Five Questions on Global Data Synchronization

That's a title likely to induce a narcoleptic attack in all but the most ardent followers of bibliographic matters but it is nevertheless an important topic for all managers of book information. Industries other than publishing also battle data reliability and timeliness and, over the years led by umbrella groups such as UCC and EAN (now combined into one organization named GS1), they have developed programs to embrace supply chain efficiency and its' co-relation data integrity. Data Synchronisation (GDSN) is such a program which I have noted a few times in the past (Post). The objective of the GDSN is to ensure that all trading partners are working with the same set of product details that are simultaneously synchronized at a network level and in transaction details such as purchase orders and shipping details. The benefits of synchronised data can extend from 'simple' efficiency improvements in the ordering and receipt process to higher effectiveness in marketing and promotions programs.

As I mentioned earlier on this topic, BookNet Canada is embarking on a test of data synchronization and I asked Michael Tamblyn, President of BookNet Canada my five questions.

1. Firstly tell us about how BookNet Canada got started and what you have achieved thus far. What are your current priorities?
   
   BookNet Canada came into being in 2003 when Canadian retailers, publishers and the federal government decided that there should be a central not-for-profit agency to coordinate technology and supply chain innovation for the Canadian book market. While that sounds about as thrilling as a three-day lecture on HVAC engineering, we have been able to move the industry very quickly in some very exciting directions. Canada benefits from relatively small size, a general tendency towards collaboration, being a cross-roads country with ties to the U.S., UK, and EU, and a community of quite forward-thinking retailers and system vendors. It lets us get things rolling quickly, gather feedback early and often, and push the envelope a bit more than larger markets.
   
   Some examples: from a somewhat stagnant state in '03, B2B e-commerce now accounts for 85-90% of all business documents; EDI invoices and ASNs are fully supported through the publishing community; even independent retailers do EDI-based receiving. BNC SalesData, our national sales tracking service, launched in 2005, tracks sales, stock position, orders outstanding on every title, without modeling or estimation, on 70% of the book market. In a nice mouse-eats-elephant story, our Canadian Bibliographic Standard was adopted more-or-less in its entirety as the BISG Metadata Best Practice Guideline for the U.S. market for both ONIX and Excel.
   
   Then there is the more forward-looking work: collaborative sales data mining for independents, backlist optimization and forecasting research, industry cost analysis on returns, digital publishing trends, our annual Technology Forum. And on it goes.
   
   
2. You announced a Data Synchronization initiative in mid-summer. Can you give us some back-ground on this project, the status and where you see the initiative going over the next six months? What is your time table and what is your hoped for end result?
   
   We approached GDSN with a set of assumptions that looked something like this:
   
   1. Publishers already have a data sharing standard -- ONIX -- that they have embraced and invested in. They shouldn't have to learn another one. Make it simple!
   2. GDSN currently serves a small part of the retail sector, but if it became ubiquitous at some point in the future, how can we protect publishers from a price perspective?
   3. Think global, start local. The G in GDSN is there for a reason, so let's not assume that we're just making a Canadian service for Canadian publishers and retailers.
   
   Those first principles have guided our efforts over the past few months. We have been working with Commport, our GDSN data pool partner, on the construction of an ONIX-to-GDSN bridge that is now in testing. Timelines are very dependent on the retailers and wholesalers involved, but we hope to be well into the pilot six months from now. From our perspective, the "pilot" itself doesn't begin until we are moving active title data from a real publisher to a real retailer who is actually going to use that data in purchasing and POS systems. That's an important point: the challenge isn't getting the data into, or out of, the pool; it's getting that data into retailer systems so that it supplants the current mix of spreadsheets and paper forms. Until then, the conversation hasn't changed. Data conversion is easy, adoption is hard.
   
   In parallel, we are preparing a draft submission to GS1 regarding additions to the GDSN Global Data Dictionary to make it more relevant to the book trade. That will certainly spend some time in the loving embrace of the BISG Metadata Committee before heading to GS1.
   
   From a pricing standpoint, I think we've come up with the best possible model for publishers. A free 1-year pilot, unlimited upload and publishing to the global network, with the clock starting when the data goes into production with retailers (i.e. not when testing starts, but when it ends). Then very low per-SKU fees that are capped at a shockingly low rate, just in case this breaks out of the mass market and into the trade.
   
   
3. What issues have you encountered that were unexpected? Given that the book industry is ‘fitting’ in to a set of standards that have been developed for other industries how much of an issue has it been trying to marry the existing data structures with our industry?
   
   Always lots to learn, which is part of the fun. Some highlights:
   * The extent to which GDSN stands to benefit independent wholesalers, many of whom have never really grasped ONIX in their relationship with publishers, and who have to serve a retail community who couldn't care less about book-industry-specific standards.
   * We've talked to several publishers who have, because of various retail relationships, been required to submit to GDSN data pools over the past five years. None of them have seen their data make it into production systems. It's safe to say that there are some data pools out there who have been less than candid about where GDSN data really gets used and by whom.
   * Current GDSN costs per SKU or ISBN have been absolutely egregious! $25 or more per SKU per year? That's great if you are in consumer packaged goods with 100 SKUs worth $50M each, not so great if you're a mid-sized publisher with a line of DIY books selling into general retail. Time to fix that, I think...
   
   In terms of fitting in, there are definitely some things that need to be improved in the Global Data Dictionary if books are going to find a happy home in GDSN. GPC Product Forms aren't perfect for books. You can't pass along an author, just a title. Things like that. It's workable for mass market applications, but I think the goal should be to get the Canadian/US standard fields well-represented and then build from there.
   
   
4. Is there an on-going relationship with GS1 here? Do you anticipate the publishing industry will be exposed to best practices and perhaps learn from the GS1 community?
   If so, where do you see the greatest potential benefit?
   
   We'll be working with GS1 on the standards and data dictionary issues, but we have avoided a relationship with 1Sync, their data pool service provider. When we started watching this space, we realized that one of the great things about GDSN is that it's an open, certified standard, which makes the data pool game an excellent market for aggressive fast-followers. We selected a vendor with a strong track record in high-volume data processing who has made a name for themselves enabling whole industries on GDSN but who was also willing to toss out the rulebook on GDSN pricing to meet the needs of the book industry.
   
   In terms of who learns from who, I think that GS1 has a lot to learn from the book industry. "Industry-With-Lots-of-Low-Price-Point-SKUs" is still reasonably new for GDSN, and nobody does massive numbers of discrete, non-variant SKUs like the book industry. They are working with Music and DVD now, which should help, but Music and DVD aren't nearly as sophisticated as the book industry regarding product data (much to the dismay of any retailer who has ever sold both!) I'd argue that we have spent more time and effort working out the issues related to standardization of rich product description metadata than any other industry, so I think the conversation is going to be "Here's ONIX, which we know and love. Let's figure out how much realistically needs to be in GDSN." With any luck, we can extend the data dictionary accordingly.
   
   
5. Will your Data Synchronization initiative influence similar initiatives in the US and UK.
   
   Will those markets make full use of your path finding or more to the point will they have to develop their own initiatives? Getting GDSN off the ground is going to require the concerted effort of several national markets. The GS1 data vetting process requires broad support to propose changes to the Global Data Dictionary. We are happy to lead the charge, but we want to make sure that this meets the needs of the larger book market as well, so plenty of collaboration is required.

Michael can be reached at BookNet Canada: mtamblyn(At)booknetcanada.com

Borders Loyalty Program

Mrs PND received a quite extraordinary promotional email from Borders Books this weekend which indicated that she had been selected to receive a package of substantial partner benefits just because she was a Borders Rewards member. Aside from the fact she has no recollection being a rewards member, the Borders Rewards Perks program offers substantial benefits to "rewards members like you" it says. If you go to the perks site linked to above you will find many many discount programs which regrettably seem to be perfectly targeted to Mr. & Mrs. PND's lavish lifestyle.

It is hard to understand what they are trying to achieve with this program. Perhaps they are attempting to mimic the 'retail emporium' that is Amazon.com in advance of launching their own web site. Or it could be a simple attempt to capture as many web consumers as possible so that they can promote the launch of the web site to an even broader base of customers.

Affiliations are often effective for merchandising and brand extension but the sheer number of bonus and discount offers seems excessive. Few if any of these appear to be 'for our Borders rewards customers only' and, as such the list of benefits may be a nice consolidation of existing discount and bonus programs. (Hey thanks!).

Some of these expire soon so hurry to your nearest Borders website so you can shop elsewhere.

Borders Australia

Speculation that the Borders Australian and New Zealand stores have been sold to Pacific Equity Partners are surfacing from a rather unique source. The India Times is reporting that industrial and services behemoth Tata Industries participated in the last round of bids for the Borders unit and also suggests the price agreed for the store operations will top A$125mm. There is speculation that PEP will also get the Singapore store and may have ascribed more deal value to the Borders brand which they may seek to extend into SE Asia. More details will follow.

IndiaTimes

CBS Outdoor Announce Times Square WiFi Hot Spot

Billboard owner CBS Outdoor is announcing a partnership with the MTA that will create a mid-town wide wi-fi hotspot covering most of Times Square.

CBS Corporation announced today that it will "light up" midtown Manhattan with the creation of the"CBS Mobile Zone," a wireless high-speed network enabling New Yorkers with Wi-Fi-enabled cell phones, laptops or other devices to access the Internet for free, and make voice over internet (VOI) calls. The Wi-Fi Hot Zone,which is available today in certain areas, will be fully operational on by month's end with a footprint of more than 20 city blocks from Times Square to Central Park South and from 6th Avenue to 8th Avenue. This initiative is part of a 6-month pilot program with the Metropolitan Transportation Authority and New York City Transit to test the potential communications capabilities of Wi-Fi technology.

Check it out. Just in time for the Kindle

Amazon Kindle to be Launched Monday

According to a report in CNet this morning there is to be a 'high-profile' launch party at the W hotel in Union Square to announce the long anticipated Kindle ebook reader. From the report,

The Kindle is equipped with a Wi-Fi connection that taps into an Amazon e-book store, which users can access to purchase new electronic books--and Amazon has reportedly signed onto a deal with Sprint for EVDO access. Additionally, the device comes with a headphone jack for audiobooks, as well as an e-mail address.

The devise is expected to sell for $399 and among its content deals the company has apparently negotiated partnerships with as many as 100 newspaper publishers. The company is also saying it will have from launch the largest inventory of all e-books available. The report also confirmed that the initial SONY e-book reader has been 'a bust' but SONY expects their second version with improved features to fair better.

CNET

Virtual Felony

According to the BBC, a 17 year old Dutch boy was arrested for allegedly steeling $3500 of virtual furniture from the 'homes' of residents of the online community Habbo. According to website administrators, the real world threat of Id theft also exists in the virtual world and this perp and several co-conspirators convinced some Habbo players to fork over their passwords. Since the Habbo credits used to buy stuff players use in the game are purchased with real money, steeling someones couch is a 'real' crime. I wonder if they will do time in a real jail?

Reed Explores Purchase of EMAP B2B

Is it a ruse to gain access to their financials or does Reed Business Information really want to purchase the Emap B2B titles. That is what a number of high profile private equity firms are considering after they were assured by the sellers that there were no commercial operators interesting in Emap. (Telegraph) Other observers have suggested that Reed may also decide to join one of the PE buyers (or wait on the sidelines until it is all over) and negotiate to cherry pick the best titles that fit with their current stable of publications. The company is especially interested in titles that have or could have strong electronic/online opportunities. Reed also has an interested in Harcourt/Riverdeep which they could trade with a PE firm for the (some) of the titles they would like to own.

The whole Emap sale has been convoluted and murky from the get-go, and with the public notification of Reed's interest the bid participants were given an additional opportunity to revise their bids. No bidder has ever appeared inclined to buy all of Emap which of course is what the sellers prefer (Guardian). The company also announced interim results earlier this week which indicated a profit decrease of 16% although the company maintained their full year guidance (Reuters). Emap consists of b2b, consumer magazines and radio.

In separate news, Reed also confirmed that the company is on track to achieve 10% growth in EPS this year with all segments of the business performing well. Hemscott

Hachette Vert

The Bookseller is reporting that Hachette livre UK is moving to firm sale on their back-list by the end of 2008. The company expects to consult with retailers on this implementation but Hachette is wielding the weapon of "Greenery"and thus have right on thier side. The Bookseller, calls the approach 'radical' and it is certainly unusual in the publishing world but in reality backlist sales are by nature far more stable than front list and the proposal shouldn't cause too much debate or controversy. (Expect to see other publishers follow suit).

The Bookseller went on to explain that this new proposal is only part of Hachette's Green policy,

Hachette has also commissioned the Carbon Trust to advise it on a long-term strategy to improve its energy emissions. It has already embarked on a range of initiatives, including persuading its head office landlords to re-engineer its office lighting system so that night-time lighting is restricted to areas occupied by members of staff; introducing dual fuel ‘hybrid’ cars into its company car fleet; and encouraging reduced use of cars.

Hachette are also revising their paper sourcing polices to follow accepted Green practices.

Pearson in Custom Textbook Test

Inside Higher Ed are reporting a program Pearson is launching with a community college in Arizona (Rio Salado College - heard of it?) that will enable academics to build custom textbooks including content from non-Pearson sources. According to IHE,

Professors can pick from among the books in Pearson’s library as well as outside sources in preparing their custom textbooks. For works not published by Pearson, there’s a limit of 10 percent of the contents, but the company will then handle copyright clearance. Freed said the ability to include journal articles and extra readings amounted to “a super-textbook, if you will.” A spokesman for the company, David Hakensen, said that the agreement with Rio Salado is unique for covering an entire college, but he noted that individual faculty at many colleges have used Pearson’s custom publishing services for their own classes.

Custom publishing has been part of the fabric of academic publishing for many years but this appears to be a twist on an old play. With easier rights clearance via CCC perhaps this program will expand rapidly particularly in disciplines where the content changes frequently due to world events. The Australian equivalent of CCC (CAL) was barnstorming the US a number of years ago selling the concept of an on-line rights clearance and custom publishing solution that enabled the creation of textbooks from multiple sources all with rights appropriately cleared, a index and toc created, pages reformatted and sequential page numbering. It was an interesting proposal which was tried and tested in Australia but didn't get any traction here. Interestingly, CCC didn't take the bait either.

Judy Does It

Forgive me for thinking that common sense would prevail but on the heals of admitting to NYDN that she 'wanted out of the spot light' Judith Regan has dropped a $100mm lawsuit on HarperCollins. Not your ordinary defamation/wrongful dismissal lawsuit she has gone to the thriller play book and selected 'political conspiracy' to add to the more prosaic "sex with a married police officer who happens to be the best mate of the mayor" Oh, and the mayor is now running for President. Sounds like a book contract to me! Get Patterson on the line maybe he could work up a treatment.

For most of us in NYC we know the details already but we can all expect the story to play like back-ground music in the elevator over the next 12 mths in the run up to the election. On cue, Judy will jump 'into the limelight' (like some momentous wind instrument in aforesaid elevator music) with something sensational that she thinks will help her case but will only serve to make herself look increasingly pathetic.

My guess, HarperCollins will not settle and Judy will implode on the witness stand.

Why digital galleys are not scary

I’m currently working with a product that has, among other features, the capability to send digital advance reading copies to media and reviewers—a concept that they are working diligently to under-emphasize because of the instinctive “that wouldn’t work for us” reaction they have received from media, reviewers and publishers alike.

This is unfortunate and short-sighted. Yes, of course, we aren’t at the point where digital galleys can replace the good, old-fashioned portability of the physical book---for a full read. But outright rejection of the digital underscores the many other ways reviewers and media use content.

Full-text digital galleys are searchable, for one, invaluable for fact checking of reviews and articles. And especially helpful because galleys often are sent without indexes. Publications could benefit from digital galleys when preparing roundups (Essential Cranberry Cooking for the Holidays—New Hot Recipes from 10 New Cookbooks and all). And let’s not forget that for certain types of media, reading the text isn’t essential—a colleague of mine gave me an example of a gossip columnist who might skim or search a text for a reference but whose need for speed would always usurp a full, critical read. Radio and television producers often mine upcoming books for content of interest to their audiences or host, and what better way to pass along a potential find than digitally? For large organizations with multiple levels of approval this is especially salient.

Finally, there is the green element, of some interest as evidenced by BISG’s and Green Press Initiative’s recent U.S. Book Industry Climate Impacts and Environmental Benchmarking Study. What interests me about the green element is the potential for media to use digital galleys to read first chapters, often an essential step in deciding if a book will be reviewed or covered.

Overall, publicity is about selling. Even reviewing, albeit more high-brow, is about recommending worthy reads. Why wouldn’t publishers and media want to share their content faster and more accurately? A production soldier at a major publisher told me that many authors, agents and editors lament the inaccuracy of galleys, since the text often changes between the time the galley goes into print production and is mailed. Digital means capturing a timelier version of the text, and aren’t we all happier for that?

I am not advocating a truly paperless advance publication workflow; that time has not yet come. But as an industry we could be braver about trying digital galleys as a supplement to print. I think the results would be surprising.

Do it Yourself Cookbooks

This morning The NY Times also has a short note on tastebook.com which allows cooks to create their own printed recipe book by downloading up to 100 recipes from epicurious.com.

For $34.95, a cooking enthusiast can select up to 100 recipes, which come encased in a ring-binder with a customized cover. Although TasteBook will not put the customer’s photo on the cover, it does offer a choice of images (a pie, a bowl of cherries, peas in a pod, corn on the cob) and naming rights to the cookbook (like “Emily’s Holiday Recipes”). The site also accommodates those who want to fill a volume with their own recipes or with recipes from sites other than Epicurious.

As I noted last week, SharedBook also launched a similar product with allrecipies.com (Readers Digest) and it is disappointing that the Times didn't look at their product as well.

Regretfully, while the product concept in both applications will be popular the execution in the TasteBook example is less than ideal. For example, the customer has to assemble the product themselves when it arrives in the mail which immediately removes a valuable sense of ownership and customization. Secondly the cover title which you select yourself is stuck on mailing label-like (on the spine as well) and lastly the heavy card binder is likely to come off second best the minute it is set on a wet counter. (Which of course happens all the time). The book does lie flat however which the SharedBook does not; however, I suspect SharedBook will be correcting that soon.

Borders Television

The NYT notes the adoption by Borders of in-store television which will provide book related content and advertising direct to the stores. The provider, Ripple already provides similar services to stores such as Jiffy-Lube and Jack-in-the-Box 'restaurants'. The company notes that the broadcast service is now in 60 stores and will be in 250 by the end of February.

CEO George Jones comments:

Borders customers tend to be “highly educated, more affluent” and spend an average of an hour in the store, making them catnip to many advertisers. “It’s becoming more and more difficult to reach people,” Mr. Jones said. “Newspapers are not as effective as they used to be. Television is not as easily reachable as it used to be. This becomes an attractive option.”

Flat screen video screens in retail are all the rage. Visiting a local Starbucks in the last few months, you will have noted the installation of video screens in their stores. Currently these support the integration with their music content which enables free downloads via iTunes. The video screens are not intrusive but mainly because the content is static: If they begin to offer video content as Borders are suggesting perhaps the vibe of the stores changes to one where you can hold a quiet meeting or take a leisurely break to one where you will be bombarded by advertising messages: The faster pace and the noise causing you to move out of the store faster. It could be unsettling. On the other hand the effort by Borders is an experiment in merchandising that should help the company develop new revenue streams and direct customer awareness of particular products. Jones was asked about the perception that screens could be counter to the store vibe and said,

The screens are “not designed to be intrusive,” Mr. Jones said. Rather, he said, they are “part of a master plan to create content that will do several things for us,” like directing traffic to the Borders Web site and paving the way to more cross-promotional deals with large media companies.

Stay tuned for more changes and experimentation from Borders.

Radiohead: Creepy Stats

Reuters reports that the CD version of the new Radiohead album In Rainbows will be released December 31st. Sometime between then and now they will eliminate the download site so that this option no longer remains although they are likely to use data from the site to promote the purchase of the physical disc. Options being discussed may include allowing a credit against the purchase of the CD based on what was paid for the download to a simple web coupon (10% off for ordering direct) to nothing. If nothing else, the experimentation will continue.

The band also commented to Reuters that the recent speculation regarding how many people visited the site and either did or did not pay was "wholly inaccurate." Furthermore the Band said that the reports "in no way reflect definitive market intelligence or, indeed, the true success of the project."

Stephen Fry Is An Actor

Stephen Fry is as about as likely to be writing a blog about consumerist technology as I am about Opera. Which is pretty unlikely, but one of us is going against presumed character (and it isn't an act and it isn't me).

Stephen Fry has started writing a blog for the Guardian newspaper and the posts are very entertaining. Apparently, it didn't start that way. He initially launched the blog by himself with a 6,000 word (I think) post about his love of all things digital. The Guardian came calling and by the third post he was writing for them as well under the title "Welcome to Dork Talk." How's that for the power of digital media! At times his proselytising for Apple may come across as a cry for help; but, I suspect once the excitement over the launch in Europe of the IPhone dies off he will move on to other matters. (I wonder what he would think of Tivo?)

Here is how he described his viewpoint:

Digital devices rock my world. This might be looked on by some as a tragic admission. Not ballet, opera, the natural world, Stephen? Not literature, theatre or global politics? Even sport would be less mournfully inward and dismally unsociable. Well, people can be dippy about all things digital and still read books, they can go to the opera and watch a cricket match and apply for Led Zeppelin tickets without splitting themselves asunder.

My sentiments exactly. And he is certainly not without an opinion. Here he is reviewing a new mp3 player from Philips:

But that’s of no importance compared with the cheap, clumsy and dreadful nature of the device itself. I wanted to throw it in the ocean after five minutes (I am in America right now), but instead gave it to a friend who threw it away after 10. One knows the instant one plays the bundled video content, a truly pathetic and dated home movie of some dudes skiing, that we are dealing with a dog. The blocky, pixelated images are so poor as to beggar belief (220 x 176 pixels) - and this is the footage that’s meant to show it off!

It gets worse. It has touch controls, but not touch screen. In the desire to jump on Apple’s multitouch bandwagon, Philips have come up with something worse than an old-fashioned knob. The Streamium offers fiddly controls with terrible delay, so you’re always pressing them too often and reversing their function. The sound level is poor and the phones inadequate. The whole thing’s a gift to Apple.

It should prove entertaining reading from a very unlikely source.

Penguin sued Over Dorothy Parker - Update

By way of update, Mr Silverstein has not won the lottery and according to this mornings Telegraph his suit against Penguin has been dismissed. Under the hugely creative headline Poetic Justice, the Telegraph reports that Pearson prevailed in this six year battle. I suspect that Mr. Silverstein is going to have some significant legal expenses to pay.

This is my original post from September:

Mild embarassment could ensue if Penguin were to loose a copyright suit over a compilation of poems the publisher produced in 1999. The wheels of justice appear to move slowly but the story is as follows. One Stewart Silverman took a project to Penguin which they turned down because they didn't agree to Silverman's format choice. Silverman went ahead and published it with Scribner. Three years later Penguin published its own selection of 'lost' Parker poems which Silverman believes was a verbatim version of his own work. Final deliberations are supposed to begin on October 9th in New York.

Penguin's argument hangs on the belief that they owe Silverman nothing for the material they published since all the Parker works were in the public domain. As such, the works are not covered by copyright. The Silverman camp suggests that he asserted copyright to the compilation and that this fact was clearly noted when he originally went to Penguin with the project. The judge will decide the result, but on the witness stand John Makinson, Penguin CEO did admit:

''I think it would have been more appropriate to have given some attribution to Mr Silverstein for those poems; it's just a personal opinion that I have based on my reading of the situation subsequent to my deposition in the initial case here."

Silverstein is looking for $1,00,000 in punitive damages.

Telegraph

A Future of Publishing

There is an interesting series of posts on MJ Rose's Buzz, Balls & Hype site about the (a) future of publishing. The series of three guest posts are written by Barry Eisler who is an author but despite that has some very interesting ideas about how the business will change and evolve. I suspect he will have something to say about my comments as well.

Here is a taste from Barry's first post:

I don't think the abandonment of record labels by two of pop's biggest stars is an aberration. And I don't think the implications of this development will be confined to the music biz. Look a little more closely, and you'll see a common element among media companies -- that is, record labels, movie studios, the newspaper business, and book publishers -- and a common dynamic.

My retort on post one:

With respect to the movie industry you haven't taken the example far enough. About ten years ago all movie distribution companies were gung ho about satellite distribution to movie houses. It would avoid shipping film reels, errors and delays and importantly enabled better accounting so houses could no longer cheat on showings. It failed because the houses saw nothing in it for them against the significant capital improvements they would have to make. Move ahead 10 years and we are again talking about digital distribution but the landscape is significantly different. As consumers we can all get new 50in flat screen TVs in our homes and we don't need a movie house any longer. (And there aren't enough of them any way). It is only a matter of time before first run movies are distributed direct to consumers together with consumer (behavioral) ad placement. Ergo: very flat distribution.

With respect to books/publishing, in my view we won't even remember the espresso machine in three years. Led by the iPhone, consumers will consume more and more books on these handheld platforms and 'vending' locations will be ubiquitous (including B&N etc.) E-books will not replace hardcopy books in total. They may replace trade paper in dramatic fashion over the next five years. (I will make another point on your next post about retail). The Espresso machine is impressive technology and will retain a place in libraries and academia but I see us the typical high street consumer skipping over the on-demand opportunity of printed works to simply e-content on a handheld.

And all this from someone who only buys hardcover titles and collects first editions!

Barry from post two:

B&N and Borders both publish their own books. True, the titles in question are mostly self-help, public domain, and other perennially-selling categories. But in June, Borders published Slip and Fall, a hardback novel by Nick Santora that's available nowhere else. Slip and Fall is a classic case of middleman elimination. I don't know the financial details, but I know the dynamic that drove the deal: Santora gets to keep more than the 15% of the price of each book he would have received from a traditional publisher, and Borders keeps more than the 40% it would have kept after paying a traditional publisher 60% of the retail price.

My retort:

The 'success of Slip and Fall' has more to do with consumers entering Border's with no clue what they are going to purchase (and research bares this out) than it does with a new found business model. In fact, as seller of anything I want to be in as any appropriate retail outlets as possible and while it may be seductive to have an exclusive with B&N or Walmart ultimately I believe revenues will be lower than if the product is distributed to the largest umber of outlets. Border's also sold that book by 'A-listing' its merchandising with in-store events, front of store displays, discounts, etc. In the process they not only for-go publisher paid merchandising revenues but that type of activity can only be done sparingly otherwise it creates too much noise for consumers. In other words if they extend their publishing program for first run titles to say 10/quarter (which isn't a lot) how will they find the space to merchandise them in the stores? And remember they have a much bigger financial stake in these titles - author advance, printing, can't return them, warehousing, etc. than if they bought them from the publisher.

Ultimately, you will see some major name authors experiment with direct to consumer but it will not represent a big trend.

Lastly, admittedly we haven't seen a huge amount of dynamism from mainstream publishers but I do think you treat them as too static relative to the change going on around them. I do believe publishers will react faster and in (perhaps) revolutionary ways but I can understand your skepticism

Barry in post three:

What about booksellers? Pretty interchangeable, too, I'd argue. The big box stores, if they stand for anything, are only about prices (not a coincidence that Wal-Mart's slogan is "Everyday Low Prices"). Amazon does have a brand, mostly about the customer experience -- the links to related products, the comments, the recommendations, the ease of use, the immediate gratification. Independents don't really have a collective brand (or if they do, it's not terribly relevant to their success). But they do, or at least should have a brand in their community, a reflection of their individuality, you could say, related to expertise, enthusiasm, and personal knowledge of customer tastes, that should continue to offer them certain advantages in a flat distribution world.

(He also speaks about publisher's brand which I will address next week).

To find my retort go to Barry's post.

Harpercollins and IPhone Deal

Harpercollins announced they have built an application that will enable book excerpts to be made available on the iPhone. It is the only deal of its type between a publisher and Apple for this content and the excerpts will be available on the iPhone and the iTouch using the Safari browser or Apple's new web applications site. In addition to text excerpts readers will be able to hear audio excerpts and hear interviews with the authors. Apple has said it has no plans to extend this deal to other publishers (although that sounds more like "no one else has asked" to me). The Bookseller is saying this is exclusive.

The Harpercollins UK announcement coincides with today's UK/European launch of the iPhone.

"Victoria Barnsley, chief executive officer and publisher of HarperCollins UK, said of the iPhone: "With its large screen and tactile nature, I believe it could be the breakthrough device for consuming digital product on the go and brings us closer to the ultimate e-book dream."

According to the company, 15 books are being made immediately available for the UK launch of the iPhone including Lewis Hamilton: My Story (he drives cars) and Playing with Fire by Gordon Ramsey (he used to play football and now cooks for a living).

Each excerpt, which we represent about 5% of the total content will be free with the remaining 95% available for purchase and download.

Harpercollins Reports First Quarter

Harpercollins' 10 year long run of impressive results took another hit when they reported first quarter results which were materially short of the pace set in the corresponding quarter in 2006. From the press release:

"Book publisher HarperCollins owned by News Corp., reported first quarter operating income of $36 million and revenue of $330 million. This compares to operating income of $55 million and revenue of $368 million in the same quarter last year. The year-ago quarterly results benefited by the strong sales of Lemony Snicket's A Series of Unfortunate Events. Current quarter results were highlighted by strong sales of The Dangerous Book for Boys by Conn and Hal Iggulden, Motor Mouth by Janet Evanovich, Ana's Story by Jenna Bush and Deceptively Delicious by Jessica Seinfeld."

From The Bookseller:

"But HCUK c.e.o. and publisher Victoria Barnsley said that despite this, HCUK's volume growth "outstripped the rest of the market", while value grew by 5%. "If you strip out the effects of the new Harry Potter book in July, we held our market share steady at 8.9%, level with the same period last year," she said."

Speaking to Publisher's Lunch, Jane Friedman (CEO) said "I would say we've probably not had a quarter this bad during my tenure." On the flip side she went on to note that the second quarter is off to a good start and one suspects that this quarterly performance is nothing to be concerned about. Indeed on the NewsCorp conference call publishing wasn't even mentioned.

Wolters Kluwer Reports

Wolters Kluwer reported third quarter results inline with expectations and also announced the completion of their initial share buy back scheme and the launch of a second buy back. The company says it expects to buy back €175mm in shares over the next several months. Highlights from the press release are as follows:

Third-quarter 2007:

• Organic revenue growth of 4% (2006: 4%)
• Ordinary EBITA of €153 million, grew 18% and 24% in constant currencies (2006: €130 million)
• Ordinary EBITA margin improved to 19% (2006: 16%)
• Revenues of €799 million, grew 2% and 6% in constant currencies (2006: €786 million)
• Structural cost savings increased to €41 million (2006: €33 million)

Nine months ending September 30, 2007:

• Organic revenue growth of 3%, on track to meet the full-year guidance (2006: 2%)
• Ordinary EBITA of €457 million, grew 20% and 26% in constant currencies (2006: €381 million)
• Ordinary EBITA margin improved to 18% (2006: 16%)
• Revenues of €2,476 million, grew 2% and 6% in constant currencies (2006: €2,431 million)
• Structural cost savings increased to €117 million (2006: €91 million)
• Free cash flow of €194 million (2006: €232 million including €53 million one-time tax refund)
• Divestment of Education generated a sales price of €774 million, a book profit of €595 million and net proceeds of €665 million

Nancy McKinstry, CEO and Chairman of the Executive Board, commented on the company’s third-quarter performance:

“Wolters Kluwer continued to successfully execute our strategy of accelerating profitable growth during the third quarter of 2007. Our good organic growth was fueled by new products and strong growth in online and software solutions. Importantly, all divisions contributed to the significant increase in operating margins realized through revenue growth, operational improvements, and prior restructuring programs. We have a strong, balanced portfolio which enables us to continue our clear growth momentum. Our performance over the first nine months of 2007 has put us well on track to meet our full-year guidance.”

The Eagles Top Billboard Charts

In an update to my post yesterday Walmart has allowed Billboard to record the sales of the new Eagles Album and this has resulted in a number one ranking for the band. Billboard

This represents a policy change in the heady world of charting best sellers since previously Billboard did not record sales when titles were sold predominately through one vendor.

The Eagles' first new studio album in 28 years, "Long Road Out of Eden," takes a short route to No. 1 on The Billboard 200 after Billboard revised a significant chart policy today (Nov. 7).In consultation with Nielsen SoundScan, Billboard will now allow exclusive album titles that are only available through one retailer to appear on The Billboard 200 and other charts, effective with this week's charts. Prior to this, proprietary titles were not eligible to appear on most Billboard charts.

According to the numbers, Long Road Out of Eden sold 711,000 units ranking it second for the year in first week sales.

Radiohead: 2 out of 5 Ain't Bad

Comscore has released a study that suggests that two out of every five downloaders of Radiohead's In Rainbows release were willing to pay something. From the press release:

During the first 29 days of October, 1.2 million people worldwide visited the “In Rainbows” site, with a significant percentage of visitors ultimately downloading the album. The study showed that 38 percent of global downloaders of the album willingly paid to do so, with the remaining 62 percent choosing to pay nothing. The percent downloading for free in the U.S. (60 percent) is only marginally lower than in the rest of the world (64 percent)

Comscore has a 'panel' of 2mm users that allow Comscore to track their internet use. The full press release makes for interesting reading but we don't know how many actually downloaded the album other than a 'significant' percentage. In my back of the envelop calculation, if only 10% of downloaders paid the average $6 then Radiohead nets about $275K. If 25% of downloaders paid the amount would be approximately $650K. If Radiohead receive approximately $1.50 per CD (avg retail $12.95) this would mean they would need to sell 450,000 CDs (in the month) to generate $650K in royalty. My numbers may be fuzzy but if they did sell to 25% of downloaders I don't think those numbers may not be bad at all.

On note that is confusing to me is that the comscore numbers are all in dollars and with the weak US dollar it is surprising that the average paid by non-US residents is lower than the US price. In the UK the typical CD sells for £10-12 (which is $20 - 24). Since their average price paid is lower than the US price that means the typical European has a much lower view of the value of music than the absolute numbers might suggest.

(Tip of the hat to Lorraine Shanley at Market Partners).

Building the Imperfect Beast

“We’re looking for a new paradigm” is how Don Henley put it when discussing The Eagles’ choice of WalMart as an exclusive distributor of the band’s first studio album in 27 years. The comment is laughably patronizing - as though we just aren’t smart enough to see his new commercial nirvana. They own the biggest-selling album of all time; just what “new paradigm” could they be looking for? Speaking of that album (and the more recent Greatest Hits 2), you could bet a large fortune that Eagles fans everywhere would harken for the old stuff anyway.

In July, Prince placed his new album with The Mail on Sunday (UK) for free. He then sold out at least five huge shows later that summer in London. That’s a new paradigm. Radiohead’s new album is available for download at whatever price you think it is worth and Neil Young’s Chrome Dreams II was sent to me free as part of the ticket package for his upcoming shows in New York. New paradigm indeed.

Contrast the minimal attention that this release seems to have garnered with those of other current releases. In the UK, it is being reported that The Eagles will top the Billboard charts and edge out Britney. Now, you might be thinking, is that any competition? But, in fact, her album has been well received over there and broadly here as well. In the US, The Eagles album may not debut in the top three; moreover, because distribution is not widely seen, it may end up dropping like a stone soon after. Since Walmart doesn’t report sales at an item level, you won’t see any of the usual excitement that ensues when a new album moves up the charts. Ergo, ignominious mediocrity. If you contrast the lack of hype around this album – remember, the first in 27 years! - from one of the biggest bands ever and the reaction to Radiohead’s new paradigm; it is comical by comparison.

As a result, fans showing up on the concert tour which is bound to follow aren’t likely to have heard the new stuff. Perhaps, if The Eagles had been more innovative, they could have created broad anticipation for the new stuff. As it is, concert-goers will hit the head when the group launches into those unrecognizable ‘hits’.

Aside from the silliness (or ignorance) of Henley’s comment, there is also a perception issue. Millions of people travel to NYC to shop on 57th Street. Why? Because the experience is evocative of exclusivity. It is unique and the stores are attractions in and of themselves. If something is sold on 57th Street, the consumer characterizes that product in a very particular way. This is no less the case with a big-box retailer like WalMart. Your association with the products sold at Walmart has everything to do with how you perceive WalMart. So, if you have a negative view of Walmart (and not everyone does) will that transfer to The Eagles? It does for me. Mrs PND has an emotive reaction to WalMart, believing the shopping environment to be soulless and barren. I, on the other hand, think of their intolerance and their overarching belief that they can influence culture by limiting or manipulating choice.

When you think about it The Long Road Out of Eden is a rather unfortunate choice of title for this album when you remember that Walmart has a history of locking up employees, dissuading employees from their legitimate right to union representation and engaging in an active effort to deflate employee wages. Clearly, for some Walmart employees there is no “road out of Eden”

Henley said they got some grief for the Walmart deal but I am simply baffled by the fact that they needed to consider this option at all. Indeed, if they were truly looking for a new paradigm, they only needed to poll some of their ‘friends’ from MySpace who could have given them any number of ideas. And I will bet none would have included Walmart.

Center of Her Own Attention

Americans remain blissfully unaware of the talent of Manchester United and England football player Wayne Rooney. On the football pitch, Wayne has few rivals and he is a sports personality whose talent transcends sport to media superstardom. Even as a better player than David Beckham, he will never rival him as a star: He doesn’t have the looks, but he will be big. On the other hand, his girlfriend/fiancee may become bigger than Victoria Beckham and the glow of Wayne’s stardom has reflected on her since they were engaged when she was 17. You see, 21-year-old Colleen McLoughlin has reportedly just signed a five-book deal with Harpercollins. Admittedly this is on the back of her successful autobiography Welcome to My World (Oopps, I almost typed “Wayne” there…) but, without Wayne would there have been an autobiography at 20 years old?

Read the rest of this post on Foreword: Here.

Simon & Schuster Reports

Jack Romanos' final year in charge at S&S continues to go well as the company posted third quarter revenues of $214.2 million up 9% from $197.4 million for the same period last year. Top-selling titles included Become A Better You by Joel Osteen and the continued success of The Secret by Rhonda Byrne. Operating income of $21.6 million was up 6% from $20.3 million versus last year, and which reflected the revenue increase and lower bad debt expense partially offset by higher royalty expenses, employee-related costs, volume-driven advertising and selling expenses and digital archive costs. Year to date company revenues are up 16% to $643.8mm and operating income is up a dramatic 73% to $67.7mm. A better than 10% margin is tremendous work in trade publishing.

Full CBS press release: Here

Seeking Alpha Transcript: Here

Comments from the earnings call:

The company has also made steady progress in the digital warehouse project. This is new storage distribution and transactional system that will digitize and house all Simon & Schuster content and manage license of our intellectual property. By year-end we expect to have 13,000 titles incorporated into the system.

During the quarter we also announced the promotion of Carolyn Reidy to the role of President and CEO of Simon & Schuster effective January 1, 2008, after Jack Romanos retires at year end. Carolyn previously ran Simon & Schuster's Dell publishing division which accounts for the lion share of the division's revenue and as you recall Simon & Schuster had its best year ever last year. Particularly gratifying when you have a deep management bench that allows you to replace one top tier executive with an internal candidate of Carolyn caliber. She is extremely well regarded not only in the industry but, also inside Simon & Schuster as well. We think she will do great things here.

Open Access: Free or Not to Be

The Washington Post reports on the status of a bill in Congress that will require any research papers that are produced/published as a result of government funded research to be made freely available one year after initial publication.

At issue is whether scientists funded by the National Institutes of Health should be required to publish the results of their research solely in journals that promise to make the articles available free within a year after publication.

The idea is that consumers should not have to buy expensive scientific journal subscriptions -- or be subject to pricey per-page charges for non subscribers -- to see the results of research they have already paid for with their taxes. Until now, repeated efforts to legislate such a mandate have failed under pressure from the well-heeled journal publishing industry and some nonprofit scientific societies whose educational activities are supported by the profits from journals that they publish.

The language supporting this legislative requirement is part of an appropriations bill and thus has not been subject to the type of open debate that publishers would like - regardless as to how difficult it is to support the argument. Typically for the government they are jumping on a hobby horse which on the surface looks like an easy win (a 'mom and apple pie' issue) without fully understanding the commercial, academic and cultural issues involved. There are in my view many more egregious and expensive abuses of public trust such as commercial mining or oil drilling on public land where the accrual to private enterprise far outstrips the perceived tax injustice that publishing research is supposed to generate. But that is not necessarily the point: Two 'bads' don't equal a good.

In publishing research and academic papers the publishing industry has created an efficient and effective distribution mechanism that enables the broadest possible access to this material. Under the aegis of legislative dictate it would be entirely probable that the access to this material would deteriorate not improve as our would-be business people (Congress) envision. Having said that, the publishing business is too entrenched in their position and could do with a kick up the bum: Better this comes from a commercial reality than the legislature IMHO.

Harlequin (Torstar) Reports

The revival at Harlequin continues as the company posted slightly improved underlying revenue growth and improved operating margins versus the same period last year. For the parent company Torstar, revenue was stable with prior year (up $3mm on revenues of $369mm). The company will be pleased that revenues improved in their Metroland Media Group and Digital properties. Operating profit for Torstar improved by $14.1mm for the quarter.

A significant proportion of Harlequin revenues are booked in US $ and as a result their underlying revenue improvement of $0.7mm was offset by more than $3.8mm in unfavorable foreign exchange impact. Operating profit for publishing improved 13% to $16.3mm for the quarter. Underlying profit without the impact of foreign exchange was slightly better.

Harlequin management expect the division to continue the improvements they have seen this year; however, underlying results will continue to be adversely impacted by the weak US $. The company also noted that the fourth quarter North America Retail publishing schedule is not expected to be as strong as compared with 2006. Possibly of deeper worry to the company is how to improve results in their Overseas markets particularly the UK where the company owns Mills and Boone.

Harlequin’s publishing operations are composed of three divisions: North America Retail, North America Direct-To-Consumer and Overseas.

Highlights:

Book Publishing operating profits were up $2.5 million in the third quarter of 2007 excluding the impact of foreign exchange.

• North America Retail was up $2.6 million
• North America Direct-To-Consumer was up $0.5 million
• Overseas was down $0.6 million

Year to date, Book Publishing revenues were up $2.1 million excluding the impact of foreign exchange.

• North America Retail was up $4.9 million
• North America Direct-To-Consumer was down $4.9 million
• Overseas was up $2.1 million

Year to date, Book Publishing operating profits were up $8.0 million excluding the impact of foreign exchange.

• North America Retail was up $6.8 million
• North America Direct-To-Consumer was up $1.2 million
• Overseas was flat.

Year to date, EBITDA was up $6.3 million excluding the impact of foreign exchange.

North America Retail had a strong third quarter with price increases on selected series product lines, a strong publishing program and cost savings. The number of books sold was down slightly in the quarter. Cost savings included lower advertising and promotional costs and $0.5 million of lower depreciation and amortization.North America Direct-To-Consumer revenue was down in the third quarter of2007 primarily from declines in a children’s direct-to-home continuity program.

In the core Direct-To-Consumer business, revenue was flat in the quarter as the series price increase offset lower volumes. Lower advertising and promotion costs associated with the fall 2007 mailing provided the third quarter profit improvement.

The Overseas markets continued with mixed results during the third quarter.Year to date the Nordic group is up 30%, the U.K. is flat and Japan is down with challenges in the core series book market more than offsetting growth in single titles and digital products.

Five Questions with Harlequin

Borders Down Under - Update

The Dominion Post (via Stuff.co.nz) is reporting that bidding for the Borders Australian and NZ stores has now closed.

A&R Whitcoulls seems certain to be one of the final contenders for the 20 Australian and four New Zealand Borders stores. Dymocks is another business believed to be still keen. Other parties cited have included Berkelouw Books and possibly large general retailers such as Woolworths.

I predict a quick decision and announcement.

Here is my update from earlier this month.

Riverdeep Syndication

Riverdeep's banks are in the process of delivering their road show (Reuters) to sell the debt proposed as part of the Riverdeep acquisition. If there are any legitimate concerns regarding the financial structure of this deal they are likely to become apparent as this syndication gets underway. As reported earlier this month, an analyst from Dresdner suggested their were concerned about the ability of Riverdeep to service the debt load that their acquisition binge has imposed on the company; however, no one else has voiced a similar concern since that statement was made public. If you want to get in on it you need to be in London on the first of November or New York on the fifth. We wait to see.

Five Questions with Shatzkin on DADs

At the Frankfurt supply chain meeting, Mike Shatzkin presented his white paper on Digital Asset Distributors. I summarized the content of the presentation here but I also followed up and asked Mike to expand on several points in the presentation. Here are his responses.

1. You mentioned that the research that resulted in the white paper on Digital Asset Distributors was developed for Klopotek. What is there interest in this research and why were they interested in this subject?
   
   Believe it or not, Klopotek really had a community interest in the subject (although that also translates into a marketing device.) They are not a DAD -- which we define as an operation that does digital storage, conversion, and distribution in response to a publisher's needs -- and have no interest in becoming a DAD. But they do sell systems to publishers that will have to account for digital activity, tying sales and revenues back into legacy systems to pay royalties, among other things. But, mainly, I think Klopotek -- which has been growing out of their German origins for the past several years -- saw a "thought leadership" opportunity to establish themselves in the English-speaking markets. And I think the White Paper and conferences -- the outputs from the research -- were successful for them in that regard.
   
   
2. You have given this presentation and speech a number of times over the past six months or so. What has been the reaction of the publishing community – not necessarily from the larger publishers – but the medium to smaller publishers? Are you starting to see an appreciation for the issues that this next tier of publisher needs to understand and appreciate as they consider their digital distribution needs?
   
   I don't see much of the smaller publishers; I think it is the nature of my consulting practice. But the mid-size ones are definitely feeling the issues raised by the DAD study. Right now, this is being driven by a combination of driving online sales (getting the content displayed with Amazon, BN.com, Google, Microsoft) and driving online marketing (widgets for MySpace and Facebook) for the consumer publishers. Publishers are also increasingly aware that there is a real ROI in developing a digital workflow, which becomes part of the thought process when they think about DADs. The more complex are the books a publisher creates -- the more highly illustrated and design-intensive -- the more benefits come from the digital workflow improvement.
   
   
3. What role are standards bodies playing in this area? Are the business needs and requirements moving ahead of the standards discussions and recommendations?
   
   Interesting that you raise this. Digital guru David Worlock said to me at Frankfurt that he wondered whether we should be worried so much about "standards" when we don't have a MARKET. Shouldn't we build the market first, he wondered? But Mark Bide, my partner in many ventures including the DADs research, would say that, without standards, you'll never build a market! I am not sure the business needs are yet moving ahead of the standards, but they probably will. I agree with something you have previously pointed out on your blog, which is that the identification of salable "chunks" can't really be done before the fact by publisher assignment of DOIs; it is the consumer who will identify what they want and how they want it put together and we don't really have a process to enable that.
   
   
4. You mentioned at Frankfurt that long term there may only be a few DAD’s but in the short term most publishers should/will contract with one of the existing players. Why do you think this is the case: Both the short term observation and the long term evolution.
   
   Technology drives scale is the answer in both cases. As it stands, all the DADs are struggling to build out their offerings to cover everything they have to do. They will all be challenged to provide real digital workflows -- real DAM capabilities -- or they will suffer competitively. They all need widgets. They all need nimble content conversion capabilities. And in the future they will need the capability to add value in sales of aggregated content. In the short term, obviously the players will choose from the choices on the table. In the US, that really means three major players (four if you are an academic publisher.) The biggest companies aren't quite all spoken for, but it will be increasingly difficult for new entrants to gain the scale that is necessary to play.
   
   
5. What will the evolution in services be for these DADs? Where/how do you think they will begin to differentiate themselves or will their services evolve into a commodity?
   
   One aspect of differentiation will be price and service. Pricing is a bit vague now and service is very hard to measure. But as new use cases arise -- Amazon Kindle, a Google device, new Web services like netGalley develop and need their database populated -- some DADs will handle these things more quickly and smoothly than others. That's why we urge strong service level requirements in publishers' agreements with DADs. In the longer run, I can see DADs "making sales." They can't really do that until they aggregate content and know they have it. But let's say a DAD has 500,000 recipes from 14 publishers and can convince Kroger to make use of them in marketing? If you're a publisher with that DAD, you make a sale. If you're not, you don't. In the physical distribution world, publishers look at "what else is in the bag?" when they pick a distributor or a sales rep group? It is too early for that kind of thinking in digital distribution, but it will come.
   
   
   Mike Shatzkin, mike@idealog.com

"Hey Nielsen" What About Books?

Nielsen is capturing the true voice of the consumer with the launch of their new “Hey Nielsen” social networking website. Designed to capture consumers immediate reactions to television, movie and music programming, the site launched in beta a few weeks ago. Nielsen is the market researcher most responsible for what we end up watching, listening to and going to see. They are not necessarily responsible for what we read however, but more on that later. Nielsen hopes that the Hey Nielsen site becomes the social monitor for all pop culture although my initial experimentation with the site seems to indicate that most people are focused on television.

Hey Nielsen works by ranking positive or negative comments based on the volume of submissions related to specific content. A “Hey Nielsen” score is attributed accordingly. Essentially, this social website becomes a panel: Perhaps not as organized or managed as a traditional Nielsen panel but by definition more broad based. Nielsen will be able to capture the immediate feedback generated by new shows, music, movies and other media – even celebrities. This could be a fundamental step forward over the old model of set top boxes and exit surveys.

Crucially for the book industry we don’t have such a facility and it is ironic that Nielsen having such a research presence in the book industry has not placed books into to the Hey Nielsen network. We are generally familiar with the BookScan POS service but it has been left largely to subscribers of this service (both in the UK and US) to derive their own insight into what the raw data suggests about sales trends, tastes and mores. I read about Hey Nielsen before I went to Frankfurt and it was at the supply chain meeting that Nielsen presented more of what we would like to see of their analysis capability.

In a presentation entitled Towards a Better Understanding of a Consumer Jonathan Nowell and Julie Meynick discussed the existing publishing market and environment. The suggested for example that contrary to conventional belief the publishing market in the UK is reasonably healthy with unit sales up 5.4% over last year and up 43% since 2001. In comparison with other media – particularly TV and newspapers – book readership has more than held its own. They followed this over view with some statistics on where books were selling and what genres were moving. There would be little surprise that published material such as hotel and travel guides, dictionaries and astrology are not competing well with online alternatives and are seeing decreased sales.

The last segment of the presentation concerned a review of the panel HarperCollins constructed to better understand their readers. (It is not clear how much direct involvement Nielsen had in this research). Researchers asked over 1000 people to rank how they used different media for different tasks and also describing their visceral reactions to what reading and books meant to them. Nielsen sales data was used to build demographic profiles of readers which in turn has been used by Harpercollins to develop genre profiles of the types of book purchasers that were attracted to specific genres. In the presentation, Nielsen showed the seven defined profiles within Cooking as an example. Each of these profiles has deeper demographic information associated with it to describe the buyers in this segment.

Nielsen showed in this presentation how psychographic data from panel information and sales information from point of sale data could be merged to create a more detailed set of information about existing and potential consumers. This information in turn creates the framework for effective marketing and promotion campaigns that should drive sales.

I saw Nowell later the next day and told him the presentation was interesting and why they couldn’t do something like this in the US. After a pause, he told me to wait and see. In the short term, why can’t they use Hey Nielsen?

Update on Harpercollins' Authonomy.com

A few weeks ago I had a post on the new authors site being launched by Harpercollins UK. Victoria Barnsley the HC UK CEO was on BBC Radio 4 talking about it. Here is the link. Her piece is about half way through the program. Meet the Author is also profiled.

Blog post

Go for the Dew(ey)

The BBC goes looking to see if Dewey is still relevant in today's (UK) libraries and along the way they discuss some of the history of Mr. Dewey and his evident psychological 'issues'. These issues may have materially impacted the development of the system. So I guess, we should be happy that Prozac wasn't available. One other note: No mention of OCLC.

This audio article appeared on BBC Radio 4. Link. It is about 20mins and if you are a Dewey know-it-all you are not going to get much out of this.

John Burdett: The Bangkok Underworld

I have read all the books John Burdett has written about Bangkok and also heard him speak about his most recent book when he was on his recent author tour. The books are evocative of the real Bangkok which you will immediately recognise if you have ever visited the city. I have been back several times since 1997 but as a child I also lived there for about a year. Burdett is profiled in The Times this morning with an article and a slide show:

Mr. Burdett delivers this grab bag through his narrator, Sonchai Jitpleecheep, a cop whose mother was a prostitute and whose father was an American soldier during the Vietnam War. Sonchai is a cultural interpreter par excellence, a cross between Descartes and a Thai palm reader who has flashbacks of travels to Europe with his mother and her various client-lovers. “I still feel very Thai, despite my straw-colored hair and sharp nose,” Sonchai says in “Bangkok 8.”

The narrator’s frequent reflections on Buddhism complete the cultural mélange. Mr. Burdett himself meditates one or two hours a day. It’s hard to imagine how the broad and nuanced canvas Mr. Burdett paints in his books could be conveyed on the big screen. But Millennium Films, which recently produced “John Rambo,” the fourth movie in the “Rambo” series, in Thailand, has optioned “Bangkok 8” and is serious about making the film, Mr. Burdett said.

Video Link

German Bookselling

The Times has an article on the German bookselling market which maybe under threat because of legislation proposed in Switzerland to abolish fixed price policies on German language titles. Germany has an extraordinarily efficient system of distributing books and in many cases orders to wholesalers are delivered first thing the next day to all types of retailers. In some cases, the dispatchers have keys to the bookstore and boxes are sitting inside the front door when staff arrive. According to both publishers and retailers interviewed in this article, the net price agreement supports the diversity of publishing and of the size and location of all types of bookstores.

The fixed-price system is not unique to Germany. France had it, gave it up and reinstituted it after finding that discounting hurt small booksellers. But in the German-speaking book world, the system has long been a source of special pride until Switzerland jumped ship this spring. Despite vigorous lobbying from German and Swiss publishers and independent booksellers, the Swiss government sustained a ruling by the Swiss Competition Commission to overturn the fixed-price law and allow discounting there.

Here is the rest of the article.

Amazon Reports

The highlights from the Amazon.com earnings call were pretty impressive and here are highlights from the press release:

• Worldwide revenue grew 41% to $3.26 billion, or 38% excluding the $75 million favorable impact from foreign exchange.
• Q3 2007 revenue benefited by approximately 290 basis points of year-over-year growth from Harry Potter VII sales, plus attachments.
• Media revenue increased to $2.09 billion, up 36%, or 32% excluding FX
  In the North America segment, revenue grew 42% to $1.79 billion. This is the highest growth rate in seven years.
• US segment Media revenue grew 38% to $1.08 billion.
• GAAP net income was $80 million or $0.19 per diluted share, compared with $19 million and $0.05 per diluted share
• The Company sold 2.5 million copies of Harry Potter and the Deathly Hallows worldwide, making it Amazon's largest new product release.
• The Company launched a public beta of Amazon MP3, a digital music store with Earth's biggest selection of a la carte DRM-free MP3 music downloads. Amazon MP3 has over two million songs from more than 180,000 artists represented by over 20,000 major and independent labels.

I found the reports on the growth of their services business to be most profound. The company annouced a development fund for companies or individuals that could build commercial applications using the Amazon web services. Amazon will fund expansion and further development of the best of these applications. Without staring a gift horse, etc. the only limitation is that they application has to work with Amazon services. On the back of this they appear to have really spured the growth of people and companies tinkering with webservices. (I might even have a go). A lot of this growth may be people checking in to look around but regardless the growth in registrations in shocking.

• Over 290,000 developers have registered to use Amazon Web Services (AWS), up 25,000 from the prior quarter.
• AWS also launched a limited beta version of the Amazon Flexible Payments Service (FPS). Amazon FPS is the first payments service designed from the ground up specifically for developers, and provides unprecedented flexibility in the movement of money through a set of web services APIs.
• AWS recently introduced several new compute instance types for the Amazon Elastic Compute Cloud, which provide up to eight times more memory, CPU, and storage, enabling developers to support an even broader set of applications. Amazon Simple Storage Service (S3) continues to be rapidly adopted by developers, and objects in storage have doubled to more than ten billion during the last six months. In addition, we have instituted a Service Level Agreement for Amazon S3 that guarantees operational performance levels.
• On the earnings call, Bezos had this to say about webservices:

Obviously if you're building web scale applications, in many cases you have to be able to charge people for things. The Flexible Payment Service is the first payment service specifically designed from the ground up for developers, and it has a lot of features that make it very flexible and easy to use for developers to incorporate payments into their own applications.So that set of services that we're offering to developers is growing very, very rapidly and has gotten an unusual amount of traction. We are very, very gratified to see this early uptake in the development community. It's happening at the very small scale with small software developers; one-person and two-person shops. It's also happening at the middle scale with venture capital-funded startups; and then at the large scale, with enterprise customers all the way from the small up to the big. So it's a very exciting and new product offering. These infrastructure services are things that we needed to build for ourselves in order to run the web scale application called Amazon. While we were in the process of building these things, we decided to build them in an external way so we could charge for them and turn them into a new profit center.

Looking forward to the full year the company stated:

• For Q4 we expect net sales of between $5.1 billion and $5.45 billion, or growth of between 28% and 37%. This guidance anticipates greater than 300 basis points of positive impact from foreign exchange.

Lastly in response to questions on the earnings call were the following:

• A question on Gross Margin: :In terms of gross margins, yes, Harry Potter is having an effect. It was slightly less than a contribution profit breakeven event for us. You should assume that's a lower gross margin than our average, so it is bringing it down."
• A question regarding the legal challenge to 1-Click. Bezos: "In terms of 1-Click, we have a longstanding practice of not talking about such matters outside of our public filings. You should refer to our public filings."
• A question on the Borders web store collaboration that is ending: Bezos "Re Borders: I don't really have any comments on any specific contracts."

Five Questions with Rosetta Solutions

netGalley is attempting to solve an intractable issue for publishers: How to ensure that your review copies get into the hands of the right reviewers, at the right time and at the lowest possible cost. In addition, tracking these reviews becomes an increasing problem as reviews publishing rapidly expands beyond traditional newspaper and trade magazines. netGalley is an innovative technology services company located in Seattle and staffed with people committed to improving the way publishing operates. For publishers, netGalley helps publicity and editorial and marketing staff reach a wider range of review publications and media and provides up-to-date status of reviews. For reviewers, netGalley helps to manage the inflow of titles and internally manage the review process. There is no cost for individual reviewers to register for the service.

I asked Michael Forney, President of Rosetta Solutions which is the corporate owner of netGalley my five questions.

1. Who is Rosetta Solutions and where does netGalley fit in the organization?
   
   Rosetta Solutions, Inc. (Rosetta) is a publishing technology company full of people who love books. All of Rosetta's products and services have been designed and built with extensive collaboration from publishers and media organizations. Our goal is to streamline and automate publishing workflows to help grow the industry. We do that by providing tools and services for both print and digital editions, including production, conversion and distribution.
   
   Rosetta’s netGalley™ is an online service that helps publishers better connect with their book reviewer and media communities through electronic distribution and tracking of ARCs, galleys and press materials. Through netGalley, publishers can simplify existing processes with premier review and media contacts and broaden their reach to online reviewers, bloggers and specialty publications, all while significantly diminishing the cost of printed review copies and press materials.
   
   
2. How did the netGalley product evolve?
   
   At netGalley, we are fascinated by how the internet continues to help connect smaller and more specialized groups of people who benefit from shared information. Books have long been sold through word-of-mouth, with traditional reviews being the most influential recommendation tool. What we wanted to accomplish with netGalley was to bring to bear the networking power and digitization of the internet on the book review process. We keep asking, “How can we make the existing process more efficient and less expensive? How can we mine the process for more information that will enable better decision-making? And last, how can we help connect the exponential number of new media outlets with new galleys at THE lowest possible cost?” We are grateful to have had the input and counsel of the some of the biggest and most successful publishers and media groups to help us shape the functionality of netGalley. Good listeners make good leaders.
   
   
3. You describe yourselves as a services company in this context what are the solutions that netGalley can provide? Is netGalley a discrete product or tool or do you see it as part of a platform or suite of products?
   
   When we first began with netGalley we saw the immediate benefits of better connecting review organizations with publishers to streamline the back-and-forth communication that characterizes this process. What we then began to see by talking to publishers is how netGalley can equally be applied to the larger publicity process by providing media with a central location to access a broad range of ancillary material about a title. We began to see how netGalley can benefit a range of constituents, directly (in the publishing house or media organizations) or indirectly (for example providing better information and services to authors). So, absolutely, we see netGalley as a platform providing a continuum of services.
   
   
4. You are currently working with a number of publishers on the netGalley launch. What have been some of the issues you have faced as you have designed and built this product?
   
   Probably the biggest challenge for us has been straddling the current reliance on printed materials with the gradual evolution toward digital media. We recognize that publishers and media will continue to rely primarily on printed galleys for some time. At the same time we can be evangelists for digital content, particularly by making it easy and secure to distribute within a given professional community. To be clear, netGalley does not require the distribution of digital galleys and facilitates the distribution of physical galleys. Yet many publishers have indicated that they can use digital galleys to supplement their physical galleys, especially to the online media and blogger communities.
   
   Have you faced particular issues in convincing publishers of the ROI involved in implementing at productivity tool like netGalley?
   
   The publishers and media organizations we have talked with all agree that there is a great deal of opaqueness in the current communication media and review processes. There is equally a sense that it is difficult to understand the true costs of reviews or media coverage. When you pair that difficulty with the explosiveness of new sites covering and reviewing books…it seems reasonable to want to automate and capture more information in this area.
   
   The distribution of marketing materials and the breadth of potential reviewers are growing rapidly. None too recently, a publisher had a fairly static list of people they needed to send ARC’s to have you heard from publishers that this is becoming an unmanageable task unless fundamental changes are made?
   
   We haven’t met a publisher yet who has noted the diminishing importance of The New York Times in selling books. We haven’t met one who says that their list of daily tasks is shrinking. The traditional media outlets will continue to have enormous impact on the books purchased by the reading public. The publicists’ day will get fuller and fuller.
   I think the challenge for publishers is partially in verifying the influence of potential new media sources. We see a lot of heads nod when we talk about automating and consolidating communications online, about bringing together potential reviewers/media who might find you as much as you find them, about cutting down the number of manual tasks particularly around formats and files.
   
   What kinds of improvements would you anticipate in a typical installation of the netGalley product?
   
   First I would ask, improvements for whom? Review organizations for example are going to see enormous benefits in terms of improving their internal workflow and minimizing redistribution costs to off site reviewers. Media organizations will see improvements in time efficiencies and task management. Publishers can anticipate lower direct costs of producing and distributing physical galleys, replacement of manual processes, and a broadening of the publicity universe at lower cost.
   
   
5. What is next for netGalley. Do you have a sense what your next development phase will be?
   
   On the netGalley side, we have a development plan that extends through the next two years and includes new functionality in the existing application as well as services to new segments such as the library and educator markets. Our research indicates that many of the benefits of netGalley to review and media communities can be transferred to other book communities.
   
   From the Rosetta perspective, we have a number of new products and services in development all surrounding the automation of publishing workflows and the consolidation of information derived from these processes. Watch this space for more!

Scanned! Libraries See the Folly in Proprietary Programs

The Open Content Alliance was established as a non-profit, non-proprietary program to aid libraries in developing their own book scanning efforts. It was partially a reaction to the far more renowned Google book program but some could argue it was a logical extension of the work of the Internet Archive program that the OCA founder Brewster Kahle also established. There are fundamental differences between the OCA approach and other digitization programs: Firstly, the library pays OCA for the scan, secondly, the content is limited to out of copyright material and thirdly, the library has no restriction on what is done with the scan.

This morning the NYTimes examines the developing resistance to commercial digitization programs such as Google and Microsoft and uses as an example the decision by a consortium of Massachusetts libraries not to go commercial.

But the resistance from some libraries, like the Boston Public Library and the Smithsonian Institution, suggests that many in the academic and nonprofit world are intent on pursuing a vision of the Web as a global repository of knowledge that is free of business interests or restrictions. Even though Google’s program could make millions of books available to hundreds of millions of Internet users for the first time, some libraries and researchers worry that if any one company comes to dominate the digital conversion of these works, it could exploit that dominance for commercial gain.

But Google continues to add libraries to their digitization program with regularity and why this continues is not really discussed here. Within the library community the disquiet regarding the Google program has been growing all year and the discussion as been as much about the restrictions as it has about the quality of the scans themselves. Less has been said about public trust and this aspect is not directly addressed in the Times article either.

As repositories of our collective knowledge and most often as beneficiaries of our tax revenues or public donations, libraries have an obligation to ensure that the general public has ready access to the content collected on our behalf. Perhaps this is a controversial point and perhaps this thought it not directly applicable in an academic context (unless it is a public institution) but the President of the Boston Public Library obliquely references this point when he says in the article:

"We understand the commercial value of what Google is doing, but we want to be able to distribute materials in a way where everyone benefits from it,” said Bernard A. Margolis, president of the Boston Public Library, which has in its collection roughly 3,700 volumes from the personal library of John Adams.

So what of the libraries in the Google program? Some are having second thoughts, some are entirely happy and some have made it work to their advantage. Generally, speaking it appears that everyone believes that all library content will eventually be freely accessible. If that means that works will have to be scanned again for those works that have restrictions placed on them by the original scanner then so be it. Since this second effort is likely to take some time, this content may be available in digitized form at a network level in advance as more and more libraries take advantage of 'open' programs like OCA.

I was intrigued by the last sentence of the article:

On Wednesday the Internet Archive announced, together with the Boston Public Library and the library of the Marine Biological Laboratory and Woods Hole Oceanographic Institution, that it would start scanning out-of-print but in-copyright works to be distributed through a digital inter library loan system.

"digital interlibrary loan system" sounds very interesting.

Pearson Ups Full Year Guidance

Last weeks positive results for McGraw Hill were said to bode well for Pearson's upcoming report and the news was confirmed this morning with Pearson reporting underlying revenues up 6% and operating profit up 20% for the first nine months versus the same period last year. Results including the impact of acqusitions and currency were 4% and and 17% respectively. From the press release:

Marjorie Scardino, chief executive, said: "We still have a lot of trading ahead of us, but every part of the company is doing well. We're benefiting from rapid take-up of our learning technologies; sustained increases in our audience and advertising at the FT; and bestselling publishing combined with operating efficiency at Penguin. This increases our confidence that 2007 will be another year of record profits for Pearson."

For the full year, the company is firing on all cylinders and is expected to achieve record performance in revenue, operating profit, cash flow and return on equity. The company is generally conservative in forecasting full year results but the confirm that all operating units are performing at or above their previous full year guidance.

Highlights for the first nine months of 2007:

Pearson Education underlying sales up 7% with good growth in all parts:

• Our School business: Sales up 7% from sustained investment in content and technology and breadth in publishing, testing and services. Full-year sales growth around the top end of the 4-6% range and further margin improvement is expected even after reorganisation costs.
• Our Higher Education business performed strongly through the start of the academic year. Sales are up 5%, with rapid growth in subjects where we offer our online teaching and assessment programmes (established services such as MyMathLab, MyEconLab and Mastering Physics as well as new programmes in Spanish, nursing and information technology).
• More than 1.3 million US College students registered for our online learning programmes in the August and September back-to-school period, a 44% increase on the same period last year.
• We now expect our worldwide Higher Education business to achieve full year sales growth around the top end of the 3-5% range with stable margins.
• Our Professional education business continues to show strong growth. Sales are up 12% in the first nine months, and we now expect full-year sales growth of 8-10% (against our previous guidance of 5-7%) with further margin improvement.

In FT Publishing,

• Sales are up 8% overall, with increasing content revenues. Our advertising revenues are up 9% in the first nine months (up from 7% growth in the first six months of the year).
• We continue to expect FT Publishing to achieve double digit margins in 2007.

Penguin sales

• Up 2% with a strong publishing performance from both new and established authors including Alan Greenspan (The Age of Turbulence), Khaled Hosseini (A Thousand Splendid Suns), Jamie Oliver (Jamie at Home) and Elizabeth Gilbert (Eat, Pray, Love). For the full year we continue to expect Penguin to improve margins further, as our publishing investment and efficiency programmes bear fruit.

Pearson Press Release