Cengage Reports Second Quarter

Second quarter revenues and EBITDA were negatively impacted by a change in accounting for deferred revenue and as a result Cengage reported slightly lower (1.2%) revenues versus their prior period. Revenues were $496mm and $502mm for 2008 and 2007 respectively. The impact of the change in deferred revenue accounting had a 100% flow-through impact and as a result EBITDA was 7% lower than the period last year ($148mm versus $160mm).

The company recorded a strong first quarter and despite the account change year to date revenue and EBITDA were 2.3% and 3.0% higher respectively. Year to date revenues were $1,146mm and EBITDA was $409mm. Margin is holding steady at a healthy 35.7%.

Other highlights:

• Academic and Professional YTD revenues and EBITDA are up 4.9% and 5.6% respectively. YTD revenues and EBITDA are $791mm and $347mm
• Gale YTD revenues were lower by 4% but EBITDA was up 2.1%. YTD revenues and EBITDA were $167mm and $63mm
• International YTD revenues were higher by 7% but EBITDA was lower than prior year by 4%.

The company indicated that their plans are ahead of schedule on cash flow, cost savings initiatives and projected EBITDA.

Cengage

Defections

Another big name author has followed the money and moved from his long term publisher. Richard Ford has moved from Knopf to Ecco after 17 years, and he follows Tom Wolfe who earlier in the year moved from FSG to Little Brown. Who can blame them? This is not a trend, as authors do move around periodically (and take their editors with them). It will have little impact on traditional publishing. The mid-market and specialty author is not suddenly going to be in a better competitive position vis-a-vis the publishing houses. What strikes me as curious, though, is that we haven't seen incursions by web companies such as Google, Microsoft, Amazon and Ebay into the original content business. Yet.

It seems so logical that one or a few of these companies will experiment in some way with branded authors. We all know the author brand is primary and we also know that some authors have become aggressive in expanding their brand - Patterson as the prime example. It may be inevitable that a major author(s) signs a three book deal with Google or Amazon. According to Publisher's Lunch, Wolfe received between $5mm and $7mm (these numbers from several sources) for his deal. It is a sad reflection on the publishing industry that these figures represent little more than gas money for the larger internet companies. Skills in book production, design, marketing and promotion, etc. are readily available and would not represent an impediment to success. It is really the expanded catalog of skills and expertise that an internet company could bring to bear that could be really interesting for authors and consumers.

Launching Major Author X via 'GooglePub' or similar would transcend the traditional publishing model and, perhaps, return it to something more like the publishing of the late 18oos where serialization (blogging) and direct reader involvement (social networking) were fundamental elements of trade publishing. (Remember Doyle trying to kill off Holmes, resulting in near riots from readers?) One of the most interesting aspects of the Radiohead experiment was that they finished their album only two weeks before it was available for download. In the world of publishing, the length of time from finished manuscript to bookstore can be years. Not only would consumer access be much faster in a 'GooglePub' world but the engagement with the author and the authors' work could be far more intense (and positive) for both author and reader.

Imagine the author maintaining an ongoing rapport with readers as the book is written. The author blogs about the process, posts excerpts, background material relevant to the story, and plot and character notes. The author publishes finished excerpts (ie. serialization), as development continues. Perhaps derivative titles or sequels are also initiated. Audio, Podcasts and video is made available. At the launch of the title, the book will have been exposed to millions of readers - perhaps all of the title has been published in parts or not - but the excitement will be significant. During this time, site traffic will also have grown and perhaps an advertising revenue share for the author will also augment their annual guarantees.

As in the Radiohead example, a physical version will be produced but, even here, the model could change. Perhaps 'GooglePub' strikes separate deals with B&N, Borders or others who produce their own versions of the titles by selecting from the wealth of content available as a direct result of the content created during the process. Basically, the author and 'GooglePub' leave it up to the physical publisher to create the physical product and just take a (painless) cut of revenues.

Publishers can't compete with this model. By the same token, the process could give rise to a new caste of publishing staffers who are familiar with the web-publishing model, social networking and engagement and who become required assets as authors migrate their brands to the internet. An interesting scenario: How prepared are large trade houses if their top-ten branded authors defect to 'GooglePub'?

Livemocha in NYTimes

I have commented on the language learning provider Livemocha and they were profiled in the NY Times over the weekend:

LiveMocha introduced its Web site in late September 2007, said Shirish Nadkarni,
chief executive of the company, which is based in Bellevue, Wash. Since then, he said, about 200,000 users from more than 200 countries have joined. “It’s a community of like-minded learners who can leverage their native language proficiency to help one another,” he said. The name “LiveMocha” is meant to evoke the relaxed atmosphere of a coffee shop. The site is still in beta, or testing, phase, Mr. Nadkarni said. Advertising will soon be added, as well as charges for some premium content and services.

The company recently closed on $6mm in additional funding.

San Francisco

I spent most of last week in San Francisco. While NYC received its first appreciable snow (and then heavy rain to wash it all away), I was wandering around in almost 70 degree weather and havinig a lovely time. I did do some work as well.






Created with Admarket's flickrSLiDR.

Click on each image to see brief descriptions of the image.

175,000 First Chapter Excerpts (And Counting)

I wasn't excessively clear in my description of the Dial-a-Book model and Mr. Greenfield has rapped me on the knuckles and asked me to correct the article. Obviously, he is quite correct to ensure we understand his business model. From Stanley,

You write:

"The idea of building a business (let alone expanding as he continues to do) on the precept that he will scan and re-key the first chapter of a book so that the content can be distributed as merchandising material in this day of e-content seems anachronistic. No telling how long it will continue to go on and many (including me) have expected publishers to take this over themselves and obviate the need for Dial-a-Book. Yet, he continues to flourish."

Michael, were this the case Dial-A-Book would not exist.

Most of the major publishers do create there own excerpts which they mount on their own sites .... and send to us for reformatting and distribution.
Our value is not that we create excerpts but rather that every excerpt we distribute is automatically mounted by

Barnes & Noble, Baker & Taylor, Ingram, EBSCO, Books-in-Print,
Buy.com, OCLC .... if they handle the books

… and by more than 1,600 library OPACs (e.g. San Francisco, Cleveland,
Seattle Public Libraries) if they hold the books in their collections.

Moreover we are the exclusive excerpt providers to all of the above, with the exception of Barnes & Noble. None of the others will mount any except unless it comes from Dial-A-Book. Every excerpt in any on-line public access catalog (OPAC) in the US is a Dial-A-Book excerpt.

The reason is that we provide an AGGREGATION function.

They would rather pay our modest charges to recieve 50,000 excerpts a year, in two deliveries a month, in a consistent format, which they can algorithmically access, or enter into their systems and servers, than receive 300 Random House excepts on a Monday, 200 Harper Collins on a Tuesday, 150 Simon & Shuster on a Friday, etc, in a variety of formats..

Dial-A-Book delivers an essential service for publishers, web sites and OPACs by the aggregation function it performs. Its unique data base contains 185,000 first chapter excerpts prepared and distributed with the permission of more than 1,400 imprints/publishers.
I would greatly appreciate your rectifying this matter for the readers of Persona Non Data lest they believe the need for Dial-A-Book can be obviated.


The original post as follows:

My friend Stanley Greenfield tells me he now has an astounding 175,000 first chapter excerpts and to think I knew him when he had less than 5,000. The idea of building a business (let alone expanding as he continues to do) on the precept that he will scan and re-key the first chapter of a book so that the content can be distributed as merchandising material in this day of e-content seems anachronistic. No telling how long it will continue to go on and many (including me) have expected publishers to take this over themselves and obviate the need for Dial-a-Book. Yet, he continues to flourish.

Here is more material from Dial-a-Book:

During 2007 Dial-A-Book continued to drive book sales and library readership as it delivered more than fifty thousand new first chapter text excerpts to its partners, e-commerce sites, media, bibliographic services, library on-line public access catalogs. The Dial-A-Book data base now contains excerpts from 175,000 ISBNs. All excerpts are produced and distributed with the permission of 1,400 imprints/publishers. The DAB Chapter One program is the exclusive excerpt provider for Baker & Taylor, Ingram, Books-in-Print, OCLC, EBSCO, Buy.com, Diesel e-books, and library on-line public access catalogs. Every excerpt appearing in any US library-on-line public access catalog (OPAC) is provided by DAB. In our continuing effort to support our partners we have enhanced our systems with a new mobile platform. The platform will allow more than five millions iPhone, iTouch and Windows Mobile users to browse our 175,000 book excerpts. Software development continues to extend the use of excerpts to other devices.

The Dial-A-Book Publishes Portal™ was successfully launched in 2007. It has been promoted by the International Publishers Association (PMA), Independent Publishers Group (IPG), Midpoint Trade Books and author services companies like AuthorHouse, Lulu.com and Infinity Publishing. Publishers Portal guarantees the display of book first chapters by the web sites and library on-line public access catalogs for which Dial-A-Book is the exclusive excerpt provider, if they handle the books or hold them in their collections. Our thanks to all our partners whose cooperation made this progress possible. Text excerpts are being increasingly displayed. This is testimony that CONTENT SELLS. We invite inquiries about how you can derive the greatest benefit from participation in Publishers Portal and Chapter One.

To learn more about Dial-a-Book contact Stanley Greenfield at 718 432 0014 or email:
srg@dialabook.net

Death of a Magazine Redux

Earlier this week MediaPost noted the almost 20% decrease in newstand sales of Time magazine for the second half 2007 versus the same period in 2006. Adding the bad news, subscription sales also fell 17%. From their article:

In November 2006, Time cut its rate base 18.8% to 3.25 million, so the decline in subscriptions may be due partly to a purge of "junk" circulation, including automatically renewed subscriptions. But it's hard to put a good spin on the steep drop in newsstand sales, which advertisers often view as an indicator of audience engagement. Ironically, the declines follow a major redesign that was intended to make the magazine appeal to a mass audience. Introduced in March 2007, the new look delivers less visual clutter for a cleaner, streamlined appearance. There is lots of clear "white" space, fewer, more eye-catching images, and interesting text formats.

MediaPost go on to note similar declines at Newsweek and US News/Report. On the flip side, The Economist inproved their numbers significantly with total circ up 12%. Time is a long way from closing down, but in my predictions for 2008 I did note that we will see some high profile magazines shut down. I think these numbers reflect wider changes in consumption patterns. (And no its not about people reading less).

Borders' Concept Store Opens

Short of visiting Ann Arbor to look over the store myself the nice people at Ann Arbor News got to preview the store opening yesterday and have written a detailed review. I hope to get out there myself in the next few months in the meantime here are some notable items from the AA News article:

The store, in the Waters Place plaza near Kohl's in Pittsfield Township, is the first of 14 concept stores the struggling retailer will open this year. Borders is striving to restructure and brand itself as a center for "knowledge and entertainment," increase sales and differentiate its 520 U.S. stores from its chief rival, Barnes & Noble
Inc.

The music section has been downsized, and in its place is Borders' digital center. The circular, oversized kiosk features several computer stations where customers can burn music CDs, download music and audiobooks onto MP3 players, create digital photo albums, learn how to self-publish and research family genealogy.

Jones said the amount of floor space dedicated to books has remained consistent in the new store, but the company decreased the number of titles it offers to make better use of space. Now, Borders stacks more books so the cover, rather than the spine, faces the customer. The new Borders also sells some digital cameras, memory cards, and more toys and gift items. Still, the selection doesn't overwhelm the main attraction - books.

There is a video in the article as well.

It might be more interesting to see how this concept store evovles as they get direct feedback from consumers. Borders' deserve credit for expanding the idea of what a bookstore is; how their ideas resonate with book buyers is obviously the point of the concept. My only negative comment is that they get points off for utilizing The Long Pen autographing system: taking autographing to the network level just eliminates all the fun.

Shocking Result: Borders Australia Sale Approved

Despite the suggestion that the consolidation of Borders and Angus & Robertson's would lead to higher prices the Australian Competition Commission will allow the sale of Borders stores to Pacific Equity Partners. The resulting combination will be considerably larger in number of outlets than Dymocks which is the only other national chain.

A&R is likely to reassess their entire chain and perhaps close some of the non-performing stores. They may also look to consolidate more retail traffic by opening larger Border's branded superstores in both urban and suburman locations. Thus far, PEP has not indicated how they will present the two brands (and Whitcouls in New Zealand) but it is probable that PEP will operate two types of stores similar to a B Dalton/B&N arrangement. Many of the existing A&R retail outlets I have been in are somewhat down-market and some look more like discount retailers than full service book retailers. Look for PEP to expand and accelerate the opening of larger Borders stores and consolidate some of the A&R business.

No official word on the price but it is estimated to exceed A$120mm. Whether this is a good number from Border's US perspective remains to be seen given the amount they have invested in the international operations.

Dymocks will also be forced to make some changes; however, their ability to do so across the entire range of stores is complicated due to franchising. With half the chain owner managed Dymocks have traditionally had difficulty (and resistance) pushing out corporate mandated initiatives. Regardless, the existence of a well funded, large and well branded competitor may help galvanize the Dymocks faithful. Dymocks could also embark on their own superstore expansion although where they would get the funding for this is anyone's guess.

The Age

NetGalley and Publisher's Weekly Launch eMarketing Platform

Publishers Weekly officially announced a partnership with Rosetta Solutions, Inc. to implement netGalley, an innovative online application. The platform is designed to help publishers better connect with both traditional and new media communities through electronic distribution and tracking of galleys, press materials, title metadata, and promotional plans. PW will use the netGalley application to capture information at the point of submission of Galleys for their reviews process. One of the key benefits of netGalley to participating publishers will be the ability to upload vital book and promotional information that will enable multiple and varied use by channel partners.

I profiled NetGalley several months ago (link).

The Bulletin: Death of a Magazine

As a newsie, I used to carry the The Bulletin on my route every week. I never understood why it came out on Wednesday; even Women's Weekly came out at the beginning of the week, but therein lay some of the failed logic that evidenced the slow and eventually rapid death of The Bulletin. Most will never have heard of this "newspaper" but it was iconic in Australia. Read as ardently in the clubs of Melbourne as it was on the station in Walla Walla, it represented the voice of Australia - both good and quite bad.

As an isolationist, white Australia and republican voice, the newspaper, established in 1880, tried hard to be confrontational and controversial. At the same time, the "Bushman's Bible” published some of the best Australia had to offer from poets, writers and journalists. They included Henry Lawson (known by every Australian school child), Breaker Morant, Banjo Patterson (Waltzing Matilda) and Miles Franklin (now the name of the leading Australian literary prize).

During the early 20th century the newspaper moderated its' views but even when it was purchased by Sir Frank Packer in 1961, he had to remove the 'Australia for the white man' from the masthead. Packer and his son Kerry built a large, influential media empire that included newspapers, television and eventually gambling. The Bulletin was always a 'trophy' property within the empire ensuring the eventual demise.

Kerry Packer's directive to his serial editorial hires, was to "make 'em talk about it." It wasn't about making money and it wasn't - eventually - about transitioning to the Internet. When any business (in this case a publication) is protected from financial reality, what motivation exists for innovation and logical strategic planning? On the death of his father, James Packer inherited the business in December 2005 and he took the long view that his fortune lay in gambling. He sold the media business to private equity and in their review of operations they shut The Bulletin several weeks ago.

The Bulletin still garner's 50,000+ weekly readers and it is hard to believe someone couldn't make a go of it at this level. The Economist only gets 20,000 in Australia and has launched a (reputed) A$500K marketing program to convert old Bulletin readers. While it is a always sad to see a media 'institution' go under, in this case it was inevitable. There hasn't been too much interest in resurrecting the newspaper from any third party and perhaps the investment required to digitize their content and production processes is too much. The real crime is the loss Australia faces from both the voice of The Bulletin and the potential to farm the content for future generations. Had The Bulletin been owned by a commercial publisher during the mid-1990s then the future may have been quite different.

Random House to Sell Chapters

The WSJ (via Reuters) is reporting that Random House will begin experimenting with the sale of chapters from their web site. The report suggests this is not a wholesale effort merely that they will "test selling individual chapters of a popular book to gauge reader demand." From the Journal:

Random House Publishing Group's experiment appears to be the first time a major consumer publisher has offered a title on a chapter-by-chapter basis. It will sell the six chapters and epilogue of "Made to Stick: Why Some Ideas Survive and Others Die" for $2.99 each.

I am pretty sure that's an incorrect statement - for example. No matter, the point is publishers are rapidly experimenting with new ways to reach out to consumers.

Harpercollins Launches Free Content

The NYTimes reports that Harpercollins will begin a marketing experiment by placing the full text of selected new titles on their web site. From the article:

Starting Monday, readers who log on to http://www.harpercollins.com/ will be able to see the entire contents of “The Witch of Portobello” by Mr. Coelho; “Mission: Cook! My Life, My Recipes and Making the Impossible Easy” by Mr. Irvine; “I Dream in Blue: Life, Death and the New York Giants” by Roger Director; “The Undecided Voter’s Guide to the Next President: Who the Candidates Are, Where They Come from and How You Can Choose” by Mark Halperin; and “Warriors: Into the Wild” the first volume in a children’s series by Erin Hunter.

As the article notes, consumers interested in purchasing the titles will be able to do so via existing online retailers. Currently, this is not designed to be a storefront for Harpercollins but does represent a continuation of their web-based marketing and promtion efforts.