MediaWeek (Vo 14, No 3) Clarivate to buy Proquest in $5.3B deal, Remember Reading, RB Media Acquires, Controversial Book Deals

Clarivate (ex Thomson Reuters company) announced their intention to acquire Proquest.  From the press release:

Clarivate plc (NYSE: CLVT), a global leader in providing trusted information and insights to accelerate the pace of innovation, today announced a definitive agreement to acquire ProQuest,  a leading global software, data and analytics provider to academic, research and national institutions, from Cambridge Information Group, a family-owned investment firm, and other partners including Atairos, for $5.3 billion, including refinancing of ProQuest debt. The consideration for the acquisition is approximately $4.0 billion in cash and $1.3 billion of equity. The transaction, which is subject to customary closing conditions, including regulatory approvals, is expected to close during the third quarter of 2021.

With a mission to accelerate and improve education, research and innovation, ProQuest delivers content and technology solutions to over 25,000 academic, corporate and research organizations in more than 150 countries. The acquisition will establish Clarivate as a premier provider of end-to-end research intelligence solutions and significantly expand its content and data offerings as the addition of ProQuest will materially complement the Clarivate Research Intelligence Cloud™. 

Why We Remember More By Reading (The Conversation)

The benefits of print particularly shine through when experimenters move from posing simple tasks – like identifying the main idea in a reading passage – to ones that require mental abstraction – such as drawing inferences from a text. Print reading also improves the likelihood of recalling details – like “What was the color of the actor’s hair?” – and remembering where in a story events occurred – “Did the accident happen before or after the political coup?”

Studies show that both grade school students and college students assume they’ll get higher scores on a comprehension test if they have done the reading digitally. And yet, they actually score higher when they have read the material in print before being tested.

Educators need to be aware that the method used for standardized testing can affect results. Studies of Norwegian tenth graders and U.S. third through eighth graders report higher scores when standardized tests were administered using paper. In the U.S. study, the negative effects of digital testing were strongest among students with low reading achievement scores, English language learners and special education students.

 New Order: Audio First (WSJ - Paid)

“The Bomber Mafia” is part of an effort by Pushkin Industries Inc., an audio company that Mr. Gladwell co-founded, to become a major provider of highly produced “original” audiobooks. Such projects sound more like podcasts than traditional audiobooks, since they often feature original scores, as well as archival and interview tape.

Industry giants including Bertelsmann SE’s Penguin Random House and Amazon.com Inc.’s Audible also produce high-production original audiobooks with sound effects and a cast of multiple actors, representing significant competition for Pushkin.

RBmedia Acquires McGraw Hill Professional Audiobook Publishing Business

RBmedia, the largest audiobook producer in the world, today announced the acquisition of McGraw Hill Professional’s audiobook publishing business, which includes its catalog of previously published titles, as well as a multi-year agreement to become the exclusive audio publisher for all of McGraw Hill Professional’s new titles.

“We are excited to participate more fully in the rapidly expanding audiobook category by partnering with RBmedia,” said Scott Grillo, President of McGraw Hill Professional. “Leveraging RBmedia’s unique abilities in spoken audio will help us reach business and trade professionals and all those striving to advance their education or careers. RBmedia creates exceptional audio productions that serve our authors well and will help them monetize audio rights at a high level. Our publishing program will be stronger because of this unique collaboration.”

Note: Overdrive purchased RB Digital the company's library platform in 2020 (Press Release) 

Who Deserves a Book Deal - Just about Anyone? (Vox)

Is the industry’s purpose to make the widest array of viewpoints available to the largest audience possible? Is it to curate only the most truthful, accurate, and high-quality books to the public? Or is it to sell as many books as possible, and to try to stay out of the spotlight while doing so? Should a publisher ever care about any part of an author’s life besides their ability to write a book?

These questions are becoming more and more urgent within the private realms of publishing, amid debates over which authors deserve the enormous platform and resources that publishers can offer — and when it’s acceptable for publishers to decide to take those resources away.

Within the media watering hole of Twitter, it can look as though these concerns are being imposed from the outside: by progressive authors calling on their publishers to abstain from signing right-wing writers; by angry YA fans and Goodreads readers; by petitions and boycotts and special interest groups. But the conversation about who deserves a publishing deal is also happening within the glass-and-steel walls of the industry itself.

Employed but Pissed at Simon & Schuster (The New Republic)

Inside Merger Mania: (The Wrap - Register)

On the tail of massive acquisitions in the entertainment and media space, such as AT&T’s $85 billion purchase of Time Warner in 2018, thew 2019 re-merger of ViacomCBS and Disney’s $71 billion acquisition of 21st Century Fox in 2019, major book publishers are embarking on their own consolidations in an effort to cement their place in an increasingly competitive environment. But are any of these major acquisitions anti-competitive, as critics have argued?

*******

Are you considering an investment in new technology?  Check out my report on software and services providers.  (PubTech Report)

PND: Digital Transformation: A Seminar for Management

PND: Blockchain for Publishers

PND: Technology News

PND: The Price is Right for Cengage  

PND: The Opportunity in 200MM Students

PND: Mediaweek Reports 

Michael Cairns is a business strategy consultant and executive.  He can be reached at michael.cairns@infomediapartners.com or (908) 938 4889 for project work or executive roles.

 

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.

Penguin & Random House Merge

News on Sunday that News Corp were considering a look at Penguin suggested that the dealings could get exciting but with this morning's announcement of a merger that will combine Random House and Penguin in a new structure makes clear these discussions were already well advanced. As The Guardian notes the new business will b 53% owned by Random House and Pearson will retain a 47% interest. The management team will be lead by Random House CEO Marcus Dohle. The combined company will have sales in excess of $3billion although this is likely to be subject to some competition scrutiny over the next several months as the deal is reviewed by authorities in the US and Europe. From their press release:

Bertelsmann will nominate five directors to the Board of Penguin Random House and Pearson will nominate four. John Makinson, currently chairman and chief executive of Penguin, will be chairman of Penguin Random House and Markus Dohle, currently chief executive of Random House, will be its chief executive.

In reviewing the long-term trends and considerable change affecting the consumer publishing industry, Pearson and Bertelsmann both concluded that the publishing and commercial success of Penguin and Random House can best be sustained and enhanced through a partnership with another major international publishing house. They believe that the combined organisation will have a stronger platform and greater resources to invest in rich content, new digital publishing models and high-growth emerging markets. The organisation will generate synergies from shared resources such as warehousing, distribution, printing and central functions. Pearson and Bertelsmann intend that the combined organisation’s level of organic investment in authors and new product models will exceed the total investment of Penguin and Random House as independent publishing houses.

The two companies believe that the combination will create a highly successful new organisation, both creatively and commercially, with the breadth and investment capacity to deliver significant benefits. Readers will have access to a wider and more diverse range of frontlist and backlist content in multiple print and digital formats. Authors will gain a greater depth and breadth of service, from traditional frontlist publishing to innovative self-publishing, on a global basis. Employees of the new organisation will be part of the world’s first truly global consumer publishing company, committed to sustained editorial excellence and long-term investment in a rich diversity of content. And shareholders will benefit from participating in the consolidation of the consumer publishing industry without having to deploy additional capital.

Interestingly, with Pearson's big acquisition of EmbanetCompass (for $650mm in cash) earlier this month the company also said that they would be somewhat limited in the amount they could spend on future acquisitions given the size of the EmbanetCompass deal. The Random House deal does not appear to improve that situation and the press release specifies that neither party may sell their shareholding in the combined business for three years.

Finally, this is the big Trade House deal we've been waiting five years for. Will there be another?

New Model Army of Self-Publishers

News that Pearson has purchased the self-publishing roll-up Author House reminded me of this post from September 19, 2007 which I wrote just after Author House acquired iUniverse.com.  My thought this week was what took so long for a large established publisher to make this acquisition.

The news that Author House and iUniverse.com were merging was not entirely unexpected, but it is interesting to me that the publishing community basically ignored the event. While it was reported in Publisher’s Lunch and Publisher’s Weekly, the report in PW focused on the question of job cuts which may reflect a limited interest in the strategic ramifications this segment poses to mainstream publishers. Led by Lulu.com, this publishing segment is exploding and the last thing being considered will be job cuts. Just look at the capabilities on offer at Lulu. Author House and iUniverse complement each other: A number of years ago, iUniverse.com made the strategic choice to add an extensive selection of professional editorial services to their suite of services, which surpass the service offered by Author House (and others in the market). Tactically, I think the two companies will slot together like jigsaw pieces.

Random House has a relationship with Xlibris and is alone among the major publishing houses in building formal relationships with the self-publishing marketplace. I would expect other major publishers to jump into this space, in the short-term, through acquisition. The leverage these companies achieve over their technology, employees and fixed expenses, the processes they have established and the market they have built make these companies appealing. Ironically, there is a ‘democratization of access’ underway in publishing, which to date, most “publishers” have not participated in; but, this will change as traditional publishers look to the self-publisher market as a natural product extension.

In the case of Author House and iUniverse.com, they each produce over 5,000 titles per year with total staff of approximately 100. In terms of titles per month and titles per employee, they shame a traditional large publisher. Everyone will argue that the quality of the content produced by self-publishers is poor, but this is no more true than the statement that all content produced by traditional publishers is exemplary. How often has a traditional publisher invested significantly in a title’s success only to watch it sell 300 copies? For the self-publisher—with an author pays model, no inventory and no promotion expense—there is only upside if a title takes off unexpectedly (and sells 300 copies).

I am not suggesting that the self-publishing business model will be adopted anytime soon by a major publishing house, but there are lessons to be learned from the success that the self-publishing industry has built in the last 10 years. Enabling technology has produced this ‘democratization of access’ and, while it is hard to imagine that there is that much content to produce, the numbers prove the case. Lulu is producing 4,000 new titles per week for a total of 300,000 newly released titles, Author House has over 30,000 authors and 40,000 titles, and iUniverse says they have sold over 5mm books.

Amazon has invested in this area (B&N is getting out via iUniverse.com) and I see some convergence between the traditional publishing model and self-publishing. The content quality issue is irrelevant: Firstly because good content will always find its market and Secondly, because quality in the self-publishing segment depends not on the content but the service the author received. Get ready to see traditional publishers adopt some of the practices of the self-publishing industry.

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 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!

Bertelsmann Reports Half Year - Lowers Full Year Estimate

From the company's press release:

• Group revenues rise to €7.2 billion
• Operating EBIT high again at €737 million
• Return on sales continues in double digits at 10.3 percent
• Group profit improves to €269 million

In the first half of 2011, the international media company Bertelsmann built on the strong results of the previous year and further increased key indicators. For instance, the company increased its revenues and group profit once more and achieved a high level of operating profit again. 

Group revenues from continuing operations increased by 1.9 percent to €7.2 billion after €7.0 billion in the comparable period last year. Excluding portfolio and currency effects, organic growth came to 2.4 percent; all divisions contributed to this. Operating EBIT was €737 million, down only slightly from last year’s record figure of €754 million. Return on sales amounted to 10.3 percent (H1 2010: 10.7 percent), putting it in the double digits once again. The Group profit rose by €23 million or 9.3 percent, to €269 million. This was due primarily to Bertelsmann’s content businesses. A further contributor was a substantially improved financial result that reflects lower interest charges in the wake of successful debt reduction and the discontinuation of negative income effects from the buyback of profit participation certificates in early 2010. The Bertelsmann Value Added (BVA), which measures the profit realized above and beyond the cost of capital, reached €88 million in the first half of 2011 (H1 2010: €82 million).

Comments on Random House

• Random House profits rise substantially driven by U.S.
• Triple-digit percentage sales growth in e-books
• Digital revenue potential strengthened through acquisition of digital media agency Smashing Ideas

The world’s largest trade book publisher significantly increased its operating EBIT in the first half, while recording a slight dip in revenues due to unfavorable exchange-rate effects. Revenues reached €787 million (H1 2010: €791 million) and operating EBIT €69 million (H1 2010: €40 million). The Random House operating EBIT benefited from a strong U.S. performance despite insolvencies and ongoing consolidations in book retail. Overall gains were driven by an outstanding portfolio of titles worldwide, with several million-copy print bestsellers, and the continued rapid growth in e-book sales across all territories. In the U.S., digital sales accounted for more than 20 percent of all revenues. At the reporting date, Random House imprints had more than 27,000 e-books available worldwide. Random House placed 145 titles on the “New York Times” U.S. bestseller lists in the first six months of the year, including the #1 bestselling “Unbroken” by Laura Hillenbrand, and sold nearly four million copies of U.S. author George R.R. Martin’s epic fantasy series “A Song of Ice and Fire.” Random House Group UK increased its year-on-year sales and profits and published more than a quarter of all “Sunday Times” bestsellers. In Germany, Verlagsgruppe Random House improved its revenues and market share in a difficult overall market, and Random House Mondadori also outperformed the market in Spain. During the period under review, Random House, Inc. author Jennifer Egan won a Fiction Pulitzer Prize for “A Visit from the Goon Squad,” and Philip Roth won the Man Booker International Prize.

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.

Girl with the Dragon Tattoo - Opens March 19th

The Girl with the Dragon Tattoo opens on March 19th and is set to play in Chelsea and Lincoln Center. The Swedish movie has already grossed $100mm in worldwide distribution and should make a bit more now that it has a release schedule in the US. Here is a link to the Music Box (Film distributor) website where there is more information. Here is the movie trailer:



Also an interview with Noomi Replace who plays Lisbeth Salander in the movie (named Millennium in Sweden) AFP

File Under WTF?

OK, so Peter Olson has been gone a while but apparently he still lives in Marion Maneker's memory: (Reuters)

Legendary Simon and Schuster CEO Dick Snyder was the figure who turned publishing companies into public corporations. And it is as corporate enterprises that the book barons lost their distinctiveness, acumen, and clout. Indeed, Peter Olson's lasting legacy was not making a business of Random House but making it a business that was too big, wasteful, and flabby to succeed.

As head of U.S. operations, he presided over the purchase of Random House from the Newhouse family and combined it with Bertelsmann's own Bantam, Doubleday, Dell operation. The resulting empire controlled 10 percent of the book market but could never outrun its own massive cost structure. It lumbered from hit to hit without making progress toward greater profits. By the time Olson left for Harvard Business School—pity the students he teaches—Random was envied by no one.

As an intro to the above the author chastises Olson for a comment (taken out of context by him) quoted in Portfolio about having a hand in being "part of a process of making something that was a gentleman's hobby into a real business."

Truth is, you could drop the three or four paragraphs in question out of his commentary and I don't think it would matter at all. If you are going to do a hatchet job on a managers' legacy, do the job don't bury it in an article about ebooks.

(Gender corrected - thanks SW.)

Bertelsmann Reports Higher Net Income

From their press release:

After nine months of the 2008 financial year, Bertelsmann reported a solid business development. The international media company achieved revenues almost at the level of the previous year in its continuing operations. Operating EBIT remained below that of the previous year. EBIT and net profit increased significantly.

Consolidated revenues reached €11.4 billion to the end of third quarter, down 0.7 percent year-on-year (€11.5 billion). Adjusted for portfolio and exchange rate effects, revenues rose by 1.6 percent. After nine months, Operating EBIT reached €926 million (previous year: €1.03 billion). The return on sales amounted to 8.1 percent. EBIT increased to €823 million compared to €692 million in the same period of the previous year, when high special items were incurred. At €387 million, net income almost tripled (previous year: €132 million).

The company also noted that they continue to manage their operations portfolio notably selling their half interest in the SONY/BMG music business and the North American book club business. No detailed discussions about the performance of Random House although in separate news the company announced that Ian Hudson (Deputy CEO of RH UK) has been named to the Bertelsmann supervisory board.

Dohle'n Out Some Change

Article in the New York Observer about Random House and Marcus Dohle. They contrast RH with the fortunes of the Hachette Book Group although this is done by illusion since the author seems to be saying just because Hachette is smaller they are better.

That would be between 600 and 700 titles per year, if you’re keeping score. Random House, which one rival publisher recently called “the biggest, fattest, most grotesquely obese company ever,” last year published more than 3,000.

Of course, the vast majority of those books were signed under Mr. Olson, whom Bertelsmann replaced late last spring with a much younger, more German man named Markus Dohle.

MR. DOHLE, who at 40 years old has never worked in publishing before but had previously managed a large printing company, has not yet ordered any major changes since moving to New York from his home in Gütersloh and taking up the frayed reins Mr. Olson left behind. There have been some adjustments, to be sure. For one thing, Mr. Dohle has hired several new people at the corporate level, including a director of human resources who, like his boss, is very young and comes from Germany (one editor said, half seriously, that “there do seem to be a lot more people speaking German in the elevators”). For another, some division heads have asked their employees to cut back on expenses such as lunch and travel.

Also, as an example of Dohle's impact they note (only) the elimination of 16 jobs at Doubleday. These apparently "stunned" the industry. Someone needs to point out to the Observer that we are in a recession and 16 jobs (with due respect to the people that held them) is small beans. Stunned is just silly.

DailyLit And Tom Peters

DailyLit is a pathfinder in the selling of books in serial format. The company has only been around for a short time but already has an inventory of over 1,000 classic and contemporary titles available for free or for a small fee. Readers sign up for the service via their web site, select the titles they wish to read and specify the time that the content is delivered to them. Each short book installment is sent via e-mail or RSS feed to arrive in the readers in-box where they can be read on a mobile device or laptop.

The company already has a phlanx of dedicated readers who can download a wide array of content from romance to business titles. The company announced today that they have signed a deal with Random House to feature several of management guru Tom Peters' books in serial form:

The books now available in short installments include The Brand You50, The Professional Service Firm50, The Project50 and The Pursuit of Wow!—titles geared to make employees and management more competitive in the evolving workplace of the twenty-first century. The books, originally published by Alfred A. Knopf, are available for $4.95 each on DailyLit. "I am thrilled to be serializing these Tom Peters books on DailyLit," said Susan Danziger. "His work has currency and relevance, and our format—with a workforce that has a computer, Blackberry or iPhone almost always within reach—suggest this is a natural fit for us. Published in short installments—many of which can be read in 30 seconds—these titles are perfect for any busy professional. I am also excited to be featuring Knopf titles on DailyLit as Knopf is an imprint I have greatly admired since my days working at Random House."

Dohle to Head Random House: UPDATE

The search term 'Marcus Dohle' sat highest on the list of queries to hit the blog site yesterday, so it was apparent to me that the word had leaked out that Dohle was about to be announced as the new head of Random House. No official announcement has been made yet but Reuters and IHT are reporting that a statement will be made later today.

(Also, looks like his name is spelled with a K and not a c: Markus).

UPDATE FROM BERTELSMANN CORPORATE:

Hartmut Ostrowski, Chairman and CEO of Bertelsmann AG, announced today that Peter Olson, 58, will step down at his own initiative from his positions as Chairman and Chief Executive Officer of Random House and as a member of the Executive Board of Bertelsmann AG, effective May 31. Olson will pursue an academic career. Markus Dohle, 39, will become the new Chairman and CEO of Random House. He was appointed by the Supervisory Board of Bertelsmann AG and will succeed Mr. Olson on the Bertelsmann Executive Board as of June 1. Mr. Dohle is presently member of the Arvato AG Executive Board and CEO of Arvato Print. Dohle’s successor at Arvato will be announced shortly. The Direct Group North America reporting line will shift from Peter Olson to Bertelsmann’s Chief Financial Officer Thomas Rabe.

In addition to the above announcement, Ostrowski also announced that

Richard Sarnoff, President of Bertelsmann Digital Media Investments and a member of the Supervisory Board of Bertelsmann AG, will take on the additional role of Co-Chairman of Bertelsmann, Inc., reporting to Bertelsmann CFO Thomas Rabe, effective immediately. In this new position, Mr. Sarnoff will play a key role in Bertelsmann's strategic and corporate development activities in the US, where he will work in close cooperation with executives from the divisions and the Corporate Center. Hartmut Ostrowski stated: “The US market is the world's largest and most dynamic in media as well as services, and as Bertelsmann both refines and expands our portfolio of activities in the US, we are fortunate to have an executive of Richard Sarnoff's caliber, profile, expertise, and background to take on the Co-Chairman role at Bertelsmann, Inc.”

Bertelsmann Reports Improved Results

Random House corporate parent Bertelsmann reported improved quarterly operating profit performance and remains optimistic about the remainder of the year. From their press release:

Bertelsmann, the international media company, today reported strong first quarter fiscal 2008 results. First-quarter operating profits (Operating EBIT) were up by 9.6 percent compared with the previous year. Operating EBIT for the period under review amounted to €217 million (Q1/2007: €198 million). These developments were driven by the continuing positive performance of the major core businesses. Group net income improved to €35 million (Q1/2007: €-70 million). Meanwhile, revenues declined by 3.9 percent year-over-year to €4.2 billion. Adjusted for portfolio changes and foreign-exchange effects, revenue decreased 1.7 percent year-over-year. The revenue performance reflected negative foreign-exchange effects due to the Euro’s strength relative to the U.S. dollar and British pound. Revenues were also impacted by declines in sales of physical recordings and revenues at Direct Group in North America. Adjusted for portfolio changes and foreign-exchange effects, Bertelsmann expects a moderate rise in revenues for 2008. The Company expects operating results for 2008 will be on par or slightly above the high levels seen in 2007. Group net income will be well above 2007 due to fewer special items and lower interest expenditure.

The company announced earlier this month that they have hired Morgan Stanley to sell the Direct Business.

Bertelsmann investor presentation reflecting the full year results from all divisions. Here. (RH revenue of $1.8bill and op income $172mm for 2007).

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.

Bertelsmann Reports

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

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

At Random House they noted the following:

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

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

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

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

More from their full press release on Random House:

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

Random House to Sell Chapters

The WSJ (via Reuters) is reporting that Random House will begin experimenting with the sale of chapters from their web site. The report suggests this is not a wholesale effort merely that they will "test selling individual chapters of a popular book to gauge reader demand." From the Journal:

Random House Publishing Group's experiment appears to be the first time a major consumer publisher has offered a title on a chapter-by-chapter basis. It will sell the six chapters and epilogue of "Made to Stick: Why Some Ideas Survive and Others Die" for $2.99 each.

I am pretty sure that's an incorrect statement - for example. No matter, the point is publishers are rapidly experimenting with new ways to reach out to consumers.

Shared Book And Random House

In what I expect with be the first of many similar relationships, SharedBook has formed an alliance with Random House to create personalized versions of Children's books. The Pokey Little Puppy will be the first title in this new venture.

Utilizing SharedBook's Reverse Publishing Platform, consumers can now create a unique, personalized version of The Poky Little Puppy by using an online book-making template. Consumers can create their own version of The Poky Little Puppy complete with a custom dedication and also upload a personal photo to the front of the book. The book is then purchased and sent to the printer for on-demand output in laminated hardcover format.

I saw a sample of this product several weeks ago and other than the personalization the book is indistinguishable from a book found on the shelves of any bookstore. The binding, boards, ink and color qualities are all of a high level as you would expect from a product from Random House.

The price for a unique, personalized edition of The Poky Little Puppy is $25 in laminated hardcover format, which includes standard domestic shipping. Completed books arrive in 10-14 business days. Expedited shipping options are available for an additional charge.

I interviewed Caroline Vanderlip, CEO of SharedBook a few months ago and here is her interview.