Live Academic: Crank Up The Volume

Few publishers would limit themselves to selling or distributing through one outlet when there were multiple routes to customers on offer at zero incremental cost. Microsoft, as the second guest to the party, recognizes this and is at pains to present that they will accept digital files from publishers or scan titles in a manner that creates no additional costs to publishers.

With their nascent book program, Microsoft – the big bully of yore - is defined relative to the incumbent but doesn’t court that comparison to their advantage. Microsoft has attempted a stealth approach in gaining publishers’ attention and cooperation via direct communication and visits and presentations rather than a more aggressive marketing and public relations program. At least that’s my explanation for their rather meek entrée into the digital book space. It will be interesting to see the level of interest in their presentations at BookExpo later this month. If the meeting I attended at London Bookfair is any indication where there were less than 30 people in attendance this could be another missed opportunity for Microsoft.

Microsoft need to court some controversy in order to draw attention to themselves. They also need to exhibit deeper knowledge and understanding of the publishing industry: Both the simple mechanics of the industry and the quixotic issues such as the inter-house struggles over international rights which are particularly relevant with respect to electronic content.

The Microsoft personnel involved in the Live Academic program all need to understand this material rather than just the front man. Google also took a long time to learn this lesson believing that their people were so smart they could fake it but this attitude was taken for arrogance and things got off to a bad start. The improvement was evident at London where the 60 min overview presentation of Google Book placed the program in the context of the industry and with the issues the industry faces. A second panel discussion leaned heavily on publisher experiences and Google barely needed to speak to get the positive point across. In contrast, the Microsoft presentation seemed to run out of gas after 15mins or so. The features are impressive but the delivery isn’t emphatic. In answer to a question about upcoming features, Microsoft diverged into a 10min presentation of the NYT e-reader product – interesting - but not on point.

Microsoft Live Search has over 30,000 titles available (once it officially launches) and the titles are displayed in a two pane system. The page layout is functionally more appealing than GBS. Moreover the user is easily able to export segments of highlighted text, link to abstracting and index products and citation services such as bibtext.

Microsoft is also emphasizing that the program is conducted with the full cooperation with publishers: Meaning they are not scanning books where the copyright is ‘in transition’ (in the words of Google). To support this emphasis on the publisher, the company designed what amounts to a publisher platform to manage the content in the Live product. Via this ‘platform’ publishers can set the level of preview rights in three ways: 1) percent viewable, 2) pages forward and back, or 3) contextual snippets. The publisher can also set territorial rights as well – geographic locations – all of which are assignable on a per-book basis. Not foregoing my earlier comment about understanding the industry, Microsoft seems to have recognized that the book is a unit of component parts and have made the permissions process so flexible that the publisher can even set rights for an image or table in a specific book.

The publisher also gets marketing and promotional options that enable branding (logos), promotional programs (links, coupons), commerce applications for ‘buy the book’ activities and links to online retailers. An appreciation of the importance of metadata to discovery also percolates and the company decided to license bibliographic data from a leading source and also capture the book text in multiple ways to ensure the rendition of the book was accurate and that the text was indexed appropriately. Scans are held in hi and low res images and the text is fully indexed and sits ‘behind’ the image. Current OCR technology is not sophisticated enough to replicate complicated page layouts that incorporate call outs, high lighted text, block quotes and the like. All of this gets scrambled via OCR. (The text of the title is captured in reflowable xml).

Microsoft suggest they want consumers to find books in places they wouldn’t ordinarily find them which is in search results and have made the point to publishers that the Microsoft program is another outlet for promotion and perhaps sale of their content. Regardless of the sound of this pleasant and appealing message it is far too quiet and what Microsoft should do is raise the volume. Google is bound to release a version 2.0(beta) of GBS shortly and would look to incorporate some of the best features of Live Academic. What will the message from Microsoft be then? My suggestion is to open up the content and allow web service and api access to the book content (with publisher approval of course). After all, who really wants a second closed content platform comprising similar if not duplicative stuff? Courting ‘controversy’ may be another way of gaining attention but I think that’s what Microsoft Live needs.

Thomson Reuters Update

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

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

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

Weekly Update

Deal News:
When Opportunity Knocks Pearson Goes Shopping: Harcourt Assessment. Independent Forbes
£8.0 Billion Thomson bid for Reuters: Independent
Discussion of possible Thomson bid for Reuters: Toronto Star The National Post
Private Equity Threeway for EMI: Reuters
Douglas and McIntyre Publishing (Canada) Acquired by PE: PR Web
Riverdeep Refinances: RTE

Publishing:
Lonely Planet Unsure: Seek Investor(s): The Age
Torstar (Harlequin) report improved Results: Global & Mail
PR Newswire to offer Blog Measurement Tool: PRNewswire
Simon & Schuster Doing Well: The Bookstandard

Other News:
Application of FAST search Technology to Newspapers: Reuters
Shareholder Opposition to Murdoch Dow Deal: Reuters

Sports:
Champions: BBC
Clemens Back with the Yankees. NYTimes.

Bid Rumors: Reuters & Thomson

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

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

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

Help, My Book Won't Open

New technology hits the monastery and the monks appear baffled. The trust worthy and reliable help desk support team arrive to sort it all out.

Thanks to Martyn Daniels for the link.

Google Lending Books

I attended two of the very well attended Google sessions at London Bookfair last week and in the second of these Jason Hanley from Google gave a full overview of the Google book program. He also gave a very short overview of some of the new initiatives that Google is working on and one of these caught my attention.

Google propose to roll out a book 'rental' and 'retail' program sometime before the end of the year. The program will enable customers to either have lifetime access to a title if purchased or to rent a title in weekly increments. Details of the financial arrangements are being discussed with the content owners at the moment but there is no reason to believe that both of these programs will not be launched by the end of the year. The program will be optional for publishers but represents just another of the expansion of options that publishers will have to distribute, market and/or sell their content.

Details at the presentation were sketchy so I emailed Jason the following:

Jason,

I attended your session at LBF last week and I was interested to learn a little more about the Book “Lending” program you touched on in New Initiatives. I would like to write something about it for my blog which is read by a fair number of librarians who would be interested in knowing more about this initiative.

Here are the brief notes I took:

• Borrowers will have the ability to ‘rent’ or ‘borrow’ a book for a week. · Full content of the book will be available
• This is not an ‘e-book’ program
• It will be launched by the end of the year (together with a purchase option which you also discussed)
• Final details are being discussed with content owners

Could you elaborate on the above by answering the following questions:

1. Is this a lending program or a rental program?
2. What do you mean when you describe this as not an e-book program?
3. What will the financial model look like for publishers?
4. Do you think the financial arrangements you arrange with publishers cascade into the current financial relationship between Libraries and Publishers? Typically publishers sell titles to libraries at a ‘short’ discount and do not receive additional payments no matter how frequently the title circulates. Presumably, in your arrangements with Publishers there will be some remittance to publishers each time a book is ‘lent’
5. Is this an ‘add-on’ benefit to publishers of the Google Book program and as such voluntary?
6. Is there any anticipated connection with libraries: could libraries act as intermediaries between their patrons and the Google “Lending” program or is there no practical need for this?
7. Any other information my readers may find interesting.

Thanks and if you don’t want to say anything about the above please let me know so that I can go ahead and make it all up in my blog article.

OK so the last bit is slightly irreverant but I hope it didn't cause him not to respond because so far no response. (He did open my email).

This will be interesting to watch and I think perhaps one of the more revolutionary changes that may evolve from a program like this could be a significant change in the financial relationship between libraries and publishers. In my view the current one time fee paid to publishers by libraries has to (and will) change to a per use fee. Libraries will pay fees based on circulation of the titles - both print and e-book versions. There are a few ways this may happen and none are mutually exclusive particularly as publishers and libraries experiment. For example,

• Calculate a unit fee per title and remit to publishers each time a title is circulated
• Each title is 'sold' in circulation increments - perhaps they expire - so a title is sold with 10 circulation 'units' and the library pays each time the book is circulated 10 times. (Perhaps the base level - in this case 10 - values the book at the retail price)
• Publisher agrees a site license for their titles at an institution which would be an annual fee covering all circulation for e-books and print titles. Each year the fee would be negotiated. Clearly in this case e-books are easily managed and this is a model already in place for database products but for print titles the solution would be trickier but not impossible.

In truth, evolution is coming to the relationship between publishers and libraries driven by Google and e-books and ultimately these changes will result in libraries becoming more relevant to publishers not less. As libraries are networked and catalogs indexed their collections are more accessible which means that publishers may want a bigger slice of revenue but it may also mean that they want to ensure that this avenue to consumers that libraries represent presents all their products in the best possible manner. That will mean that libraries get more attention and possibly are able to lend more content. Change is good.

Murdoch Seeks Dow Jones

Harpercollins owner News Corp has made an unsolicited bid for Wall Street Journal publisher Dow Jones (Reuters). The bid is priced at $60/share and Jim Cramer (crazy guy) on CNBC (which broke the story) suggests that this may jump higher if others get involved. Currently the offer price is 50% higher than yesterdays share price close so News is going for broke. This deal has been on the cards for years; however, Cramer noted today that the two or three executives and board members opposed to the deal are no longer part of the organization. He also speculates that members of the Bancroft family are already in his camp which could make approval of the acqusition easier.

Others may jump at the opportunity to own a prime name in financial reporting but so far Bloomberg for one has issued a denial. It would be a stretch to see Thomson Financial anti-up for the property because their entire focus is on electronic delivery. Thomson sold the bulk of its newspapers years ago. Private equity could be an option as well. Cramer also frequently mentioned his audience with the Digger back in 1996 when Murdoch was willing to offer $73/share for the company but was rebuffed. What discouraged Murdoch the last time was the suggestion that the Bancrofts would not approve the deal but this time that doesn't seem to be the case.

Related:
Reuters: Pearson shares up 5%
Forbes
Predictions 2007: Noted at the bottom of the page.

Borders International Update

Borders announced in March that they were reorganizing their store operations and would be divesting most of their international operations including the UK stores which they (mostly) acquired via the purchase of Books etc. In other parts of the world particularly in SE Asia and Australia/New Zealand, Borders built their brand in these markets from scratch. Initially the growth was slow: They only had a store in Singapore for a few years; however, by 2002 store development in Australia was in full swing. Things seemed to be going so well that Borders opened several new stores in New Zealand in the week before they announced that they we getting out of the international business.

In my old home town newspaper this morning, The Age confirms that private equity firm Pacific Equity Partners is actively interested in purchasing the Borders stores and naming rights in the Australia/New Zealand market. The book retail market in Australia is dominated by two retailers. Angus & Robertson, which is now owned by PEP, was owned by WH Smith and numbers about 180 outlets. A&R stores are predominately corporate owned. Dymocks is the other chain retailer and most of their stores are franchised. Leading Edge is a ‘consortium’ of independent retailers that have joined together to aid in business negotiations and enable technology development.

(On a related note, Readings a Melbourne independent retailer and customer of Global Books In Print for many years, won chain bookseller of the year in 2006 even though they only have about five stores. Mark Rubbo the owner has consistently won independent bookseller of the year for many years and successfully battled against a Borders superstore that opened across the street from his main store).

PEP is interested in expanding Borders across the market and will do so without merging the brand with A&R. A&R also own Whitcoulls in New Zealand and PEP appear to recognize that there is room in that market for both brands as well. The Age article also notes that Borders management are also trying to interest private equity in fronting a bid. It would seem likely that some accommodation will be made since the management will be vital to the continued performance and development of Borders in Australia.

Related:
What Borders Could Have Said
Borders Reports Their Strategic Plan

(Thanks to my Aussie stringer for the article).

Sting's Lyrics in Book Form

I had this idea last year that compendiums of an artists lyrics would make an interesting book product although I also suggested that including reflections on what the songs meant, what was going on with the artist/band at the time and some autobiographical material would round out the titles. I have read two books from the Continuum series of mini-books on seminal albums and they are quite interesting but one dimensional. Really long essays written by music critics they speak about the construction of the album and the songs on it as well as some of the circumstances surrounding the recording. My thought was that this concept would be more interesting if presented by the artists that wrote and performed the music.

The AP via the Miami Herald is reporting that all Sting's lyrics will be presented in book form and published by The Dial Press. The press release suggests that there may be some accompanying text with the lyrics however it is not specific on that point.

Some other suggestions: Hiatt, Thomson, Young, Waits, Wilson, Townshend, Armstrong, Lovett, Gallagher(s), I could go on...

Weekly Update

Deal News:
Thomson Learning Sale said to Encourge Share Buy-Back: Globe

Publishing:
About Book Reviews Sections: HuffPo
One Billion E-Books From Ingram: PR
LexisNexis Teams with Elsevier: PR
SilverChair and MGH announce Pharmacy Platform: PR
Elsevier Extends ScienceDirect ArticleChoice: PR
Elsevier Selects Rightslink: PR
McGraw Hill report first Quarter: PR
Edgar Award Winners: PR
Wiley in India: IHT

Other News:
Swets/Muze Glabal Announcement on Fed Search: PR
Generate, Inc. Announce tool For in Context Content Distribution: PR
OCLC Announce WorldCat Local: OCLC

Sports:
Whinging Cry Baby: BBC

Pearson 2007 Guidance

Pearson reaffirmed their guidance for 2007 and said the strong performance they had in 2006 was continuing into the early part of 2007. Strong adoption results and uptake from their new electronic online learning and assessment programs in Higher Ed and good performance from Penguin were largely responsible for the results. In summary their press release presented the following information:

• School to achieve underlying sales growth in the 4-6% range with margins improving;
• Higher Education sales to grow in the 3-5% range with stable margins;
• Professional revenues to be broadly level with margins improving;
• Penguin margins to improve further, as our publishing investment and efficiency programmes continue to bear fruit;
• Financial Times Group profit to grow strongly with our cost measures, integration actions and revenue diversification pushing margins into double digits at FT Publishing. IDC revenues to grow in the 6-9% range with net income growth in the high single-digits to low double-digits (headline growth under US GAAP).

Scardino is confident of "another good year for Pearson" so on the back of a record breaking year in 2006 the question will be how much they exceed the results of 2006.

Also of note, shareholders at the AGM approved a buy back program.

Press Release
Reuters

Thomson Reports 1st Q

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

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

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

Here is the press release.

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

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

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

Here are the slides from their financial presentation.

Computers In Libraries

The conference was in Virginia last week and here is a great summation of some of the sessions from John Dupuis (Confessions of a Science Librarian).

Thomson and Harcourt Reunited Again?

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

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

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

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

Bondi Digital to Create Rolling Stone Archive

Earlier this year Bondi Digital publishing announced an agreement with Playboy Enterprises to create a DVD compendium of every issue. They recently announced a similar deal with Rolling Stone. These were the guys behind The New Yorker archive that was released two years ago.

The first release of the Playboy titles (1950's) is due in October and the The Rolling Stone titles around the same time.

Just in time for Christmas.

Weekly Update

Deal News:
KKR and Carlisle group join the race for Thomson Learning. Reuters The Times
Wickes Group has retained Credit Suisse to look at strategic options for The Daily Racing Form. PRNewswire
Is Pearson Plc underweight? NewRatings

Publishing:
Harper SanFrancisco and the search for a follow-up to The Left Behind series. SF Chron
Iran proposes to publish UK Sailors memoirs. Iran news
12 Arrested in Turkish Bible Publisher murders. Guardian
BusinessWeek article about Korean Comic Publishing. Businessweek
Interview with Robert Harris. Telegraph

Other News:
Reed targeted by Protestors. The Independent
Predicted demise of Libraries not supported by visitor numbers. PRNewswire
WH Smith operating update. Hemscott

Turkish Bible Publisher Targeted

News is reported of a new attack on publishing freedom in Turkey. If you will recall a few months ago a highly regarded news reporter was killed outside his office and today comes news of a horific attack on a Turkish bible publisher. From the UK Guardian newspaper:

The three victims - a German and two Turkish citizens - were found with
their hands and legs bound and their throats slit at the publishing house.
Police went to the scene after receiving calls about a fight, Milliyet newspaper
reported.

Thomson Learning Sale Update

The Financial Times updates the status of the Thomson Learning sale suggesting that first round bids will be submitted at the end of April. As things go this is slightly later than originally planned but they also confirm that the purchase price is expected to exceed $5.5billion which is approximately 10x EBITDA. From the article:

The bidders include a consortium made up of Bain Capital Management, Thomas H. Lee Partners, the Blackstone Group along with Bertelsmann, the privately-owned German media company; a second bidding group is made up of Providence Equity Partners, which is possibly teaming with one other investor, and has the learning division’s management’s on its side, according to the sources. The Carlyle Group and Kohlberg Kravis Roberts & Co. are bidding alone, the sources said. Providence’s partners in the bid could not be confirmed, but one of the sources said it is teaming up with Ontario Teachers Pension Plan, while another source said it is teaming up with Pearson

Google Book vs Microsoft Live Search

I will post more on this next week but the differences between the two presentations was considerable. Regrettably, Microsoft may have the better product. Regrettable, because on the basis of attendees at the respective presentations, few publishers will know it is better because few publishers bothered to show up at the presentation. This may have been partially due to the difficult to find conference room in which the presentation was made; however, MS only had about 20 attendees versus two Google presentations in front of over 125 in each case.

Microsoft have definitely learned from Google in the way Google approached the presentation and the management of the publishers' content. The display is visually more appealing in the Live case and they have incorporated a number of widgets that allow outbound linking which will be very useful to users and publishers. It is the publisher 'work-bench' that I identified as a key differentiator. In Live, the access for a publisher to manage the content - particularly content access, pricing and rights information - is especially functional versus the Google model. I will look into and describe the benefits to Live next week.

No publisher should market and promote their books exclusively through the Google Book program. Intuitively, most publishers would understand this, but why there were so few people willing to spend the time with Microsoft is shocking. Microsoft Live for Books is the new kid on the block and it would seem more likely that having heard the Google spiel numerous times, publishers would be very interested in hearing from someone else. Especially when that someone else has gone out of their way to support publishers copyright.

London Bookfair

It is a fabulous venue for LBF this year; I missed last year's disastrous trip to the Docklands but against Olympia the venue at Earls Court is far superior. It also helps that the organizers have listened to the attendees and the publishers to make the aisles wider, the furniture and fixtures more accommodating and pleasant and made sure there were enough food outlets. Olympia was especially bad at food and drink outlets.

It is also an active show with a lot of seminars to attend but the traffic on the floor is also robust. There is more than enough discussion about the state of the business both from the perspective of publishers and retailers. There has been some expressions of concern I have heard about the state of book retailing in the UK and the unknown impact of the Border's divestiture. There have been rumors that Richard Branson is interested in acquiring the chain and if that were to happen perhaps it would invigorate the book segment. There is a pervading emotion of disappointment by publishers in the way book retail has been managed in the UK and there is a general feeling that publishers can not expect improvement any time soon. It is a sad circumstance.

Given the level of acquisition activity in education publishing, there is a sense from publishers I spoke with that this is going to continue to be a very active year. There is an expectation that the Harcourt and Thomson deals are only the beginning and that trade will also see at least one major house put on the block before the end of the year.

Weekly Update

As mentioned London Bookfair is next week and posts will be sporadic.

Deal News:
Wicks buys Thomson Education Direct (Distant Learning) Times Tribune
Torstar may be under attack and what of Harlequin? National Post
A possible buyer of the Borders' Australia and New Zealand stores. NZ Herald
Media finance conference in Europe announced. Release
Buyers are less then enthused with Primedia enthusiast magazines. Reuters
Reed Elsevier advised to gear up. The Independent
Nancy McKinstry thinks Germany is ripe for new deals. Reuters
Axel Springer likely to do more deals soon (doubtful in publishing). The Australian

Google News
Lorcan Dempsey linking to comment on Google and Publishers Blog
Adam Hodgkin on publishers grumbling about Google Blog

Education:
Harcourt have had a lot of problems in School academic testing this year. Casper Trib. ZDNET
Thomson revolutionizes marketing text Release
There will be more on this: Wikipedea 'broken beyond repair' according to founder. ITNews

Other News:
Penguin obsession Blog
Peter Brantley's lively discussion over a $58 Paperback Blog
Mike Hyatt on Imprints and the decision to do away with them Blog
GalleyCat linking to a Bookseller article about what works here but not there. Blog
Joe Wikert gets all riled up about the logic of Print Blog
Reed Elsevier can't trade mark 'Lawyers.com' Bloomberg
SmartMoney wonders why no one is excited about Gannett. Smartmoney
The commercial E-Book market is broken. Blog

People:
McGraw Hill Hire Dan Caton as Head of Learning Group Release
New Board Members for SIIA. Release
Riverdeep/Houghton Mifflin announce appointment of President. Release

Sport:
Man Utd into the Champions League semi-final in style BBC

Reed Speculation

Via the Independent (UK), an investment analyst is suggesting that Reed Elsevier is under-valued and that a PE bid could push the share price up 85% higher than yesterdays close of 619p.

Collins Stewart adds that, with a current debt weighting of just 1.4 times earnings, Reed is under-leveraged and if it does not gear up its balance sheet "maybe private equity will do the job instead". The broker estimates at a debt multiple of 8 times earnings the shares could be worth up to 1,147p

Once the sale of Harcourt is done perhaps some activity will heat up. I see them being very interested in Bureau van Dijk as it would fit nicely into their legal and regulatory segment. Interestingly, the international spread of BvD could also aid Reed in expanding legal and regulatory into wider global penetration with new products and data/information.

Media Deal Confusion: But Lots of Them

From Financial News Online (US) there were 282 disclosed deals valued at $114.6bn (€87.3bn) in the entertainment sector in 2006 according to PricewaterhouseCoopers , marking the best year for M&A in the media and entertainment sectors since 2002, when there were $118.6bn of mergers done. According to PwC the outlook for 2007 looks stronger, with a backlog of 132 deals worth $103bn. Those deals, which have been announced but not completed, include the proposed buyouts of Clear Channel and Univision,valued at $26.7bn and $13.5bn.

Given the activity that folk in the publishing and business information segment have seen in the past 12mths, it is no surprise that the numbers year on year look impressive. Two very active investment banks in our sector also publish annual reports on their views of the business. (Veronis Suhler also active in this space publishes a fat annual report which is sold so I didn't access it).

In their report presented in January The Jordan, Edmiston Group contended that there were 621 deals worth $57.3Billion in 2006 and 542 deals worth $54.0Billion in 2005. The JEGI report covers 11 media segments with Marketing and Interactive Services with 138 deals and Online media with 174 deals leading the way. A short synopsis of each segment and the notable deals for each is also presented in the report. By way of forecasts, they only project what they expect to see happen in the trade show space which increased in the number of deals between 2005/6 but saw a decrease in the value of total deals. (In each of their periodic reports they pick a segment to forecast and more of these past reports are on their web site).

Desilva and Phillips has also done considerable business in the past year - by their own admission more than their pessimistic 2005 forecast - and while the numbers are again different from those above they do show impressive growth. From Desilva and Philips 2006 Market Report there were 151 deals worth $20.5Billion in 2006 and 115 deals worth $6.0Billion in 2005. They do take a look into the future:

Just as the economic outlook continues – even improves – in 2007, we see a continuation of a great deal market. We expect the number of deals and the dollar volume to continue – at least – at the record level of 2006. We are also aware of a very full deal pipeline. We expect to see more public companies going private, just as Reader’s Digest did – and it’s not just Sarbanes-Oxley. As we’ve seen, media executives now know that they need to transform their companies into platform-neutral content enterprises combining strong traditional and new-media distribution channels. But to do this makes it even more difficult to manage earnings from one quarter to the next, as the public markets demand. One result: the solution offered by buyout firms looks ever more attractive.

The outlook for M&A in 2007 is as good as we’ve ever seen. All the pieces are in place: availability of funds, favorable interest rates, eager buyers without the time to build rather than buy, brands that need to find new delivery platforms, and a regulatory climate that all but deliberately discourages new companies from going public and existing public companies from controlling their own fates. There is yet another population of buyers perhaps waiting in the wings – European media businesses newly flush with a strong Euro and, finally, thriving domestic markets. To say we’re looking forward to the excitement is an understatement.

No matter how the numbers are tabulated, given the activity already announced at the tail end of 2006 and the first quarter of 2007 it is hard to see 2007 not being a banner year for M/A activity in the media space. Already Wolters Kluwer education has gone for over $1.0billion, Veronis (Private Equity) has purchased Advanstar for over $1.obillion and Houghton Mifflin has been purchased by Riverdeep. In the wings are expected $4-5Billion deals for Thomson and Harcourt and $1.0billion for Bureau van Dijk. If Pearson or Reed are gobbled up by PE then it really will be a banner year.

There is a key comment in the above forecast which studiously points out that some very big and seemingly sophisticated media companies still have a lot to do to re-make their companies into 'new-media' content providers and not print companies. Five years hence the companies purchased by private equity will burst forth into the public markets in almost unrecognisable form having gained the flexibility to transform their companies into true online and new media players.

Deal News: Bureau van Dijk On the Block

The Daily Telegraph is reporting that Bureau van Dijk has hired LongAcre Partners and Goldman Sachs to review the company's strategic options. Generally a prelude to a sale.

Industry sources said Bureau van Dijk is likely to generate bidding interest from business information publishers Reed Elsevier, Reuters, Pearson and Incisive Media, which was last year acquired by private equity firm Apax. US bidders such as Dow Jones & Co, publisher of the Wall Street Journal, Standard & Poor's owner McGraw-Hill and Factset are also likely to be interested.

BvD was sold to Candover a number of years ago when the founder and owner sold 60% ownership. Senior management own the balance of the stock. The company publishes business and company information on millions of companies (private and public) around the world. From their web site:

We provide detailed, analytical databases, for in-depth research, such as AMADEUS (a pan-European database), ORBIS (33 million companies around the world) as well as extensive country-specific databases (FAME, DIANE, DAFNE). These products are ideal for in-depth research of individual companies, identifying
companies complying with specific criteria plus detailed analysis of company
peer groups and benchmarking. In addition, our ZEPHYR database covers M&A
deals and rumours around the world.

The Telegraph suggests the company could be worth over $1.1billion; however, financial information is sparse and this company could be a one of a kind deal given the value of the type of information it collects and the depth of its databases.

Bloomberg LP

The NY Times has a short item regarding the $20Bill Fortune valuation of Bloomberg LP. In happy news to all the potential operating company acquirers, when Bloomberg is asked if he could watch the company be acquired by private equity he says no. There is no indication that a sale is in the works (an offer was rumoured last year) and other than the unlikely event that Bloomberg will run for President it doesn't look like anything will change until he has finished his term as Mayor. As The Times alludes, real numbers are hard to confirm but with operating margins of 30+% and a commanding market share this could be an expensive purchase for someone; whether it would go for the multiple Fortune suggests is hard to believe but I am prepared to be surprised.

With the cash that Bertelsmann, Reed and Thomson have or will have there could easily be some competition for this one in the next 6-18mths.

BookExpo America Conference Agenda

The pre-show education and seminar program has been announced by BookExpo America and I wanted to draw attention to my contribution. A few months ago, I thought it would be interesting to hear from some publishers who are using blogging to get their message out and to understand the issues, surprises and successes. The organizers have used my idea to build a program around this theme and I hope you will join us and support the rest of the program.

Here is the day/time and description of the seminar. As you can see, I will be supported by a purposely divergent group of publishers.

Thursday, May 31, 2007
2:30 – 3:30 PM
1E04
Corporate Social Media Platforms: A Case for Publisher Participation
Corporations in all industries are experimenting and effectively using social networking tools to build product awareness, communicate and converse with customers and experiment. In the publishing environment, books provide an easy platform for the many individual consumer and author blogs that exist – and there are many – but what of the publishers?
For publishers, the question is not whether they should be involved in social networking activities (blogs, RSS, podcasts, etc.) but HOW should they go about experimenting and launching effective social network programs. This session provides an overview of the activities of various publishers and provides a window on their motivations, successes and expectations. Audience members will hear how these publishers are creating a ‘social’ identity to leverage their brand, content and authors and support marketing and sales goals.

Moderator: Michael Cairns, Information Media Partners
Panelists:
Karen Christensen, CEO, Berkshire Publishing
Jimmy Behrle, The Overlook Press
Mike Hyatt, CEO, Thomas Nelson
Carrie Kania, Publisher Harper Perennial, Harpercollins

London Bookfair

LBF starts a week on Monday and I shall be there. Let me know if you would like to meet at the show or later in the week in London. I am looking forward to it and perhaps will report on some of the sessions I plan to attend and whatever else I hear about during the week.

Email: michael.cairns@infomediapartners.com

Richard Dawkins: The God Delusion

Well it is Easter weekend and I thought appropriate to mention that I just finished The God Delusion by Richard Dawkins. The book is only one of several the author has written over the years and if they are as readable as this one they might be good to look for. This book is very entertaining and believable (although I suspect if you are staunchly religious you might not think the latter), and the writing style is less heavily dogmatic than it is conversational. It makes fairly easy going even though some of his arguments are complex. Here is an short interview with him on the UK news show Newsnight.


The title has been out for months and is a best seller in the US and UK, and it may have tapped a nerve with respect to the increasing representation of religion in politics and political life. It is interesting to read that he makes an assertion (as other writers cited by him have also concluded) that many of early leaders of US political life (notably Jefferson) were probably atheists. Given this shared perspective that the founding fathers had in creating the constitution I wonder what they would think about the current mingling of religion and government - not just here but all around the world.


Lastly, I am unsure of the motivation for the design of the US book cover but I was struck by the association with the (stupid) mirror on the cover of Time's Person of the Year issue. The God Delusion has a bright silver mirror like cover and in reflecting your image to you it seems to emphasise Dawkins view that "we make our our purpose in the world" and our purpose and morality in life should not governed by organized religion.


Dawkins website

Borders: The Gang That Couldn't Shoot Straight

Quick on the heals of their mediocre strategy declaration a couple of weeks ago the company announced yesterday a reasonably significant recapitalization of their current and revolving debt facility. True to form, the details were not exactly clear in the press release why this strategy made sense and why their financial advisers seemed to have a material stake in the effort. So arcane is the description of what they intend to do with the $250mm that I have yet to find a financial report deciphering it.

Borders Group has been advised that, in connection with establishing a hedge of the convertible note hedge and warrant transactions, the counter parties to those transactions or their affiliates expect to enter into various derivative transactions with respect to Borders Group's common stock concurrently with or shortly after the pricing of the notes. The counter parties or their affiliates may also enter into or unwind various derivative transactions with respect to Borders Group common stock and/or purchase or sell Borders Group common stock in secondary market transactions following the pricing of the notes (and are likely to do so during any observation period relating to the conversion of a note).

The lack of reporting could also be the result of their apparent omission of any reference to an action like this in aforesaid strategic plan. Nevertheless, it doesn't really matter since this morning they decided that they needed to reconsider and that they were cancelling the offering. They blame shareholder feedback - which must have been pretty swift - and my guess is that the existing shareholders were not at all convinced that this financial restructure wasn't going to be immediately dilutive. It is also likely the shareholders found out via the press which doesn't seem ideal....

Borders Group, Inc. (NYSE: BGP) has determined, based on shareholder feedback,
to re-evaluate its proposed offering of $250 million of Convertible Senior
Notes, announced yesterday. The offering will not proceed today as originally
planned while the company re-evaluates this and other financing alternatives.
Upon completion of this re-evaluation process, Borders Group will issue an
update at a later date.

April Forewarning

On the back of their self-regulation of the famous swimsuit issue, Sports Illustrated announced that they would no longer report on women's professional volley ball. In comments, the company stated that the decision to restrict circulation of the swimsuit issue to libraries had led to some internal 'soul searching' and, as a result, the company had decided that they would no longer picture the scantily clad and excessively athetic atheletes of the PVA in the magazine. No word yet from the library community.

In other news, the ISBN community reported that they are considering adding a suffix to the recently adopted 13 digit ISBN syntax that will enable ISBNs to include additional characters and/or numbers for parts of products. The proposal would add a decimal point followed by whatever series of numbers and symbols the publisher required. The agency commented that the additional characters would not be confusing - unless the publisher chose to use a rune - and that they would be basically ignored by electronic bar-code readers. The decimal point would be calculated as a zero.

Borders (Lack of) Strategic Plan

The WSJ took a look at Borders today but not in any great analytical sense (subscription required). There is much to think about from the perspective of shareholders but this perspective seems to be missing from the discussion thus far. Perhaps some of the analysts that follow the company are preparing their position reports. The Journal did allude to the possibility that Borders could be a PE target: I would wonder about that although they believe this seems to be buoying the stock. In my opinion given the newish management, I think any Banker would want to see some improvement before they jumped in. Over the past six months there have been precious few positive actions out of the company but only a few people seem to be concerned about the long timetable to improvement.

My post from earlier this week.

Here were some other blog posts:
The Publishing Contrarian
Booksquare

The Road - Cormac McCarthy. An Oprah Pick

Oprah announced an unusual choice for her Book Selection today. Cormac McCarthy's The Road which I read in November is a frightening book and I recommend it. Here is my take.

If you saw the movies 21 days or Omega Man or Plant of the Apes you will know that in the post apocalyptic world we will be separated into two classes. Those that remain human and those that have become something terribly mutated. So it goes with The Road by Cormac McCarthy.

The book is immediately powerful because the reader sees this post-Armageddon future as entirely likely and the ravages forced on society as absolutely plausible. There are two characters in the book - father and son - and so depraved are the antagonists that the father concentrates on retaining one remaining bullet for his gun so he can shoot his son should they be captured. He cannot let the son become victim to a certain end that is revealed episodically until a climatic moment near the middle of the book. As they stumble along the road in a daily struggle for food the possible future is horrifyingly recounted when they nearly interrupt a cannibals smorgasbord replete with cauldron in the yard.

The book depicts a greyed out world where nothing apparently grows, all structures have been stripped by some locust of human desperation and death is found everywhere even in the tarmac of the the road they are travelling. It is not entirely clear where they are travelling or what has lead them to make this journey - there are several explanations which adds to the mystery. The book is riveting and is a stylized conversation between father and son which flows fast and sure. The Road, which I read in two days will live in my mind for a long time, but as horrific as this story is, I am sure the real thing will be worse and that is saying something.

Metadata, identifiers and a challenge ahead ….

Another rehash from March 28, 2007 this time a post written by Michael Healy who at the time was the Executive Director of the Book Industry Study Group. Michael has since moved on to Copyright Clearance Center but all of these issues he spoke about in 2007 remain relevant.

I am (unsurprisingly) in complete agreement with Michael’s comment in his thought-provoking piece on metadata that publishing businesses “must continue to focus on product information”. No one would seriously argue with his assertion that the quality of metadata has risen in recent years.

Several factors have influenced the improvements we have seen. International standards, notably ONIX, have been helpful to this process and many publishers, booksellers and data aggregators have adopted it to organize and communicate information in a standardized way. Practical guidance has also been made available. The Book Industry Study Group has prepared Product Metadata Best Practices, a set of voluntary guidelines that aims to help publishers improve the quality of their product information throughout the supply chain and speed the delivery of that information to the vendors’ trading partners. Innovative services from companies like Quality Solutions and Netread have also played their part.

I think also the general level of awareness in the book industry of the role product information plays in selling books has risen substantially. This has been helped by leaders like David Young at Hachette, Joe Gonnella at Barnes & Noble, and many others evangelizing on the subject for many years.

Under normal circumstances when improvements like those we have seen are made there is a danger of complacency setting in, but I see encouraging signs that this is being avoided. In many of the larger publishing houses, where investment in quality metadata has already been significant, I find abundant evidence of a commitment to raise standards even further. Many examples of high-quality data can be found outside these large houses, but I think it remains true that many smaller companies, working with fewer resources, have a lot to do raise their game. Organizations like BISG must face the challenge of how to reach these companies with clear, straightforward advice and with tools to help them deliver good metadata. We will be announcing some initiatives in this area shortly.

More work is certainly needed in the standards area and much of this is underway. A new release of ONIX is expected later this year which, among other things, will improve its handling of digital publications. An entirely new standard now under development, the International Standard Party Identifier (ISPI), will in time establish a unique identifier for authors, composers, performers and others in the creative supply chain. We are all aware of how unreliable personal names are as a means of identifying individuals, especially when we consider how many people share the same name and how many authors use pseudonyms. The adoption of a standard ID for personal and corporate names will be a big step in eliminating ambiguity when searching and in facilitating transactions such as the remittance of royalties.

RFID also appears to offer interesting opportunities. As the price of tags continues to fall we are beginning to see some large-scale adoptions in libraries, notwithstanding well-documented concerns about privacy issues. In bookselling, at least so far, the response has been more cautious. The adoption of RFID by the leading Dutch bookshop chain, BGN, has certainly stimulated interest among American booksellers but at the moment most of them appear to be waiting for more compelling cost benefits to emerge.

As we look further ahead into a future in which more fragmented content is sold, distributed and traded digitally, whether it’s cookery recipes or individual chapters from textbooks, one key question is how the industry will cope with the metadata challenge. If publishers are finding it demanding today to provide comprehensive, accurate and timely product information to support a universe of more than 3.0 million US titles and 200,000 new books a year, what happens in a market where available product is set to grow exponentially?

Michael can be reached directly at CCC.


Links: Metadata: What does it all mean

Thomson Learning Sale Update

The Globe and Mail (Toronto) is naming the names of those who are bidding for Thomson Learning. No real surprises and it would appear that the only operator that may emerge as a potential party to an acquisition is Bertelsmann. The only reason for that would be the announcement last week of Bertelsmann's establishment of a private equity fund. Perhaps if that announcement had not been made this list would be exclusively PE. Those named in the article are Bain, Thomas Lee, Blackstone, Warburg and Apax. Pretty much the top of the pile.

According to the article the dd meetings are underway and a deal is expected in the next two months. It seems likely that the Reed/Harcourt divestiture timetable may be set back into the third quarter due to this activity. Now that the WK education deal is done activity and attention will move to Thomson so look for more articles.

Globe & Mail

Wolters Kluwer Education Sale Confirmed

WK confirmed the sale of its education unit to Private Equity fund Bridgeport Capital for $1.0billion. As mentioned last week this represents a good price and WK, Reed and Thomson Learning should all be happy with the valuation.

Reuters

Englishman in New York

One of the great things about living in New York (technically, I live 1.5miles to the west) is that you can find just about anything and if you work it right you can live in a neighborhood or interact completely with people from your own land. In my case, there are numerous opportunities to bond with fellow English (or Greater England) in bars and stores in lower Manhattan. On Saturday afternoon, I visited my favorite corner shop for a few pork pies, sausage rolls and some bangers. As a quite considerably displaced English person (via Thailand, New Zealand, Australia and Hawaii), I can still remember the first time I walked into Myers of Keswick. (This is not a good picture). I almost expected Ronnie Corbett to to be standing behind the counter. (Thankfully the shop assistants are considerably better looking). At Myers, you can find everything from Flake and Crunchie bars to Ribena to Branston Pickle all of which are favorites of mine. A side effect of the limitation on traveling with liquids has been a significant reduction of my direct importation so I am lucky to have Myers.

At the store, I also found out for the first time that a number of local West Village stores are attempting to designate the area bordered by W14th, Greenwich Avenue and W10th as “Little Britain”. The campaign was undertaken by Tea and Sympathy (a tea shop) and is also supported by Virgin who bring loads of us back and forwards from the UK. There does seem to be some support for the idea. If you navigate to the ‘map’ segment on the web site you will find all the local ‘little Britain’ attractions. Highlights are Myers, A Salt and Battery and The Spotted Pig.

Following my shopping visit to Myers, I wandered around the west village neighborhood and at one point joined a crowd outside a full pub named The Red Bull where the group were watching South Africa attempt to match the incredible 40 over total of Australia (377 and they won). Standing outside in a group of about 20 were people from England, South Africa and New Zealand all joined by their interest in Cricket. At the same time on a TV screen further inside the bar England were dismally performing something closely resembling football. I love New York.

Krakoff Dies

From PaidContent.org: Bob Krakoff died suddenly last night at the age of 72. Krakoff, had recently taken over the VNU business media properties in the wake of the Nielsen privatisation. In his sucessful media career, Krakoff ran many of the Reed Business magazines and reference companies and rose to vice-chairman at RE.

Paidcontent.org.

Harlequin: An Augmented Man Is Good to Find

If you happen to be in Toronto this weekend and you are male you may want to try out for the open 'casting call' to be a cover model. Apparently, they are having difficulty finding the right sort of bloke and are going to look beyond the typical modeling agency fodder and take walk-ins. The modelling agency hurdle had always been my biggest obstacle but sadly I am not able to make it to Canada this weekend. Regardless, the rather sizable 'alternate lifestyle' community of Toronto should have some fun with this one. From The National Post:

"Ms. Reynolds also said Harlequin, which typically relies on a male protagonist of chiselled physique for its titles such as Slow Hand Luke and Jack & Jilted, is often looking for more muscular models that her agency typically wouldn't carry. "It's difficult because we only have a limited pool of guys who might be able to--even if they're slightly augmented -- look right. It's easier for us to provide the James Bond guy or the New York, sophisticated-businessman guy."

"Peter Duck, a professor in Ryerson University's School of Fashion, said he was not surprised to learn Harlequin is facing a shortage of manly models, given trends in the fashion industry. "The agencies, I'm sure they're getting this look that's been popular for the last few years, which is very skinny, tall and young."

I swear that was the first cover I came across.

Pearson Teams With Google

Educational publisher Pearson has linked up with Google Video to offer students quick video programs of educational programs.

Lecture and Test Prep videos for seven additional Martin-Gay titles from Pearson Prentice Hall will be available for download by summer 2007, covering basic college mathematics, introductory algebra, and, intermediate algebra. Students can purchase sections of the Lecture Videos for $0.99 each; a chapter of the Test Prep videos for $1.99; and a full chapter of the Lecture Videos for $3.99.

The quick video content is designed to support in class and text material and a 'great way to get extra support'. Parents may anti-up for the videos but I wonder whether the kids will. How soon will the videos be available for free on YouTube? You do have to recognize that Pearson comes up with these interesting ideas to extend content into different distribution channels and to go where the customers are.

Also, it being Friday and there being excitment over Wolters Kluwer, the Pearson plc stock is up (again) this morning on speculation of a break-up.

Wolters Kluwer in Divestiture Talks

According to (Dutch) BNR newsradio Wolters Kluwer has entered into exclusive talks with investment fund Bridgepoint for the sale of its Education unit. This would seem to confirm that the front runner Pearson is not in the running to acquire this business. Speculators commented that the price PE were willing to pay was simply too much for Pearson. Bridgepoint have invested in media in the past but nothing this large; there other investments span industries.

The IHT is also reporting that the unit will be sold for as much as €775million. First out of the gate with a sale agreement, this sales price sets a high mark that may lead to high sales values for Thomson Learning and Harcourt.

Reuters

Bertelsmann Speculation (Deuce)

No sooner was the press conference over that announced the launch of an equity fund than speculation resumed over an purchase of Thomson Learning by Bertelsmann. No news from the company naturally. Reuters. Stay tuned.

Fund
Speculation

Barnes and Noble Report Full Year

Barnes and Noble announced their full year results this morning and in the previous press release providing full year guidance the company indicated they would be at the lower end of the EPS range of $2.20-2.30. They are coming in at $2.18 and the market will not be too happy with that performance.

Here is the press release
Here is a financial chart reflecting their performance
Here is my prior post on this subject
Here is a webcast

Borders Reports Their Strategic Plan

Is there room for another book retail website? Borders believes there is and has announced that they will reopen the web bookstore. Strategically, this is the best move; however, operationally this is going to pose tremendous challenges for Borders and I am not sure they can pull it off. The lesson in the B&N approach to the web is that it can be an effective customer retention and customer service tool and they have achieved a successful integration with the stores. The flip side of that is if B&N had screwed up on the web then it could/may have screwed up the store business which is the risk Borders will face. Let's face it, there is little that the company will be able to achieve that is new and revolutionary in placing a bookstore on the web, so their real task has to be in building customer retention and extending the community of Borders customers beyond the stores. In other words, if they are going at this to compete with Amazon to build a real 'destination' book retail site they will loose out and in the process loose a lot of money in the process.

Management at Borders is also an issue and has been over the past ten years or so. New management is installed and the announcement of the web site is a representation of the new regimes strategic plan for the next several years. There have been several regimes installed in recent years with grand plans (category management anyone?) but while the ideas had merit the execution left something to be desired. Building a new web presence is not something that they can do on the cheap which means they are going to have to have the right people in place to get the job done. If it were me, I would take the entire web initiative out of Ann Arbor and set it up from scratch in India. There is just too much baggage in the home office.

Enough editorializing.

Elements of the announced strategic plan are as follows from the press release:

Revitalizing the domestic Borders superstore business to achieve, by 2009:

• Consolidated EBIT margins of 5% to 6% compared to 1.8% in 2006, driven by sustained same-store sales growth in the low- to mid-single digits at domestic superstores.
• Improved inventory turns of 2 times compared to 1.6 times in 2006.
• Refocusing investments toward transforming domestic superstores while significantly reducing investment in segments that have not provided a satisfactory return, including the International segment and Waldenbooks

Specialty Retail segment.

• The company will explore strategic alternatives for the majority of its International segment, including its U.K., Ireland, Australia and New Zealand superstores and Books etc. business, and will look toward its successful franchise model for future international expansion in new markets.
• Highly aggressive efforts, which began in the fourth quarter of 2006, to right-size the Waldenbooks Specialty Retail segment will continue in 2007 with the goal of reducing the number of Waldenbooks stores from 564 at the close of 2006 to approximately 300 by the end of 2008.
• Reinventing the company by leveraging innovation, technology and strategic alliances to differentiate Borders in the marketplace, including the debut of a new proprietary e-commerce site in early 2008

It is a fairly long press release - although one should expect that given it is supposed to spell out the company's strategy - and they go on to explain how they will revitalize the Borders stores and merchandising, continue to invest in Seattle's Best Coffee and Paperchase. (Is there a future as a combo WH Smiths and B&N me thinks...). The company will also continue to invest in the Borders rewards program (which in the case of B&N, they blame on decreased operating margins for the upcoming six-nine months) which has 17 million members. The company will halt capital improvements to their stores until they are able to prove out their new 'store concept' which they expect to be completed in the second half of this year. Lastly, the company will expand its publishing program. About the only thing they are doing that doesn't appear to mimic B&N is invest internationally. (Suggestions that they were changing their corporate colors from red to green and beige are untrue and mean).

In discussing the web site the company says the following:

As part of the development of Borders.com, the company is consolidating its Web properties into a single infrastructure. This will facilitate a seamless cross-channel experience that will integrate the in-store and on line experiences. The addition of new "Digital Centers" in Borders stores will enable customers to learn about, interact with, and purchase new digital products-- such as audio books, e-books, MP3 players -- and services such as down loading and personal publishing that complement the Borders brand. The company is in the process of exploring several potential arrangements for key partnerships with respect to its digital offerings. The digital services can be made available both in-store and online as a result of the Web initiative.

Lastly in signing off the CEO George Jones is quoted as follows:

"We need to reinvent our business to exploit the rapid changes taking place in how consumers access information and entertainment," Jones said."Our ultimate goal is to make Borders a vital community gathering place where people come together to see, touch, interact, and learn -- online and in- store."

Gosh, that about sums it up. Good luck with that.

Borders Full Year Results

Any new manager wants to clean house and start from scratch which may be the tactic the CEO George Jones is adopting with the "disappointing" Borders full year results. The worse the starting point the better the future comparison - assuming the strategy works.

From the press release this morning:

The company recorded a consolidated loss in the fourth quarter of $1.25 per share, which compares to consolidated earnings per share of $1.78 for the same period in 2005. For the full year, on a GAAP basis, Borders Group posted a consolidated loss of $2.44 per share compared to consolidated diluted earnings per share of $1.42 for the prior year. Excluding non-operating charges, primarily comprised of asset write-offs, the company recorded consolidated diluted earnings per share of $1.61 for the fourth quarter, which compares to operating consolidated earnings per share of $1.87 one year ago. For the full year, on an operating basis, Borders Group posted consolidated earnings per share of $0.39 compared to $1.57 consolidated earnings per share in 2005.

Most of the EPS loss is attributed to asset impairment related to the UK operations (although they don't discuss exactly what the reasoning is here) but even without the write-downs which were probably necessary the full year operating results versus a mediocre last year are pretty dire.

Full year results were announced as follows:

• For the full year 2006, consolidated sales increased by 0.8% to $4.06 billion.
• The company recorded a net loss of $151.3 million in 2006 compared to net income of $101.0 million in 2005 on a GAAP basis.
• Excluding non-operating charges, net income decreased by 78.3% from $112.0 million in 2005 to $24.3 million in 2006.
• Borders stores comparable store sales in the segment decreased by 2.8% in the fourth quarter and declined by 2.2% for the full year.
• International segment comparable superstore sales increased by 0.3% for the fourth quarter and decreased by 0.4% for the year in local currency
• Walden comparable store sales in the segment decreased by 6.2% in the fourth quarter and declined by 7.5% for the full year.
  

Press release

Scholastic Earnings

A big day for earnings reports today and first up is Scholastic which is reporting 3rd Quarter results today. They have narrowed their loss versus the same period last year but they are cutting their full year outlook. Watch the stock price later in the day. The company's year ends in May and the last Harry Potter book is due in July. (Reuters)

Here is the full press release and an excerpt:

Results in the third quarter were generally positive. Strong sales in the core clubs and improved efficiencies sustained an impressive profit turnaround in School Book Clubs and drove higher margins in the Children's Book Publishing and Distribution segment. Robust technology sales also improved results and margins in Educational Publishing. In addition, the Company's cost reduction efforts remained on plan," commented Richard Robinson, Chairman, CEO and President. "While customer acquisition through the Internet remained strong in Continuities, higher bad debt and promotion amortization hurt the quarter's results and have caused us to reduce our outlook for the fourth quarter and full year.

Results for the quarter:

• Company now expects full year earnings in the range of $1.40 to $1.60 per diluted share on revenues of $2.1 to $2.2 billion
• Free cash flow for the fiscal year is now expected to be between $50 and $70 million
• Childrens segment revenues in the third quarter of fiscal 2007 were $280.1 million, up 3% from $270.9 million in the prior year period
• Educational segment revenue increased slightly to $74.6 million from $73.5 million in the prior year period, and operating results improved to a loss of $3.0 million from a loss of $3.5 million in the year-ago period.
• International segment revenue rose 5% (or 1% in local currencies) to $101.5 million from $96.9 million in the prior year period and operating profit improved to $3.5 million from $2.3 million a year ago, primarily as a result of higher export profits.
• Media, Licensing and Advertising revenue in the segment declined 12% to $40.8 million from $46.4 million in the prior year period.
• Corporate Overhead declined 20% to $15.7 million from $19.7 million in the prior year period.

Blurb.com

As readers should know, I have had great experience with Blurb.com's digitial publishing 'program.' The fees are so cheap that I encourage anyone interested to give the application a try. Today they are covered in USA Today. And here is an excerpt:

Blurb now has fans among architects, real estate agents, photographers, cookbook authors, museum archivists and others who have used it to print bookstore-quality editions. It takes orders for thousands of books daily, up from hundreds just a few months ago.A basic hardcover Blurb book is adorned with a full-color, glossy dust cover that looks like it belongs in a bookstore, not on a standard $29.95 homemade project. "We live and die on … quality," says Gittins. "That's what's really gotten people's attention."

Most Blurb customers (Gittins calls them Blurbarians) order books of 100 to 120 pages, and the cost is $37.95. A similar book from Shutterfly or the Kodak EasyShare Gallery would cost upwards of $100. Gittins says Blurb makes money
on every book, and can afford the lower prices thanks to automation.Blurb's Booksmart software is a free, fully functional layout program. Designing your book — if you are so inspired — can take many hours. But once it's finished and uploaded to Blurb, there's very little human interaction. "We're the cleanest business (that) printing has ever seen," Gittins says. "There are no proofs, just finished books."

Proquest Suspended

In a press release this afternoon, Proquest advised investors that trading in their shares had been suspended by the NYSE due to their failure to submit various regulatory filings.

The NYSE is suspending trading because the Company now anticipates it will not file its Annual Report on Form 10-K for fiscal year2005 (2005 10-K) with the Securities and Exchange Commission (SEC) by April2, 2007 and is therefore not in compliance with NYSE Rule 802.01E. The NYSE stated that an application to the SEC to delist the Company's shares from the NYSE is pending the completion of applicable procedures.

The company is obscure about when it will be in compliance indicating it will be sometime in the second quarter.

Proquest Guidance