Serves 8 to 10

I have often said that caramel is the desert equivalent of bacon but I never thought you could put the two together. Apparently, this is a dish that can't be ruined. You got that right! From The New York Times magazine:

Caramelized Bacon
You can make this up to 3 days in advance. Keep in a tightly sealed container at room temperature. This is a dish that can’t be ruined. You can freeze the leftovers. But why are there leftovers?

1 pound bacon
1 1-pound box light brown sugar (about 2 ¼ cups).

1. Go to a butcher and spend as much money as you have on very good bacon. Cut it into medium-thick slices, say, 3\16 of an inch.
2. Preheat the oven to 400 degrees. Line a large, rimmed cookie sheet with parchment paper. Dump a box of brown sugar into a big bowl. Light brown sugar is best, but if you want to use dark brown, I won’t stop you. Add ¼ cup of water, so that the sugar becomes more than damp but less than soupy. Some bacon caramelizers add a dash of cayenne pepper, but I think this makes the dish too nutritious.
3. Dredge the bacon in the sugar, one slice at a time. If the sugar isn’t sticking to the bacon, add some more water a teaspoon at a time until it sticks. (By the way, you won’t use all of the sugar, but it’s good to have extra.) Place the bacon strips on the paper. I then smear some sugar on top of the bacon, on the theory that if a little sweet is good, more is better.
4. Place the bacon in the oven. It’s impossible for me to tell you how long to cook the bacon because it depends on whether you like it chewy or crispy. Some recipes tell you to keep it in the oven for 8 to 13 minutes per side, depending on the thickness of the bacon. I keep it in on the longer side. You should take yours out when it resembles the kind of bacon you would like to eat. Cut it into roughly 1 1/2-inch triangles. Serve at room temperature. Serves 8 to 10.

Of course, had I been more inspired I would have pictures; but it is just a matter of time.

Borders Reports Holiday Sales

Borders reported consolidated sales increased 3.9% for the nine week holiday period versus the same period last year. Domestic superstores sales increased 6.5% and same store sales increased 2.4%. Books increased a "solid" 3.4% on a comp basis and the company saw large increases in Seattle Coffee and Paperchase revenues. Compatible with the holiday results reported by B&N, Borders also saw a significant drop in Music. Same stores sales at Walden were essentially flat but the group was significantly lower in total due to an aggressive program of store closures. The company has 136 fewer Walden outlets than at the same time last year.

These results reflected 'continuing operations' and the company included international operations in the press release. International revenues increased 36% including currency gains. Sames store comps were driven by strong performance in Australia. (It makes one wonder why they need to sell up down-under but I've already made that observation).

The real crux of these results is the impact they have on operating margin and as B&N were sanguine about their full year results and adjusted eps accordingly, this is what George Jones had to say about Borders results:

Still, the overall holiday shopping environment was intensely promotional and impacted the bottom line more than we anticipated. As a result, we anticipate fourth quarter consolidated operating earnings per share from continuing operations (excluding non- operating charges and discontinued operations) to be flat to down slightly compared to last year's $1.45 per share (excluding non-operating charges and discontinued operations). Overall, we continue to move forward with confidence in our strategic plan for a turnaround of the company and are encouraged by the progress we are making."

Borders will report in March.

The Riverdeep Deal

The Irish Independent takes a look at the Riverdeep deal and concludes that if all the pieces fall into place Barry O'Callaghan's stake in the business could soar to $2.2bn. Davy, which is the broker for Riverdeep, comments in their offering document that "equity investors could potentially double their investment over the next two years". They go on to explain how this may occur via various an exit strategy options:

While the broker said it is too early to discuss how investors will realise gains, potential exit strategies over the next two to five years include a stock market flotation in America or a trade sale "to a large international publishing company such as Newscorp or Viacom". It said a third option of refinancing the group is the least likely route, given the current state of the debt markets and EMPG's relatively high existing debt.

In the Independent article all so notes the potential for cost and efficiency gains that are assumed in the combination of HM and Riverdeep.

BISG Wants Your Comment on Digital Content

Michael Healy, Executive Director of BISG has announced the publication of a discussion paper on the Identification of Digital Content. The paper was written by Michael Holdsworth who is working as a consultant in the UK and was with Cambridge University Press.

Here is the executive summary and I encourage you to contact BISG with comments. (Report)

The identification of digital book content A discussion paper commissioned by the Book Industry Study Group and Book Industry Communication and prepared by Michael Holdsworth.Executive summary Although there are strong similarities between the identification needs of physical books and of digital book content in the supply chain, new business models and new delivery channels challenge existing practice. There is a pressing need for clarity on the use of standards for the identification and description of digital products.The International Standard Book Number (ISBN) is considered fit for purpose for trading,discovery and reporting of digital products within the supply chain.Every digital manifestation traded separately should be assigned an individual ISBN and publishers should adopt the principle that products should be separately identified to the extent that they need to be so identified.The Digital Object Identifier (DOI), though not in any way a substitute for an ISBN, is a valuable additional identifier which enables content to be “discovered” on the Web.Publishers and others should explore the possible opportunities for using the International Standard Text Code (ISTC) as a means of collocating different manifestations of the same textual work.Publishers should review their practices relating to the assignment of identifiers, particularly where a digital product is traded through an intermediary and accurate reporting of sales is required for royalty payments or management information.The practice of using a single ISBN for all digital manifestations of the same work is strongly discouraged.The use of “ISBN‐like” 13 digit identifiers other than those properly assigned by the ISBN agencies is strongly discouraged in all circumstances.

Trading Update from B&N

B&N's aggressive sales year ran into choppy waters over the holiday period and as a result they have reduced their full year eps guidence. They do note however the full year eps target is still higher than the target they set at the beginning of their fiscal year. Full year results will be released on March 20, 2008. From the press release:

Barnes & Noble store sales for the nine-week holiday period from November 4, 2007 to January 5, 2008. were $1.2 billion, a 4.1% increase over the same period in fiscal 2006. For the 48 weeks ended January 5, 2008, Barnes & Noble store sales rose 4.8% to $4.3 billion, while comparable store sales increased 2.0%.

Barnes & Noble.com comparable sales increased 10.9% for the holiday selling season and totaled $129.4 million. For the 48 weeks ended January 5, 2008, Barnes & Noble.com sales were $428.8 million, representing a comparable sales increase of 12.8%.

Based on holiday sales results and January sales trends to date, the company is reducing its earnings per share guidance to $1.57 to $1.76 and $1.81 to $1.99 for the fourth quarter and full year, respectively. The company’s previous earnings per share guidance was $1.67 to $1.86 and $1.91 to $2.09, for the fourth quarter and the full-year, respectively.

Supreme Court Says No to Copyright Law Review

From MediaPost:

The Supreme court has refused to review a case that may have resulted in declaring an element of copyright law unconstitutional. (Lots of 'ifs' there). From the article:

In the case, Internet Archive founder Brewster Kahle challenged the copyright protection given to so-called "orphan" works, or material for which the owner can't be found. Currently, if Kahle or other Web companies post such material, but the owner later steps forward and sues, the companies can't defend themselves on the grounds that they couldn't locate the owner. Kahle, represented by the Center for Internet and Society at Stanford, had hoped to change that by arguing that the law protecting orphan works--passed before widespread Internet access--violated the First Amendment.

News From England: New Fairy Tales

The UK produces a number of great newspapers. In recent years, the larger national newspapers have produced their respective big versions on Saturday rather than Sunday. This allows readers to meander over the paper through the entire weekend. All continue to publish on Sunday but it is the Saturday version that is my preference. Leaving London on Saturday after spending two weeks with the family, Mrs PND and I loaded up on three of the big dailies.

There is a lot of publishing industry and book related news in these newspapers. This weekend The Times reported on the ranking of the top 50 best post war British writers. Philip Larkin was ranked at the top of the list for those who care. Personnally, I only have a casual interest in lists like these. I think the composition of these lists is subject to whim and justification is hard to fathom. Here is how they put it: "Because there is no scientific method for making such a list in the correct order, we applied no scientific method. But we considered a number of factors — sheer quality of writing, longevity, lasting impact and, naturally, commercial success." The Times asked a number of current authors to write some of the profiles which is an interesting twist.

Other interesting news in The Times was the news that the BBC is developing several bo0k derived projects. Unknown in the US, Arthur Ransom wrote a series of adventure titles for boys and girls refered to as Swallows and Amazons. I found these titles when I was eight or nine and loved them. The BBC is close to gaining options on all 12 titles. From the article:

Inspired by the success of The Dangerous Book for Boys, the BBC is betting that camping, fishing and messing about in dinghies will seem as thrillingly exotic to modern children as any special-effects-laden superhero movie. The producers believe that the resourceful young heroes of Swallows and Amazons and the book’s idyllic Lake District setting possess an allure that they did not have when the tale was last filmed in 1974, before childhood hobbies became as sedentary, solitary and technology-driven as they are today.

Unknown to me until I read this article was that Ransom married Trotsky's secretary and spied for the Bolsheviks. Who knew?

The BBC is also broadcasting new versions of old fairytales. This effort is similar to their ShakespeaRe-Told series which ran on BBC American early last year. The BBC will broadcast Rapunzel on Thursday in the UK and I suspect it will be here soon. From The Times tv guide:

After the success of their updated Chaucer and Shakespeare dramas, the BBC have set their cross hairs on the fairy tails of the Brothers Grimm, Han Christian Andersen and Charles Perrault. Fairy tales work on subconscious levels, quite unlike normal stories and plays. Their plots are weird and the characters are symbolic rather than human. For Rapunzel, the writer Ed Roe has concocted a farcical little fantasy about a useless Eastern European tennis player who pretends to be a woman in the hope of beating Rapunzel the long haired woman's champion.

All told an interesting weekend in the British press for publishing. Rent the Shakespeare titles if you can find them.

McGraw Hill Job Cuts

MGH announced yesterday that it will cut 3% of their workforce (about 600 jobs) and take a charge for the upcoming quarter. From Reuters:

The cuts will result in a $43.7 million pretax restructuring charge and reduce fourth-quarter earnings by $27.3 million after taxes, or 8 cents per share, McGraw said.
"For 2007, we still expect double-digit earnings per share growth" excluding the restructuring costs and other charges, McGraw said.

Also of note, MGH shares have fallen 39% over the past 12 mths in part because of what some have seen as faulty advice from its S&P unit with respect to the sub-prime banking crisis. While McGraw attributed the restructuring to the financial market issues the largest cuts look to be in their education unit. Given the amounts being invested by the other large players this seems counter intuitive.

NYTimes

Macmillan Acquisition

The NYTimes reports that Macmillan has acquired a custom educational textbook publisher named Hayden-McNeil Publishing for an undisclosed sum.

Brian Napack, president of Macmillan, said that custom publishing was the fastest-growing arm of the textbook market. He said that while Hayden-McNeil was “not huge at this point,” its revenue had been growing by double-digit percentages in the last five years.

Some of the larger educational publishers have established custom publishing operations already having built them organically. They have also reported similar growth percentages in revenues.

Redroom.com: Author Central

The San Francisco Chronicle reports on the launch of a new author/publisher/reader community site named Redroom.com which went live December 21. Redroom is founded by
Ivory Madison who wants to create a site that is "...a household name, where people start when they're looking for an author, a book or what people are saying about current ideas or events...Because we have the writers, we have the potential to be the smartest conversation on the Web."

The site is starting off with a number of well known authors including Amy Tan and Salman Rushdie and Madison expects as many as 400 to establish their web presence in the short term. From the article:

All writers join the Web site for free, and soon readers will be able to have their own free pages, too. Publishers also will be invited to have free Web pages on Redroom.com, with Chronicle Books serving as the Web site's first test case. Madison has collected $1.25 million in venture capital for the business and has hired a staff of 15, and anticipates raising $2 million more in the coming months. She said she expects to break even in 2008 and make $15 million in gross revenue in 2009.

Revenues will be generated by ad revenues and tranaction fee and a portion of revenues will be designated for charity.

Whether this will succeed is any ones guess. It does seems a long shot to me that this will develop into a sizable web presence that a significant number of consumers will be interested in. I am of the belief that the market for author sites or book sites is fairly narrow. Witness the long list of consumer oriented magazines about books and authors that have failed over the years. These outlets failed both because ad dollars were sparse and subscritions were minimal.

On the other hand, the initiative is worth attempting and it is worth noting that potentially 'natural' developers of a site like this such as Publisher's Weekly or Kirkus (or even Bowker) continue to be non-players. Innovative projects like Librarything.com and possibly Redroom fill gaps that for some reason the existing players don't see or can't react to. Redroom may be worth keeping track of and I do like the design and navigation of the site: It is very well done.

Raincoast Gives Up On Canadian Publishing

Raincoast announced today that it was abandoning its domestic publishing operations which it set up in 1995. According to management the operations have remained unprofitable. The operation has published between 20-30 titles per year and will finish this year with 15.

Raincoast is the Canadian partner of Bloomsbury and has published and distributed the Harry Potter series. It is on the back of the success of these titles that the company has built their distribution business into the "preeminent distributor in Canada" (Globe&Mail).

As a result, yesterday's announcement should be seen as a
back-to-the-basics move, and a return to Raincoast's core competency, as a distributor that represents an estimated 50 domestic and foreign-owned publishers, including Bloomsbury U.K., Bloomsbury U.S., Chronicle Books, Lonely Planet, Grove Atlantic and Harcourt/Houghton Mifflin.

Whether this will have a material impact on Canadian publishing is doubtful although some commentators will be all doom and gloom. The domestic Canadian publishing industry is a strange beast with significant amounts of government money distributed to small publishers on the basis of maintaining cultural heritage who wouldn't survive commercially without the funding. In fairness, this active nurturing does produce some great Canadian titles but no doubt most are less than commercially viable.

More ominously the article also contains a veiled suggestion that Raincoast may be planning to rightsize some of their distribution clients as well. More news on that "in the next several weeks".

George Macdonald Fraser

Tom Brown's School Days is a famous book set in the context of Tom's experience at an English boys boarding school. In that book, a boy named Flashman makes a minor appearance as a bully and cad. Forward to 1968 and Flashman makes his literary debut as a self-penned chronicler of some of the epic events of English and World history during the 19th century. Flashman is everywhere from the Crimea to the American Civil War, apparently saving the day and playing a material role in the events in question. At the same time he manages to bed over 400 women (while also maintaining a marriage to a nymphomaniac), is routinely captured, tortured (in some unlikely ways) and escapes. Through complete incompetence and cowardice he always manages to end up looking like the hero.

The entire series of books was based on G M Fraser finding a collection of memoirs at a house sale and it written in the first person narrated by Flashman. They are all hilarious and historically accurate but with respect to Flashman entirely fiction. Fraser made up the entire story of Flashman's travels through British History but what a ride it was. Each book included a sizable addendum that noted the significance of the events, places and people mentioned in each episode. As someone interested in history, these sections were almost as interesting as the fictional work that preceded.

At 82, Fraser died this week after a year long battle with Cancer. As the Times puts it "There will be no more Flashman books chronicling the the life of Brigadier-General Sir Harry Paget Flashman, VC, outstanding Victorian soldier, coward, bully, womaniser, cad, bounder and hugely admired all-round bad egg." Times

Informa: Buy Rating

Following the apparent sale of Emap's businesses over the past month, analysts have cast a look over the rest of the industry for potential upside (Reuters). Analysts at Bear Sterns and Panmure Gordon have rated Informa as 'out perform' and 'buy' respectively. Informa's share price surged 7% in trading following the recommendations. In mid December, Informa gave the following trading update:

The Board is confident that the 2007 performance will be in line with our significant growth expectations. Organic revenue on a constant currency basis* is projected to increase by 9%. All three of Informa's divisions: Academic & Scientific, Professional and Commercial, are contributing well to the year on year increase. Commercial is having a particularly strong 2007 of double digit growth. Trading within each of the divisions is good across all of Informa's business activities: events, performance improvement and publishing.

Shares in Informa have under performed the UK market by 22% and are currently trading at 466p. Panmure is targeting a price between 530 and 550p. Over the past six months the stock has traded over 550 but has fallen recently.

CafeScribe: e-Textbooks are working

Interesting article from Inside Higher Ed on the recent success of CafeScribe and CourseSmart. From the article:

Like iTunes, the model features a type of digital rights management that allows users to download individually purchased e-textbooks to three separate computers or laptops. But like Apple’s digital music service, the success of ventures like CaféScribe depend on the availability of content. Johnson estimated that the company would have some 15 publishers on board in the first quarter of 2008, including more content from Oxford. Still, he conceded, he receives hundreds of requests for titles each day. “Content is our biggest obstacle right now,” he said.

Quebecor in Strife: More News

Quebecor has been given a reprieve of sorts in that lending banks have lifted some of their loan covenants for the company's fourth quarter. It may be all for naught however because in the short term the company must come up with $125mm in short term financing and refinance $500mm in debt. Failure in either case could force the company into bankruptcy. From The Toronto Star:

Quebecor World said it agreed to a requirement to obtain $125-million in new financing by Jan. 15, and also agreed to complete a "refinancing transaction" by Jan. 31. That transaction will require the company to reduce its current credit facility to $500-million by Feb. 29. In addition, the company said it must repay the full borrowing facility and terminate its North American securitization program by June 30. The company said it is in "active discussions" with financial institutions, but no firm commitments have been obtained so far "and there can be no assurance that such financing commitments will be obtained."

It is probable that the company will cover the $125mm if for no other reason than this will give their primary shareholder some breathing room to review their alternatives. Regardless, the amounts in question - quoted in the article an analyst says 'it is a lot of money' - and the present difficult market for financing Quebecor is certainly in a lot of difficulty.

How Literary Reading is like the Dodo

Publishers received the literary equivalent of coal in their stocking over Christmas courtesy of Caleb Crain at The New Yorker. His article Twilight of the Books presented a depressing synopis of the state of reading in the US. It has long been the case that few people read more than a few books per year. Many read none; however, as Crian points out in his introduction to his essay, that so concerned where pollsters that they began changing the questions in order to make the results seem less bad. From ‘are you reading a book’in 1933 to ‘have you read anything in the past 12 months’ in 2007.

To those in the publishing industry the recent confirmation of the decline in book and newspaper reading merits significant concern and reaction. Most of us recognize that reading is still being conducted but not of ‘publishing’ material as we know it. In his article however, Crain takes the stats a step further and suggests that the impact of the decline in formal reading that helps readers develop and hone their ability to evaluate character, argument, plot and perspective is leading to a population of dumber readers.

More alarming are indications that Americans are losing not just the will to read but even the ability. According to the Department of Education, between 1992 and 2003 the average adult’s skill in reading prose slipped one point on a five-hundred-point scale, and the proportion who were proficient—capable of such tasks as “comparing viewpoints in two editorials”—declined from fifteen per cent to thirteen. The Department of Education found that reading skills have improved moderately among fourth and eighth graders in the past decade and a half, with the largest jump occurring just before the No Child Left Behind Act took effect, but twelfth graders seem to be taking after their elders. Their reading scores fell an average of six points between 1992 and 2005, and the share of proficient twelfth-grade readers dropped from forty per cent to thirty-five per cent. The steepest declines were in “reading for literary experience”—the kind that involves “exploring themes, events, characters, settings, and the language of literary works,” in the words of the department’s test-makers. In 1992, fifty-four per cent of twelfth graders told the Department of Education that they talked about their reading with friends at least once a week. By 2005, only thirty-seven per cent said they did.

Reading for pleasure is a relatively recent phenomenon in human history. It is possible (and maybe a Phd project) that the development of mass market reading also wrought massive hand wringing and consternation from those who controlled media in the 18th and 19th century. No doubt these owners and social and political leaders believed that society was being eroded and undermined and that the youth (and/or the lower classes) of the day were dooming the traditional publishing business to ignominious death. Whether the comparison with the drivers of change we currently see – social networking, gaming, television, etc. – represents a similar transition I do not know. What is certain however, it that publishing and reading will not disappear but will change and adapt to suit the market and perhaps evolution.

Why evolution? Read the article to understand how the brain develops based on external stimuli. This discussion might lead you to conclude that ‘new media’ could lead future generations to develop different cognitive powers than we currently possess.

Emap Break-up

Earlier in December, I noted the sale of Emap consumer publications to Bauer. At the time (mid December) Emap announced they would keep their business to business publications as presumably the offers were not high enough. It was always the intention of the Emap board to sell all the businesses completely if they could.

On Christmas Eve, it was announced by Emap and Apax that Apax and Guardian Media Group had presented Emap with an offer to buy the outstanding shares of Emap for just over £1billion. Apax/GMG already own b2b publisher Incisive Media and hope to merge the two businesses together to produce a £2.0billion publisher.

Despite the announcement there is some speculation that a rival bid may emerge and the Emap share price has traded above the 931p offer price. Apax/GMG have already purchases a 19& holding in Emap.

Telegraph

Predictions 2008

This is the time of year when prognosticators attempt to handicap the future while, at the same time, trying to explain why they were so horribly wrong with respect to the prior year. I am no different. 2007 saw some stunning developments in the publishing and media space--particularly in mergers & acquisitions—and, broadly speaking, I see several trends emerging. First, I expect more change driven by M & A activity in 2008. Second, as more companies bound by traditional publishing models migrate online and join those already there, the application of technology in our industry will accelerate. Third, we will see a ‘squeezing’ of the value-chain (from author to publisher to consumer) driven by publishers looking to build community models around content and authors.

Associated media markets, such as broadcasting, newspapers and games, also influence our industry in interesting ways. We are starting to see our traditional segment descriptors – publishing, newspaper, broadcasting, information – become meaningless as content becomes ubiquitous and network access (or distribution) becomes universal. Publishers and information providers must expand their capabilities beyond traditional market segments if they want to remain competitive. On a related note, there is an escalating ‘compacting of media’ taking place, where the interests of all media players are converging on issues like rights, piracy, market concentration and access to markets or even consumer attention. (Text) book content, broadcast TV programs, movies, music, games and news can all be delivered via Xbox or Ipod: In this environment, where does the power lie? Who “owns” the customer? And how are content-selection decisions made? A publisher can no longer be one-dimensional and hope to survive, which is why companies like Lexis, West and Pearson are building delivery ‘platforms’ where (traditional) content is only a part of the offering.

In the not-too-distant future, we may look back on 2007 as a significant transition year for the media business. In education, a number of large companies were taken private and will reemerge five years from now as fundamentally different, platform-based companies. The Hollywood writers strike will redefine how content producers are compensated as content distribution expands to the Internet. Journal publishers will trace the history of their ad-based revenue models back to Reed Elsevier’s experiment with oncologyonline. And in the news & information segment, NewsCorp’s purchase of Dow Jones and Thomson’s acquisition of Reuters will radically change the model of information delivery. Even the self-publishing market showed a level of maturity with the consolidation of AuthorHouse and iUniverse.com. Outside our immediate universe (but no less relevant as advertising becomes a more important revenue stream) is the purchase by Google of adserver Doubleclick.

Here are my predictions for 2008:

Education:

• Recognizing the potential for aggressive competition, McGraw-Hill will reorganize its business much as Thomson has done. MGH education could be sold to private equity.
  Cengage will spend aggressively to round out its content and assessment products with course management and school resource planning tools.

Information:

• We will see at least one mega-deal involving, perhaps, D&B, the information assets of McGraw (S&P) or Bloomberg. Following closely on the heels of past investments in tax, legal, financial information, the insurance segment will become a focus of aggressive new investment for information providers.

Trade:

• It also seems inevitable that there will be some additional consolidation in trade and this could result in a higher profile for Hachette, Bloomsbury and/or Macmillan. One publisher may get out of the self-publishing market but another will jump in with both feet. A company like Lulu.com or the AuthorHouse/iUniverse combination could be targeted by a trade publisher seeking to expand its market and build an author community. More trade publishers will eliminate imprints in favor of theme-specific content.

Retail:

• The ongoing rumors of a Barnes&Noble/Borders combination will continue until one of these retailers purchases a third. This new combination will not materially change the book retail market, but the combination of the two companies will result in a financially stronger retailer.

Other:

• Broadcasters will have a strong advertising year due to the political calendar and the Olympics. (A three-party race for President will be an added boost).
• Facebook and Linkedin will join forces, but we will also see the development of more ‘by invitation only’ social networks. (Potentially, these could be administered by the current incumbents but they are more likely to be new entrants).
• As many as ten brand-name magazines will cease publication or reduce their frequency due to ad-base declines and the rise of specialty web sites.
• News sites (either branded or not) will ramp up efforts to harness niche bloggers and online publishers (either by acquisition or association) in an effort to boost traffic, broaden audience and develop more relevant op/ed and reportage. Incumbent news providers are realizing that acquiring an established online presence with a built-in audience represents a path to growth and they will begin to employ this tactic during 2008.

As always, it looks like the coming year will be an exciting one in media. At least according to me.

The Year In Reading 2007

I barely purchased any books this year; however, I managed to read over 20 titles. Around this time last year, I rearranged my book shelves to place all the unread books on one shelf. I was more than a little surprised to find I needed two and a half shelves (or six and a half feet). So, I determined that I would aggressively winnow the back log down before I started buying again. Success of sorts then in the number completed. I have selected the easier titles to read and the next 20 titles will be tougher.

I was anticipating a hard slog through McCullough's John Adams but this was my personal favorite of the books I read this year. It was especially rewarding to be half way through it when Romney (Presidential hopeful) explained on Meet the Press how Adams would have agreed with him that you can't have freedom without religious morality. That was certainly not my interpretation of what Adams believed. Another notable nonfiction title I enjoyed was Overthrow written by NY Times reporter Stephan Kinzer. Kinzer takes the reader through all our foreign affair blunders from Hawaii to Afghanistan showing how the country and the leadership keep repeating the same mistakes time after time. He shows, using before and after comparisons, that the US involvement had appalling results for the citizens of the countries in question. Naturally, there are highly appropriate references to the current Iraq incursion. Rounding out the top three non-fiction titles was Dawkin's The God Delusion which I found immensely enjoyable. Just knowing our smirking, giggling, singing the wrong lyrics and generally clowning around during required weekly chapel at Melbourne Grammar School is not going to get me in trouble in the hereafter is enough for me.

Fiction. The Night Gardener (Pellecanos), One Good Turn (Atkinson) and Bangkok Haunts (Burdett) were my top three reads this year. Pellecanos sets his crime dramas in Washington DC and this one has the same tight character development and story line. Mrs PND has read Atkinson and I picked this up on her recommendation: She is as good a crime writer as you will find and I look forward to reading her other titles. Burdett launched his Thai/American protagonist about three books ago and he improves with each successive title. I also met the author at the Strand this year which is an added bonus. Read his books to understand more about Thailand and Bangkok generally. Of note, Burdett comes up with some of the most elaborate killing scenarios you will ever find.

Other notable books were Perry Garfinkel's Budda or Bust and Patrick White's A Fringe of Leaves. White won a Noble and is one of Australia's greatest authors. This title sat on my parents shelf since it was published (1976) and I decided to read it based on some controversy reported regarding the current state of Australian literature.

Here's looking forward to another year of reading.

A Year of Reading at The Millions

Graphic Realities

I wrote a post last week about Graphic novels related to an article that appeared in the Philadelphia Inquirer. My post generated this comment from Van Allan and it is a post in and of itself about the developing graphic novel marketplace:


It is amazing to see how much the medium of graphic novels have grown over the past 20 years. And it's been fascinating to see Hollywood come calling. However, I do believe quite strongly that there are some major barriers on the distribution side of things that have inhibited this growth and have prevented comics from growing as much as they could. The main issue isn’t in the book trade, however, but rather in the Direct Market (the “comic shops”).

Diamond's monopoly on the Direct Market has become far too onerous for any of the non-brokered publishers. It boggles my mind that so many of these publishers signed exclusive distribution deals with Diamond that have really gotten them nothing at all. Diamond will still not take an inventory position on titles and "out of stock" titles become defacto "out of print" in many, many cases. Getting re-orders flowing through Diamond in a way that I'm familiar as a bookseller with would seem to be nearly impossible. From this point of view, Diamond is not a distributor at all, but rather a freight-forwarder. And since they are the exclusive supplier in the Direct Market, they really are the only game in town. Certainly the ability to use just-in-time inventory management is a major problem on the retail level as a result of this. Factor in low discounts to retailers and you have a situation that leads to conservatism in ordering. It is fascinating to me that a title like Persepolis performed so much better in the book trade channel. I think the same can be said for manga.

Just to drive this point home even further: it is no surprise to me whatsoever that both Fantagraphics and Drawn & Quarterly have set-up retail operations (in Seattle and Montreal respectfully. The distribution situation is fundamentally untenable as it stands right now and publishers are trying to find alternatives. This all means that if a small press title (and really, that means anything published by anyone save for Marvel, DC, Image and Dark Horse) has small initial orders from Diamond, growing sales long-term is almost impossible. A title is dead right out of the gate.

In my own case, I know that if I tried to launch my graphic novel through Diamond tomorrow I'd be facing initial orders of no more than 300 copies. I'd be looking at re-orders at only another 100-200 if I was very lucky. Even if I managed to get into Ingram, Baker & Taylor, Bookazine, North 49, etc..., orders would most likely be very poor. Printing 1000 copies of my graphic novel is about the minimum I can shoot for with offset printers like Lebonfon. I suspect the odds are long that I'd sell that many over the course of a year.

I think this partially explains why so many graphic novelists are turning to the web and trying to gain traction that way. It certainly does in my case. While I think the diversity in what is being brought to market is truly amazing, I suspect we’re heading towards a schism between the two channels (if we’re not experiencing it already). And that is a somewhat scary proposition for those of us trying to earn a living in this medium.

Predictions 07: How did we do?

This time last year I made a number of predictions and I was less than accurate and as a prelude to looking at what may or may not happen in 2008, I thought I would revisit these. (Current comments in italics).

NYTimes will eliminate the Saturday print edition of the newspaper. It will also create local web news sites for every major metropolitan city in the US and will stream video from their owned broadcast television stations, classified advertising will be free. The company will also launch a citizen’s paper: The New World Times. NYT will create suite of news gathering tools – web services – and make available to ‘citizen journalists’ content and research traditionally only available to professional journalists

Some media prognoticators are suggesting that one of the top 100 US dailies will make the move to eliminate a Saturday print edition sometime in 2008. The NYT is at the same time too conservative to try anything so radical but also without motivation that true public company ownership would insist on.

YouTube tv: Just like America’s funniest home videos we will see a TV show based on original YouTube video content. It will win its night by 10% and will be turned into a weekly Saturday night talent show.

Didn't happen but we did see some excruciatingly scripted YouTube insertions into one of the Presidential debates. We also saw content owners get very angry at Youtube during 2007.

Using cell phones’ camera as a barcode reader will lead to an explosion of mobile in-context/ in situ mobile advertising – followed in 2008 by RFID based in-store advertising (with software for cell phones). Mobile advertising will surpass 5% of all ad dollars spent by agencies by end 2007. (Web currently at 20%)

Not sure about this one. I think more will happen here in 2008 but mobile is not quite ready for prime time. We did see the immense growth of Twitter which wsn't on the radar 12 mths ago. Integrating an ad model somehow here will be a big deal perhaps by 2009.

Google launches product placement advertising program. Based on similar key word algorithms advertisers will bid for placement in movies, television, other broadcast, ports, etc. prior to production and/or live telecast. Program will represent 10% of all fall 2007 upfront spend. FCC will hold hearings on standards related to product placement advertising in late 2007 as the market explodes

Didn't happen but Google expanded their grip on the advertising space with numerous acquisitions including Doubleclick. Despite their size they still only represent a fraction of the potential ad market. See them grow....

Apple will think about buying Disney and Electronic Arts but will buy Tivo and slingBox. Apple will also launch a Beatles version of the I-Pod including the entire Beatles catalog plus video/movies. The Beatles I-Pod will retain the tradition Apple artwork (Green apple front, cut away apple on the back). Yahoo will by EA and within six months launch a social network gaming site based on EA content

Tivo has re-established its self and is now selling its technology to companies they once viewed as competitors. The company seems stronger than it was 12mths ago. Slingbox was acquired by Echostar (Sat provider). EA will be wondering about the big combination in their space of Activision and Vivendi but they have aggresive themselves and is likely to remain independent.

Yahoo continue to have their problems and haven't established a breakout strategy after Jerry Yang took over 12mths ago.

Hard to believe we don't have a Beatles section on iTunes. We do have Led Zep.

No-one will buy Netflix.

Got this one right

Social Media in Education: Several major US colleges will teach various social science courses entirely in simulation. The courses will not be taught in traditional lecture form but entirely within the software simulation.

There hasn't been too much movement here and the biggest news in education were the ginormous monies spread around to acquire Thomson and Harcourt.

News Corp will buy Dow Jones and Financial Times and sell Harpercollins and Hachette will by Harpercollins.

One right. HC may yet be sold in 2008

EBay will by Linden Labs (Second Life). Within six months they will integrate Ebay selling tools into SecondLife enabling virtual store fronts, sales assistance and virtual trading. Will launch program with major retailers and create first Second Life mega-mall in cooperation with Westfield. Ebay also launches SecondLife media placement agency to handle all media inventory on SecondLife. T Mobile buys Skype from Ebay. Linden dollars will be included in the Feds M1 currency calculation.

Ebay has seen continuing deteriorization in revenues from their best customers. The company spectacularly recognized how bad the Skype acquisition had been by reducing its book value by half. Will they sell Skype? If they do it will probably not occur until they have a new CEO. Second Life had some problems: they were hacked and lost some customer information and during 2007 growth has slowed. Hard to know where this will go.

Neil Young’s Living with War wins the Grammy for best Rock Album.

Lost but still an awesome album.

I will revisit predictions for 2008 next week.

NYC Christmas

Created with Admarket's flickrSLiDR.

I'm experimenting with this photo viewer thing. Not too sure about it. Each image has a comment but it is not obvious.

BBC: A Whale of a Story

The BBC have chosen to cover the Japanese whaling fleet in the South Atlantic by sending a reporter named Jonah Fisher. Some wag suggested it must be a send up but sure enough I saw him on the news last night. I wonder what amount of ribbing he is getting from the crew.

Year in Stats & Popular Posts

By way of thanks to all my loyal readers I thought I would list some of the stats for the blog. I am not sure how 'auditable' these stats are but between google/analytics and feedburner there is some consistency. Currently I have nearly 800 subscribers via RSS and over 100 via email. During the year I had approximately 30,000 visits which resulted in 45,000 page views. On average, those who browsed the content spent 2.25 mins per page. Nearly all of this growth happened since May.

The top label (subject) was 'thomson'. Rounding out the top five were playboy, future of biblio, Harcourt and Educational Publishing. Seasonally, I had my heaviest traffic during the summer when the education publishers were in play. Thomson, Harcourt, Houghton, McGraw Hill and OCLC all provided the most traffic other than that delivered via commercial operators like Comcast, Roadrunner, etc. Top referring sites included the normal suspects: Google, Blogger, Technorati. Additionally, I thank Charblog, Eoin Purcell, Exact Editions, Schlagergroup, Bill Trippe, Lorcan Dempsey, Ed Champion, The Millions, Gladys Bembo , Teleread and PW for their support. (I don't do enough to return the favors and I hope to do better).

The most popular blog posts were:

Amazon & Self Publishing, Headline Guaranteed to Get Attention, Penguin Sued over Dot Parker, High Voltage: Australian Publishers Upset, Five Questions with Rosetta Solutions, Harpercollins reports Higher Revenues, .epub: What it means for Publishers, Endorsement for PND, Scholastic, the future, Five Questions with Lonely Planet.

Perusing my traffic reports, I always notice the 'Hilton hotel' or 'Marriott' network ids and think some poor shlepper is on the road and all they want to do is read my humble blog. Well, thanks to all of you stuck in some bland hotel getting your Personanondata fix. I appreciate it and I've been there myself.

The network addresses throw up other interesting items such as spelling mistakes. It always makes me smile when I see my friends from "Nielson" have come to visit. I always say, one thing you should always be able to do correctly is spell your name.

Search strings are another source of (my) amusement. Here is a sample of actual searches that landed on my site from the past 30 days:

“non german or non chinese customer who engage in electronic commerce”
"Motor Mouth barnsley”
"who is an actor"
"supply chain for a gym”
"2007 2008 email contact of chear holders in france @yahoo.com”
"Mr. Katz is in the widget business. He currently sells 2 million”
"escorting for dummies”
"Local news on the 7 October 1997 in London”

While for obvious reasons I hope these people left my site disappointed there is a reason I look at these queries because they often throw up leads for blog posts.

I hope next year is even bigger. Thanks for the support and please tell colleagues, friends and family members about the site.

HarperRandomCollins or RandomHarperCollinsHouse

Well why not? If Forbes and CNN Money have the same short note suggesting that Bertelsmann is going to buy Harpercollins for a $1.obillion then why not Personanondata? On the suggested deal itself, I am sure Hachette would have something to say about that. Or any media PE oriented group. Maybe CBS would carve off S&S for a combo with Harpercollins. Even the FTC would weigh in once all the booksellers reacted. Anyway, Harpercollins denies any discussions are taking place: But they would wouldn't they. Reuters.

This could make for an interesting new year. With Harpercollins' recent financial performance not comparing well with their own high standard and News Corp's expensive purchase of Dow Jones perhaps there is something to this. On the other hand, Bertelsmann already have a $1billion trade publisher and strategically would they want to invest a $1.obillion in a business with slow (if any) revenue growth and low margins. A better solution, would be to invest in an information business that in the right segment would see fast revenue growth and margins greater than 20%. We will see.

On a related note, Bertelsmann confirmed again that they have no intention of sell Gruner + Jahr. Bloomberg.

Scholastic Beat Estimates

Scholastic reported second-quarter profit above analysts' estimates, helped by revenue and profit growth in their International segment. The company also announced they are divesting the direct to home continuity business. From the press release;

Revenue in the second quarter was $746.2 million compared to $735.5 million in the prior year period, and net profit was $75.6 million versus $75.1 million. Earnings per diluted share rose to $1.93 from $1.75 in the prior year period, primarily reflecting accretion from the previously announced $200 million accelerated share repurchase. In the quarter, Direct-to-Home Continuities contributed revenue of $33.2 million and resulted in a pro forma net loss of $6.1 million or $0.16 per diluted share, based on the Company's normal effective tax rate of 37.0%; this is compared to revenue of $38.1 million and a pro forma net loss of $2.8 million or $0.06 per diluted share in the second quarter of fiscal 2007.

"In the second quarter, Scholastic's businesses, excluding Direct-to-Home, performed on plan, and the Company's operating income and margin improved year-over-year," commented Richard Robinson, Chairman, CEO and President. "Profits from School Book Fairs, Clubs and Trade Publishing all rose, while Scholastic Education made progress investing in a reorganized sales force, increased technical support and consulting services, and new technology products. In addition our International segment recorded double-digit revenue and profit growth."

The company has retained Greenhill & Co. and has begun the sales process and will also report direct to home as discontinued operations.

The company maintains their full year revenue forecast of $2.3 to $2.5 billion and earnings per diluted share of $2.35 to $2.85, noting that they expect the solid performance in their core businesses to offset the lower than expected results from Continuities. Full year net income may be impacted by write-downs associated with the sale of the business unit but there is no expectation that cash flow will be adversely impacted. The company also announced a modest stock repurchase plan and is authorized to purchase $20mm of its common stock.

Highlights:

• Harry Potter's boxed set helped the consumer segment to achieve flat revenue and profit
• In education, revenues were flat with prior but operating income was lower due to planned investments
• Large gains in international revenues and profits offset declines in other segments.
• Revenues were up 13% and profit up $4.5mm (22%)

Philadelphia Graphic

The Philadelphia Inquirer (philly.com) has an overview of the the growth of graphic novels and the accelerating relationship with movie productions from these works:

The genre's success has carved out new bookshelf space in bookstores, and caused Hollywood to come calling: In addition to Miller's Sin City and 300, recent movies such as V for Vendetta, Road to Perdition, and A History of Violence began as graphic novels. The holiday season brings the animated film version of Marjane Satrapi's Persepolis, about girlhood in Iran after the fall of the shah; Satrapi served as codirector. Satrapi lives in France, a nation where graphic novels have been a respected form for decades. In Japan, the bulky comics known as manga are read by businessmen on the subway. In many ways, America has embraced its graphic novelists a little late. Even so, the genre's success is due to its global appeal, Mahoney said. Graphics with straightforward dialogue enable the medium to simplify complex issues and cut through language and cultural barriers at the lightning speed of the Internet.

The article orients itself around an exhibit at the Norman Rockwell museum in Stockbridge MA. which is described as 'captivating'. I will do what they didn't which is to link to the exhibition which runs from November 10 - May 26, 2008.

LitGraphic: The World of the Graphic Novel
A burgeoning art form with roots planted firmly in history, graphic novels, or long-form comic books, have inspired the interest of the literary establishment and a growing number of readers. For today's aficionados, graphic novels, with their antiheroes and visual appeal, are positioned to usurp the role that the novel once played. Focused on subjects as diverse as the nature of relationships, the perils of war, and the meaning of life, graphic novels now comprise the fastest-growing sections of many bookstores‹an accessible, vernacular art form with mass appeal.

Reed Business Expect Slower Growth

Reed Business Chief Executive Gerard van de Aast spoke to Dutch daily De Telegraaf (via Reuters) and indicated that revenue growth in 2008 could slow due to continued weaker US dollar rates and a general economic slow down. He did confirm that results for 2007 show significant improvement over 2006 with internet revenues up 25-30%. Naturally, since the discussion was in the Netherlands he was asked about a proposed merger between Reed and Wolters Kluwer which he dismissed as pure speculation. He indicated that on paper it could make sense but culturally the two companies were not compatible.

Quebecor in Strife

Quebecor's CEO resigned on Monday in the wake of a failed recapitalization several weeks ago and on the heels of the collapse of their deal to sell their European printing operations. There is now heightened concern that the company could become insolvent in the short term unless their existing banks or primary shareholder provides some additional short term liquidity. There may be little expectation from the banking sector both because the company's access to revolving credit was reduced recently and analysts expectations that Quebecor will miss their liquidity covenants when they announce their next financial results.

Predictably, the markets have identified parties that could be circling the sinking ship and these include Donnelly and Transnational (Transnational have said they may only want parts) with some private equity companies for good measure. Another option is for Quebecor's primary shareholder Quebecor Inc. (35% of shares and 84% of voting) to take the company private. Certainly, if Quebecor Inc, stepped in they would want some assurances but their shareholders may not be happy with any type of rescue. Quebecor Inc's shares also dropped on news of Quebecor's problems.

From The Globe and Mail:

The company was once a money-spinning jewel in Pierre Karl Péladeau's Quebecor Inc. media and printing empire. Now, it is viewed as a drag on Quebecor, which has to decide whether it wants to throw it a lifeline or cut it loose by selling it or letting it fend for itself. At this point, it appears less likely that Quebecor World's banks will want to extend credit lines after having recently lowered the credit facility to $750-million from $1-billion, National Bank Financial analyst Adam Shine said in a research note. There would have to be assurances of help from parent Quebecor, but coming to the printing subsidiary's rescue appears "increasingly burdensome and certainly wouldn't sit well with [Quebecor] shareholders," he wrote.

While the sale of the European operations would not have generated a significant (less than $50mm) gain it would have eliminated a loss making drain on the company's resources. Coupled with the loss of their CEO (sixth in four years) and the failed recapitalization, Quebecor shareholders have bailed. Quebecor was at one stage the worlds largest commercial printer but failed management and misguided strategic leadership has left it light years behind industry leader Donnelly.

Cancelled: Lynne Spears Parenting Book!

Is it really a surprise that Lynne Spears book on Parenting that was to be published in 2008 has been cancelled? Thomas Nelson is saying it has been delayed not cancelled. Perhaps she can rethink this as "Lynne Spears: Grand Parenting for Dummies."

Replacing Harry in 39 Steps

Scholastic will announce a new publishing program that they hope will replace the Harry Potter franchise. In this case, they will retain all rights to the intellectual content so while traditional published product may not reach the heights of success that Harry did, Scholastic will be able to leverage the content in a much broader fashion than the Potter series. Rowling retained most rights to negotiate directly with other third parties such as movie producers without having to pay Scholastic or Bloomsbury a percentage.

From the NYTimes:

The series, to be officially announced by Scholastic on Tuesday morning, will be aimed at readers 8 to 12 and offer mystery novels telling the story of a centuries-old family, the Cahills, who are supposed to be the world’s most powerful clan. According to the books, famous historical figures ranging from Benjamin Franklin to Mozart were members of the family. The plots will revolve around the race by two young Cahills, Amy, 14, and Dan, 11, against other branches of the family to be the first to find the 39 clues that will lead to ultimate power.

Scholastic intend to make non-print publishing a key component of this program recognizing that not only is print less appealing to younger readers but that the web related product could actually create a larger more compelling product.

As a side note, I thought it curious that NYT has chose not to place this story in the media & advertising section of the times but in the Arts section. Seems to me that this is both: Certainly from a business perspective, replacing Potter revenues at Scholastic will be of interest to the business community.

Reed Elsevier: How to Expand a Market

Professional publishing companies are leading the industry in the transformation from a print single volume paradigm to an integrated, unified platform approach to content delivery. This latter approach combines the integration of content across categories with third party content and the integration into/with client workflows. Leading the charge are companies such as Elsevier, Kluwer and West each of which are investing significant amounts in electronic delivery of content. This investment goes beyond simply digitizing and indexing their content to building applications, webservices and supplemental databases that materially improve the productivity of their clients work environments.

This weekend TimesOnline discussed the impact this strategy was having on Reed Elsevier with CEO Sir Crispin Davis:

Davis said that the shift, which has taken place in the past 18 months, was “a natural but important evolution from print to online and then from online to workflow solutions”, Where possible, Reed is linking its own online platforms with a firm’s intranet, joining them at the hip. It is no wonder, then, that contract retention has gone up from 88% to 97% in science and is almost as high in legal. To a certain extent, the shift maps Reuters’ move from selling share quotes and news to more graphical data and research. But Reed has gone even further. For small legal practices, it will more or less run the office, providing administrative software that can track billable hours and keep a diary of court appearances.

Integration and the corollary understanding of the clients workflow is only part of the story. Using their content as their spring board, these publishers have radically expanded their potential market. In the article, Davis notes that they could be limited to participating in a $18billion market but in adding applications and services their potential market could exceed $48billion. Interestingly, when we discuss the size of the publishing market in revenue terms the boundaries will start to be much less clear as integrated products take hold.

Elsevier's experience and strategy is no less important for other segments of the publishing community. Education is the next publishing segment to adopt a platform approach to learning and leading this transition is Pearson. As I have commented before, this company has systematically acquired companies that now enable it to supply a broad array of products and services to the education community. The lines between content supplier and solutions provider are blurred as Pearson can provide content, assessment, remediation, school management applications and community solutions to their clients. Admittedly the sales process is likely to be more complicated; however, the market for Pearson's products is now radically larger, seasonality can be mitigated and their products can now be embedded in workflow and infrastructure. Switching costs are raised for the customer as a direct result of 'embedded' solutions which, while an obvious benefit for the publisher, also enables the publisher to maintain a consistent level of customer directed investment.

While Pearson has led this move in education in the last several years, the privatization of Thomson and Houghton/Riverdeep will result in these companies rapidly making up for lost time in the development of similar solutions for education. Providers like Elsevier have already identified a large new market for their products/solutions which will enable them to post annual revenue gains as they deliver radical new productivity gains for their customers.

Mike Huckabee's Message to Iowa

Noted on Chris Matthews this morning. Too funny.

LA Times: A Dismal Year (or maybe not)

The LA Times takes a retrospective look at the year in publishing and concludes it was just like the year before the year before.

"Books are news that stay news," Freeman said. "And because there's so much published, they need to be sifted for the public, to see what matters."Overall, as the publishing world looks back on 2007, it's hard to reconcile the unease people feel about the business with the excitement they feel about the books themselves. When he goes to publishing dinners, bookseller Doug Dutton said, the conversation swings between lamenting the state of the business and exclaiming joy over a new novel or history."It's about as murky a picture as I've seen," said Dutton. Then he amended that slightly: "Sort of like last year and the year before."

The newspaper also manages to speak to a publisher other than Jane Friedman.

Louis XVI: Let them Pay Shipping

The court at Versailles has ruled that Amazon.com is not allowed to offer free shipping on book ordered by French shoppearrs. From the NYT:

The action, brought in January 2004 by the French Booksellers' Union (Syndicat de la librairie française), accused Amazon of offering illegal discounts on books and even of selling some books below cost.

Amazon.com had no comment but they will be required to pay a fine of $150,000 to the booksellers union and are also assessed a fine of $1500/day for each day they retain the free shipping. Now I'm thinking this is a rediculously low amount if the court really intends to penalize them and stop them from providing this service. One would think this is actually good and in the interests of French consumers, mais non.

Assuming they care, perhaps this will go to the European court. As the article notes, pricing is highly regulated in France especially on books.

Sony BMG: Demerge?

The European Court of Justice could be on the cusp of upholding a lower court ruling that the 2004 merger between Sony Music Group and BMG should have been rejected. Guardian

"The Court of First Instance rightly held that there had been a failure to state reasons and a manifest error of appraisal in the Commission's decision", said Juliane Kokott of Germany, an advocate general for the European Court of Justice.
There is no date set for the ruling by the court. It follows the advice of its advocate general in a majority of cases.

The merger has actually gained approval twice - Sony-BMG returned a second time and won approval again last October - and this ruling effects the first approval. It is unclear whether the Court will have any say over the subsequent 10/07 approval but the plaintiff (Impala) may decide to appeal this second ruling as well. Aside from taking up significant legal time and expense the impact of this process has not been felt on the business. It is unknown what potential remedies would be required if the merger is ruled uncompetitive and not in consumers interests.

The impact on the European competition commission maybe more profound since the court is likely to question the process and objectivity of the commission in evaluating mergers. The lower court noted that significant issues were raised by the commission in the early stages of their review but they approved the merger anyway and left unresolved some of the key issues they themselves had raised. Perhaps the court will request specific changes in the operations of the commission to ensure that this situation is not repeated although these requests are unlikely to be binding. The role of the commission is to uphold consumers interests but it is also to help ensure that deals like these don't end up in court.

Reed Complete Harcourt Sale

Reed outlined its plans for a special shareholder dividend to distribute the proceeds from the sale of the Harcourt education unit. From Reuters:

Reed Elsevier shareholders will receive 82 pence per share while Reed Elsevier NV shareholders will get 1.767 euros per share. This will be accompanied by a share consolidation, which has already been approved, on the basis of 58 new ordinary shares for every 67 existing ordinary shares.

According to ABN AMRO analyst Paul Gooden (also quoted by Reuters) this is good news because some analysts were worried the deal could collapse. Post-sale, the consensus is that share performance will improve as the impact of Reed Elsevier's electronic publishing is more readily apparent. It was generally believed that Harcourt was a drag on the overall business.

Reuters

Borders Australia Decision Delayed

A few weeks ago the Australian competition commission asked for more feedback from the marketplace regarding the sale of Borders Australia. Given the length and specificity of the questions it is not surprising that they have now decided to give them selves extra time to review the responses. The anticipated delivery of their report is now January 30th rather than the previously announced December 19th.

Prior PND report

Reuters

Technology In Publishing: An Overview

I was asked to present an overview of current (and future) technology in the publishing industry of some visiting Chinese students participating in NYU's publishing executive management program. Bare in mind I only had 30mins! Naturally, without my riveting voice over the content may be difficult to follow but let me know your comments. If I forgot something remember it is an OVERVIEW.

NYU Publishing Program: Overview of Technology in Publishing from Michael Cairns

Thanks to Robert Baensch for asking.

Live Mocha: Social Language Learning

Live Mocha is a relatively new social networking web site that won 'best in show' at a recently innovators conference. The premise of their site is that people can learn a foreign language by being connected to native speakers and other learners. It is an interesting application of the social networking concept.

The founders of this product have done their homework and thought a great deal about features, content and the subscription model. Their adviser's include language learning experts to ensure that supplemental content is created with true pedagogical foundations but it is curious that they have elected to create educational material themselves rather than license it from an existing publisher. As their needs grow perhaps this will change but at the very least they should consider including dictionaries and learning aids such as games. (These could be used as premiums).

Established players such as Berlitz and Rosetta Stone don't appear to be playing in this segment. While Berlitz (and possibly Rosetta) have the financial resources they are both either conservative or strictly wedded to their existing content delivery models. As a result, competition is most likely to come from new entrants (Mango, italki.com, Virtualingo.com, Huitalk.com, Kantalk.com, Welang.com) but based research into these, there doesn’t appear to be any immediate direct competitor to LiveMocha that combines online delivery of language learning with all the benefits that social networking can offer.

In a research context some universities have experimented with learning using a social context but, as yet, these don’t appear to have become commercial operations. There is a great deal of interest in applying social networking in an education setting. It is likely that research will be ongoing and that eventually a commercial program will develop. Moodle.org is a course management platform on which an experimental pilot study was based to teach a five week German course at the Open University (search ‘language’). The University of Manchester (UK) used Macromedia Breeze to test voice, video, chat to teach Spanish (link). In my view, the LiveMocha model could be used as a platform for other subjects beyond language learning.

LiveMocha has not implemented a pricing model yet. Berlitz group lessons run about $250 for 10 sessions and Rosetta Stone's self-teaching products start around $200. I would anticipate LiveMocha using these price points as guides but LiveMocha may be considered a ‘supplemental’ approach to language learning which means consumers may not be willing to pay at this level. More importantly though, I think LiveMocha will want to encourage users to stay with them for an extended period because more users represent more of a community and therefore more of a learning environment. Effective pricing is an important element of that strategy. If the community is in constant flux: one week you have three friends and next week they are all different, this is will undercut one of the core advantages of learning language in a social network. Establishing a price mechanism that encourages users to stay with the service/community for 12-18mths could be more financially rewarding than having them come in for 3mths and leave. The social network will be more robust and stable thereby encouraging new community members and existing ones to stay longer.

This is an interesting social web site and it will be interesting to see how it develops and whether some of the more traditional players follow with their own applications.

(Thanks to the anon person for pointing out a major erroneous assumption in the earlier draft).

On the Hudson

EMAP Dispose of Consumer Titles

After a half year process that at times appeared confused, EMAP announced this morning that they have agreed to sell their consumer magazine and radio business to Heinrich Bauer Verlag KG for £1.14 billion in cash. It appears to represent an excellent deal for shareholders who will receive a special dividend of the proceeds. From the announcement:

Emap has entered into agreements with Heinrich Bauer Verlag KG ("Bauer") to sell Emap Consumer Media and Emap Radio for a total consideration of £1.14 billion on a cash free, debt free basis. This represents a multiple of 2.2x pro forma 2007 revenue and 11.2x pro forma 2007 operating profit and offers a compelling opportunity for Emap shareholders to crystallise value from the two divisions.

Following the sale, the company states that they will refocus intently on their B2B business as a stand alone business. The affirmed that they have terminated any on-going discussions they had with potential acquirers. Clearly, they were not seeing the value here from the prospective purchasers and have decided to carry the unit for the foreseeable time. Some analysts have suggested the advertising outlook for 2008 could be dim and therefore forward financial projections were probably muted.

While Bauer is already big - 166 magazines in 14 countries on three continents and nearly E2.0Billion in revenues - this represents an important expansion for the company. They will immediately gain a substantial position in broader consumer content and english language publishing.

Alun Cathcart, Executive Chairman of Emap, said:

“We are pleased to have achieved a successful outcome in the review of Emap’s Group structure. The price achieved for Emap Consumer Media and Emap Radio fully reflects the value of the two divisions. Emap will now be a focused B2B company with strong market positions, strong cash flow and a proven management team and track record in delivering value and growth.”

Press release

Kindle: An e-platform for the masses?

In mid 1998 I had an audience with Jeff Bezos together with several French publishers. During the meeting the conversation moved to a discussion about what Amazon.com was going to be when it grew up. The supposed genius in the group (me) volunteered that Amazon would remain true to its book retail focus and not become some type of on-line mall. At the time, Amazon remained very close mouthed about their plans but in retrospect it's my suspicion they had every intention of becoming the emporium we now know them to be; moreover, they knew exactly how they were going to get there. Since the launch of Kindle, I have thought a lot about this meeting in 1998 because I don't believe anyone has a clue what Amazon sees as the future of this device.

Tim O'Reilly blogs about the relationship between ebook pricing and attention. There is obviously more to the post than that and the comments are worth a read as well. His article argues a salient point: Because reading is an 'active' past-time there is only a certain amount we can read given the time we have available. Raising or lowering prices will not (de)increase the "supply of time" dedicated to reading. In other words, I can only read one book a week and even if book two were free it wouldn't mean I could somehow read two.

The price of the Kindle is approximately $300. I would argue, rather than reducing ebook prices to $5.99 (versus print prices of $20) the pricing for the device should be similar to the razor blade/razor model. Even then I am not sure the model would work. Why? Because most readers don't read that many books. Most of the readers of publishing blogs like this one, O'Reilly Radar and those with a publishing audience represent a skewed view of the appeal of reading. We all love it and we all do a lot of it. Regrettably, the rest of America is not like us and on average the average book buyer will read less than 3 books per year. (Research studies note that even 'book buyers' are a small group).

So aside from early adopters and techno-fadists who flocked to acquire the first Kindles who will buy the next batch? If the average reader buys three books a year for a total of $90-100, why would they buy an ebook reader for $300 even if those three books were free? Your average consumer is not a dummy and can do the math.

So what of Amazon? They absolutely have the best information available about purchases so perhaps they believe they can sell enough Kindles to the small segment that reads over 10 (or 'x') books per year: I wonder about that. It would seem to me that on the basis of ebook sales alone for use on the Kindle, the device will be a failure. I believe the Kindle represents the first generation e-platform rather than a pure ebook reader. Amazon has a much broader view of how and what content will migrate to the Kindle.

There has been much discussion, argument and commentary about the Kindle and what it means but one thing is clear to me. Amazon has a plan that most likely exceeds our expectation about the positioning of this device. What that is I can only speculate but I suspect as an e-platform they will aggressively start establishing content relationships with all kinds of publishers, content providers, service providers and broadcasters to build out this device beyond the book world. Just like Amazon.com, books may represent the strong footings of the business but it won't be all they do on the Kindle. Any discussion about pricing ebook versions of paper books likely misses the point in terms of their long term strategy.

Reading Stutters

Some time contributor to this blog Andrew Grabois writes about the recent reports on reading over at beneaththecover.com. He discusses the results of the recent National Endowment for the Arts study and the Progress in International Reading study:

Now, on the heels of the NEA’s gloomy assessment, comes the Progress in International Reading Literacy Study (PIRLS). Based on tests given to 215,000 10-year-olds from 45 countries and provinces, and data gleaned from background surveys of pupils, their parents and teachers, the findings tell the same sad story. Since 2001, the U.S. dropped from 4th place to 18th place; the U.K., from 3rd to 19th. The average scores for U.S. and U.K. students did not drop as much as their places on the new list would suggest, but they didn’t make any progress compared with the spectacular improvement shown by 10-year-olds in Russia, some Canadian provinces, Hong Kong, and Singapore. The best that can be said is that the average scores for children from the world’s two largest book markets were above the international mean. So far, there’s been no official response to our relatively poor showing.

Here is the link.

Beware: Your truck may not fit!

With the advent of Amazon.com, the publishing community rapidly understood the value of deeper descriptive information necessary to merchandise products in the virtual world. Initially, we were concerned with provision of cover images and marketing blurbs, then author bios and tables of content and on everafter. Our experience is not unique and in all industries and product segments deeper more descriptive information is now being sought to enable web browsers, service providers and consumers to make better more informed decisions.

There are many examples but I was immediately struck in this article about satellite navigation and driving instructions in the UK. The article (NYTimes) focuses on the negative impact of computerized driving instructions and how they can sometimes be too literal. It is no longer a matter of simply providing a geographic description and route map between two points. As more and more people and vehicles rely on these systems, the data elements required to build a viable route that doesn't create some of the issues mentioned in this article will need to include items such as road width, (tight) turnings, bridge weight limits, speed limits, hill length, season variations - like snow or ice conditions - and the list could go on and on. From the article:

“Foreign drivers very much depend on sat nav systems when they’re coming to a different country, and they are following them rather more blindly than they ought to,” Mr. Dossetter said. Last month, a Slovakian truck driver arrived in Dover, bound for Wales with 22 tons of paper. But, directed off the highway and onto increasingly narrow roads by his navigation system, he ended up wedged on a tiny lane between two houses in Mereworth, a village in Kent, whereupon he had a panic attack, jumped out of his truck, and burst into tears. “He got back in his lorry and tried to maneuver his way out, but he was starting to scrape against the front walls,” Mark Siggers, a resident, told a local newspaper. He also knocked down the village’s power cables, cutting off the electricity. It took the authorities several days to remove his mangled truck.

Imagine the poor guy having to report back to head office that he got their truck wedged between two buildings. Just exactly how these navigation systems will incorporate this deeper (metagraphic?) data into their systems so mistakes like these don't happen could represent a monumental task. It is a problem perhaps perfectly placed for the application of social networking. The truck driver above should be able to wipe away the tears and document his experience in some manner that will improve the navigation for the next European truck driver.

The lesson of Amazon.com is that the development of better descriptive information is an on going struggle; Amazon hasn't stopped improving merchandising and has always recognized the more data elements the better. I suspect that many other industries are and will embark on data collection efforts (and seek data from their vendors and customers) that improves the service or products they provide.

Cengage Swoop on HM College Division

Cengage announced they have reached a definitive agreement to acquire the College publishing assets of Houghton Mifflin for $750mm in cash. The companies also announced that on closing they would work together to expand the distribution of Cengage’s college textbooks and related materials into the U.S. high school market, with particular emphasis on Advanced Placement and Honors programs. From the press release:

“We’re very pleased to acquire the well-respected assets of HM College, which are highly complementary to our existing business,” said Ronald Dunn, President and CEO of Cengage Learning. “We look forward to combining the people, products and publishing programs of HM College and Cengage Learning to expand and enhance our range of services for students, instructors and institutions in the higher education market.”

The divestiture will enable Houghton Mifflin to focus on its K-12 education products but it will undoubtedly strengthen Cengage's position in College. How valuable the marketing agreement will be is unknown although selling College text into the high school market has been growing over the past five years.

Importantly, Cengage has demonstrated that despite the huge price paid for the business they are able to go back to the well (bankers) to make this acquisition. Their investors recognise that the base business is doing well and this acquisition represents an opportunity to strengthen their market position. Perhaps this is at the expense of Houghton Mifflin whos banks announced last week that they could not sell their loan syndication.

On a related note, Cengage presented a brief overview of their first quarter performance and they reported consolidated revenues of $650.1mm up 5.1% versus the same period last year. Operating Income of $247.1mm was up 10% (before allocations and amortization). Higher ed and International delivered strong performance with revenues up 7% and 13% respectively. The library division (Gale) under performed with revenues and operating income off 5.9%. During the conference call CEO Ron Dunn listed several areas where the company is focusing their attention. These include establishing their new leadership team, driving revenue growth, reorganization of international and merging higher ed and professional publishing.