industry showing growth in 1997. Sales of professional books, journals, newsletters and online data are projected to grow 6.3 percent to $11.28 billion in 1997, according to Publishing for Professional Markets: 1997-98: Review, Trends and Forecast, the latest research report from Cowles/Simba Information.

Trade book markets are projected to remain flat this year. The industry reached an estimated $10.62 billion in 1996, up 6 percent from 1995, according to the report. Thomson Corp. was the leading professional publisher, with worldwide sales from professional information at an estimated $3.39 billion in 1996. Legal publishing remains the largest segment of the professional publishing industry, with revenues projected to reach $4.24 billion in 1997, up 5.9 percent from 1996. According to the report, books, online and newsletter/looseleaf are the leading delivery methods for legal information and Thomson is the leading legal publisher-at least until the Reed Elsevier/Wolters Kluwer merger is completed early next year. Scientific/technical is the second largest segment of the industry, followed by medical and business. Journals represent the largest medium for sci/tech information, while books account for the largest portion of medical information sales.

Online and books dominate the business segment. Books are the leading overall medium for professional information, accounting for $4.23 billion, or 37.5 percent of all sales in 1997. Thomson Corp., which generated $725 million in professional book revenues and Times Mirror, which generated $530.4 million, were the leading publishers of professional books in 1996. Journals represented the second-largest segment of the professional publishing industry, followed by online, newsletters/looseleafs, directories and "other" media, which includes some CD-ROM revenues and revenues from miscellaneous media, such as audio and video. The professional publishing industry is projected to grow 6 percent in 1998, 5.8 percent in 1999 and 5.9 percent in 2000, according to the report.

The legal segment is forecast to remain the largest and books will continue to be the leading medium for professional information over the next three years. However, online is forecast to surpass journals as the second-largest medium by 1999. Publishing for Professional Markets, 1997-98 includes an overall ranking of worldwide revenues for leading professional publishers, rankings for the leading publishers in each of the four industry segments-legal, scientific/technical, medical and business, as well as rankings of leading publishers by each major professional publishing medium-books, journals, directories, newsletters/looseleafs and online. In addition, the report provides revenue forecasts through 2000 for each of the four market segments and each major medium and detailed profiles for 34 leading professional and university press publishers. The report costs and can be obtained by calling Bill MacRae at Cowles Simba, or by e-mail at bill_macrae@simbanet.com. Business Editors STAMFORD, CT--(BUSINESS WIRE)--Nov. 3, 1997--

K-III Begins New Era; Reports Record Third Quarter; Announces Name Change and Growth Strategy:
NEW YORK, Oct. 30 /PRNewswire/ -- K-III Communications Corporation (NYSE: KCC), today reported that third quarter sales and EBITDA from continuing operations each increased 15.5% setting new records. The parent company of such prime media brands as Seventeen, Soap Opera Digest, Weekly Reader, Channel One, Ward's Automotive and The World Almanac, also reaffirmed its growth strategy: focus on its fastest growing businesses, complete certain divestitures and change the Company's name to PRIMEDIA. This quarter, the Company begins presenting results from continuing operations which exclude businesses that have been, or will be, divested. "The continuing operations results show our true earnings power," said William Reilly, chairman and chief executive officer. "As just one measure, EBITDA margins were more than two percentage points higher in the nine-month period when the divestitures are removed." Results from Continuing Operations (Excluding businesses divested in or held for sale)

($ millions) 3Q97 % Change 3Q96 9 mos %Change 9 mos 96
Sales $305.7 15.5% $264.8 $884.9 16.1% $762.0
EBITDA $63.4 15.5% $54.9 $192.3 15.1% $167.0
Margin 20.7% 20.7% 21.7% 21.9%


Charles Siegel Named Chief Operating Officer of K-III Consumer Magazine Division Search Continues for President of Media Group:
NEW YORK, Oct. 22 /PRNewswire/ -- William F. Reilly, chairman and CEO of K-III Communications (NYSE: KCC) announced today that Charles Siegel, 51, has been named to the newly created post of chief operating officer for its consumer magazine division. Siegel has held several general management positions at K-III, Simon & Schuster, and Macmillan Publishing Company. Most recently Siegel has been president and CEO of K-III's Newbridge Communications. He will manage the team responsible for the 24 consumer magazines in the K-III Consumer Magazine stable. K-III's consumer magazines include New York, Chicago, Seventeen, Automobile, American Baby, Modern Bride, Soap Opera Digest and Soap Opera Weekly. Siegel will report to K-III chairman and CEO Reilly until a replacement is named for the late Harry McQuillen who was president of the K-III Media Group. A search for a President of the K-III Media Group is still underway. learning and workplace learning), and information (consumer directories and business directories).

Another Celebrity Book Bites (the Dust):
Now you can get Paula Barbieri's book at a steep discount--$9.95, instead of the $23.95 list price. And in plenty of time for stocking stuffing. Barbieri's "The Other Woman," a memoir of her relationship with O.J. Simpson, arrived to a thunderous ho-hum recently, despite a $3-million advance that had been paid to the former model by a confident Little, Brown and Co. Rather than have to take back thousands and thousands of unsold copies, the publisher is offering booksellers a credit on each book sold, allowing them to slash the price. In the business, it's known as "remaindering a book in place"--a polite description for a book that is fizzling. Cowles Business Media

News Corp. Posts a 9.5% Profit Boost For 1st Quarter, Topping Expectations ---- By John Lippman:
Rupert Murdoch's News Corp. posted a better-than-expected 9.5% profit increase for its fiscal first quarter, citing a robust U.S. television-advertising market, and sounded an upbeat note about the current quarter ending Dec. 31. But per-share results fell, reflecting an increase in shares outstanding at the acquisitive Australian company. And pretax operating profit fell 43% at the Filmed Entertainment unit, as the Fox film and TV studio faced a tough comparison with a year-earlier quarter fattened by megahit "Independence Day." For the first quarter, ended Sept. 30, Australia-based News Corp. reported that net income rose 9.5% to US$243 million, or 26 cents an American depository receipt, from $222 million, or 27 cents an ADR, a year earlier. Revenue for the quarter increased 16% to $2.9 billion while cash flow -- earnings before interest, taxes, depreciation and amortization -- for the media giant rose 23% to $436 million. Operating profit before special items was up 7% to $240 million. The Wall Street Journal via Dow Jones

The Mouth Strikes…
TED TURNER, the founder of Cable News Network, yesterday reignited the personal feud with Rupert Murdoch by once again likening the chairman of The News Corporation to Hitler. Mr Turner, in London with his wife, Jane Fonda, was challenged yesterday by William Shawcross, author of an unauthorised biography of Mr Murdoch, whether it was true that he had likened the News Corp chairman to Hitler at a lunch on Monday. "I didn't use that word," said Mr Turner, who added that he had instead likened Mr Murdoch to "the former leader of the Third Reich". Mr Shawcross asked the American media mogul, who is now a vice-president of Time Warner, whether it was "appropriate for a businessman like you ­ who pretends and purports to be working for the benefit of mankind ­ to compare a competitor to Hitler?" "If the shoe fits, wear it," replied Mr Turner, who was in turn accused of a "stupid and cheap shot" by Mr Shawcross. Raymond Snoddy - London Times

Reuters and Chutzpah:
REUTERS, the online information company, is to charge many of its institutional clients for correcting the millennium bug that threatens to paralyze its equipment in the year 2000. The company, which yesterday detailed its approach to the problem, said that clients who need their computers changed overnight or at the weekend could be sent a bill for the privilege. The move marks a distinct break from the industry norm, where companies usually agree that their customers should not be asked to pay for the supplier's failure to plan for the date change. Raymond Snoddy - The London Times.

Amazon.com biggest Penguin Customer:
THE Penguin Group, the publisher owned by Pearson, yesterday said that Amazon.com, the Internet bookstore, may soon be Penguin's largest customer. Michael Lynton, Penguin chairman and chief executive, said that Amazon bought $1 million of books from Penguin last year. This year's total looked likely to be $10 million, and the growth rate was 40 per cent a quarter. Mr Lynton said: "If this current growth continues in the next two to three years, they will probably be our largest customer." More than 90 per cent of Penguin's US backlist sales come from Amazon. The enormous Internet backlist sales, Mr Lynton said, "could be of huge importance to us".

Golden Books and Disney Licensing:
Disney Licensing Deal Will Cost Golden Books At Least $47.7M (Simba/Book Publishing Report) Golden Books Family Entertainment will pay the Walt Disney Co. at least $47.7 million in royalties over the next four years for its recently extended licensing agreement, according to a document the company filed recently with the Securities and Exchange Commission. Golden Books has agreed to pay at least $7.4 million for the period between Jan. 1 and Sept. 30, 1998, then $11.7 million in the second, $13.3 million in the third and $15.3 million in the fourth year of the agreement, the document said. Cowles Business Media

Reed Elsevier Seeking Content Acquisitions:
Calling content "the crown jewel," Dutch multimedia publisher Reed-Elsevier said it is considering snapping up new content partners. Chatting with executives at a Financial Times publishing conference, Reed-Elsevier chairman Nigel Stapleton countered rumors that his firm was on the hunt to buy a software firm, saying "the thing that we're most looking to acquire is more and more content." Reed-Elsevier will be going through a little consolidation itself should its prospective merger with Amsterdam-based publishing giant Wolters Kluwer NV go through. The London Times.

Online Publishing:

Publish Your Own Book:
Nov. 3, 1997-- 1stBooks Champions Aspiring Authors, Bypassing "Gatekeepers" and makes it possible for authors to "publish" their work and still retain full legal ownership and rights. For less than $500, they will digitize an author's book and publish it on the Web, along with a "digital book jacket." This "virtual cover" offers the prospective reader much the same information as a traditional book jacket: a cover design or illustration, a summary of the book and a biographical sketch of the author. There is even a free two or three page excerpt from the text itself, for the potential buyer who might like to leaf through a few virtual pages before making a purchase. "A typical book in the library can be purchased and downloaded for $5.95 to $9.95, less than the cost of most paperbacks. A few highly technical books are offered for as much as $25.00. As hardbacks, they would probably cost $50 or more," The buyer can download the book electronically, and typically is offered a choice of formats. For authors who have gone the subsidized publishing route, the site also offers the opportunity of selling traditional bound copies of their books. The site also offers authors full-service accounting and record keeping, as well as detailed marketing, customer tracking and prospect-to-sale ratio information. And authors receive a commission or royalty of 40% of the selling price, less any credit card fees, on each "book" sold.

Leading Online News Delivery Services Merge as NewsEdge:
Established electronic news aggregators Desktop Data Inc. and Individual Inc., both of Burlington, MA, are merging companies and services in a stock swap deal to be closed in first-quarter 1998. The new company will be titled NewsEDGE Corp. -- named after the flagship news delivery service of Desktop Data -- and headed by Desktop Data founder and CEO Donald L. McLagan. Combined, the companies drew $75 million in revenues during the year ending Sept. 30, 1997 -- a 35% growth from the year prior.

Interactive Journal Exceeds 150,000 Mark In Paid Subscribers:
Dow Jones & Co. said The Wall Street Journal Interactive Edition has attracted more than 150,000 paid subscribers just over a year after it began charging for access to its site on the World Wide Web. The Interactive Journal has the largest circulation of any paid-subscription site on the Web and is among the top sites for generating advertising revenue on the Internet, according to Thomas Baker, business director of the Interactive Journal.

Technology Brief: Easing of Indian Internet Rules:
The Indian government said it has lifted all restrictions on the number of private Internet-service providers allowed to operate in the state-controlled Internet market and on the fees they charge subscribers. The companies, however, will still have to obtain government licenses to operate. The government said the aim of the move is to bring Internet connections to as many as two million Indians within two or three years, from 40,000 now. Until now, the state-run Videsh Sanchar Nigam Ltd. has controlled Internet access in New Delhi, Bombay, Calcutta, Madras, Bangalore and Pune, while the Department of Telecommunications provided access in the rest of the country. AP-Dow Jones The Asian Wall Street Journal via Dow Jones