Google Lending Books

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

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

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

Jason,

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

Here are the brief notes I took:

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

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

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

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

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

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

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

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

Murdoch Seeks Dow Jones

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

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

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

Borders International Update

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

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

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

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

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

(Thanks to my Aussie stringer for the article).

Sting's Lyrics in Book Form

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

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

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

Weekly Update

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

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

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

Sports:
Whinging Cry Baby: BBC

Pearson 2007 Guidance

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

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

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

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

Press Release
Reuters

Thomson Reports 1st Q

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

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

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

Here is the press release.

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

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

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

Here are the slides from their financial presentation.

Computers In Libraries

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

Thomson and Harcourt Reunited Again?

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

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

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

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

Bondi Digital to Create Rolling Stone Archive

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

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

Just in time for Christmas.

Weekly Update

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

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

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

Turkish Bible Publisher Targeted

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

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