Time to Re-Think BookExpo

Imagine the lone guy on the periphery minding his stand with only a solitary apparently lost attendee to keep him company once an hour. By some accounts that was the state of affairs sometime over the weekend at BookExpo America in Los Angeles. In advance of the fair Thomas Nelson, one of the largest publishers in the US decided to pass on attending the show. This action was different than the publisher boycott of several years ago; in this case, Nelson recognised that exhibiting at BookExpo is increasingly irrelevant in addressing the dynamics of the market place. In an age when the traditional publishing schedule is looking decidedly frayed, how BookExpo measures these dynamics will determine how many publishers continue to value their attendence.

In much the same way that Publisher's Weekly has seen their traditional advertising model change fundamentally as the bulk of bookstore book purchases are made centrally and six - nine months in advance of publication, BookExpo is in danger of suffering a similar dislocation. In PW's world there is no need to advertise and in BookExpo's world attendance becomes an expensive way to reach independents. More publishers will drop out - perhaps not next year as the show is in New York but it will happen, because the current show format is an old and increasingly ineffective tool. The decline will accelerate as more publishers take advantage of electronic marketing and promotions tools such as NetGalley (functionality will rapidly expand across the MarCom value chain) and more publishers will experiment with virtual trade shows , webinars and virtual worlds like Second Life.

There are two segments to BookExpo - the education program and the exhibits - and both need revamping. On the education side, BookExpo is losing ground to new upstarts like TOC and SIIA conferences. In both these cases, the conference organizers are successfully exploring the intersection of publishing and technology which many of us in the traditional publishing world continue to battle. Attending SIIA conferences with its breadth of content and technology companies all addressing new and old problems in unique ways can be a stunning business experience. At BookExpo we may see this in isolated cases but not comprehensively. In the traditional publishing market an education program similar to TOC or SIIA is still a market opportunity given the concentration of publishers attending BookExpo. On the other hand O'Reilly (TOC) may have already established the beach head. Consumers are decidedly lacking at BookExpo and in some other trade education programs panel discussions include consumers - in one memorable case they were all thirteen year old girls. Our business is in complete flux and that's the kind of education we should be looking for.

On the exhibits side, BookExpo must lead in the expansion of marketing and promotion programs that go beyond the physical limits of a three day event in a location not everyone can attend. The BookExpo America site should be a 365 day exhibit space. Many publishers and some websites are hosting e-versions of their catalogs. Coupled with more product details, ordering facilities, merchandising tools, etc. the traditional conference attendee should be able to visit and interact with all publisher products on the BookExpo site. (I do mean all publishers). The experience can and should be better than visiting the physical show. The traditional publishing calendar is disappearing - it serves no purpose (just as television has eroded their producer driven schedules) other than as a reminder of the formulaic approach to publishing. The physical exhibit can continue but it must change unless it is to devolve into a middling trade show for small and medium sized publishers.

BookExpo also needs to think strategically about exhibitors and to seek new categories of attendees. There should be more technology companies, service companies and others. Since the market is retail what is more logical than encouraging more vendors who market store systems and products? On the technology side there are many vendors who want to expand into the publishing business but do not attend BookExpo. They do attend SIIA, TOC and Book Business conferences. Expansion along these lines is a double-edged sword since a target audience needs to be in attendance. For that, a stronger education program and specific outreach programs need to support exhibitors and attendees. First time exhibitors should get two years for one paid year for example. (As an aside, I also believe the central exhibit floor 'neighborhood' where the largest publishers congregate should be broken apart to encourage more interaction).

Anyone who has stayed over the weekend at the Frankfurt bookfair (as I did on my first visit - and never again) will hiss and blubber over the idea that BookExpo be open to consumers. This issue has previously been debated by BookExpo managers, and indeed at Frankfurt, the issue of consumers attending the fair has long been controversial with the UK and US publishers. My suggestion is based on simple logic. Book reading is declining so what better way to introduce consumers to what publishers have to offer than showing them. Look at the success of the various city wide book fairs including the one in DC.

I have always enjoyed attending BookExpo but seeing the lack of traffic in many areas this year I doubt I would be the only one considering rethinking my exhibition participation for next year. The fact that BookExpo is in NYC next year will cover over the troubling issues because of the influx of many publishing staffers. In reality the addition of 10,000 publishing staff attendees from NYC is not really what will help return BookExpo to the preeminence it deserves.

Ian Fleming

There is an exhibit opening at the Imperial War Museum this weekend on Ian Fleming and James Bond. There have been several news reports about Fleming and Bond (aside from the new book by Sebastian Faulks). Here are some links to those items:

Telegraph: Joseph Connolly got hooked on 007 when he was 12 and has been busy collecting the novels - from paperbacks to first editions - ever since. Here he provides a bookworm's guide. (I did something of the same thing last year: "Noting the release of the latest James Bond movie Casino Royale, the December issue of Rare Book Review included a spread on first editions of all the James Bond books. Collecting true first editions of the set is likely to set you back $150,000. (Sniff...time for that raise). What is useful about the article is that each edition is described so that should you come across one of these at a local thrift store you will know what to look out for").

TimesOnline has an interactive exploration of the exhibit.

International Herald Trib: Ian Fleming, had he lived, would have celebrated his 100th birthday on May 28. James Bond, his greatest invention, is probably a bit younger, strictly speaking (the evidence in the books is a little contradictory) - except that Bond, of course, is ageless and immortal. Never mind those three packs a day; he has wind to spare. His liver, astoundingly, is still holding up. He has survived not only Fleming but Kingsley Amis and John Gardner, who, among others, kept on publishing Bond novels in Fleming's stead.

Times Online: Bond never goes out of fashion.

For the insatiable: CommanderBond.net

New Links

In the last few months or so I have started reading a couple of new blog sites.

Tools of Change: Is published by the O'Reilly TOC conference organisers. They have been nice enough to mention me once or twice. Here is there article on Treating E-Books like Software.

Alison Pendergast is an executive at Pearson and has many interesting insights into Educational publishing. Here she speaks about digital music - slightly off topic but minic my own experience and I thought interesting.

Abbeville has launched a blog to support their publishing activities. I liked this post on The Art of Rocking Podcasts. In this post is also a link to a series of podcasts entitled "so you want to work in publishing". Listeners are advised to ignore the sound of tinking glasses, laughter and smoking.

WSJ Interviews Bezos

This interview may not be avialable for long: (some of this has been reported already)

Jeffrey P. Bezos, as chairman, president and chief executive of Amazon.com Inc., made e-commerce mainstream when Amazon started selling books over the Internet in 1994.
Since then, he has turned the site into a virtual shopping mall, where the company and thousands of independent merchants sell just about anything from abacuses to zithers.
He spoke with The Wall Street Journal's Walt Mossberg about cloud computing, streaming movies and why books are like horses. Here are edited excerpts of that conversation.

OUP Believes E-Book Sales are Huge

Evan Schnittman on the OUP blog has some interesting analysis on ebook sales for the balance of this year. He concludes thus,

Success in technology, like everything else, leads to more success. It’s not uncommon to see five-fold growth the year following a successful technology product launch. Think iPod, think Wii, think Blackberry. Whole micro-economies emerge around products that range from accelerated content creation, and all sorts of aftermarket products and services. Versions 2.0 and beyond create better and better devices. The better the devices, the more accessories, the more content there is, and soon a whole world of business opportunity is rolling downhill picking up speed. With this in mind, I can easily imagine the success of Kindle and Reader dramatically expanding next year and growing by a factor of five. If that happens, then the formula above leads to a completely new ebook economy. Five million devices would mean ebook sales of $1,200,000,000, which, by my estimation, is 1.3% of the current global book market of $90,000,000,000.

Call in Sick

From this mornings Chicago Sun Times.

LIBRA (Sept. 23-Oct. 22): Avoid emotional discussions about politics, religion, racial issues or even matters related to travel, foreign countries, publishing and education. These discussions will either go in circles or die on the vine. People are quick to take offense or assume that something is personal.

Shouldn't the and education be or education. Image people in publishing taking things personnally.

Controversy Continues to Dog BBC Aquisition of Lonely Planet

Earlier this year the commercial arm of the BBC purchased the travel publisher Lonely Planet from the founders Tony and Maureen Wheeler. At the time the purchase raised eyebrows since it represented a particularly overt foray into competitive publishing by an organization that historically did not seek commercial advantages. A number of publishers took issue with this purchase even though the acquisition was made by the for profit business operations of BBC Worldwide. This type of expansion had been published and discussed by BBC Worldwide unit as part of its strategic plans.

The Sunday Times is reporting that Time Out founder Tony Eliot has written to the Office of Fair Trading demanding that the office launch an investigation into the purchase. Eliot believes that the acquisition breeches the BBCs obligations under their fair trading and competition guidelines. From the article:

In the letter, seen by The Sunday Times, Time Out founder Tony Elliott says he fears that the BBC will provide Lonely Planet with “an inexhaustible fund of factual, technical and editorial information and expertise quite beyond the resources of any privately funded organisation such as Time Out”.

The article also notes that Penguin, which also publishes travel guides might also support the action:

Penguin, owner of the Rough Guide travel series, is also frustrated. It requested further details from the BBC Trust last October, under the Freedom of
Information Act, on how the Lonely Planet deal was endorsed and how the company would operate in future.

The larger issue regarding BBC Worldwide's ability to expand and extend their commercial activities has already been established; therefore, it is unlikely that this action will generate any support at the OFT. No doubt Time Out has attempted to galvanise some additional publishing support behind this effort, but has evidently not been able to do so otherwise, the PA would have been party to the complaint.

In related news Judy Slater who had been CEO of Lonely Planet since 2000 has left the company to join an investment advisory group.

Informa and UBM in Take-Over Discussions

Several UK newspapers (Telegraph) are reporting that United Business Media has initiated discussions on a £3billion take over of Informa. UBM has not been as active as other media companies over the past several years in expanding their business offerings, on the contrary the company has deleveraged the business and is now a company with relatively low debt. In the US, UBM owns PRNewswire and runs conferences, trade magazines and data and information products through the CMP and Commonwealth Business Media brands. From The Telegraph:

The Sunday Telegraph has learned that United Business Media (UBM), which has a market value of £1.5bn, has approached £1.6bn Informa about a merger that would establish a powerhouse in the increasingly competitive world of business-to-business media. Discussions between the two companies are at a very early stage and are not yet thought to have progressed as far as substantive negotiations about the structure or price of a potential combination. UBM and Informa may come under pressure to confirm the talks to the London Stock Exchange as early as tomorrow morning.

Informa has been considered a buyout candidate over the past several months since their long time CEO David Gilbertson left to run PE led Emap Communications. Business media and conferencing companies have become hot properties because their subscription based business models mitigate much of the variability in advertising based businesses. Steady cash flow is highly desirable.

More Informa

In the ebb and flow of big media deals it is interesting to note that having spent the last several years on the sidelines unable to compete with the very large multiples that PE players were prepared to pay, some operators like UBM may be well positioned to make significant strategic acquisitions as those same PE companies become skittish in the current market. Last week we saw CQ Press acquired by SAGE and an effort by Reed Elsevier to sweeten the pot for potential acquirers of Reed Business. Analysts are now suggesting that RE may be unable to sell the RBI unit in one piece which would have been unheard of only 18mths ago.

Update Monday: Telegraph confirms discussions and notes share price jump


Other reports:
Forbes picks Candover but not until summer.
Earlier report from The Telegraph proposes other bidders including Axel Springer.
TimesOnline: Informa Garners Attention

The Lost Theatres of Los Angeles

I like neon and in walking along Broadway in Los Angeles there is a feast of it adorning the front of the many old theatres that formed the core of LA's theatre district from approximately 1910 - 1940.

LA city government has announced a $30mm restoration project for this area. It would be great if they could recreate the glamor and excitement that pervaded this area in the 20s and 30s.

Each picture has some description sourced from a variety of sources including the theatre's websites and expert sites such as latimemachines.com and publicartinla.com.

Links for BookExpo

A few items of interest from BookExpo.

BookTour: Set up by Chris Anderson (Long Tail) to aggregate information about Author tours. (Around for a while but I've never mentioned it).

BookVideos.tv: Here are all the publishing clients and their videos using the BookVideos format. (Also around for a while).

MuseStorm: Widget maker working with publishing clients.

Mobifusion: A mobile platform that several publishers are using.

EarlyWord: A new blog/website launched by ex- Publisher's Weekly Editor & Chief Nora Rawlinson and ex- PW Publisher Fred Ciporen. The site aims to help Libraries with Collection Development and you can find out more about their philosophy on the site.

BigUniverse: Children's books that you can create yourself.

217Babel.com: Interesting collaborative writing project.

Green Data Centers and Space

Nation, like me and astronauts everywhere you will be immensely relieved that they have fixed the toilet on the space station. Now I'm a true believer in colonising space, after all what could be better than performing circus tricks in a small tubular room, experimenting with compounds that only a HS science student could understand and riding up there on a huge tank of nitrogen that blankets South Florida with exhaust. In fact, pretty soon those space monkeys aren't going to want to come back and that's why I was interested to hear from fellow traveller Karen Christensen who is co-chair of the first Green Data Centres Conference.

No, they aren't looking to abolish the space program (after all where would we put all those tubes of nitrogen), this conference is all about making computing more green and sustainable.

Karen tells me she is,

particularly passionate about green computing because of my work on community and sustainable business, and as a publisher increasingly involved in social media and online distribution. For years I've felt that the environmental impact of computing needed much more attention, and the conference will bring together experts from some of the world's major technology companies, as well as from banks and other international institutions.

The two day event is being held in London July 1-2 and if you travel there make sure you carbon offset. Karen is offering a 15% discount on the fee.

Here is some of the agenda and registration information is here:
http://www.blogger.com/www.greendatacentres.co.uk

Valley Conferences have brought together a stunning group of speakers from companies that are setting out to be leaders in sustainability. As someone who grew up in the Silicon Valley, I'm thrilled to chair the first day of the first Green Data Centres conference in the city where my publishing career began - this definitely feels like coming full circle." Karen Christensen, Conference Chairman and CEO of the Berkshire Publishing Group.

Day 1: Tuesday 1st July 2008
KEYNOTE PRESENTATION:
How Green Data Centres are Changing the Face of Business
Per Bahr, EMEA Business Development Manager Public Sector, AMD (Advanced Micro Devices). Data Centres are going green, helping reduce costs and increase efficiency. This presentation will look at how new technologies such as virtualisation are changing the the face of business, and what other measures companies can put in place to meet today's European Green IT standards.
KEYNOTE PRESENTATION:
Case Study: Sun Microsystems: Green Data Centres, The Million Dollar Prize... Richard Barrington, Head of Public Policy, Sun Microsystems UK.
Sun Microsystems has received a Million Dollar 'Cashback' from PG&E in addition to on-going utility bill savings because of the energy efficiency demonstrated in the design and construction of its new Data Centre in Menlo Park, California. This presentation will explain and analyse how Sun's internal IT ops organisation has developed a blueprint for the successful creation of a modular 'eco-DC'.

What can I say, its Friday...

Reductions at Reed Business

Folio is reporting that 41 positions have been eliminated at PW, Variety and Broadcasting & Cable. From their report:

Shortly after the announcement, RBI CEO Tad Smith, in an internal memo, tried to reassure RBI staffers that their jobs would be intact—including his own. "I am committed to leading our business as your CEO during the sale process and thereafter," Smith wrote in an internal memo. "In the meantime, business will continue as usual and everyone's jobs, benefits and pay will be unaffected."

No doubt that sets everyone's mind at rest. Folio used the work 'slashed' but it would be hard to characterise it this way especially since in the same article they quote an insider saying that the division has been able to replace most (if not all) open positions since the start of the year. These amounted to over 200 positions so 41 job eliminations seems minor (unless you lost your job obviously - and apologies etc.)

During a sale process the seller would want as few disruptions as possible and what this action suggests is that Reed is now resigned to a much longer sale process than originally thought. HQ is most likely demanding that the operating unit achieve their budgeted profit numbers at all costs since the unit may linger around for a full financial year.

Jane's Gone

Jane Friedman, CEO of Harpercollins is leaving her post after an impressive 10 year run at Harpercollins. She joined the company from Random House having been lured to Harpercollins by Rupert Murdoch himself. Harpercollins had been struggling under Murdoch up until that point but Friedman invigorated the business and ultimately produced a strong profitable publishing company.

Brian Murray has been named as her replacement and he has been key to executing their current long term strategy to transform the business from print to electronic distribution. From the press release:

"We are enormously grateful for her contributions over the past 10 years and understand her desire to seek new challenges at this point in her career," Murdoch said in a statement issued late Wednesday.

Murray, 41, has been president of HarperCollins since July 2007. He joined the publisher 10 years earlier and held several positions in the General Books Group until 2001, when he was named CEO of HarperCollins Australia/New Zealand. Murray returned to HarperCollins in the U.S. as group president in 2004 before his promotion to president. "In his 11-year tenure, Brian has demonstrated an impressive track record of growing publishing companies," Murdoch said. HarperCollins said he has led the publisher's digital efforts, including the development of its direct-to-consumer marketing.

Borders Sell Australian Store Group

The only surprising thing about this announcement was that it was so long in coming. Borders have agreed to sell their store operations in Australia and New Zealand to Pacific Equity Partners the private equity firm and owners of Angus and Robertsons and Whitcoulls (NZ). The price paid is a disappointing $90mm in cash and deferred payments of $14mm. Earlier in the process amounts as high as $120mm were suggested and importantly this purchase price includes the rights to use the Borders brand name throughout the region.

Further details of the transaction may become clearer but to sell the branding without any long term licensing deal supporting a supplemental revenue source for Borders seems unfortunate.

There is also no comment from Borders on whether they will use the cash generated from this sale to repay the emergency financing provided by Pershing earlier this year.

CQ Press sold to Sage

The decision to sell the publishing unit of Congressional Quarterly Inc. was announced in January together with a promise that the sale process would be completed by months end. Yesterday CQ Inc. and Sage announced a sale agreement had been completed. The long process seems to reflect the slow nature of M&A in the publishing business at the moment: Haights Cross is still awaiting a purchaser after placing itself on the block in December. In their joint announcement Sage and CQ promised to keep CQ in tact and in Washington DC (although their location is less important to this division than the rump CQ business).

Commenting on the acquisition, Blaise Simqu, SAGE’s President and CEO said the following:

“We’re very pleased CQ Press is joining the global SAGE family,” said Simqu. “CQ Press and SAGE enjoy a shared mission and values. Both are driven by a passion for scholarship and innovation that impacts education and public policy. John Jenkins and the rest of the CQ Press executive team have created an impressive publishing enterprise that will further enhance SAGE’s presence in the marketplace.”

Despite the long sales process, interest in CQ Press was high with a number of publishing companies actively involved in the purchase process. Terms have not been announced.

AARP and Borders

Like me you you may believe that this agreement of a marketing agreement between AARP and Borders is at best bad timing based on the company's announcement of headcount reductions and the general problematic bookselling environment.

AARP and Borders(R) announced today a long-term agreement that will provide unique benefits and discounts to AARP's more than 39 million members. The nation's largest membership organization for people age 50 and over and Borders
will combine forces to expand access to information on health, financial security, travel, and other issues important to personal growth and quality of life for those over 50. In addition, Borders will offer AARP members in-store and online discounts on select merchandise and will encourage AARP members to take advantage of the benefits of membership in the Borders Rewards(R) customer loyalty program, which now has over 26 million members.

On the surface, and as a marketing agreement, this may be mutually beneficial; however, I would argue this group doesn't need too much additional motivation to buy books. Getting this group into Borders to make their purchases is not a problem unique to this segment and that's the bigger issue at the crux of Borders problems. Separate from bigger issue, whether offering membership discounts in addition to the Borders Rewards program is required to encourage this group is debatable. On the other hand, this program may compound the view that the industry is catering to the wrong market. Envision the flyers that will now populate your local Borders: won't it begin to look like the waiting room at your doctors office?

Regrettably, the marketing department also thought it a great idea to organize an essay writing contest around the idea of "Your Next Chapter". While this is clearly suggestive of a 50+ person contemplating life choices, there is the distinct possibility that any number of current or past Border's staffers will consider entering the content on behalf of the corporation.

Reed's Loan to Buy Offer

The Telegraph is reporting that Reed Elsevier is facing such a problem selling Reed business that they are organizing a consortium to provide funding for a potential purchase. Initially, the company said it would sell the entire division (excluding the Exhibitions Group) then they annouced that they would consider separating the UK and US operations. Outside appearences indicate the sale isn't going quite as well as planned. Ultimately, the division will be sold but Reed may have to give up on their price expectations or consider further break-up scenarios.

If the current approach is succesful it could limit or slow down a potential buyers ability to carve up the company and sell off the pieces they don't want. Any potential buyer is likely to want to sell several properties in an effort to focus the group on a number of core industry segments that have already shown potential for electronic publishing. Any buyer taking advantage of this financing model to be as flexible as if they had negotiated the terms themselves and whether this is possible remains to be seen.

Borders Axe Falls

Rumors were rife this weekend at BookExpo about the situation at Borders and the news was confirmed today regarding a significant headcount reduction. The company released a press statement that said in part,

As part of this expense reduction program, management reported that the company is today implementing a corporate payroll reduction that includes the elimination of 156 corporate positions spread across virtually all departments of its Ann Arbor headquarters. Employees at the company's headquarters were informed of the job eliminations this morning. In addition, Borders Group has eliminated 118 corporate posts that are based outside its headquarters, impacting primarily corporate employees in distribution centers, the field marketing organization, and the corporate sales division. These employees were informed yesterday. In total, the corporate payroll reduction eliminates approximately 20% of the company's corporate positions but less than 1% of its total workforce. The job elimination, with the exception of less than a handful of positions, is limited to corporate employees and does not involve store employees at the company's 547 Borders superstores and 475 Waldenbooks Specialty Retail stores worldwide.

Naturally, this news will only make publishers more nervous about extending credit to the company. A deal to sell the business can not come too soon.

Small Publishers and Foreword Magazine

Foreword Magazine is celebrating their 10th anniversity and they asked me to write something on the changes I have seen in the past 10yrs or so.

Many years ago I attended my first BookExpo conference in Miami. On subsequent visits ever since, the rows upon rows of independent publisher booths have both awed and discouraged me. I have frequently said to friends and colleagues that as a reality check anyone considering establishing a publishing company should attend a BookExpo before committing dollar one. For many (myself included), there is a romantic notion attached to publishing which isn’t entirely undeserved; however, a trip through the aisles will prove that the unique idea you thought you had for the ideal publishing house or list is represented multiple times perhaps even in the same aisle.

At Bowker I saw a relentless procession of new publishers adding their information to Books In Print. Each year we saw approximately 10,000 new applications for ISBN numbers and these applications were fairly constant between the mid-1990’s and 2002. At the turn of the century, the numbers of new applications began to grow inexorably and is most likely well over 12,000 by now. The growth in self-publishing and the democratization of the publishing process is to ‘blame’.

In 2005, (if I recollect correctly from my Bowker years) 18 publishers produced almost 40,000 titles and 13,000 publishers produced 77,000 titles. (Including all titles the number published in 2005 was 180,000 give or take). On average, each of the 13,000 publishers published less than 10 titles per year. While these numbers reflect one year (2005) the data was proportionate to the entire Books In Print database of 5mm titles and 165,000 publishers. To emphasize the breadth of suppliers, I have heard Barnes & Noble say they order at least one title from 45,000 publishers in any given year.

All new publishers and existing independent publishers publish in every niche imaginable with lists ranging from one title to several thousand. Each publisher knows their market is intensely competitive and that titles will never be successful unless they are supported by an intensive focus on marketing and promotion. Naturally, some do this better than others.

There are significant challenges that small and medium publishers must overcome; getting their titles noticed is the greatest. At Sourcebooks, the company has adapted traditional advertising and marketing principles and applied them to the book industry. The results are instructive (and impressive). At the core of their business model is the understanding that each new title is a ‘product’ which requires a specific marketing and promotion plan. (Marketing’s four ‘p’s: product, promotion, price and place). At Sourcebooks, the difficult questions regarding how the title will be marketed and promoted are asked at the adoption stage rather than applied by rote as the book is being printed. Sourcebooks is a proven example that publishing can be done successfully by approaching the business less as an avocation and more as a market driven business. In order to be successful, more small and medium sized publishers will need to adopt similar programs to support their publishing efforts.

Other challenges abound. For example, we may begin to see the self-publishing model begin to impact the available pool of authors. Many authors may come to realize they can produce and promote their own title(s) and make more money rather than work with a traditional publisher. It has long been the case that the success of any title was dependent on the level of self-promotion provided by the author: As manufacturing and editing become commoditized, the author may wonder what a publisher’s value add will be if the titles’ success resides entirely on their promotional abilities. More authors may decide to do it themselves.

All businesses evolve and publishing is no exception; I see more and more independent publishers begin to adopt better financial controls, better marketing and promotion and make more astute title selections. While some significant challenges have occurred over the past 20 years – publisher consolidation, retailer consolidation, a reduction of independent bookstores – there have also been some impressive positive improvements. Opportunities represented by more effective use of technology, digital distribution and online advertising should all be experimented with, embraced and adapted to the publishing model. I also believe we will see more small and independent publishers seek out and work with some of the self-publishing companies (Author House, Lulu) where each supports the other’s business model. There remain opportunities in the independent publisher market: Look for me in the aisles in Los Angeles.

Borders First Quarter: Sales Down Cash UP

Borders Group, Inc first fiscal quarter, total consolidated sales, at $784.7 million, were down 1.0% over a year ago. Borders domestic superstores comp sales for the period decreased by 4.1%. Excluding music, same-store sales at Borders domestic superstores decreased by 1.7% for the quarter. Waldenbooks comp store sales decreased by 0.8% over the same period a year ago. International segment increased by 3.1% in the first quarter.

Improvement in Cash Flow:

Cash flow from operations improved by $132.9 million for the quarter compared to a year ago due in large part to improved inventory management,which generated $88.9 million in cash in the first quarter. Inventory decreased by $188.4 million at cost from the same period a year ago. Debt was reduced by $130.9 million compared to the prior year, including the prior year debt of discontinued operations. Commenting on the results CEO George Jones said:

"As was the case with nearly every other retailer, the challenging overall consumer environment hampered sales performance in the first quarter. I am pleased, however, that even within this difficult retail climate, we were able to manage inventory well, begin to aggressively reduce expenses, and end the quarter with better bottom line results than would have been expected in this type of environment. In fact, we worked with a third party advisor to develop a plan to reduce our annual operating expenses by$120 million, giving Borders a new, more effective base operating model going forward. We expect to realize about half of these savings within the current fiscal year and the full amount in 2009. We also
substantially improved cash flow and reduced debt in the first quarter -- both of which are critical factors in achieving our long term financial goals -- and as we announced in March, we completed financing to support our short term goals. While we have seen an improvement in sales in recent weeks, we will continue to aggressively execute expense reductions and manage our business conservatively, putting us in a much better position for long term success."

Press Release

To Return or Not to Return

An interesting discourse on the Publisher's Weekly web site about comments made by Barnes & Noble (specifically Steve Riggio) on ending returns policies. Naturally, this would only come about when it is of advantage to the retailer and this is a point not lost on those commenting. Here is a sample from Richard Curtis:

Mr. Riggio criticizes returns practices as "expensive." Perhaps he means it’s become expensive for the chains now that publishers have been squeezed so ruthlessly they have nothing left to give. Has it begun to dawn on executives like Mr. Riggio that, as powerful as the chains may appear to be, they are just another brick and mortar operation doomed to disintermediation by the Digital Revolution? So, now you want to end the consignment model of book distribution? Sorry, Mr. Riggio. The monster created by bookstore chains has the industry by the throat and will not let go. Returnability may be archaic, wasteful, stupid and fraudulent but publishers, bookstores and consumers are addicted and nobody is going to give it up. Not now, not ever. You’re welcome to try to reform the old business, Mr. Riggio, but that’s no longer where the game is being played.

Book Expo Session

I am hosting a Panel discussion at BookExpo this week. Please join us for an interesting look at digital content and how publishers are learning to experiment with social networking and consumer interaction.

Feel free to contact me if you are attending BookExpo and would like to meet. (michael.cairns @ infomediapartners.com)

Here is the panel description and some background on the panelists.

Digital Bundling: Considerations, Combinations & Costs
1:00AM - 12:00PM (Thursday, May 29, 2008)

Most publishers are committed to allowing consumers access to electronic versions of their books whether on their own account or via programs such as the Google Book program. Some publishers are going a step further and are allowing consumers to interact with and create their own products using the publisher’s content. As publisher’s build their content databases, digital bundling will become a significant part of the product mix and will change the concept of the customer – from bookstore to consumer - and the concept of the product – from book to service. Rapid improvements in technology will enable ‘mass customization’ of publishing products and will fundamentally change the relationship with customers. While many publishers are still tentative in their e-book experiments others are already experimenting with digital bundling. As these publishers experiment, what are their experiences, what are the issues and what costs exist as these publishers engage their customers in new and revolutionary ways? Hear from publishers who are experimenting or are contemplating launching making their content available to consumers for new and exciting products.

Panelists and Bios:

Sheila Clover English – CEO of Circle of Seven Productions, Executive Producer of Reader’s Entertainment TV and author of the ebook entitled The Book Trailer Revolution Book Marketing and Promotion Through Digital Video

Mrs. English is a member of the Association for Downloadable Media where her video performance rating system has been a topic of conversation, shared at the ad-tech convention and now under review with the Internet Content Syndication Council where Circle of Seven Productions has joined the likes of CBS, Associated Press, Google, Reuters, Studio One, NBC and other top media companies that will help shape the future of online video syndication.

Mrs. English has been interviewed by NPR, Newsweek Magazine and most recently The Wall Street Journal regarding book trailers and will be featured on the Robert Scoble Show this July talking about book trailers and online distribution.

A multi-award winning copy writer and executive producer and a member of the International Academy of the Visual Arts, Mrs. English has pioneered many milestones for digital video in the publishing industry. Her company, Circle of Seven Productions created the first book trailer to play in a movie theater, mall screens and the first to win the prestigious Telly Award.

Tom Hall is a Senior Digital Product Manager at Lonely Planet in Melbourne, Australia. For the past 2 years, he's been responsible for the development and launch of Pick & Mix, a program which allows consumers to buy, download and print individual chapters from Lonely Planet guidebooks. Prior to this, he managed the http://www.lonelyplanet.com/ home page and the ThornTree travel forum.

Tom has a long and checkered background in leading software projects and products. Prior to joining Lonely Planet in 2003, he was an IT Consultant to the Egyptian Ministry of Health in Cairo, and a Supervising Producer at Ninth House, a San Francisco eLearning startup. He has degrees in American Literature and and Writing from the University of California, San Diego.

Laurie Petrycki is the General Manager of the Head First and Missing Manual divisions at O’Reilly Media, Inc., where she oversees the development and creation of all products and services. In the Head First division, she and her team shape content to cultivate passionate users by making learning easy and fun for the brain. With the unique Missing Manual format, the goal is to respect readers' intelligence and help them get stuff done. As part of the publishing community for almost 20 years, Laurie has expertise in all sides of the business-- including editorial, production, and manufacturing--and has published on various technological and educational subjects.

David Wilk is an independent consultant and marketer (Booktrix.com) with broad experience in publishing, book packaging, sales, distribution, e-commerce and marketing. He has the privilege of working with authors, publishers and their books, in all formats, at the intersecting points of creativity, technology and cultural change. All applied to the traditional matters of art and commerce.

He has lately been working as a publishing industry consultant to Shared Book, a “reverse publishing” technology that enables content rich websites to give their users a broad array of publishing tools. Shared Book is inherently a mass customization and personalization engine. It is also somewhat chameleon-like, insofar as its many features can be deployed in different configurations, depending on the specific market needs of its site partners.

For example, children’s book publishers are using Shared Book to create extremely simple (and highly profitable) personalized versions of some of their classic titles, printed one at a time, with no changes to the essential art and text of the original books. Random House was first with Poky Little Puppy, the success of which was sufficient for them to be adding another 50 titles to the program this month.

Content rich sites including magazines that have extensive digitized and tagged content sites are enabling newly developed quick tagging tools which allow their site visitors to assemble a customized book from any article or photograph that sits on their site. Allrecipes.com and several other cooking sites give their users the ability to create customized and personalized cookbooks using either site supplied materials, or user generated content or both.

And there are even more complex uses possible with Shared Book’s sophisticated annotation engine – academic publishers and social networking sites are looking at an application that will allow professors to create custom texts for small or large study groups.

The applications of the highly evolved electronic publishing platform that Shared Book has created will enable traditional and nontraditional publishers to serve customers with the content they want in easily created customized and personalized forms.

Brideshead Visited

An interesting article on the background to Waugh's Marchmain House.

The mind of Waugh the writer was stimulated at Madresfield. He not only drank in the medievalism of the house, but also savoured his encounters with the aristocracy, studying their habits and developing 'perfect pitch' in describing their jargon. He was fascinated to learn that his friend's father, the 7th Earl, considered it middle class not to decant champagne into jugs; how effectively nicknames and idiosyncratic jargon could exclude an outsider; how scruffily dressed the aristocrat could be at home. With his ear for dialogue and his eye for mannerisms, Waugh absorbed them well enough to be able to reproduce them faultlessly - even reverentially - in his novels.

Barnes & Noble Post Loss

The WSJ has a blog post on the muted combination between B&N and Borders. It is really an interview with Politics and Prose owner Carla Cohen. From the interview:

Carla Cohen: We kept one step ahead of the competition. We opened a coffeehouse before Starbucks was on the scene. The model for us was Kramer Books. We’re a much better venue for authors so we’ve never competed with Barnes & Noble on that. We can always do a better job keeping in touch with our customers and keeping publicity out about the events, so we’ve never had to compete. I think our biggest competition is with Amazon.com. Amazon makes it easy when people are sitting at their desks — which most of us are during the day — and you read something and go online and order it. You have to be an old-fashioned book-lover to say ‘I’ll wait until the weekend.’ We do get a fair amount of Internet ordering on our Web site with people who are going to pick it up later.

I had to comment on the post which you can read if you follow the link above.

In other B&N news, the company saw a small increase in revenues to $1.16 billion in the first quarter, from $1.15 billion in the year-ago period. Earnings were significantly impacted by an $8mm pretax charge related to sales tax withholding. The company said it lost $2.22 million, or 4 cents per share, in the quarter ended May 3. That compares with a loss of $1.67 million, or 3 cents per share, in the year-ago period. Excluding the charge, the bookseller would have earned 5 cents per share. Same store sales declined slightly in the period.

B&N Conference Transcript: SeekingAlpha

Books A Million 1Q Profit Off 57%

From the Books A Million earnings call yesterday, (Seeking Alpha)

Net sales for the 13-week period decreased 0.7% to $115.5 million from sales of $116.3 million in the year earlier period. Comparable store sales for the quarter decreased 3.4% when compared to the 13-week period for the prior year. At quarter end we were operating 207 total stores. During the quarter we opened one new superstore and closed two Booklands. Gross margin as a percent of sales was 29.3% compared to 29.0% last year. The increase as a percent of sales was partially due to lower discounts and markdowns versus last year. Operating expenses as a percent of sales increased to 24.6% for the quarter from 23.2% in fiscal 2008. The increase as a percent of tax is primarily due to a one-time charge of $406,000 ($241,000 net of taxes) for severance related to staff reduction at the company’s headquarters. Depreciation expense increased $114,000 to $3.5 million from $3.3 million.

Shares in BAM trade around $8 close to its 12mth low and the company has a market cap of $126mm. Their 52 week high is $20.70. There are 16mm shares outstanding and in recent months insiders have purchased 2.5mm shares (16%). Primary among this group are CEO Cochran and Chairman Anderson.

Indigo (Canada) Reports

Speaking of parties potentially interested in Borders, Indigo Books and Music reported their full fiscal 2008 results after the close of the TSE yesterday. In a challenging year the company reported earnings of $52.8 million or $2.08 per diluted share on $922.9 million in revenue. This performance compares with a profit of $30 million or $1.19 per diluted share on $875 million in sales a year earlier. Company CEO Heather Reisman commented the following:

"It was a demanding year for many retailers as a result of the significant increase in the Canadian dollar. Booksellers in particular saw a meaningful decrease in book prices. Despite this downward pressure on our top line we are pleased with our
results."

At the end of 2007, Indigo operated 249 stores including 88 superstores under the banners Indigo, Chapters and the World's Biggest Bookstore, and 161 small format stores under the banners Coles, Indigo, Indigospirit, SmithBooks and The Book Company. Over the past year the company's share price has fallen from a high of $16 to its current $13. It had been below $12, but the company announced a buy-back program that may have aided its recent up tick.

From the press release:

Total revenue for the quarter increased 2.1% to $206.2 million. On a comparable store basis,Indigo and Chapters superstores posted 3.4% growth, while Coles small format stores were up 2.4%. Sales from Indigo's online channel, Chapters.indigo.ca,grew 1.0% to $24.7 million. The Company's net earnings for the fourth quarter were $3.1 million, up$7.3 million from the same quarter last year. Pre-tax earnings rose$6.1 million to $1.9 million. For the full year, total revenue increased 5.5% to $922.9 million while net earnings were up 76.0% to $52.8 million. Included in this year's results was a $8.8 million non-cash tax recovery. Pre-tax earnings rose $14.1 million to $44.1 million.

Borders Update

Borders held its annual meeting yesterday and CEO George Jones refused to be drawn on where the company was in its strategic review. Later the company released a press release saying as much (or little):

In response to recent inquiries, Borders Group, Inc. (NYSE: BGP) today reported that the company is in the midst of the strategic alternatives process and has not engaged in substantive discussions regarding any specific transaction to date. The company does not intend to make any further comment while the process is ongoing.

There has also been an inordinate amount of interest in the reports of B&N taking a look at the Borders business. Few reports seem to offer any kind of analysis on the merits of any type of combination and even fewer seem interested in a wondering who the 40 or so other companies/entities are that have indicated some level of interest.

At the meeting, Jones was quoted as saying: "The investments that we've made during the past year ... certainly affected our financial performance in 2007... We feel that this is the year when we'll start reaping some of those benefits." (FreePress) It has always been a wonder to me that this company continues to invest in an expensive 'bet the company' revamp of its retail presence (off and on-line) while management is claiming they are cash strapped. As an investor, you would expect to reap all those benefits but not only could their timing not be worse but management don't appear to know when to both change course or ratchet back on the spending throttle.

In the UK, high street retailer WH Smiths have been linked with a bid for Paperchase. Reports suggest a value of $100mm (some say higher some say lower). The best thing that could happen for Borders is for PE to buy the whole thing. Only months ago, Paperchase was viewed as a key component of the company's future business strategy but having needlessly mortgaged the business, Jones and co have backed themselves into a corner where selling assets that should be supporting them in a downturn is considered as viable solution to their problems. Rest in peace.

Cramer Hates Media

Jim Cramer comments on the media business in the Hollywood Reporter:

"I hate media stocks."...."The world got changed by two companies," he says. "Apple is taking away the profitability of TV, and Google is taking it away in print. And it's never going to reverse." In the near term, Google is the bigger villain."It's just a parasite," he says. "It doesn't create content, it steals it, borrows it, shares it. It's no secret that print media is in trouble. It's why Gannett has gone from $80 a share in 2001 to less than $30 nowadays and why the New York Times has gone from $50 to less than $19 in the same time frame.Time Warner, too, is saddled with print by way of a huge magazine business. Time Warner is a content company for old people," Cramer says. "I try to get my kids to read magazines and newspapers, but no kids do. It's a tragedy."

He doesn't care too much for book retail either.

Patent Approved: Is This A Joke?

Under the title "Can the Publishing Industry Be Saved" was a press release describing a "Method and System for Customized Print Publication and Management." I was curious. I read the press release and it immediately made me wonder how anyone could get a patent for what was described. So I searched for the patent description. This looks to me like custom publishing which has been going on for forever but perhaps I am missing something: Like some thing patentable.

The following is a description of the patent application which has apparently been approved by the US Patent Office.

A method (Figure 3) for creating and managing customized print media through an enhanced content management process is disclosed. A print media customer, which may be an individual or organization, is profiled to determine content preferences (step 122). Profiling may be based on face-to-face or electronic surveys, Internet usage patterns, buying patterns, or other criteria. Content associated with the preferences is obtained and analyzed (step 124). Content affinities, or relationships between the content and other content in a content network, are determined, and may influence the print media produced (steps 128 and 130). A history of the content is maintained, to ensure content is not duplicated (step 126). Both substantive and non-substantive content, such as advertising content, is used. Both the content and layout of the print media can be customized (step 132).

The "steps" refer to a diagram. Further details of the above appear here. The description of the patent includes the following:

This invention provides a comprehensive method for effectively creating and managing customized print media through an enhanced content management process.

Summary of the Invention: In accordance with the embodiments described herein, method comprises customizing print media for organizations and individuals. The information for customization may derive from computer-based applications, internet-based sources, or more traditional, non-electronic survey techniques.

And then lastly,

While the invention has been described with respect to a limited number of embodiments, those skilled in the art will appreciate numerous modifications and variations therefrom. It is intended that the appended claims cover all such modifications and variations as fall within the true spirit and scope of the invention.

Is this yet another example of the USPO inability to guage real innovation versus patenting "processes." Or is PND over reacting?

Champions Again (Of Europe)

Only wish I was there. BBC Report.

B&N In Competitive Benchmarking

According to the WSJ via Reuters, B&N is interested in checking out Borders books. From the report:

Barnes and Noble has put together a team of executives and advisers to look
into the possible acquisition, the Journal said, citing a person familiar with the situation. Borders said in March that it might sell itself as it has struggled with liquidity and economic issues that have cut into customers' discretionary spending.

Time will tell if this amounts to much.

Twitter

Mike Hyatt, CEO of Thomas Nelson has a great how to for setting up and using Twitter. For those of you like me this is the guide to use. Mike's philosophy on social networking is you have to use it and experience it in order to pontificate on it. Obviously, understanding all social media tools is also critical to understanding how customer may/could/do interact with your content.

Link Here.

And while you are there, check out his "what I have learned in four years of blogging"

Dohle to Head Random House: UPDATE

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

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

UPDATE FROM BERTELSMANN CORPORATE:

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

In addition to the above announcement, Ostrowski also announced that

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

Cengage Reports Continued Improved Performance

Cengage Learning posted third quarter results last week which showed continued improvement over their 2007 performance. For the quarter, revenues of $286.2mm were 7.4% higher than prior and EBITDA of $21.8mm was significantly higher than the $0.4mm they posted in 2007. YTD revenues for the nine months were $1,432.7mm a gain of 3.3% and EBITDA of $509.0mm represented a 6.7% improvement over the performance a year earlier.

Segments:

Academic and Professional:
Revenues for the quarter up 17.3% to $157.6mm with EBITDA up sharply to $13.6mm
YTD Revenues up 6.8% to $948.9mm with EBITDA up 6.2% to $414.2mm

Gale:
Revenues for the quarter were down 5.5% to $61.9mm with EBITDA down 11.7% to $21.1mm
YTD Revenues down 4.4% to $229.3mm with EBITDA up 4.8% to $102.6mm

International
Revenues for the quarter were up 9.4% to $67.3mm with EBITDA up 87.9% to $(0.7)mm
YTD Revenues were up 7.7% to $259.3mm with EBITDA up 18% to $35.4mm

Presentation

Thoughts on a Publishing Manifesto

Sara Lloyd of The Digitalist has a series on the future of publishing in the 21st century. The series sets some of publisher's challenges into context. She summarizes the first installment as follows:

The locked-in perception of the book as a unit or a product has also led to digital ‘strategies’ which largely consist of the digitisation of existing print texts in order to create eBooks. This in turn has led to an obsessive focus on the reading device and a perception that the emergence of a ‘killer device’ will be a key driver in unlocking a digital future for books in the way that the iPod was, say, for music. This is a flawed perspective in a number of ways, not least because it fails to recognise the enormous amount of online or digital ‘reading’ that already takes place on non-book-specific devices such as desktop PCs, laptops, PDAs and mobiles, but also because it fails to recognise that the very nature of books and reading is changing and will continue to change substantially. What is absolutely clear is that publishers need to become enablers for reading and its associated processes (discussion; research; note-taking; writing; reference following) to take place across a multitude of platforms and throughout all the varying modes of a readers’ activities and lifestyle.

Big BullyBoy Amazon

UK's Publishing News has a report on UK publishers increasing concern over Amazon's bullying tactics. From their report:

PUBLISHERS ARE REACTING angrily to what one senior executive described as a “crude” attempt by Amazon to increase its discount. “It is going from publisher to publisher with extortionate demands, and if it does manage to get a figure from one publisher it is then going back to the first house and saying x has agreed to such-and-such.”

Bloomsbury rec­ently had a terms dispute with the bookseller which resulted in Amazon removing the 'Buy Now' button from certain Bloomsbury titles on its site. But one CEO commented: “We are prepared to lose a year's sales with Amazon. They may try many things but we are not moving. We have been foolish enough to give in and grant generous terms in the past, but we're not giving any more.”

Book Launch 2.0

This is funny video about book promotion in the web 2.0 age. Sadly, the 1.0 world wasn't that great but it's only got worse.

Tip of the hat to Brantley

AAP Supports .ePub Standard

Last week (somewhat out of the blue) the AAP announced that on behalf of their members they were supporting the .ePub standard for electronic [book] texts. On the surface, this is a positive reflection of two industry groups working together in support of industry standards however, the commercial results of this letter of support will be minimal in the industry. Certainly, the largest US publishers who are the important members of AAP would need no encouragement to use the .ePub standard (and they are) if there were commercial advantage in doing so. The real background issue to this announcement is Amazon.com which typical of the company have spurned the standard approach and are not using the .ePub standard with the Kindle.

Adam Hodgkin at Exact Editions reports on the same announcement and captures the essence perfectly:

It is a mostly waffly and empty letter and will not carry weight in the tussle between Google (which should have minimal need for the EPUB format) and Amazon which is broadly on the books-are-a-file side of the fence and ought to be using EPUB for its Kindle, but is not. Whether digital books are citeable and searchable, page-fixed, digital resources; or electronic texts within a Kindle/Sony/Iliad reader will be clearer in a year or two. I doubt that it will be settled by October of this year.

Publishing In The Digital Age

A podcast is now available for a panel meeting I participated in. I posted the presentation that accompanies the panel discussion (here) and this new link is to the podcast. My session is in part four.

Informa In Play?

The Times is reporting that private equity groups including Carlyle and Apax are looking closely at Informa although no official bid has been made for the public company. From the article:

Carlyle and Apax are among those considering a bid for the group, which has a arket capitalisation of £1.64billion. No approaches are understood to have been made. Informa's shares have fallen almost 40 per cent since it announced the acquisition of Datamonitor for £502million in May last year amid widespread de-rating of Media stocks amid fears of an economic slowdown. Some analysts have raised concerns about Informa being hit by its high debt levels after the Datamonitor acquisition and partial dependence on the financial services sector.

Earlier this year, Informa has announced that David Gilbertson would resign as chief executive and from the board to take up the role of CEO at EMAP. EMAP has itself been purchased by a private equity group and the move by Gilbertson was a surprise. Together with now current CEO Peter Rigby they had built Informa into a the largest provider of Trade Shows in the world and a significant professional publishing company.

Tom Waits Press Conference

Say hi to your mother...

Is the World Watching Random House?

The FT speculates with the aggrandising title, All Eyes on Random that we are all on the edges of our seats wondering who will be the next CEO of Random House. The paper suggests that RH is set to be managed by someone outside the industry either from the services unit Arvato or the Direct Group. From the article:

People familiar with Random House’s parent Bertelsmann said that the German media group had decided against promoting Random House UK head Gail Rebuck or German chief Joerg Pfuhl in order to bring a fresh pair of eyes to the
business. In his first high-profile personnel decision, Bertelsmann chief executive Hartmut Ostrowski is expected to opt for a Germany-based executive from either media services division Arvato, the unit he once ran, or book-clubs unit Direct Group.

Bertelsmann is famous for placing relatively young executives in positions of high responsibility and the paper goes on to mention one Marcus Dohle a 39 year old executive at Arvato.

Noting how Arvato under Ostrowski was able to expand the size of their competitive marketplace by expanding their business offering, the paper suggests that is how Ostrowski would like Random House to think. Other publishers in the professional and information segments have been doing this successfully for a number of years, but the strategy has yet to be proven in trade. Publishers such as Elsevier and West now compete in markets that are an order of magnitude larger than what could be considered traditional publishing. I believe something of the same model can be developed for trade and all of the major trade publishers will be thinking the same thing. Time will tell which publisher gets there first.


And there is more from New York Magazine:

A stronger personality might have disciplined Random, but there’s a good case to be made that the conglomerate was a victim of its own strategy. Size gave it strength against bookstores, but big-box outlets and Amazon provide sales velocity now. Random, and the rest of the industry, has little or no leverage with them. Were they really going to keep Grisham out of Costco? What would they get in return?
Meanwhile, Random’s size became a liability. Even with megahits like Bill Clinton’s memoir and The Da Vinci Code, the company’s annual revenue has been stagnant. To maintain its 20 percent share, the company has to publish around 2,000 titles, while more-efficient rivals like Hachette do under 500 titles for about 10 percent of the market. It’s a quarter of the work for half as much market share.

Personally, I find the construct of this article a little silly. It ends with the suggestion that Olson saw himself as 'last of the publishing moguls' - did he? I'm not too sure that one holds up.

Champions Again

Manchester United retained their Premier League title this afternoon with a tense win away to Wigan. Away to Wigan meant that most of the ground was filled with United supporters some of whom were paying $1000 a ticket to get into the ground. We are now one win away from an impressive double. The Champions league final against Chelsea is a week on Wednesday. The season didn't start so hot and the team went from this one off the bottom:






to the top having pushed aside the hated Arse but almost letting in Chelsea by the back door. You may wonder why I have this screen shot from the start of the season but I had faith the team would win.

I hear red is still the prevailing color choice in Moscow.

Bridge Tagged With ISBN

When I first became involved with ISBN's I heard and received a lot of grief about ISBN's applied to non-book items like rulers and teddy bears and so involved did I become with the ISBN agency that I sometimes joked that I would apply for my own number and have it tatooed on the back of my neck. Happily, that never happened. Tagging a bridge with an ISBN is something that few of us would have anticipated. This is doubly concerning because this is a clear re-use of an existing number which is a big no-no in ISBN land. From the Torontoist:

It seems that some Toronto taggers are no longer content to scrawl their own names on blank concrete canvases around the city and are trying instead to make more of a cultural statement. Last year, references to composer Gustav Mahler popped up in several places around town. This year, a more cryptic stencil has appeared on the Humber Bay Arch Bridge, boldly proclaiming "ISBN 486-28495-6" for all to see and ponder. This International Standard Book Number turns out to be a paperback edition of Henry David Thoreau's Walden; Or, Life in the Woods.

Bertelsmann Reports Improved Results

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

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

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

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

Harpercollins Reports Static Results. Releases Authonomy.com

Harpercollins produced revenues of $302mm in their 3rd quarter ended March 31st which compared favorably with the same period last year ($291mm). For the nine months, revenues continue to lag the performance in 2007. 2008 YTD revenues of $1,038mm are marginally lower by $14mm.

Operating income as described in NewsCorp's press release was as follows:

HarperCollins reported third quarter operating income of $29 million, in-line with the same period a year ago. The current quarter included strong sales of Naughty Neighbor by Janet Evanovich, Stop Whining, Start Living by Dr. Laura Schlessinger, Lady Killer by Lisa Scottoline, Fancy Nancy, Bonjour Butterfly by Jane O.Connor and The Chronicles of Narnia: Prince Caspian by C.S. Lewis. During the quarter, HarperCollins had 54 books on The New York Times bestseller list, including 4 titles that reached the #1 spot.

Again, no mention of the performance of Harpercollins on the earnings call.

On another note, Harpercollins UK announced last year that they were establishing a site for authors which they named authonomy. The site is now in private beta and is covered by fellow traveller James Bridle at Booktwo.org.

The real challenge, of course, is to persuade wannabe writers to post their work at all - in my own personal experience, unpublished writers are terrified of their work being ’stolen’, enough to be suspicious of publishers themselves, let alone your average web surfer. The Front List, a previous attempt at a “YouTube for books”/”crowdsourcing the slushfile”-type site, solved this by hiding everything from non-members; one approach certainly, but not one likely to bring in the crowds.

James is also an author.

Amazon The CD Manufacturer

An article in Information Week (I'm more likely to read Cosmo) bubbled up in my alerts this week about Amazon working with Sony BMG and EMI to bring 'out of print' recordings back into circulation. From the article,

Amazon, Sony BMG, and EMI Music said that they will make hundreds of out-of-print albums available on Amazon's Web site through CreateSpace's Disc on demand service. Some of the titles that have been restored to availability include Hatari Soundtrack by Henry Mancini, Earthquake Weather by Joe Strummer, Motorcade of Generosity by Cake, Telepathy by Bill Stewart, Foreign Intrigue by Tony Williams, and Carryin' On by Grant Green. A few of the recordings being made available through Disc on Demand are new releases rather than reissues, such as the upcoming title in KCRW's Sounds Eclectic series. The arrival of brand-name, major-label content should enhance the credibility of CreateSpace's media on-demand service, which has yet to shake of the stigma associated with self-publishing. CreateSpace was born last August. It used to be called CustomFlix, which Amazon acquired in July 2005.

Just another example of how Amazon is willing to move up and down the supply chain. Interestingly, the author of the article does note the controversy around the BookSurge situation but perhaps the more interesting point is about how Amazon will use their own demand analysis to determine which recordings to produce. Perhaps not so obvious is the impact on all the Amazon affiliates who have businesses supplying rare and hard to find recordings. Are they doomed?

Nielsen BookData NZ Sets Milestone

Good news from New Zealand, all nine New Zealand booksellers voted in Nielsen BookData's NZ Booksellers Choice Award for book of the year. As they note, "For the first time in the history of the Nielsen BookData New Zealand Booksellers' Choice Award, several titles received precisely the same number of nominations, making it impossible to create a shortlist of four titles." The seeming statistical impossibility was left unexplained by the data aggregator/market researcher. As a solution, the company decided to create a "long short list" of possible winners. The list amounts to eight titles and the sheer enormity of the task required of Booksellers to make the actual selection is likely to induce rioting.

In fairness, here is the list:

- A Nest of singing Birds: One Hundred Years of the New Zealand School Journal by Gregory O'Brien, published by Learning Media
- Bill Hammond: Jingle Jangle Morning by Jennifer Hay, published by the Christchurch Art Gallery
- Edwin and Matilda: An Unlikely Love Story by Laurence Fearnley, published by Penguin Books NZ Ltd
- Mau Moko: The World of Maori Moko by Ngahuia Te Awekotuku, published by Penguin Books NZ Ltd
- New New Zealand Houses by Patrick Reynolds and John Walsh, published by Random House New Zealand Ltd
- New Zealand's Wilderness Heritage by Les Molloy and Craig Potton, published by Craig Potton Publishing
- Ribbons of Grace by Maxine Alterio, published by Penguin Books NZ Ltd
- Soundtrack: 118 Great New Zealand Albums by Grant Smithies, published by Craig Potton Publishing
- The Road to Castle Hill by Christine Fernyhough with Louise Callan, published by Random House New Zealand Ltd

(At least they are books and not rulers - which is an inside joke that only my past colleagues will get).

Shatzkin Speeches Posted

Mike Shatzkin informs me he has just posted on his website four talks delivered this year (three of them somewhat belatedly). Mike noted, "There is definitely a good deal of repetition here, but there is also a distinct slant to each piece. For those of you who are not gluttons for punishment, I'd suggest the one, delivered on Wednesday, May 7, 2008 in Copenhagen. The one titled The End of General Trade Publishing Houses is a completely rewritten version of an earlier version some of you may have read. The other two are described sufficiently below."

May 7, 2008 to Danish publishers and booksellers in Copenhagen on the Future for Publishers and Booksellers: Here

April 16, 2008 to UK publishers at London Book Fair, summarizing US state of affairs reporting on "The State of Digitization in the US": Here

March 10, 2008, "Publishing in the Digital Age" panel participant remarks at Book Business Conference and Expo: Here

January 22, 2008, rewritten reprise of "The End of General Trade Publishing Houses", to Random House's "Digital Day": Here

Barnes & Noble Sells Magazine Subscriptions

Didn't Prodigy do this once? No matter, B&N announced yesterday that they are offering magazine subscriptions and will offer a digital service that enables users to buy old single copy editions. B&N is partnering with Zinio to offer the service which is the same service B&N has used to offer digital book content for preview on the B&N website. From their press release:

BN.com will sell subscriptions to over 1,000 magazine titles, available in both digital and print formats, at prices up to ninety percent off newsstand cover
prices. Digital subscriptions will be available within minutes of purchase for viewing on desktops and laptops. In addition, more than 12,000 back issues of hundreds of magazine titles will be available digitally for purchase as single copies.

A digital Cosmo (first one I saw, not one of my usual reading sources) is on sale on Zinio's site for $12.00 and on the B&N.com site for $12.00 or $10.80 with a membership card. So, some advantage at B&N. Selling magazines is a natural combination made especially clear given the amount of store space given to magazines in a typical B&N superstore. One wonders why this has taken so long. B&N is betting on the electronic delivery as the future play here rather than the print subscriptions. Print is a logistics nightmare where margins are razor thin which is why none of the big book web retailers have pushed print magazine subscriptions in the past. (Admittedly, fulfillment could have been done by third parties but it is still the B&N brand that goes on the package).

B&N will allow users to use the same Zinio "see inside" feature with the magazine content (probably not Playboy since they say only 'certain' magazines). Marie Toulantis, CEO of B&N noted the following:

Our magazine offering gives our customers the ultimate flexibility to consume their favorite magazines both digitally and/or in the more traditional print form via a subscription. By growing our relationship with Zinio, and introducing a partnership with M2 Media Group, we will be the only retailer to offer both options in an integrated shopping experience.

The Zinio relationship may be symptomatic of a larger strategic play that B&N may be engaged in that is, the evolution to the digital superstore. They will have watched the morphing of Newsstand.com with some concern. Under the LibreDigital brand, this company is in the process of expanding their digital delivery and content management tools to publishers and have notable deals with Harpercollins and Harlequin. B&N may be slightly aggrieved that this seller of newspapers and magazines has now inserted themselves into the publishing supply chain where B&N believes they should have reign. Adopting digital magazine distribution is only a skirmish in what may be a protracted battle for supremacy in the digital content supply chain.

Transition: Print to Online

Many publishers (myself included) have made the transition from print orientation to web and seen their business and not least their revenue model completely transform. I've refered to this as the 'valley of death' which is what the top line can look like as you make this transition and others have referred to it as "trading dollars for dimes". Industry luminaries such as Tim O'Reilly have noted some fundamental problems in trading subscription and print based ad models for web only ad models: Basically the numbers can fail to add up. (Read the article and follow some of the links).

There are some success stories and there are likely to be more as publishers willingly and generally otherwise, look to the web for revenue growth. The NYTimes discusses how magazine publisher International Data Group which is the biggest publisher of technology magazines has successfully made this transition. From the article:

Advertisers and readers of high-tech publications have moved online more swiftly than other audiences, so I.D.G. may offer a glimpse of the future of publishing. Yet the transition at I.D.G. came only after years of investment, upheaval and changes in its practice of journalism. “The excellent thing, and good news, for publishers is that there is life after print — in fact, a better life after print,” said Patrick J. McGovern, the founder and chairman of I.D.G.

The article goes on to note that InfoWorld is now generating ad revenue of $1.6mm per month with an operating margin of 37% whereas the combination print and web product of a year ago was a break-even operation. Since their market is technology they have some advantage over other types of magazines; however, their navigation of this transition is instructive and predictive of the manner in which publishers will ultimately become successful.

In IDG's case they have remained faithful to the mission of providing content their core market wants, aggressively managing the performance of their titles and shutting down those that don't perform and they have combined staff into cohesive and focused groups. Companies that make this transition early and successfully will establish difficult to surmount positions relative to their competitors; thus it becomes harder for the second, third and fourth players to garner the ad revenue and secure transaction revenues and fees necessary to become successful.

Olson to Leave Random House (+ Middelhoff News)

The NYTimes has confirmed via two executives at Random House corporate owner Bertelsmann that Peter Olson will be leaving his position as CEO of Random House in the next few weeks.

Mr. Olson, who has run Random House, the world’s largest consumer publisher, since 1998, has come under mounting pressure in recent months as Bertelsmann’s financial results have been damaged by lower profits at Random House and steep losses in its American book clubs, which he also oversees.

It was not yet clear who will replace Mr. Olson, although these executives said it would not necessarily be a prominent figure from New York publishing, and maybe not even an American.

Surely not a non-american!

On a related note, Thomas Middelhoff took exception to comments The Economist made in an article on Bertelsmann under incoming CEO Ostrowski. Among them the following:

Perhaps because he has Arvato up his sleeve as a source of future growth, Mr Ostrowski appears to be far less interested in the internet than other media bosses. Losses made by Mr Middelhoff's internet ventures may also contribute to his caution. “I will not put a bet on one or two big internet investments; we must build an online presence organically,”

His rebuttle in the letters to the editor was as follows:

Bertelsmann's performance
SIR – I do not agree with the statements in your recent article (Face value, March 22nd) concerning my term as chief executive of Bertelsmann. The development of the company between 1998 and 2002—ie, the creation of the RTL Group, the acquisition of Random House, etc—have not “strained” Bertelsm€ann's finances in any way. At the time of my retirement its debt amounted to €334m (with revenues of €20 billion). RTL Group today contributes more than 50% towards Bertelsmann's profit.

I also do not agree that my “internet ventures” were costly in general. Selling the company's AOL shares and its 50% stake in AOL Europe and the sale of mediaWays, an internet-service provider, generated a profit of €10 billion.

In the three-and-a-half-years of my leadership Bertelsmann doubled its revenue, tripled its operative profit and quintupled its net equity. Not a bad result compared
with the company's present situation, almost six years after my resignation.

Thomas Middelhoff
Chief executive
Arcandor
Essen, Germany

€10 billion profit isn't too bad now is it?

Pearson Buying Language School

Only 1% of Pearson's revenue is generated in China and they like many other companies hope to improve on that percentage in one of the fastest growing markets in the world. The company is in the process of acquiring a chain of private language centers in Shanghai which will leverage some of the language teaching product the company publishes through Longman. Several newspapers are reporting on the acquisition (which isn't completed). From The Telegraph:

The FTSE-100 media group is near to finalising a deal to buy LEC, a group of 15 Shanghai private schools, The Sunday Telegraph has learned. The deal, likely to be announced this week, underlines Pearson's aim to expand its Chinese operations as the country's economic growth presents opportunities for foreign companies. Demand for English language tuition is at an all-time high in mainland China as a result of the country's continuing integration into the global.

Pearson has been buying educational assets aggressively in the US for several years; however, they have not purchased schools per se. In China, they may be considering a more expansive expansion across the entire education value chain from content creation to delivery. In other developed Asian markets such as Korea and Japan, private education plays a significant role in the education of Children and a similar structure is developing in China. For Pearson to participate in that market development only makes sense.

Crowded House and PS22

New York's vast social patchwork was on vibrant display last week when Neil Finn of the band Crowded House started their set with the choir of PS 22 from Staten Island. Normally, when a band launches into their set they do so with gusto, but on Wednesday night Finn, wandered casually out to the microphone and announced we were in for something special. He commented that someone had forwarded a Youtube video of the PS 22 choir doing high justice to one of the bands signature songs and he was going to bring them on stage.

On came the choir first to do several song on their own and then to join Crowded House on the first few songs of their 2 hour plus set. It was magical. The kids were great, their joy was transparent and they showed no stage fright with a couple of the kids doing solos.

As you watch the video (which is the first song of the Crowded House set), look at the faces of the kids and think about the breadth of the backgrounds, experiences and ethnicity that they represent. It is quite incredible and it's what New York is all about.





Needless to say, it was a great night out.