McGraw Hill Third Quarter Strong

MGH continued to delivery strong financial results on the back of their strong start to the year. In the third quarter revenues up over 9.8% to $2.2billion. Net income for the third quarter grew by 18.2% to $452.0 million. Foreign exchange rates positively affected the growth of revenue by $21.3 million and contributed $1.8 million to operating profit. From the press release,

"Double-digit growth and increased share in the elementary-high school market in
the most important quarter of the year for education and solid performances in Financial Services even as the structured finance market deteriorated were key to our results," said Harold McGraw III, chairman, president and chief executive officer of The McGraw-Hill Companies. "The operating margin expanded in all
three segments."

Net income for the first nine months was $872.9 million. and Revenue for the first nine months grew by 11.6% to $5.2 billion. Commenting on the outlook for the balance of the year the company stated:

"We are still on course to produce double-digit earnings per share growth in 2007, as well as improved operating margins in the Financial Services and McGraw-Hill Education segments. For the fourth quarter, revenues and earnings will not match last year's results because of challenging conditions in the structured finance market and some softness in education."

Highlights:

Education:

• Revenue for the McGraw-Hill School Education Group increased 11.2% in the third quarter to $670.8 million.
• Revenue for the McGraw-Hill Higher Education, Professional and International Group grew by 8.1% in the third quarter to $505.1 million
• Capturing 32% of the fast-growing state new adoption market was the key to this year's industry-leading performance by the McGraw-Hill School Education Group
• In professional markets, digital products, which include Access Medicine, Access Surgery, Access Emergency Medicine and Access Pharmacy, continue to attract a growing number of domestic and international subscribers. Our new digital iSpeak products, launched in April and now available in seven languages, are gaining traction

Financial Services:

• "Revenue for this segment increased 12.5% in the third quarter to $759.6 million compared to the same period last year.
• Operating profit grew by 17.3% to $346.7 million. Foreign exchange rates positively affected revenue growth by $12.6 million and had an immaterial impact on operating profit growth.
• Double-digit growth in Standard & Poor's international fixed income markets, a strong performance by corporate and government ratings, and outstanding results from financial information products and services offset growing weakness in structured finance
• "Standard & Poor's data and information products and index services recorded solid gains. Increasing assets under management in exchange-traded funds, stepped up trading volume of derivative contracts, and growth in licensing fees, all linked to Standard & Poor's indices, contributed to the improvement.
• "Strong demand for data and information products is spurring growth. Capital IQ continues to add new customers and expand services to existing clients. A primary revenue driver has been the addition of new modules to the Capital IQ platform, including portfolio management tools and detailed fixed income information.

Information & Media:

• Revenue for this segment increased 2.1% in the third quarter to $252.4 million compared to the same period last year.
• Operating profit grew by 35.8% to $18.6 million. In the third quarter of 2006, the segment incurred a pre-tax restructuring charge of $5.8 million.
• Foreign exchange rates did not have a material effect on revenue or operating profit growth.

Full press release
Powerpoint

Identifying My Package

As publishers we remain committed to defining for our readers and users the ‘package’. At the Frankfurt supply chain meeting last week as I listened to another “history of the ISBN” and other bedtime stories I was stuck by our insistence as publishers to define for our customers just how they should consume our content. This was manifested in our approach to identifiers for segments of content. I include myself in this criticism as a proponent of ISBN, DOI, ISTC and other alphabet defying groupings over the past 10 years. Three or more years ago, I think we were on the right track but in today’s user defined world the consumer is telling us what parts they want to consume and we will need to come up with easy to use flexible solutions that can identify the content and use.

On the Exact Editions site a user can select, by highlighting, a piece of text they want to use from any number of the journals and magazines hosted by EE. (The tool is named The Clipper). It is a fun and useful tool but in its implementation it doesn’t restrict the user in any way (other than a limitation on the amount of content). If a similar solution were implemented in a research context (within Refworks for example) I would like to see a persistent identifier created on the spot who’s syntax could be partially defined by the user. This is a perfect implementation for a DOI (one of the few perhaps) that enables the user to select a segment of the content they want, makes it persistent, creates a record for the publisher and enables any necessary reporting to take place.

It would seem to me that formatting a programmatic standard syntax to represent paragraphs, chapters, images etc. is a backwards approach simply because we will never fully anticipate how our users will use the content. We also continue to use the printed page as a construct which is fast diminishing in the online context and further undercuts the current standards approach. Attempts to build out a standard by unilaterally assigning executable identifiers to works (books) will be a waste of time and I simply don’t see the benefit of this approach; moreover, I don’t see anyone paying for it. It is not even clear publishers would welcome this approach.

Several implementations of technology that places at the point of need an easy to use script has proven that users want and are willing to purchase or gain approval for the use of content. CCC and O’Reilly are two differing examples of this concept. In the same manner, enabling an easy to use [citation] solution that provides a user with a simple pop-up window tied to the content they are interested in is a far more flexible and appropriate solution to identifying content. Avoid proscriptions: Let the user decide.

Amazon to Loose "One-Click"?

From my Aussie stringer, the Sydney Morning Herald has an article this morning on a New Zealander called Peter Calveley. Peter has been engaged in what is becoming a sport of sorts for dedicated people, crank-heads and other patent crusaders who seek to challenge existing patents for various technical solutions and products. In this case, he has waged a long battle over Amazon.com's famous 1-Click patent, a process that enables online shoppers to buy goods with the single click of a mouse button. From the news report:

In response to Calveley's request to re-examine the intellectual property, the US Patents and Trademarks Office (USPTO) has just handed down a decision
rejecting all but five of Amazon's 26 claims to the patent. The Patent Office agreed with Calveley's claim that processes similar to the 1-Click solution had been documented before the Amazon patent was lodged in 1997. Eight of Amazon's 26 intellectual property claims were dismissed because of a Newsweek magazine article entitled The End of Money?. It was published in 1995 - two years before the 1-Click patent was lodged. The article described a process where someone could click a button to pay for "an annotated bibliography of every article ever written about Sandra Bullock" and download the file.

Naturally, Amazon.com are not giving up so easily and can opt to appeal or take the case to the civil courts. As for now, the decision has been posted on the USPTO website but don't go adding 'one click' to your transaction module just yet.

Booker Short List is Free

The Times Online is reporting that the MAN Booker prize short listed titles will be made available for free download. Apparently the initiative is well advanced but what I really thought interesting was this statement:

The downloads will not impact on sales, it is thought. If readers like a novel tasted on the internet, they may just be inspired to buy the actual book.

Hummm. I must be missing something because while some forward thinking people in the industry subscribe to this theory it is by no means universally held. In fact I laughed when I read it. Surely, if free downloads were a promotional vehicle there would be more (all) of them.

Also, in one sweep the publisher disparaged the sales data in Nielsen's bookscan product by suggesting that the sales units of the Booker winner documented in the Nielsen reports were only 10% of the actual total. (Me thinks they are counting in Cusslers). The writer goes on to say that winning will do wonders for sales of the title - breathlessly, "Enright’s sales may now quadruple, at least". Gosh, is that an extra 12,000 units?

Lulu Name New President

Lulu.com the self-publishing juggernaut announced the appointment of Bryce Boothby Jr. as President and COO of Lulu Enterprises. Boothby, 57, will oversee all finance, engineering, and business at Lulu.com as well as Gnack, the Lulu Enterprises company that provides support and services for open media businesses.

From the press release:

"We are very excited to have an executive of Bryce's caliber joining the company," said Lulu Founder and CEO Bob Young. "Because of our rapid growth we must prepare our company to serve millions of customers. Bryce's experience and remarkable track record of success will ensure Lulu's ability to continue to scale rapidly into the future."

Boothby appears to have no direct publishing experience other than a stint at Quebecor in the 1990's. He does have strong manufacturing, process and technology experience which should give you a sense as to where the publishing industry is headed.

Sommers Named President of Gale

Pat Sommers who until recently was President & CEO of Sirsi/Dynix has been named as the new President of Gale Reference. He replaces Gordon Macomber who announced last week that he was leaving for Wolters Kluwer Education. Sommers will report directly to Cengage CEO Ron Dunn. From the press release:

"Pat Sommers is extremely well qualified to lead Gale. He has anoutstanding record of success in managing information service businesses,and I am confident that he will provide strong leadership to help Gale growand further solidify its position as the world's premier library referenceinformation business," said Mr. Dunn. "I am delighted to welcome Pat toCengage Learning and look forward to working with him to provideoutstanding products and services for Gale's customers."

He starts Monday.

Press Release.

Pick Up and Go Book Vending

Doughty thieves made off we two new book vending machines over the weekend (as reported by the BBC). And to think we believe reading is in the decline. Who said reading isn't popular.

"The machines, worth £10,000 each, were in a trailer attached to a lorry parked at PN Computer Services on High Street, Elsenham near Bishop's Stortford. They were due to be delivered to Stansted Airport, but thieves took the trailer between Friday 14 and Monday 17 September. Essex Police said they have few leads and want information from the public."

I could have told them to avoid Bishop's Stortford; too many angry booksellers. I have always liked the idea of book vending machines and proposed the idea when I worked for Berlitz publishing as a unique way to sell our travel guides and phrase books. Idea died.

Swets Acquires MPS Scholarly Stats

The MPS resource management tool Scholarly Stats was quite innovative but in my opinion never really fit with the MPS core business. As a result I think they struggled to sell it into the library market and gain any significant market share. At a time when librarian's budgets are threatened or limited in some manner, Scholarly Stats is a tool librarian administrators can use for library usage statistics of licensed materials. From their website:

ScholarlyStats has been developed to provide information professionals with a single point of access to their vendor usage statistics. Providing faster access to consolidated data, it can help you to analyse usage of your online content more easily and more effectively. ScholarlyStats delivers consolidated reports to libraries around the globe, providing a clearer view of usage of over 70,000 journals and almost 450 databases from 46 platforms.

MPS was not a subscription agent as Swets and Ebsco are so could operate as a neutral party. With this purchase, the Scholarly Stats tool will be integrated into the Swetswise product portfolio and this will require some of the other platform providers and agents to beef up thier own tools for managing and monitoring licensed content usage.

More on the acquisition: Information Today

On a related note, the EU competition commission has cleared the acquisition of Swets by Glide Buyout Management Holding BV. This deal was previously announced in early September. Forbes

Olivieri Resigns From Wiley Blackwell

The Bookseller (UK) is reporting that Rene Olivieri who was responsible for the integration and merger of the Blackwell business into Wiley has resigned. There is no official report from the company which seems to indicate that the timing is unexpected. (Not least because senior execs in the US will still have been in bed when The Bookseller was reporting this). Having said that, it would seem that senior executive level changes were on the cards as the integration progressed and while this change may be presumptive it may also have been inevitable. Steve Smith was appointed earlier this year as head of all Wiley operations in Europe, Asia and Australia.

LibraryThing Launch Wiki Books In Print

The success of wikipedia, Librarything and other social databases has always intrigued me in terms of the models potential application to the development of a wiki-like bibliographic database. Well, it looks like Librarything has launched something that seeks to build a collective database of book catalog information. They call it Common Knowledge and describe it thus:

Common Knowledge works like a wiki. Any member can add information, and any member can edit or revert edits. All fields are global, not personal. Common Knowledge diverges from a standard wiki insofar as each field works like its own independent wiki page, with a separate edit history. Some examples:

Jonathan Strange and Mr. Norrell. I've been conservative with characters and places. (See Longitude, worked on by Chris for the opposite approach.) But I wish I had her editor! The history page for "important places" in Jonathan Strange and Mr. Norrell, showing improvement over time.
David Weinberger. Half-filled. He mentions his agent, but I can't tree his major at Bucknell and the honors section is empty.
Hugo Award Winners. This is going to get very cool.
The global history page. Mesmerizing.

In order to get Common Knowledge off and running, Librarything are "slapping fields up there" but this effort it really intended to give Common Knowledge some initial heft. Since all fields are editable this gives significant content for users to react to and add, correct and expand which is, of course, the intention. Tim at Librarything says that this is the perfect Librarything feature and he is very excited about it. As with other similar wiki like applications, users will be able to use and build off the data (as long as they cite the source) and there is strong encouragement to do so. Tim goes on to say that they will be building API's to promote even greater use.

As a result of this initiative we are going to see a much greater blending of user generated content and structured content from the likes of Ingram, Nielsen and Baker & Taylor. The commercial database companies would be crazy not to incorporate this content into their products but they have to be careful. What Librarything is doing is compounding the notion that biblio data is a commodity. Value still exists in the logical compilation of bibliodata but how long will it be before crowd sourcing encompasses the development of logical frameworks, data standardization and taxonomies. Perhaps this is starting to happen and indeed examples such as software development (Linux) prove that groups can build logical and powerful constructs. A wiki biblio database is probably easy by comparison and I can see the day when a biblio manager will no-longer have 50 data entry staff in New Jersey but will rely on an army of free contributors with far more collective expertise. The trick will be how each of the current commercial providers are able to differentiate themselves.

Wire Loose

Wired notes the 'rumor' regarding Random House's possible inclusion in the Google Book Program. It was mentioned as an aside by Peter Olson in a panel meeting at Frankfurt. I don't believe this article is particularly accurate and commented as such. Especially this quote:

As for Random House's rumored about-face, there's certainly the distinct waft of
desperation to it; a struggling publishing company facing stagnant sales and falling revenue trying to "compromise" with a internet titan.

Wired

The Radiohead Agenda

Dear Sir,

We will not be requiring your services any longer and will not be renewing our contract. We thank you for your 10 years of often frustrating, painful but finally rewarding management expertise but as a band we have decided we need to be masters of our own creativity and financial development.

All the best for your future plans,

Radiohead.


P.S. If you would like a copy of our new release click here. It's free.

P.P.S. Our mates OASIS and Jamiroquai are joining us.

My Foreword Article

Harpercollins Launches Authonomy.com

Harpercollins UK has announced the launch of an author community site that will attempt to mimic the success that MySpace (and others) have had in the development of new music. Interestingly, the parent of both Myspace and Harpercollins is Newscorp and leveraging Myspace across the Newscorp businesses was something observers were expecting when the deal was consummated last year. No matter.

Authonomy will be expanded globally and will seek to develop the type of social networking framework that has been the hallmark of myspace, bebo, facebook and others. That type of success is hard to bottle so it remains to be seen whether Harpercollins can create the same type of social interest around writing and authorship. Users of the site will be encouraged to upload their own writings, comment on others and generally support the efforts of their fellow Authonomists.

As talent is spotted, Harpercollins will consider the works for general publication. No guarantees of course. Thus far, the launch hasn't really generated too much excitement.

Frankfurt Bookfair Blog

The bookfair has a blog and they kindly added me to their blog roll. I wish I had known in advance and I would have been more diligent in publishing material about the fair. No matter there is always next year. I think I have my old colleague Andrew Wilkins to thank for this.

Frankfurt Blog

Frankfurt Supply Chain Meeting: MVB Content Warehouse

I attended the 29th Frankfurt Supply Chain meeting this week and from a jet-lagged audience I report on a few of the presentations. The room was typically full of vendors, publishers, data suppliers, software providers and consultants. There was a disappointing number of questions and follow-on discussion with all the presentations and I am unsure of the reason for this. Perhaps most disappointing was that the promised drinks cart failed to arrive at the end of the day - not as it turns out, the responsibility of the conference organizers.


Roland Schild: The Changing Landscape of the Book World.
Schild is the director of the German publishers and booksellers organization (MVB) has took over management of their book digitization program when he joined MVB from Amazon.de. The digitization program was originally announced at Frankfurt 2005 and is based on the Macmillan Bookstore platform. In presenting their project, Schild noted that they are announcing a name change to Libreka. The launch of the site is going to be somewhat limited with "purely search" only until added features such as purchasing are added sometime in 2008. The focus of the site is on titles "with economic value" that is those titles in German Books In Print. (MVB is the publisher of German books in print). Schild noted they have three objectives in supporting both publishers and booksellers with this initiative:

1. Maximize reach to the publishers target audience with two 'aspects': Firstly in a quantitative manner in driving traffic where the publisher is less concerned with a targeted approach: A Dan Brown novel where they just want mass exposure. Secondly, a targeted approach where the book content may appeal to a narrow audience such as 'rose gardeners'. The product will enable both models
2. Beginning in the first quarter 2008, they will become an 'open sales channel for booksellers and publishers' offering new content and content models for sale.
3. They intend (must) operate in a 'copyright friendly' way and adhere to all copyright requirements.

It remains to be seen whether Schild and his team will be able to build what he described as a 'European Digital Library' especially in competition with the likes of Google and Yahoo and even some specific library programs. Nevertheless, MVB has been seeking the support of 'GYM' (Google, Yahoo, Microsoft), libraries, publishers and others to make them aware of the program and to ensure that their content is included in search results. That seems rather obvious but the biggest challenge will be to establish a relevant content warehouse will all digital content that is a real destination. Assuming digital content is searched via GYM how MVB will draw traffic to their site will be a big challenge. Of note, Springer which is a Google Library client was not mentioned as an MVB participant and if the case represents a significant hole in MVB's digital content repository.

Schild mentioned that they would like to use the ACAP content access protocol which will allow the MVB content to be indexed but will enable traffic to be referred back to the MVB site where various content access parameters are in place according to publisher preference. Their approach is similar to the Microsoft Live Book search approach.

It was interesting to hear about the production issues they faced in this project but there were two strange things: Firstly, Schild announced they were rebranding the product but didn't show us the brand and Secondly, most importantly there were no screen shots or a demo...

Frankfurt Supply Chain Meeting: Random House

Fionnuala Duggan spoke of RH's internet marketing efforts: "Web2.0 and the marketing mix" and 2005 to RH. She has experience in music, newspapers and publishing so offers a broad base of experience in web 2.0 applications. She introduced her discussion by commenting on how there has been a rapid increase in 'a different type of company'. She noted Myspace, facebook, ebay, photobucket and librarything. The central tenet of these social companies is that users are "choosing to interact" with them rather than having something imposed on them.

Fionnuala noted that attention and activity is now widely dispersed across the panoply of media choices. Media is vastly more fragmented than ever before and unless you as a publisher have a strategy to hit potential consumers in the locations where they are surfing then she concludes "you haven't got an internet strategy". You need to fish where the fish are and be present where the consumers are active. The object of internet marketers is to reach out into the internet and bring back the consumers to the RH site where they can interact/engage with them.

Vehicles used include email which if closely and accurately marketed can be an "extraordinarily powerful marketing tool and has been for RH." Most of traffic for RH comes from search and while a competitive market, search is a priority for RH in navigating traffic to RH. Google booksearch is also going to be an enormously important step in the growth of books. Books will now compete with all kinds of published works and the challenge for publishers is to make books relevant within the context of all other types of printed media. So, publishers need to be far more aware of the consumer experience, the content of books, the presentation of books, etc.

She reminded the audience however, that making books available is not the same as selling them and as an example she showed a music retailer named emusic. The company is a 'long tail' retailer of music content and has been able to create a strong viable content retail operation entirely through merchandising. The company has a catalog of over 2mm tracks and has "electrified and made interesting" the long tail of music retailing.

The Random House widget has been very successful for them and is an important aspect of their desire to seed social sites like Myspace and Facebook with Random House content. Other social applications she mentioned were iLike, iBook, Bebo and librarything. As book publishers they should be trying to infiltrate these sites with their content and also be prepared to engage the resulting consumers/users in social interactions.

Lastly, having an internet presence is a lot more than having a web site. It is far more than that and while important to front list, if done correctly their activities will have far more impact on the long tail of Random House titles which provides the excitement.

Frankfurt Supply Chain Meeting: Shatzkin & The Emergence of DADs

Mike Shatzkin of Idealogical company presented his research into Digital Asset Distributors in a speech entitled An Emerging Infrastructure of Digital Asset Distribution. Mike has presented this material on at least three occasions and I discussed it earlier this year here. He also has a copy of a similar speech from earlier this year on his web site here.

The publishing supply chain is changing and is no longer simple. In digital distribution even without ebooks they have more content to supply more trading formats, more trading partners and more customization. A lot of this content is about sales but also a lot about marketing. A little more than a year ago, Shatzkin saw a number of companies developing digital asset distribution (DAD) services who distribute content for digital asset producers (DAP) and pass the content to digital asset retailers (DAR). The role of a DAD is to get content delivered to a wide aray of content users. In his view there are more scale reasons for the development of DADs than there are/were for physical distribution which has been consolidating steadily for 40 years. Shatzkin went on to identify eight companies in the publishing arena he considers to be DADs: Biliovault, Bookbank, MPS Bookstore, Code Mantra, Ingram Digital, LibreDigital, Random House UK and ValueChain International. (These companies are also noted in the speech cited above).

In determining the need for a DAD a publisher should document all their use cases such as, files sent to printers including archiving and version control, files to merchants to support sale including covers, toc's etc., files sent for subrights reasons, files sent to websites and/or syndicators for pr reasons and files sent to online booksearch programs. Finally ebooks are the least important of the use cases as don't currently provide a lot of revenue but do provide promotional benefits. The objective of a publisher is to get a DAD that can support all their use cases and avoid retaining DADs that can only fulfill part of their use cases. New use cases arise all the time so the DAD also needs to be flexible.

In the long run Shatzkin believes that most DAD's will become industry resources for most publishers and publishers (with only a few exceptions) will forgo development of their own DAD capability.

There are a number of steps a publisher should take in beginning their DAD strategy.
Firstly, a publisher needs to develop a spreadsheet inventory of all their files, their locations and their formats. Secondly, the publisher needs to document all their use cases. Thirdly, understanding both the current costs of fulfillment and what is not getting done is also important. These three items are critical for the publisher to have a meaningful discussion with the potential DAD's about services and costs. If the publisher doesn't have the content in a form to distribute, the DAD will almost certainly work with them to transform the content for a fee.

Lastly no DAD is future proof and so you must get to know the provider not just the sales team. Be sure to build strict service level agreements into your contract which also includes an innovation clause enabling you as a customer to ensure the DAD continues to innovate and expand their services in line with your customer needs and requirements.

WH Smiths Beats Estimates

For some reason AOL Europe put this article at the top of their search results for WH Smith this morning. As the article is six months old you might want to look at more recent results here.

*****


Good news for UK book retail this morning in the results for WH Smith's. Annual revenues and profits were higher versus last year on the back of better results in their railway and airport stores. City center stores continue to plague the business and revenues were off 6% versus last year; however, the company indicated that market conditions are masked in this result as they continue to realign their store product mix.

Highlights from the company press release:

Profit before tax and exceptional items up 29% to £66m (2006: £51m). Profits from trading operations are:
• High Street profit up 5% to £44m (2006: £42m)
• Travel profit up 16% to £36m (2006: £31m)
• Total Group profit before tax of £76m (2006: £44m).
• Like-for-like (LFL) sales down 4% reflecting our strategy to rebalance the mix of our High Street business towards our core categories.
• High Street LFL sales down 6%, with total sales down 6%
• Travel LFL sales up 2%, with total sales up 6%
• Gross margin has improved by 230 basis points year on year.
• Cost savings of £10m, with £3m delivered ahead of plan; further incremental cost savings of £11m identified.
• Strong free cash flow of £81m (2006: £68m).
• Underlying earnings per share2 up 26% to 29.3p (2006: 23.3p).
• Basic earnings per share up 82% to 33.1p (2006: 18.2p)3.
• Final dividend proposed of 8.1p, up 31% on the prior year. Total dividend per share of 11.8p
up 27% on prior year4.

Specific to books the company stated:

Books LFL (like for like) sales were up 1% as we continued to focus on rebuilding our authority as a popular book specialist and maximising profitability. Excluding the Harry Potter release in the second half, LFL sales for the year were flat, with gross margin slightly down including Harry Potter and up excluding Harry Potter. We maintained our strong performance versus the general high street, a trend which has continued for over 2 years now. We are particularly pleased to have maintained this performance during the second half of the year in the face of very strong competition on Harry Potter. During the year, we saw strong shares in some of the front list books, both over the key Christmas period on titles like Peter Kay, The Sound of Laughter, and then with further strong shares on key summer titles such as Cook Yourself Thin and the Richard & Judy Summer Read. Improvements to category planning and management have delivered good results, notably through improved ranges, innovative promotions and a focus on specific genres, such as Kids.

The High street revival is part store remix (DVD and CD sales are rapidly declining) and also based on the integration of post office concessions. The company has announced plans to integrate these concessions in 71 of its 544 high street stores and while operationally complex they have said they are on plan to achieve their goals. Currently they have 23 concessions in operation. The company has previously said the object of installing the concessions in the stores is to provide increase foot traffic and in prior interviews Kate Swann (CEO) has said their assumptions of the impact of this strategy is being borne out.

The company is naturally guarded about the coming year and warns that the marker should not expect too much by way of a rapid turn-around in the High Street stores. Regardless, shareholders and the publishing community generally should be relieved at these results which show significant performance improvement.

Reuters

Borders' UK New Investor

There was a profile of Luke Johnson in the Wednesday Evening Standard which I read wedged into seat 26a coming home. Even thought he is only 45, Johnson has a long history of both entrepreneurial activities and private equity investing. He is currently Chairman of Channel 4 which was one of the early commercial UK broadcasters but if there is a theme to his business history it is in retail customer management. He believes that the Borders UK operations have a lot to offer and,

"It's like gold to us." Come on, there's a Borders near me, and while it's great wandering round the basement listening to the CDs, I'm also aware I'm often the only one down there. "In music retailing, life is tough," Johnson says. "HMV and Virgin have shown that. Borders needs reshaping. "When the internet came along, people said it would transform retailing -- it's taken until now for it to really make an impact. It's not just CDs -- travel agents, cameras shops, video rental, they all face a difficult future. But Borders doesn't just sell CDs, its main business is selling books and the good thing about them is that their sales are still growing. Millions of people want to browse in bookshops. Did you know the average dwell time in a Borders is one hour?"

Article

Macomber appointed President & CEO Wolters Kluwer Health

Wolters Kluwer Health, a division of Wolters Kluwer, a leading provider of information and business intelligence for students, professionals, and institutions in medicine, nursing, allied health, pharmacy and the pharmaceutical industry, announced today the appointment of Gordon Macomber as President & CEO of its Professional & Education business unit, with responsibility for the Lippincott Williams & Wilkins product lines.

For the past four years, Macomber had been President of Thomson Gale Reference in Farmington Hills, MI.

"The appointment of Gordon Macomber brings us extensive publishing experience as well as the leadership skills and business proficiency to take our books and journals business into the next era of content-in-context," said Jeff McCaulley, President & CEO of Wolters Kluwer Health. "We could not be more thrilled to have Gordon join our leadership team."

Press Release

Borders Down Under

As reported before, final bids are due by the end of the month for the Borders store operations in NZ and Australia. Bids are expected to be in the A$80-100mm range with Private Equity Partners the owner of Angus & Robertson the presumed front runner. Some serious contenders are already reviewing the books and according to this article from the New Zealand Herald there may be more than one or two candidates. Already mentioned were PEP and Berkelouw Books (a small book company), and now Dymocks the other large bookseller in the marketplace has confirmed it is looking to make a bid. Additionally, Woolworths and Paper Plus, a PaperChase like franchise operation, may also join in. This additional interest must be good news to Border's US who need to get a high price for these operations to mitigate the disappointing sale of the UK operations. Also noted in the article is a suggestion that Borders Australian management may have backed off a management buyout in order to align themselves with one of the purchasers most likely PEP.

Riverdeep Rumor and Reed Elsevier "Buy"

A curious note from Usman Ghazi of Dresdner Kleinwort who, in the process of recommeding Reed Elsevier as a buy - with a target price of 780p - takes note of rumors suggesting Riverdeep risk "either not securing the bank funding required to finalize the [Harcourt] transaction or going bankrupt in the intervening period, leaving the deal unfinished." He dismisses these rumours and I can't find any other suggestion of these issues so how much of a concern are they?

Borders CEO Jones Buys 50,000 shares

Nothing speaks to committment than dipping into your own pocket and putting your money where your mouth is and that's exactly what Borders' CEO George Jones has done with his purchase of 50,000 shares. While Borders' hit a long term low after their recent earnings announcement this endorsement may both shore up the share price and let investors know that senior management believes the future looks good for Borders. This purchase was one of the largest single purchases of Borders' stock in recent years. The purchase cost over $660,000 and as a result, Jones owns over 121,000 shares.

In related news, the company also annouced a fulfillment agreement with Baker&Taylor for support of the to be launced Borders.com retail site.

"We selected Baker & Taylor as our primary fulfillment partner because of their excellent track record with consumer-direct fulfillment of all of the product types we'll offer at Borders.com, and their ability to serve our customers in the superior manner they deserve," said Kevin Ertell, vice president of e-business for Borders Group.

"We are delighted to be Borders' fulfillment partner for book and entertainment products" said Richard Willis, CEO, Baker & Taylor, Inc. "We look forward to working closely with Borders on this exciting initiative and providing their customers with the world-class fulfillment services that are a standard of B&T."

In the same announcement, the company formally annouced the beta for the new retail site with some description of the site's features.

One such feature is the Magic Shelf(TM), which Borders has been testing on the beta site for over four weeks. The Magic Shelf is Borders' unique online version of the warm and engaging shopping experience that takes place in its bookstores every day. When arriving at the site's home page, customers see a realistic looking, three-dimensional shelf of actual book covers displayed as they would be in a Borders store. For details on each title, customers simply click on a book that interests them, much the way they pick up books that catch their eye in Borders stores. Over time, as customers shop at the future Borders.com, the Magic Shelf will become personalized for the shopper based on past purchases and will display books that the customer may be particularly interested in exploring. On the beta site, there is a related Magic Shelf feature called "Picked for You." Customers simply indicate the subjects in which they have an interest, and Borders will stock the "Picked for You" shelf with books on those subjects.

Penguin Lives in Whyville

Mediapost has an interesting post about the virtual world whyville and how the site is being leveraged by Virgin, Penguin and the University of Texas Health Science Center. The virtual world has over 2.4mm active users between the ages of 8-15 and is billed as place where children can gain an understanding and appreciation for math and science. It is also a place where companies can advertise there products as long as the advertising is 'active brain advertising'.

Here is what Mediapost said about Penguin's activity:

For Penguin Books' kid-friendly adaptation of Al Gore's "An Inconvenient Truth," Whyville created an entire Global Warming program--complete with in-world climate changes and tropical storms. Kids were able to band together for community clean-up activities after a storm trashed the Whyville beach, and take CO2 and temperature readings of the island at the Penguin-sponsored Climate Center. Almost 400,000 members visited the Climate Center within months of its launch at the end of June.

Foreword Magazine

Foreword magazine asked me to blog for the which I have been doing for the past four weeks. Most of what has appeared there is content from PND but Competitive Writing is something new. You may also like the new Foreword website recently redesigned.

Media Deals Keep Getting Better

The Jordan, Edmiston Group released their quarterly press notice on media deals and the results keep getting better and better - if you are selling. Amidst general worries about personal retirement accounts (mine) and decreased real estate valuations (my ex-neighbor but they deserve it) here we have our industry's bell weather shooting through the roof. JEGI tracked 637 deals and $95billion in value for the first three quarters of 2007 and they say deal value has already far outstripped the total value for all 2006.

JEGI tracks 11 industry segments and the leading segments were Marketing and Interactive Services and Online Media. In both segments the number of deals were up over 50% and the valuations were also up over at least 50% versus 2006. While there were a lot of deals in these segments they were 'small' compared to education where several very large deals resulted in a valuation increase from $387mm in 2006 to $14,239mm this year. There was a similar increase in Information Services.

Laggards in value included Business to Business media, consumer books and Directory and Reference Publishing.

You can read the entire release here.

EBAY Takes Charge

It was obvious to me in December that EBAY had either not purchased the right company or they had and had failed to execute with the acquisition of Skype. That's why in my (self indulgent) predictions for 2007, I suggested that EBAY would sell the unit. However, things are worse than that. With EABY's listings listless and core revenues a concern to business analysts, the company annouced yesterday that they made a mistake and overpaid for Skype and would take a $1.4billion charge in the third quarter. The purchased the company in 2005 for $2.6billion. Talk about dialing the wrong number.

There is still time for T-Mobile to step in.

Penguin Blog a Classic

Penguin has launched a blog site that seeks both reviews and social commentary on their list of over 1,400 classics. You can register to receive one of their titles in the mail and then 'blog' about it on the site. It launched a few months ago but at the moment this interesting experiment looks like a site for reader submitted reviews. There are some comments attached to some reviews but the site doesn't seem to capture the spirit and spontaneity that blogging could engender.

Blogging can be anarchic and to some extent that's what you would want to see from this project: Someone having a conversation with or interaction with a book as they read it. What they feel, what they don't understand, what happened that day in their lives that reminded them of the book, whatever.... We can get a book review from Amazon. I think Penguin should take the shackles off and loosen up.

Penguin

Harpercollins Goes to The Movies

The Associated Press reports that Harpercollins has established a strategic relationship with Sharp Independent.

Under a multiyear agreement, Sharp Independent at HarperCollins will be based at the publisher's Manhattan offices and will work with authors and agents on developing film versions of HarperCollins books. "We are always looking for ways to give our authors' works greater visibility. Providing an avenue and competitive advantage in the film world is another example of this," Michael Morrison, president and group publisher of Harper/Morrow, which includes the HarperCollins and William Morrow divisions.

AP

FT is Free

The Financial Times announced on Monday that they would be allowing free access to the content on their website. The FT was a late player in paid web access following the WSJ but are now following the lead of the NYT in opening up the site. From Mediapost:

FT.com isn't actually opening the doors all the way: there's a limit of 30 free stories per month, and visitors are required to register at the site after viewing the first five. The paper said the new policy is designed to make the site more accessible to blogs and news aggregators--increasingly important sources of traffic for news sites. Around the same time, FT.com will also launch a number of new products, including more video journalism and new editorial features, columns and tools.

It is great to see some of these newspaper sites change even though it can be argued it is Murdoch's purchase of Dow Jones that is prompting the action.

Who do these 'Literary' Competitions help?

Yet more competitions to seek new publishing works. Why, I don't know. This seems a dopey way to generate product IMHO. But then, that's probably not the point just like finding The Next Top Model is about modelling.

News on Borders/CourtTV/Gather.com and Amazon.com/Penguin/HP.

NYTimes
SeattlePI

Five Questions with Harlequin (I ♥ Presents)

At Harlequin there is good news on multiple fronts as Harlequin’s financial performance improves and their e-publishing initiatives are showing real signs of resiliency and development. Harlequin began their e-book program in October 2005 when they launched 9 titles and the company announced last week that all front list titles will have e-book versions. To spur growth and motivate buyers the titles are priced below the list price of print titles. As many know, the Harlequin community is incredibly loyal and by accounts read more than 2x as many books as a typical reader. The e-book customer is little different in their (her) dedication: She is willing to overcome the invariable technology issues of e-books to enjoy the benefits of e-books and loves the immediacy and portability that the e-book format enables.

In addition to e-books being available at all known e-retailers and in all formats, the company is also experimenting with content on mobile phones. This distribution method has been insanely popular in Japan and Harlequin has launched a monthly subscription offer that includes chapters, games, polls and reading lists. Priced at $2.49 it is competitive.

The Harlequin community has always been cohesive and eharlequin.com their web community site is now 10 years old. The site traffic is significant with ¾ million page views per month: What other publisher has traffic that large? Currently they receive over 20,000 posts per month discussing and reviewing books, interacting with editors and even pitching their own titles: Fifteen members sold books to Harlequin in 2006.

Yet another more recent initiative is Harlequin Presents (I ♥ Presents) which was launched in February 2007. Among the features, editors and writers post blogs and interact with readers who comment on average 13 comments per blog post. Harlequin has a built in advantage in developing social networking but they could have fumbled it. What is increasingly clear is that they are the dark horse in publisher’s race to engage their customers. Harlequin is proving that social networking will improve reader engagement, has the potential to turn customers into product ambassadors and facilitates two way communication between publisher and customer. Harlequin’s branding is well known in print but they are increasingly making it known online.

And with that intro, I asked Malle Vallik, Harlequin's director of digital content my five questions:

1. Harlequin has always been about community and somewhat 'cultish' in the level of obsessiveness of its readers. Is that an accurate description?

The majority of our readers are avid readers and incredibly knowledgeable about both our authors and our various series. A Harlequin Presents reader loves her Harlequin Presents stories, has favorite themes (like Mediterranean heroes) and knows when the books are available for sale. She shows up on the date the book goes on sale in a bookstore or mass merchandiser and at online retailers on the first of the month when the new titles are released.

Moreoever, our readers do like to share their thoughts about the books; that is what community and all the other new social media platforms offer – a means to connect readers from around the world and authors to readers.

2. Harlequin is doing a lot in online community building and social networking, is the ability to leverage these new technology tools a dream come true for Harlequin in that you are able to build immediate and direct relationships with highly responsive customers? Has this been all good? Tell us how it has it fostered changes in the organization.

Overall, it’s fantastic! You have basically hit the nail on the head. We can build immediate and direct relationships on a global scale. We can connect readers from Texas to Switzerland and connect readers to authors no matter where they are in the world.

We can also connect aspiring authors to our editorial team. Our community hosts writing events from authors along with editor meetings and pitches.

3. What new markets have opened up for Harlequin due to your web initiatives? Any surprises - like men as readers for example. Are these markets segments - narrower elements of existing markets - or are they completely new to Harlequin?

We have been able to create new products specifically for the digital market, whether it is bundles combining several titles together like the NYT bestselling author Jennifer Crusie 4 novel bundle. Or a bundle that makes shopping easier – what we call a one-click bundle. You can get all 8 Presents novels published in one month, with just one click and one download!

We launched the Harlequin Mini, a short story, available only as an eBook in August 2006, and launched Spice Briefs, short erotica, a spin off from our Spice imprint, again available only in eBooks in August 2007. We are publishing 2 – 3 Spice Briefs every month and are publishing both new and existing authors.

Perhaps our biggest surprise is how willingly women are approaching eBooks. It is still a very small part of our business but clearly a big growth area for the future.

4. Do authors bring you new ideas for using networking and the internet in new ways? Does what you do on the web result in new content? How much user content is solicited and used?

Yes, authors bring us new ideas. We work very closely together as a partnership with our authors: we have a website exclusive available to our authors where we offer suggestions on how to use digital more effectively and authors also contribute their case studies and ideas here. This is a collaborative learning experience for us both as we figure out how to maximize time commitment to return.

5. What is next for Harlequin on-line and social networking?

We just launched 100% frontlist in eBooks

We have launched the Harlequin Author Spotlight podcasts and will be soon launching a series of podcasts on how to write romance novels.

We are strengthening and expanding the back end power of our community by building a new platform that will be much more richly integrated into our website and let community members create meaningful profiles that include links to other social media.

We held our first author reading in Second Life yesterday, September 25 with author M.J. Rose, THE REINCARNATIONIST.

We have plans to acquire more eBook only content and other interesting new content for eBooks, create a new kind of eBook (more details to come!) and to continue to work with authors to launch more blogs.

BBC Worldwide Buys Lonely Planet

BBC Worldwide the commercial arm of the BBC has purchased Lonely Planet travel guides and although it had been rumoured for quite some time that LP was for sale the purchaser is a bit of a surprise. Founders Maureen and Tony Wheeler will remain with the business and retain 25% of LP.

''Joining BBC Worldwide allows us to secure the long-term future of our company within a globally recognised media group,'' the Wheelers said in a statement.

While the terms of the deal were not disclosed, The Herald noted that a 10% stake in the company was sold in 2005 for A$10mm to ANZ (that's a bank btw). Mr. Wheeler believes the bank did well out of the deal which values the company at over A$100mm.

Commenting on the deal John Smith, CEO of BBC Worldwide, said: "We are delighted to be announcing this acquisition today. Lonely Planet is a highly respected international brand and a global leader in the provision of travel information. This deal fits well with our strategy to create one of the world's leading content businesses, to grow our portfolio of content brands online and to
increase our operations in Australia and America."

BBC Worldwide is the commercial arm of the BBC and seeks to leverage the vast content owned by BBC into new distribution channels around the world. They have six core businesses: Global Channels, Global TV Sales, Content & Production, Magazines, Home Entertainment and Digital Media. In the year to end March 2007, BBC Worldwide generated profits of £111.1 million on sales of £810.4 million. The company has begun to invest heavily into digital distribution and has also recently announced key hires and organizational changes in this segment as well.

BBC Worldwide Press Release
The Herald
The Age
Five Questions with Lonely Planet

Publishing Trends Trends

Publishing trends released the results of their recent survey of publishing persona and reported some interesting but perhaps predictable results,

Not sure which refreshments to serve at your next publishing soirée? Wine and
beer are the safest bets…but it wouldn’t hurt to stash a few joints behind the
bar either.

Publishing Trends emailed the survey early in September to several thousand publishers, agents, booksellers and individuals in related businesses, and received a double-digit response rate that included comments and opinions on a wide variety of topics. Though the survey was anonymous, a significant group of respondents asked to be contacted for more in depth interviews. According to some, publishers lack vision, editors lack taste, managers don’t understand the business, authors exhibit bad behavior, and an Oregonian publisher thinks the industry is “too narrowly focused in NYC.” One VP of Sales and Marketing at a major publisher simply “fears for the future of the biz.”

Read the rest here.

$106MM Charge For Borders and A New Board Member

Strange this is getting reported today by Reuters because this information was noted in the sale announcement last week. Borders will take a $106mm charge most of which is due to the sale of the UK store operations.

An announcement regarding the sale of the Australian operations is expected soon.

Reuters

In a separate Reuters report, Spencer Capital Management which owns about 8% of Borders stock is seeking board representation. From the report,

Spencer said it would seek to have Glenn Tongue, managing partner of fellow Borders shareholder T2 Partners Management, added to the board. The hedge fund advisor said in the filing with the U.S. Securities and Exchange Commission that adding Tongue to the board would bring focus to board efforts to maximize shareholder value.

Glenn Tongue is the Managing Partner of T2 Partners LLC and has 17 years experience on Wall Street, most recently as an investment banker at UBS, where he was a Managing Director and Head of Acquisition Finance. Before UBS, he was at DLJ for 13 years, the last three of which he served as the President of NYSE-listed DLJdirect. (From his Bio).

Charkin Goes to Bloomsbury: But What About My Link?

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

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

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

Harvest Moon Over Manhattan

A late summer heat wave is contributing to clear skies here in New York.

Update on Winnie the Pooh and Micky Mouse

As an update to the long running battle over royalties for the Winnie the Pooh character, an LA court has declined to reinstate the case that was dismissed in 2004. The daughter of Stephan Slesinger (below) said she would appeal the decision to the CA supreme court and also proceed with a Federal case.
NYTimes


Disney Wants the Honey Jar Too (February 20, 2007)

Disney (although not the plaintiff) lost a court case to have the rights to the Winnie the Pooh characters returned to the family of AA Milne and illustrator E.H Shepard. Disney and the relatives were seeking to overturn an earlier case that said that Clair Milne could not void an agreement that renewed the license to Stephan Slesinger in 1983. Slesinger obtained the original rights in 1930 and in 1961 passed those rights to Disney in exchange for royalties. The Slesinger family have also been fighting Disney for more than 10 years for unpaid royalties which they estimate could exceed a $1.0billion. According to Reuters, Pooh generated over $6.0billion in retail sales in 2005 alone

Harlequin Make All Titles Available For Download

Perhaps time to clear off some space on your MP3 player as Harlequin announced this week that all their titles will now be available for download. Harlequin has pressed ahead in the last two years or so with a number of aggressive electronic publishing and social networking programs and this is a continuation of that process. The initiative will include every line and every title which is about 120 titles per month.

From the press release:

"Women have embraced eBooks," says Malle Vallik, Director Digital Content & Interactivity. "They demand portability, immediacy, availability, depth, breadth and convenience and, by making our entire front list and exclusive digital editorial available to them, we are meeting that challenge. We are meeting the needs of our current audience and reaching a new and diverse base of readers. Seeking innovative new ways to serve our audience continues to be a Harlequin tradition."

Eharlequin.com

Audible Launches Crime Serial in Audio Only

Audible announced the launch of a serialized crime novel, The Chopin Manuscript which will be available exclusively in audio format and via audible.com. Not only is the novel a serial but it is also written by 15 different authors who have each written one or more chapters of the book. The collaboration began when Jeffery Deaver wrote the opening chapter of the work and handed it off to fellow best-selling writer, David Hewson, who wrote chapter two. Other successive authors include Lee Child, Joseph Finder, and Lisa Scottoline. The novel returned to Deaver for the final two chapters and is narated by Alfred Molina.

From the press release:

“I think The Chopin Manuscript is an important literary innovation in three ways,” observed Donald Katz, Chairman and CEO, Audible, Inc. “First, 15 of the most gifted practitioners of a very demanding and technical form of modern fiction – the thriller – came together to create a chapter of a single novel before handing the plot development to the next master. Second, the fact that the novel was written to be produced and published as an audiobook is a step forward for the literate listening category Audible was founded to develop. And finally, the work is being delivered as an episodic, high-tech-Dickensian publishing cycle, using Audible’s technology to automatically deliver a chapter at a time. In a variety of ways this grand experiment deploys technology and new techniques to open up digital media possibilities that can expand the digital audio sector and the literary form in general.”

The title is available only in audio format and available now via the audible.com website.

California Moves On Textbook Prices

More on two pieces of proposed CA legislation on textbook pricing:

Senate Bill 832 by Sen. Ellen Corbett, D-San Leandro, would require publishers to give faculty members a list of book prices in a given subject and information on significant changes in the new edition and also estimate for how long the book will be on the market. The bill would also require publishers to post the differences on the Internet. Assembly Bill 1458 by Assemblyman Jose Solorio, D-Santa Ana, would make publishers summarize the differences between the two editions inside the books and provide wholesale prices on request.

DailyBreeze editorial which agrees with the legislation even though they admit prices could rise which seems to fly in the face of the objective. For anyone familiar with textbook publishing there are a few strange comments in this article.

Faulkners Birthday

American Heritage has a long essay on Faulkner. For those who don't know much about him (like me) it is interesting reading on one of America's finest writers.

Faulkner was apparently a single minded individual and didn't have too much patience with many things including frivolity. He lived most of his life in Mississippi but found himself in Hollywood on a number of occasions as a screen writer. On one of those occasions, he grew so frustrated with the movie set lifestyle, the wasted time and the shallowness of the life on set that he asked his director if he could work from home. The director said sure no problem and Faulkner proceeded to fly back to Mississippi. I always found that story funny.

American Heritage.

Luckily, I am only down $10

My blog of last week (Sept 19, "I know what you said about me yesterday"), challenged marketing and publicity professionals to utilize technology, specificially Technorati , to follow what is being said about their titles in the blogging world. I choose three titles randomly from the Amazon Top 100 and challenged the publishers to find me within 24 hours--for each that did, I'd donate $10 to First Book . The result?

Only Fritz Foy, Senior VP of Holtzbrinck (I chose Middlesex, published by Picador, a Holtzbrinck imprint, as one of the titles), found me. He did it in two days but I still donated the money. It is a good cause, after all.

All publishers could be using tools like this to identify the most influential blogs, maximize marketing budgets by initiating inexpensive blog tours, and provide superior service to their authors. Many are already doing so, and successfully (see New York Times a friend forwarded the article to me). This is a trend to watch.

Five Questions with Bondi Digital and the Playboy Archive

The first DVD archive of all the 1950's issues of Playboy magazine will be released at bookstores and retail outlets by Bondi Digital Publishing on November 2nd. (It is now available for presale at www.covertocover.com). Long considered an icon of 20th century publishing the eventual full set of DVDs will cover every Playboy issue since the title launched in 1953. Bondi Digital Publishing has undertaken the task of truthfully representing each page of the magazine so that buyers of the set will be able to see the magazine as it was originally published.

The first set of Bondi Digital Publishing's Cover to Cover Series covers the launch of the magazine in 1953 with the now unforgettable Marilyn Monroe featured as Playboy's first centerfold, up through the beginning of 1960.

Included with the box set is a 200 page 'behind the scenes' companion book covering the highlights of Playboy's humble launch by 27-year-old Hugh Hefner and the rise of the magazine during the conservative 50s. The box set also includes a complete reprint of the famous first issue featuring Marilyn Monroe.

David Anthony is co-founder of Bondi Digital Publishing and I recently sat down with him and asked him my five questions.

1. You also did a similar project for The New Yorker. Tell us how these three projects came about.
   
   There was a fellow who worked at the New Yorker named Andy Pillsbury, who I had known for years, long before he was with The New Yorker. I had shown him some interactive magazine viewing technology that I was working on in the late 90s. So fast forward 5 or 6 years, and he is now at the New Yorker and he and Ed Klaris, their general counsel, are talking about doing a complete digital archive of all 80 years of the New Yorker. He looks me up and contacts me, and in the meantime I had started a DVD design and production company with Murat Aktar – which was actually great background for what the New Yorker had in mind. At the DVD company, we had been thinking about and designing all these DVD interfaces, including things like the Rolling Stones Four Flicks box set, so when it came to thinking through how people might like to experience half a million pages of a magazine, I think we brought a very unique perspective to the project. It was, of course, on one hand a huge technical challenge, but in a very real sense I believe the greatest challenge of these kinds of projects is trying to help people make sense of the vastness of the media, while at the same time making sure that the digital experience is fast, intuitive and hopefully fun and useful, all at the same time.
   
   Coming off of the New Yorker project, we thought, hey this is kind of cool. I wonder what other magazines might like to have complete digital archives? Right off the bat we were thinking about Rolling Stone and Playboy. They are both very innovative magazines, and both had a rich and long history – and they had these visionary founders who were still at the helm. Besides, we are both long time readers of the publications. So it made a lot of sense to talk with them – and low and behold both loved the idea and we were able to work out deals with them.
   
   
2. Were the projects similar? What have you learned from one project to another?
   
   From a publishing perspective, the big difference with the Rolling Stone, Playboy and The New Yorker, is that beginning with Rolling Stone Cover To Cover: The First Forty Years and Playboy Cover To Cover: The 50s, we launched Bondi’s publishing arm and are bringing these out under ourselves. While Bondi developed the software platform for the Complete New Yorker, it was published and distributed by The New Yorker and Random House.
   
   All three magazines are very different, so a big challenge that we have in any of these projects is to first analyze each magazine’s format and create a schema for its database that makes sense of all the idiosyncrasies of each magazine’s particular formatting characteristics.
   
   As far as the software platform goes, the Bondi Reader, which is what we are calling it now, has continued to evolve quite a bit. We now support full text search, using a very powerful indexing engine. This is a great step forward and has sped up our searches to the point where the local experience compares favorably to online searches. Also we are adding the ability to import and exchange reading lists, which will allow two people who own the same archive to share what they find very easily.
   
   
3. There is a lot of interest in the Playboy products because the magazine is such an icon for our times. Tell us about the conception for the product – breaking the titles into decades – and the thinking behind the design.
   
   Each decade of Playboy has a unique tone and feel, and by publishing the magazine’s archives decade by decade, Bondi is able to offer distinctive features for each digital archive collection. Playboy Cover-to-Cover: The 50s will not only include all of the magazine’s issues on DVD, but it will also include Playboy 50s – Under the Covers, a 1950s-focused companion book that is absolutely chock full of never-before-published photos and letters from Hef’s personal library and archive. As well we have created a page-for-page reissue of the very first Playboy from 1953 with its iconic Marilyn Monroe cover.
   
   
4. What most excites you about the products? (Rolling Stone, NYer, Playboy)?
   
   I guess it is seeing all these amazing stories, photos and ads come back to life – in their original context. I for instance did not know that Annie Leibovitz had taken that great cover shot of John Lennon curled up with Yoko but a few hours before he was taken from us. That is a hugely important fact in helping to understand the impact and importance of that cover. But that was 1980 and I was only 13 years old – so I never experienced the magazine itself. I, like I imagine a lot of people, have only ever experienced that shot as a stand-alone photo. We have seen that cover reprinted over the years, but without seeing it in the context that it was originally published you might never understand its true significance. And that is extremely exciting to me – that we might be playing a part in not only preserving these magazines legacies, but also allowing for people to understand these very real cultural events in a full and clear way.
   
   Not having been alive in the 1950s it was also a real eye-opener to see the Playboy issues from the 50s. From the first issue, the voice and outlook are clear. But at the same time you begin to see the role that Playboy played in both women’s rights and also civil rights. In the 50s women didn’t work out of the house, let alone have a sense that they should be allowed to own their sexuality. And as I found from working on the project, the publishing of Playboy was a bit of a watershed moment in the turning of society’s views on women’s rights, and then also civil rights. So all of that is exciting to us. And then to see that Hefner from the beginning courted writers like Hemingway, Ray Bradbury, Jack Kerouac and Steinbeck – well you get the point. Turns out there is a reason for all the jokes about the articles.
   
   
5. What is next for Bondi? Are you looking at any other implementations you can tell us about?
   
   At the moment we are concentrating on finishing up the software production for both the Playboy Cover to Cover and Rolling Stone Cover to Cover products. Then we focus on deals with several other magazines. As excited as we are about the success of the Complete New Yorker and the release of our Cover to Cover series, I don’t think that the general public really understands what a searchable digital archive of a magazine is yet. And so it is important that this not be a category of one or two products. Our focus for the time being is working with other magazine publishers to develop similar Cover To Cover products. We are just about ready to announce Playboy Cover To Cover, The 60s, which will bring our Cover to Cover series to three. By the holiday 2008 season, we hope to have six - eight Cover To Cover titles in the line.

Bondi PR is being handled by Catherine Lewis at The Rosen Group: http://www.rosengrouppr.com/

Let's Not Go

Young, commercial, beginner’s guidebook, with frivolous, silly humor represented some of the responses to a survey conducted by St Martin's Press about the Let's Go series of guides. That was in 2001 and St Martins have just decided that they won't be renewing their 25yr partnership with the Harvard student run organization. The current deal expires in 2009. Citing stiff competion and free travel information sources,

David Moldawer, a St. Martin’s editor, told the New York Observer last week that the break with Let’s Go reflected “a change in our publishing strategy and how we see the travel book market.”

The Crimson went on to say that the Let's Go editorial staff were putting on a strong face and view the change as a chance to rethink and reevaluate the publishing strategy. They also wanted to ensure that there are no job losses for students. The survey results were fairly damning and suggest that hopes of continuing the publishing program after 2009 maybe a pipedream.

The report, which was based on four San Francisco focus groups, suggested that Let’s Go discontinue its guides and reopen with a different brand name. “It is extremely difficult to change an image of a brand which has lost its stature as a leading brand, especially when the re-positioning is not supported by heavy marketing and advertising dollars,” the report read. “It may be more prudent (and cost effective) to introduce a new series of guides under a new name with an updated format rather than trying to convince the target that ‘Let’s Go’ is new and improved.”

They have a few years to think about it although one wonders how much sales support St. Martins' will give the series and how likely retailers will be to re-order titles from this point on.

Borders UK Operations Nearly Sold

Ten years ago, Borders Group was a book store chain willing to take risks, try new things and seek new business models. Alone among US booksellers they embarked on an international expansion and bought a high street UK retailer named Books Etc. They paid $65million for the company but things didn't go well from the start. Over the course of the past 10 years virtually nothing was shared between the US and UK operations in terms of operating efficiencies, product management and management expertise. Attempts to manage the some of the operations from the US failed but it was the nature of the UK market which posed the most challenges. Most of the 30 or so Books etc stores were small and located on busy main roads, the net book agreement collapsed which intensified competition between retailers, Internet selling grew exponentially and attempts by Borders to expand the superstore concept was slow to gain customer traction. It is unfortunate that these issues conspired to defeat what could have resulted in a remarkable international retail success: A strong Borders retail brand in Europe, Australia and SE Asia.

Now it is all over bar the tears with the announcement today that the UK operations have been sold for a paltry $20mm in cash and $10mm in deferred payments based on performance. Borders are also forced to take a 17% interest in the resulting new company. No doubt they would have liked to have made a clean break. UK management, who have worked hard to keep the company a float and who now have a real chance to improve their prospects may be the only group seeing a silver lining in this situation. I hope they succeed and prove that the book super store concept can flourish in the UK as it has done for computer and electronics retailers over the past 10 years. It will be tough since the UK book retail market is a wasteland.

When Borders completes the deal (PR) it will hand over 41 Border's superstores and 28 Books Etc stores located in the UK and Ireland. Given the original price paid for Books Etc and the investment the company has made over the past 10 years it is not surprising that the company expects to book an after tax loss of $115million with minimal tax benefit meaning they get no future benefit from applying the loss to future earnings. If I were a shareholder, I might want to ask why book value for the UK operation wasn't almost zero on their balance sheet. (I also wonder what is the value of the UK inventory?)

On a more positive note (unless like me you wonder why they are selling off in the first place) Borders may do OK with the sale of the Australian/New Zealand business. Sources suggest the operations could go for $85mm but if BV is higher then they may book another loss. Well best to get all these items out of the way before Mr. Jones' strategy starts to gain traction and a private equity buyer shows up to take the shareholders out of their misery.

College Textbook Affordability Act

I wonder how many votes these legislators expect to gain from legislating capitalism - at least as it pertains to textbook pricing. Ex-academic and now Californian Democratic state senator Ellen Corbett notes a particularly poignant and, yes, unique excuse for not finishing a class assignment.

"One of my students told me they were not going to finish their homework because they couldn't afford the textbook," she said. "That stopped me dead in my tracks and broke my heart."

No doubt the student received a passing grade for creative writing but an F for initiative. Corbett is sponsoring a state senate bill that will attempt to regulate textbook prices:

"For too long, California college students have dealt with outrageous textbook costs. Publishers set the cost, faculty makes the choice and students pay the price," Corbett said. "It is time for the textbook publishing industry to level with their consumers and end their deceptive marketing practices." If passed, Senate Bill 832 would take effect in January and require publishers to fully disclose to faculty their wholesale or retail costs, an estimation of how long the book is expected to stay current, and a breakdown of differences between current and past editions.

Textbook pricing and the publishers are an easy target and provide an annual respite from dealing with truly important issues like (in the case of CA) a mammoth budget deficit and (topically) rising tuition fees. On the other hand, here is something that is sure to please students and could provide for the budget deficit: Legalize it!

Borders Stores Australia

The sale of Borders Australia/New Zealand retail operations appears to be coming to a head. Reuters is reported a source has told them that the Private Equity firm Pacific Equity Partners has lodged an indicative offer of interest in acquiring the operations. This is typical of the auction process where initial non-binding offers would be made as a prelude to more rigorous reviews of financial and operational details. The report also noted that the sale is unlikely to conclude before November. The long timeframe since this was announced is somewhat surprising since there are only a handful of parties considered real candidates but perhaps the time taken to put the books in order and complete the fiscal year delayed matters. Regardless, PEP are the front runner and the deal is expected to be completed for A$100mm.

Reuters

Scholatic Reports

Scholatic reported first quarter revenue of $586.9million which was 75% higher than the same period last year. The last Potter title accounted for the increase. Scholastic routinely reports a loss in its first quarter and their net loss this period was $2.8million or $0.07/share. From the press release:

“This summer Scholastic again broke publishing records with the launch of Harry Potter and the Deathly Hallows. Exceptional promotion and marketing combined with overwhelmingly favorable publicity resulted in unprecedented sales, while efficient distribution and execution helped us achieve high sell-through and improved margins. Sales of READ 180® and educational technology also rose solidly in their primary selling season, reflecting Scholastic’s continued success raising student achievement,” commented Richard Robinson, Chairman, CEO and President. “These positive first quarter results position us well to meet our fiscal 2008 goals while making planned investments to drive long-term growth, in particular in our education and children’s book businesses, and progress toward our 9 to 10% operating margin goal.”

The company reaffirmed its forcast of full year revenues between $2.3 to $2.5 billion and earnings per diluted share of $2.35 to $2.85.

Other highlights from the press release:

• Children’s Book Publishing and Distribution. Revenue for the quarter was $342.5 million, up over 200% from prior year. Potter revenue increased to approximately $240 million from $5 million reflecting the launch of Harry Potter and the Deathly Hallows, and higher sales of the first six Harry Potter titles. Operating profit for the quarter, improved to $2.7 million compared to a loss of $67.3 million a year ago
• Educational Publishing. Revenue for the quarter was $127.8 million, level with the prior year period. Educational technology sales rose 9% largely due to solid sales of READ 180 and FASTT Math™. This was offset by schools’ continued weak spending on supplemental materials, which resulted in lower sales in Paperbacks and Library Publishing. Segment operating profit was $30.6 million compared to $32.7 million in the first quarter of last year
• International. Revenue of $99.6 million was up 26% (17% in local currencies) from the prior year period. Segment operating loss improved to $2.7 million compared to $5.5 million in the prior year period, primarily due to strong export sales of Harry Potter and improved results in Australia and Asia.
• Media, Licensing and Advertising. Segment revenue for the quarter rose 8% to $17.0 million, due in part to higher sales of interactive products. Segment operating loss improved to $5.1 million from $6.1 million
• Other Financial Results. Corporate overhead in the quarter was $20.3 million compared to $19.9 million in the prior year period, reflecting higher Harry Potter-related expenses, partly offset by company-wide efforts to reduce costs

I know what you said about me yesterday

I sometimes do work in the non-profit world, and I borrowed this trick from a blog I read there. I’ve been itching to try it out in this area. This is the question I pose: what if there was a way to better understand the elusive power of “word of mouth” in selling books? What if publicists and marketers could eavesdrop on conversations between readers and recommenders, and even know which recommenders carry more weight than others? Technorati (www.technorati.com) provides essential insight into this process on the web by allowing (among many other things) users to set up automatic alerts for any search terms mentioned in the 105.8 million blogs and over 250 million pieces of tagged social media they currently track. It is so easy, it’s almost cheating.

My bet is that most publicists and marketing folks are not currently tracking who says what on their titles on blogs, therefore not using the blog medium to the best advantage. But I could be wrong. As a test, I’ve picked the three titles below, all on the Amazon Top 100 list and all published recently. For each publisher who emails me at sruszala@gmail.com in the next 24 hours to say they’ve found this blog, I’ll donate $10 to First Book.

Here are the titles:

Middlesex, by Jeffrey Eugenides published by Picador

Super Crunchers: Why Thinking-by-Numbers Is the New Way to Be Smart by Ian Ayres, published by Bantam

Giving: How Each of Us Can Change the World (Hardcover) by Bill Clinton, published by Knopf

Good luck!

New Model Army of Self-Publishers

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.

Bloomsbury Reports: Revenues up 36%

Bloomsbury reports this morning that revenues rose 36% for the first half 2007 boosted by Harry Potter and 37 other best sellers. The company also says that they expect the strong results to continue due to a good pipeline of new titles but that full year profit will be negatively impacted by an increased tax burden.

Reuters reports that the company's shares were trading down 0.6 percent at 170.5 pence at 0730 GMT, valuing the firm at 125.4 million pounds.

Reuters

Highlights from their press release:

• Six months Revenue up 36.5% to £51.41m (2006, £37.66m)
• Profit before investment income increased 7.6% to £3.25m (2006, £3.02m)
• Interim dividend up 6.1% to 0.70p (2006, 0.66p)
• Four electronic rights deals signed this year which included Bloomsbury ’s most important reference rights partnership to date for Finance: The Ultimate Resource with Qatar Financial Centre Authority
• Strong publishing lists for second half and into 2008
• Well positioned for further growth

Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chairman, said: “This is a good set of results which puts us back on track following last year’s profit warning. Between April and June, Bloomsbury enjoyed one of the most sustained periods of publishing bestsellers in its history. Four major reference rights deals which had been in the pipeline have now been completed and will provide very important revenue streams going forward.We are also starting to see the benefits of the strategic approach which we outlined in my previous Chairman’s statement and our publishing programme for the second half of the year is very strong.”