MediaWeek Report (Vol 1, No 40): UK Publishing Market

The UK publishing market is bracing for potential credit issues with the wholesaler Bertrams. Bertrams were acquired by Woolworths which appears to be in financial difficulties. Publishers are working with Bertrams to ensure supply to the market but also to protect their receivables and stock. As this article indicates, Bertrams are on very short terms. (Telegraph):

Tim Hely Hutchinson, UK chief executive of Hachette Livre publishing group, confirmed told trade magazine that Bookseller that he was in talks with Bertrams about new credit terms. "Following the sudden removal of credit insurance cover from the Woolworths group wholesalers, we have proposed new credit arrangements that will allow us to continue trading together," he said. Bertrams, which is run by Woolworths' entertainment division EUK, is understood to have been in negotiations with publishers for several weeks over demands for quicker payments to compensate for the lack of insurance cover. Woolworths strongly denied reports that major suppliers have temporarily halted trading through Bertrams, while negotiations over credit terms continued. Trade was continuing "as normal" insisted the spokesman.

From Lambeth (and its not often you say that), apparently the desire to pull the sheep over the eyes of taxpayers is alive and florishing (This is London)

Lambeth Council has been accused of inventing “ghost libraries” to con government inspectors and protect its position as London’s most improved local authority in a scandal dubbed “librarygate”. The accusation is based on the mysterious opening of three book-lending, cultural information hubs, the week before a vital inspection into the quality of the council’s cultural services. The centres - one which lent out no books at all - issued only 25 library books before being closed after six weeks but were still used to bolster figures about library opening times in the audit commission inspection, according to an email sent from a cultural services officer and seen by the Streatham Guardian.

Another bone-headed missive from Forbes' Sramana Mitra on Amazon.com. Hardly an objective view of services available to the spectrum of authors and publishers. I didn't bother commenting on the first article she wrote and I am not sure I know why I bother with this one, only, it's FORBES! She signs off with the obligatory blinded me with science (numbers).

What does this mean for the book publishing business going forward? Are we about to see a degree of vertical integration, at least in certain nonfiction genres that have large Web presences? How big a role will Amazon play as it morphs its various on-demand offerings to recruit authors who are also entrepreneurs and Web-savvy marketers? And what about Kindle? While there are no publicly announced numbers about how many Kindle e-book readers have been sold, I know that many early-adopter techies have already standardized on Kindle.

The Techcrunch blog estimates the number of Kindles sold so far to be 240,000. Citigroup analyst Mark Mahaney is among the most bullish, calling Kindle Amazon's iPod. In an August report, Mahaney estimated that Amazon will sell 378,000 units this year and that Kindle will be a $1.1 billion business that accounts for 4% of Amazon's revenue in 2009. Pacific Crest's Steven Weinstein believes Amazon can sell more than $2.5 billion in e-books for the Kindle by 2012.

USS Intrepid Goes and Comes Along the Hudson

This morning the Museum ship USS Intrepid returned from its refurbishment in Bayonne. It is all newly painted and the rust you could see on the waterline on the way south is now all gone. Back at the dock they have also made a lot of improvements. This is apparently one of the most popular tourist attraction in NYC.

ABC-Clio Acquires Greenwood Publishing Rights

In a deal announced this morning, Houghton Harcourt Mifflin has agreed to grant ABC-Clio a perpetual license to use the imprints and publish the titles of Greenwood Publishing Group, including Greenwood Press, Praeger Publishers, Praeger Security International and Libraries Unlimited. The announcement goes on to say HHM will transfer certain intellectual property, contracts and assets to ABC-CLIO and that the agreement is effective immediately. Terms have not been announced.

From the announcement:

"By combining Greenwood Publishing’s impressive and extensive list of titles with our experience in publishing widely respected databases, reference books and eBooks, ABC-CLIO is expanding its role as a leader in the publishing industry,” said Ron Boehm, CEO, ABC-CLIO. “We believe that we will launch the next generation of high-quality reference, professional development and other resources for education and libraries.”

This looks like a good deal for ABC-CLIO. They gain a strong list of reference titles, a reputable publisher with a history of stable consistent operations and a reliable brand particularly in the library and educational community. Greenwood was part of Reed Elsevier for many years and was incorporated into the Harcourt business unit after Harcourt was purchased by Reed. That business was sold and Greenwood ended up at HHM.

Perhaps this is how deals will be done in the short term to compensate for the lack of credit.

Voyager Learning Company First Half 2008 Update

No SEC filing for the first half which is becoming something of a broken record for Voyager. The company held a conference call for investors which did motivate some analysts to participate in contrast to some prior calls.

Read it in full here.

Following are some selected quotes and those about the potential sale and valuation of the business are interesting.

Brad Almond

With that said, when we last provided an update via our July 22 press release, we anticipated that we would file our 2006 10-K by July, 31, 2008. We have obviously slipped from that target. We are in the final stages of preparation for the release of the 2006 10-K and expect to have it filed before the end of this month. We expect to file our 2007 10-K approximately four to six weeks after the filing of the 2006 10-K. We have been preparing the 2007 results and audit work in parallel with 2006 efforts and such work has been progressing very well to date.

*********************************************************************************

Doug Asiello – Invesco

Hoping you would help me through what the implied free cash flow for your – for the firm will be, so let me just show – let me walk through my math and you can tell me where I am off. So that $19 million your current cash, $45 million from the tax refund, $25 million in operating cash flow, gives you about $89 million, less the uses of cash $5 million from the settlement, $4 million from the wrap-up of the legacy corporate, $3 million from the shut down of the headquarters. So if you expect to have $70 million at year-end, by my math you are generating about $20 million in free cash flow. Is that wrong?

Brad Almond

You are essentially right. We’ve – the math you’ve done, you add up all the pieces and our range would be – these are actually out at the highs and lows, all those ranges that I gave, you probably see something more in the $73 million to $83 million—

Doug Asiello – Invesco

Yes.

Brad Almond

But however to account for any unknowns out there and therefore I gave a range of $70 million to $80 million.

Doug Asiello – Invesco

Alright. Okay, so let me ask a followup then. My enterprise value for your firm is roughly $100 million and you are generating $20 million in free cash flow. That’s five times free cash flow. And then I guess if you layer in SG&A cost and corporate overhead, I have a hard time believing there is not some strategic buyer out there that hasn’t thought that this is – this would be very easy to wrap – to roll up into their existing franchise and sales force at – and then kind of wipe out a good chunk of SG&A and corporate overhead at a extremely inexpensive valuation. What’s wrong with my analysis?

Chark Blog is Back

Richard Charkin's blog is back but in print form. Pan Macmillan has announced that they are selling a POD version of some of his posts from is highly popular blog. No word on when/if he is going to get back to blogging. Here is a summary from The Bookseller:

Chark in print: Pan Macmillan has released a p.o.d. version of former chief executive Richard Charkin's blog. According, to the publisher it translates into a pleasingly weighty tome, a wide-ranging collection of observations, views and reminscences about the state of publishing (and sometimes cricket) during a particularly interesting time in the industry's history. Orders can be placed here, and will take three working days to be despatched.

Borders Group Issues Warrants to Pershing Square Consistent with Previously Announced Agreement

From their Press Release this morning. No more details as yet regarding what this will mean for the management of the company. The implications of this must have been anticipated given the lack of success in reorganizing their assets but it remains to be seen whether Pershing Square will seek more influence than they already have. This result does place them squarely in the drivers seat regarding Borders future.

ANN ARBOR, Mich., Oct. 1 /PRNewswire-FirstCall/ -- Consistent with a previously announced agreement, Borders Group, Inc.(NYSE: BGP) today issued warrants to Pershing Square Capital Management, L.P. to purchase an additional 5.15 million shares of the company's common stock exercisable at$7.00 per share, subject to anti-dilution adjustments. The warrants are exercisable until October 9, 2014. The agreement, dated April 9, 2008, is detailed in Borders Group's 8-K filing dated April 11, 2008.

Gale Launches Content Syndication

Gale has long been an aggregator of news and information content but have recently announced a new program that allows users to visit and register on a web site, chose their content from over 500 subject areas, create a collection of content that is specific to their needs and requirements and then submit this to Gale for quote.
This is an interesting idea and they have had it in beta for several months. (I haven't tried it). What Gale appears to have done is push the content selection process closer to the consumer and away from the internal or sales staff that would have been intensely involved with customers in building content packages. This idea is very similar in concept to the airline reservation sites: Give the customer appropriate and powerful tools and they will do the work for you and possibly be far more satisfied.

The site is named acquirecontent.com and according to Information Today offers more than 10,000 titles (LINK).

Promoting Clean Data Health

BISG has announced the publication of a new best practices document: Product Metadata Best Practices for Data Recipients. This publication was prepared over several months by the BISAC Metadata Committee, led by Richard Stark of Barnes & Noble, and was contributed to by a large and diverse group of BISG members including publishers, booksellers, wholesalers and bibliographic agencies. The document is freely available from the BISG website (www.bisg.org).

Aimed at improving the accuracy, comprehensiveness and timeliness of data throughout the book supply chain, the publication establishes 14 points of best practice for recipients of product information, including standards for acknowledging receipt of data, best practices for making changes and notifying customers, guidelines for displaying the data, and a basis for helpful and timely communication between data recipients and suppliers. It also includes a glossary of common terms and definitions.

Michael Healy, Executive Director of BISG, noted,

“The prominent role played by BISG and BISAC in promoting high-quality product information in our industry has been established over many years in our work on the ONIX standard, best practice guidelines and more recently data certification. This new document, however, represents a change of focus. For the first time we are highlighting the vital role played by those who receive product information—booksellers, wholesalers and bibliographic agencies—in the overall effort to raise standards. Good product information is a collaboration and this new document sets out clearly what data recipients can do to help our industry sell more books through the provision of good data.”

Firebombed

Is Random House saying I told you so? The home and office of the publisher that took on the publication of Jewel of Medina was firebombed by three men who 'pre-planned' the attack and then waited around to be arrested. Martin Rynja, who runs the House Gibson Square from his home is now under police protection. According to Police, (Guardian)

[In the early hours of Saturday] officers from the counter-terrorism command arrested three men under the Terrorism Act 2000 in a pre-planned, intelligence-led operation.

"The men, aged 40, 22 and 30, were arrested on suspicion of the commission, preparation or instigation of acts of terrorism. Two of the men were stopped by armed officers and arrested in the street outside a property in Lonsdale Square, and the third following an armed vehicle stop near Angel tube.

Thankfully only a small fire was generated but this is nothing to the excitement certain Muslim clerics will generate with their faithful. According to the Telegraph a leading UK cleric has warned of further attacks:

But the radical cleric Anjem Choudhary, who lives in Ilford, east London, said he was "not surprised at all" by the attack and warned of possible further reprisals over the book "It is clearly stipulated in Muslim law that any kind of attack on his honour carries the death penalty," he said. "People should be aware of the consequences they might face when producing material like this. They should know the depth of feeling it might provoke."

In the Times Kenan Malik drew the obvious connection to The Satanic Verses:

Today all it takes for a publisher to run for cover is a letter from an outraged academic. In March, Random House sent galley proofs of The Jewel of Medina to various academics, hoping for endorsements. One of them, Denise Spellberg, an associate professor of Islamic history at the University of Texas, condemned the book as “offensive”. Random House immediately dropped it. No other big American publishing house would touch it. Martin Rynja, a fierce advocate of free speech, eventually picked it up in Britain.

What the differing responses to the two novels reveal is how Rushdie's critics lost the battle but won the war. They never prevented the publication of his novel. But the argument at the heart of the anti-Rushdie case - that it is morally unacceptable to cause offence to other cultures - is now widely accepted. In the 20 years between the publication of The Satanic Verses and the withdrawal of The Jewel of Medina, the fatwa has in effect become internalised.

I've just finished God Is Not Great by Christopher Hitchens and this attack reminded me of this excerpt related to the infamous Dutch comics:

Euphemistic noises were made about the need to show 'respect,' but I know quite a number of editors concerned and can only say for a certainty that the chief motive for 'restraint' was simple fear. In other words, a handful of religious bullies and bigmouths could, so to speak, outvote the tradition of free expression in its Western heartland...To the ignoble motive of fear one must add the morally lazy practice of relativism: no group of nonreligious people threatening violence would have been granted such an easy victory, or had their excuses - not that they offered any of their own- made for them.

The author Sherry Jones points a finger at Random House and comments "I was disgusted by the inflammatory language Random House used to describe the potential Muslim reaction.”
(Note: This comment was misquoted by the newspaper - see the comments. It wasn't directed at Random House at all).

Isn't it time for right thinking publishers and publisher associations to stand up and voice their collective disgust and willingness to champion the right to publish without intimidation?

MediaWeek (Vol 1, No 39)

News on the Reed Elsevier sale of the magazine group. The set-up for the deal may be unravelling. FT:

The RBI sale, one of the few live auctions in the media sector, is being watched closely as a bellwether for companies' ability to dispose of assets and private equity's ability to get deals done in tighter credit markets.

Bidders will now have to look further than the lending consortium and secure a relationship with a bank not involved in the staple to plug the shortfall. Reed, led by chief executive Sir Crispin Davis, declined to comment.

Earlier in the week G+J (Bertelsmann) declined to participate (Reuters):

The Hamburg-based publisher, owned by media group Bertelsmann [BERT.UL], withdrew its non-binding bid due to declining advertising revenue at the unit, manager magazine online said citing sources close to the negotiations.

Bloomsbury announced they have agreed to purchase Oxford International Publishers a publisher of books and journals for the academic student market in the fields of fashion, design and culture studies. RTT.

Commenting on the acquisition, Nigel Newton, chief executive of Bloomsbury, stated, "The acquisition of Berg is an important element in our strategy to increase our presence in academic publishing and take advantage of a market that is already benefiting from electronic delivery and print-on-demand. The acquisition of the very fine company that is Berg follows Bloomsbury's announcement on September 5th of the launch of Bloomsbury Academic, headed by Frances Pinter, which will publish academic books in the fields of the humanities and social sciences."

Reflections on the state of University bookstore sales of academic titles from the University of Washington (SPi):

"I can't prove it, but I suspect that some amount of the drop people are reporting is because those sales are going to Amazon," said Pat Soden, director of the UW Press.

Textbooks make up a small part of the UW Press's publishing contracts. Although the press saw a 7 percent increase in overall sales over the last fiscal year, sales at college stores dropped about $30,000 between 2007 and 2008.

At Washington State University's Press, a small publishing house that puts out just a handful of books a year, the slumping sales trend hasn't really hit home. The university's press primarily produces books that serve as supplemental classroom reading; their latest releases are a 192-page book about nuclear wastelands and a 331-page volume on the history of northern Oregon.

LA Times discovers the reprint market:

Whether the increasing number of reprints is because of reader dissatisfaction with contemporary literature or the flowering of an archivist, curatorial instinct, they are certainly part of the decentralization of literary culture. Miller says that, with space shrinking for print reviews and the Web as an overwhelming presence, people are trusting their instincts to figure out what to read. The threat this poses to the literary establishment is that whenever one of these new-old titles connects with a reader, whenever a reader wonders how Rose Macaulay's "The Towers of Trebizond" or Hamilton's "Hangover Square" could ever have been forgotten, it raises distrust in the establishment that proclaims certain books important. Especially if the reader has slogged through the pages of some highly praised snoozer.

New model newsroom Forbes:

He isn't alone. From Politico to Breaking Views to the Huffington Post to thousands upon thousands of blogs, droves of journalists have fled traditional newsrooms in the past decade looking for a way to make a living from the exploding world of digital media. So far, precious few have replicated the quality or impact--or profits--of the name-brand companies they left behind.

But Balboni thinks he can, using the lure of ownership. His site is hiring the five regional editors--for the Americas, Asia, Africa, Europe and the Middle East--and some 72 correspondents located around the world. None of them will be full-time employees. Instead, each is being lured by sizable equity stakes (not stock options) and a five-year guarantee of monthly fees of about $1,000. Correspondents will report to regional editors, who will report to the 15-person GNE.

Dire prediction for Ad based media companies for 2009 (Guardian):

The worsening state of the global economy will make 2009 a "horror show" for advertising-dependent newspaper and television companies, with some analysts predicting that businesses may have to wait until 2011 to see positive ad growth.

Paul Newman

So many great movies. Mrs PND and I saw him on stage in 2002. I consider ourselves lucky.

NYTimes Obit.

Book Army From Harpercollins

Looks like Harpercollins UK are set to announce a book social networking site similar to Goodreads.com and librarything.com. Named BookArmy, users will be able to build a library of books using ISBNs, tag them and interact socially (online) with other book lovers. Importantly, the site is not restricting the participation to books published by Harpercollins.

In a post I wrote about branding several weeks ago, I wondered who the first major publisher would be to incorporate a books in print database on to their site and it looks like HC UK will be the one. (In comments to that post some did point out Bloomsbury tried this approach years ago).

No doubt there will be some questioning why we need another book oriented social network when we have shelfari, goodreads and librarything. Certainly a valid question, but I doubt the goodreads people wondered if they could complete with librarything when they got started and here they are only a few years later with bigger traffic. There is no reason to believe that HC will not appeal to a new segment - or steal some of the users from the incumbents. I hope they will be able to instill in the BookArmy brand something that is unique and unifying because if the site comes across as HC corporate in disguise it is unlikely to be successful. I think the HC people are smart enough to realize that.

Harpercollins is very actively trying new things online. There US site is vibrant and full of experimentation. Some have argued that they don't go far enough in allowing access to their content but the point is they are not adverse to experimentation. The UK and the US online exercises do seem to be different in approach. It is not that they are uncoordinated but their respective approaches seem different. In the UK BookArmy and Authonomy.com are examples where they have have taken the potential of the web to build community just a bit farther than the US office is doing.

What could be most interesting about this is how successful HC will be in promoting the site across the other NewsCorp sites particularly Myspace. If they are able to gain traction there then we could really begin to see a significant player in book social networking. Perhaps even a transaction site that could become very significant given the concentration of users around the Myspace brand. On the other hand, your typical Myspace user may not be the perfect book reader and therein lies the challenge. Taking the battle directly to the group less interested in reading could be just the thing that builds some renewed interest in published content.*

I hope to have more on this when the site launches next week.


* I am not saying the typical Myspace user doesn't read: We need them to read books in quantity!