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.

Harlequin Shows Disappointing Form

Torstar the owner of Harlequin published their first quarter results this morning showing Harlequin revenues fell $15mm versus the prior period. $11mm of the short fall was due to the decreased value of the US dollar versus the loonie. The company also suggested that the comparison favored a much stronger first quarter 2007 when Harlequin had a stronger publishing schedule. (I believe this is the same 'publishing schedule' that strategically they have looked to trim). Reported revenue was $109.7 million in the first quarter, down $14.8 million from $124.5 million in the same period last year. (In 2006, 1Q revenues were $116mm. Under lying revenue growth for the 2007 quarter was only up $1mm with forex delivering a $5mm gain on the 2006 level).

First quarter underlying revenues have been a mixed bag at Harlequin over the past four years: Up big in 2006, down big in 2008 and 2005 and it is hard to discern any real pattern.

The following is from their press release:

Book Publishing revenues were down $3.9 million in the first quarter of 2008 excluding the impact of foreign exchange. North America Retail was down $2.8 million, North America Direct-To-Consumer was down $1.2 million and Overseas was up $0.1 million. Book Publishing operating profits were down $0.6 million in the first quarter of 2008 excluding the impact of foreign exchange. North America Retail was flat, North America Direct-To-Consumer was up $0.3 million and Overseas was down $0.9 million.

Torstar stated that "Harlequin’s outlook is positive" except if there is a major economic down turn in the US. (Which I believe we are in). Any further decrease in the value of the dollar will continue to result in a material impact on results. As an aside, the company doesn't note any hedge against the US dollar fall which seems somewhat irresponsible given the US outlook although they have hedged in the past. The company went on to state that "Harlequin is also experiencing accelerating progress with its digital media strategy which will contribute to earnings growth in 2008 and beyond."

Operating profit was also impacted by the unfavorable impact of foreign exchange. Operating profit of $16.2 million in the first quarter of 2008, down $2.9 million from $19.1 million in 2007 including a decrease of $2.3 million from the unfavourable impact of foreign exchange rates.

Torstar announced a restructuring program earlier this month but Harlequin was not mentioned.

New Fake (With Branding)

JK Rowling can't catch a break. The Guardian blog points to an infraction by Bloomsbury but does so by using the name of Rowling to draw attention, thus;

The latest of these comes from JK Rowling's publisher, Bloomsbury, which was due to publish on May 5 a new biography of Louis XIV's mistress and "secret wife" Madame de Maintenon, by Veronica Buckley.

Turns out Ms. Buckley quotes a document in her book that was outed as a fake a number of years ago. The publisher is recalling the title as they were notified of the error during the review cycle. While there is no 'crime' here on the order of some of the more recent fakery and Bloomsbury is recalling the title, it still points to the rather shoddy fact(less) checking that seems not to occur. It appears that it was well known that this document was a fake.

But what does Rowling have to do with this? Some in the comments section noted the same thing.

Miss Pettigrew

Some times there is gold in them thar hills. The Guardian this weekend profiled the book that became the under-the-radar hit movie Miss Pettigrew Lives for a Day. From the article:

The novel was a small sensation in the 1940s, but has gone on to sell far more copies after being republished by Persephone, which specialises in forgotten women's literature from the inter-war years. In the month since the release of the film in America, 12,000 copies have been sold, while British sales have topped 24,000, a remarkable feat for a book in this niche market.

The author of the book Winifred Watson gave up writing only a few years after penning this book when her house was bombed in 1940. Her family couldn't convince her to start writing again.

Francis McDormand, the lead actress in the movie has also contributed to a new audio version of the book that will be out later this year.

S&S Revenues Off 12%

Directly from the CBS press release on the performance of Simon & Schuster,

revenues for the first quarter of 2008 decreased 12% to$201.6 million from $229.3 million for the same prior-year period, as best-selling titles in the first quarter of 2008, including Duma Key by Stephen King, Where Are You Now? by Mary Higgins Clark and Change of Heart by Jodi Picoult, did not match contributions from prior year titles, which included The Secret by Rhonda Byrne. Publishing OIBDA and operating income decreased 28% to $17.1 million and 32% to $14.6 million, respectively, principally reflecting the decline in revenues partially offset by lower royalty expenses, production costs and selling and advertising expenses. Publishing results included stock-based compensation expense of $1.0 million and $.7 million for the first quarter of 2008 and 2007, respectively

.