The Shatzkin Files

No not some espionage novel, but Mike Shatzkin who has written here once or twice has joined the blogging community. His blog address is: http://www.idealog.com/blog/ and we will all be look forward to reading his views on the industry. (And it was nice of him to give me a call out).

Here are two of his past posts at Personanondata:

Borders Stickers Books, Why? (Perhaps a coincidence but this got a comment today).

Amazon and Book Pricing.

MediaWeek (Vol 2, No 7): OCLC, Slate, EBook Pricing

For those with a bibliographic bent, ARL has published a short document on the proposed changes OCLC wanted to make to their data use. (Link) A sample:

“Band’s explanation indicates that both are intended as contracts, and describes the various forms and gradations that can characterize a contract as “bilateral” or “unilateral.” The new Policy is clearly intended as a unilateral contract, unilaterally imposed on any entity using records from the WorldCat database, including member libraries. While the 1987 guidelines have also served as a unilateral contract—and have much substance in common with the new Policy—the OCLC-member community has not perceived them as such. The guidelines are both less “unilateral,” in that they grew from a known and more open process of debate, and less “legalistic” in language. With the enormous environmental and technological changes that have occurred in the 22 years (a generation) since the guidelines were introduced, the major differences in tone and language between the guidelines and the new Policy, and a number of significant differences in substance between the two documents, the new Policy cannot be viewed as a mere update describing already accepted practices. The member community has seen the introduction of the new Policy as a fundamental change in the nature of the relationship between OCLC and its member libraries. In the eyes of the community, the guidelines expressed a mutual social contract, and the new Policy represents an authoritarian, unilaterally imposed legal restriction.”

The writers of the report also indicate that the manner and method of OCLC’s policy making needs a revision in thinking. (See when you screw up sometimes the consequences are even bigger than you might anticipate).

The task force applauds OCLC’s recent announcement of delayed policy implementation and the creation of a Review Board on Principles of Shared Data creation and Stewardship. We hope that the Review Board will consider its timeline and process, as well as its recommendations on policy issues, in light of the analyses and findings of this report. We believe that, using as a base the work done to date on the proposed policy and the issues it raises, a fresh start to policy determination and articulation is desirable.

Peter Brantley has a more expansive reaction to the report and its implications. (Link)

And it is there that I feel more caution must be exercised. The research library community, particularly, has now smitten OCLC forcefully upon its head with the flat of Library's sword and advised that it must go back to the schoolhouse. There is a danger of over-reaction in this. It is one thing to tell OCLC that the community believes its licensing policy was a mistake, its tone too “unilateral” and not conversational, and its process (essentially) pig-headed. It is another to envelop OCLC’s management in restrictive committee-based decision-making over matters that are vital to its survival; the times demand effective leadership and far-sighted vision; libraries have too long emphasized diplomacy.

Read Slate's article Not all Information Wants to be Free (Link). It raises and interesting question in my mind: Is Apple iTunes platform a precursor to the Kindle platform?

That iTunes is a free-standing application and not contained inside a browser, as is the Amazon music store, is not accidental, and I reckon that its "outside the browser" design has played some role in its success. Consumers have been conditioned to think that content delivered by a browser is supposed to be free. They get annoyed when they encounter a pay wall on a browser but are more psychologically open to the nonbrowser Web interface.

By thinking outside the browser, Apple answers to nobody but itself when it wants to add features, such as movies and TV show sales and rentals—or when subtracting them. If the browser window is the commons, the iTunes application is Apple's castle, where you're expected to do as you're told.

Some interesting data points in the discussions between Youtube and Music publishers over revenue sharing: (Guardian)

To understand the implications of these terms for closing deals, consider the penny per-stream component. It amounts to $10 per 1,000 streams, or a $10 clicks per-thousand. This means that before the digital company makes any money on advertising it would have to pay the first $10 of the ultimate CPM to the labels, then split what's left 50/50. So, if YouTube were to sell a $20 CPM pre-roll on a music video, it would give the first $10 to the label then keep $5 of the remaining money. That's $15 to the label and $5 to YouTube, or an effective CPM of $5 on a pre-roll ad. That's not going to leave YouTube rolling in revenue, never mind profits. Throw in the fact that it has to pay millions of dollars upfront, and you can see why these talks are so strained.

A very interesting discussion at HarperStudio over eBook pricing. It is the comments that are most interesting. (26thStory) Here is Shatzkin:

Decisions about price aren’t about fairness or equity, they’re about the market. I want to read books on my device. I choose a) from what’s available, b) what I like, and c) considering the price. I remember when I first got this ebook habit nearly 10 years ago, I paid $28 for an ebook bio of Grover Cleveland because (a) was very limited, so (b) got down near zero, and I was wanted to read something so I yielded on (c).

The ebook world is going to change enormously over the next several years. We’re still in a great period of proliferation: of formats, titles, concepts for the books, retailers, retailing “styles”, readers and devices. The Kindle and iPhone have a kind of dominance in the tiny market we have now; they may or may not be number one in what will be a much larger market three or five years from now.

Swan Song for Sir Crispin

Reed Elsevier presented a robust end to 2008 with the presentation of their end of year numbers yesterday. In constant currencies, RE revenues were up 7% over 2007 and operating income was up 12%. Underlying results were slightly less at 4% and 9% respectively.

Reed Elsevier revenues finished the year at £5.3billion and earning per share were up 15% in constant currencies and the press release points out this is their highest growth in 10 yrs. As expected Elsevier, Lexis and Exhibitions all drove revenue and operating income growth and while Reed Business Information was the laggard the business hardly fell off a cliff during 2008.

From the press release:

“Reed Elsevier has had a very successful year with major progress in developing the business, and the strongest constant currency adjusted eps growth in a decade. Good revenue growth was seen across most of the business driven by the growing demand for online information and workflow solutions. The revenue growth and a strong focus on restructuring and cost management delivered meaningful margin improvement and the operating cash generation was excellent. Whilst the economic environment has become progressively more challenging, our business is more resilient than most and we are in a strong financial position.

The year saw demonstrable progress across the business from our continued investment in new content and online product development. In Elsevier, subscription renewals reached record levels whilst other online solutions for the scientific and healthcare communities grew rapidly. Online legal information solutions have continued to expand, and there is growing demand for information analytics in the risk market. In legal research we see significant opportunities for more intuitive and interoperable offerings to enhance customer productivity and are stepping up our investment to reflect this. Reed Exhibitions had an exceptional year including the benefit of non annual shows cycling in. Reed Business Information held up well for most of the year, helped by the strong growth of its significant online franchises. In the last quarter, however, the business increasingly felt the impact on advertising markets of the global downturn.

The year has also seen a major reshaping of our business with completion of the sale of the remaining Harcourt Education businesses and the acquisition of ChoicePoint. ChoicePoint transforms our position in the risk information and analytics sector and the strategic and financial benefits are very attractive. The business has performed well with the insurance data and services business, which accounts for the substantial majority of ChoicePoint’s operating profits, delivering 10% year-on-year organic revenue growth. The integration with our existing risk business is progressing well and we are confident of achieving our savings and returns targets. We were disappointed not to be able to sell Reed Business Information but the macro-economic environment and poor credit market conditions made it too difficult to structure a transaction on acceptable terms. Whilst the short term outlook for RBI is very challenging, RBI is a high quality business, with a strong management team and a record of success in developing online services. It remains our intention to divest RBI in the medium term when conditions are more favourable.

Buried in the report was also the expected news that RE have reduced what was a $300mm (€230mm) investment in Harcourt parent Education Media and Publishing Group (EMPG) to just €15m. The equity stake that RE was forced to take in Harcourt when the business was sold represented just less than 12%. Companies do use their own judgment (there are FASB rules) when re-evaluating the value of third party investments like this one however, this action isn't likely to impress the bankers who lent $7Billion to EMPG for their acquisition spree.

Management Powerpoint Presentation

Source Interlink Expands!

The anti-trust suit that Source Interlink bought against Time and several other publishers two weeks ago has been dropped - although the press release only refers to Time. Readers may recall that SI received a preliminary injunction that forced SI's existing customers to continue shipping product to them. According to the press release the company's used the strength of their long standing relationship to reach an agreement on a multi-year contract. No comment about whether SI has been successful in imposing any additional fee on Time Warner as part of this agreement. Speculation would be that if they have it will not be as high per unit ($0.07 per copy)and it will not kick in immediately. If this improves the magazine supply chain at all it will be a good thing.

From their press release:

"I am happy to make this announcement because it means the continuation of what has been a mutually beneficial relationship. We have enjoyed working with our partners at Time and plan to keep working with them for many years to come," declared Greg Mays, Chairman and CEO of Source. "This agreement is effective immediately and assures that we can continue to supply all our mainstream, specialty and international customers with the popular Time titles."

In addition (and hence the post title) SI appears to have picked up a number of important distribution clients out of the rubble that was Anderson News' magazine distribution business. From the press release:

In a separate story, Source Interlink Companies today reported that its magazine distribution unit, Source Interlink Distribution (SID), has been awarded important new business from Wal-Mart Stores, Kroger / Fry's Companies and Basha's Supermarkets. This additional business increases SID's store count by 662 stores in 9 states.

Borders Reduces Corporate Staffing

Here is the corporate announcement from Borders. We sincerely hope it doesn't go any further.

Borders Group today announced that it has reduced its corporate workforce by another 136 positions, which were eliminated effective today. The majority of the jobs, which represent about 12% of the corporate workforce but less than 1% of the company’s total workforce, are based at the company’s headquarters in Ann Arbor. The workforce reduction was spread across virtually all business areas, including marketing, human resources, field management and corporate sales. The reductions were made at various ranks, ranging from entry level to middle management. Affected employees are being offered transition pay, severance and job placement assistance.

Today’s changes follow the company’s announcement just over two weeks ago that several top-level corporate positions had been eliminated to reduce management layers and help drive expense reductions. “While reducing payroll is never easy and we respect the impact it has on employees and their families, it is one of the necessary steps we must take along with other non-payroll expense reductions to help get this company back on track financially,” said Chief Executive Officer Ron Marshall. “In this time of transition, I greatly admire the tenacity and focus that employees at all levels here have shown as we drive to significantly reduce expenses and bring other key financial measures in line. We will continue to move forward with deliberate speed to make the changes required to get Borders back on firm financial footing.”

Teleread on Amazon's Long Play

An excellent and enjoyable look at Amazon's strategy from Aaron Miller writing on the Teleread.org blog:

Interestingly enough, the Online Reader is also what authors can use to preview Kindle publications on the Digital Text Platform, Amazon’s foray into the self-publishing market. But it has all the appearances of a parallel project, something to enable reading on devices other than the Kindle. Clicking on the "Your online books" button exposes a "Media Library" and CoverFlow-like book list, which you can populate with books you’ve already purchased. Provided you’ve purchased the upgrade and the print version of the book AND the book is eligible for online access (up to publishers probably), you can read it in the Online Reader for less than $9.99, with highlighting and social annotations and bookmarking.

The Reader, DTP, Search Inside and Amazon Upgrade all have a rudimentary, R & D feel, even though some of them have been around for awhile. They’re loosely connected when used as free services, and yet as revenue generators, they’re dependent on each other in a baroque way that creates barriers to consumer adoption. This stifling of adoption on the part of a giant like Amazon seems deliberate, the equivalent of throttling certain latent channels in order to allow another to flow more primarily. The undeniable truth of all of them together which would steal the Kindle’s thunder is that they do indeed allow you to read your Amazon purchases in digital form, without purchasing a Kindle. It’s easy to overlook this capability given the lack of content and promotion for these peripheral products Amazon has. But it seems clear that they each figure into a longer-term strategy. They could easily be brought together and streamlined into a huge force in the digital book market if the right circumstances were first created and nurtured by the Kindle. Thus the name.

Thoughts on Tools of Change

At The Digitalist James Long summarizes very nicely some of the themes from the conference. They echo some of my thoughts on my "Presuming" blog post (and I wasn't even at TOC).

Link

Memorial Service for Jean Srnecz

BISG informed me of a service to remember Jean Srnecz. The following is from Michael Healy with the details on the arrangements:

Remembering Jean Srnecz

As some of you may already know, Jean Srnecz, Senior Vice-President of merchandising at Baker & Taylor and a longstanding Director of the Book Industry Study Group, was among those who tragically lost their lives in the crash of Continental flight 3407 on February 12.

Jean spent more than 30 years at Baker & Taylor and for many in our industry was the public face of that company. She believed passionately in contributing to the development of our industry and it was this belief that led her to play such an important role in BISG, in the Educational Paperbacks Association and in other industry groups.

Jean was not only a member of the BISG Board, but also a long-time member of our Executive Committee, a small group of industry leaders who guide our organization. In that role, Jean was a loyal and committed supporter of our work over a long period of time, and an insightful adviser.

For me personally, she was a generous source of sound advice from the time I joined BISG in 2006 to last Tuesday, when we spoke for the last time. Everyone at BISG will miss Jean, and on behalf of the organization she supported so strongly, I offer our sincere condolences to her family, her colleagues at B&T, and all her friends in the book industry.

Colleagues at Baker & Taylor have provided the following information about a Memorial Service for Jean:

Saturday February 21st and Sunday February 22nd 2pm-4pm and 7pm-9pm
Wood Funeral Home
784 Main Street East Aurora, NY

Funeral Mass – Monday February 23rd 11:00 am
St. Cecelia’s Roman Catholic Church
991 Centerline Road Sheldon, NY

A further service in New Jersey is planned but at this time no details are available.

Memorial Contributions may be made to the following organizations: Susan G. Komen for the Cure, 5005 LBJ Freeway, Suite 250, Dallas, TX 75244 or Mortel Family Charitable Foundation, PO Box 405, Hershey, PA 17033

Michael Healy Executive Director, BISG.

MediaWeek (Vol 2, No 6): Borders, SharedBook, Tools of Change

Ingram Digital Chief Commercial Officer Frank Daniels has done an audio interview with Karen Holt at Teleread.org and among the topics covered are the following:

–Frank’s most recent title. “If it has to do with customers, it has has to do with me.” Earlier he was chief operating officer of Ingram Digital.

–E-newspapers vs. e-books—how they differ. Frank worked for both the editorial and business sides of the Raleigh News & Observer, which his family owned for many decades.

–Ingram Digital’s VitalSource e-reading software, whose interactive capabilities are especially useful in education-related apps, such as dental training. See video for more. Ingram bought VitalSource Technologies, of which Frank was president and CEO, in 2006.

–E-book prices, which he notes range widely. “E-books are going to be priced on convenience more than they’re going to be priced on format.”

–Kindle vs. iPhone. The device “that’s going to prevail has not been invented yet.” In fact, he’s doubts that the industry will standardize on a particular device the way the Apple iPod dominates music.

–DRM. Frank’s unabashedly pro. His DRM comments begin just short of nine minutes into the interview. Listen carefully. and please be civil in our comments section if you’d like to respond. “We’ve not seen DRM to be any kind of barrier to a sale.”

Borders' is able to extend the terms of their agreement with Pershing Square. It costs them $750,000 for expenses. The company now has until April 15th to repay a $42.5mm secured term loan. Coupled with this agreement the companies also agreed to extend the option to sell to Pershing the PaperChase business. Reuters Two businesses that were attempting to develop music and video "library" services on college campuses have folded. This week Cdigix sited the bad economy for their closure (Chronicle)

Cdigix, a company that focused on selling a service to colleges to place movies and music on reserve online for students, quietly ceased operations at the end of December and is in the process of dissolving. It cited a lack of clients and an inability to raise money to continue. The company initially offered an online music service for colleges, but it ended that service about two years ago to focus on offering reserves of electronic media.

Mark Brodsky, president and chief operating officer of Cdigix, said in an interview today that the company was “a casualty of the economic times.” It had about 25 to 30 colleges either signed up for the service or were testing it, he said, but customers were notified at the end of last year that the service would shut down.

Another service Ruckus also closed this week (Chronicle):

Colleges began signing up for Ruckus five years ago, and in 2005, almost one in five was considering a subscription to a music or movie service, according to a survey by the education-technology group Educause. At first Ruckus charged for campus wide access, but by 2006 it had shifted its focus from site licenses to advertising, still requiring colleges to sign deals, but not to pay.

SharedBook launched Smart Button technology a streamlined implementation of the SharedBook platform that, (SharedBook)

allows partners to apply SharedBook's customized creation capabilities with minimal resource application and maximum flexibility, delivering new revenue sources. Initially, Encyclopaedia Britannica's editors will use Smart Button to create a new line of books culled from their vast troves of content, arrayed to illuminate specific topics for their customers. Soon, visitors to Britannica.com will also have the ability to use Smart Button to make their own works, by selecting various articles and content, and with one click, add them to a custom, one-of-a-kind volume. "Smart Button turns the historical process of publishing a book on its ear, bringing specialized content to our users faster than ever before", said Joe Miller, Managing Director of Encyclopaedia Britannica's Consumer Division.

In addition to EB, Legacy.com and Sohio Blackwell was accused of 'dechristianising' their Encyclopedia of Christian Civilization (Guardian):

The Encyclopedia's editor-in-chief, George Kurian, claims that under pressure from an anti-Christian lobby, Blackwell decided that entries in the four-volume book were "too Christian, too orthodox, too anti-secular and too anti-Muslim and not politically correct enough for being used in universities". Kurian also claims that the press wants to delete words including "Antichrist", "Virgin Birth", "Resurrection", "Evangelism" and "Beloved Disciple" from the book, as well as objecting to "historical references to the persecution and massacres of Christians by Muslims".

Proceedings from last weeks Tools of Change Presentations. (TOC) Eduardo Porter writing in the New York Times on what Newspapers do (NYT):

Companies in countries with a larger daily newspaper circulation are fairer to minority shareholders and have a better record responding to environmental concerns. And a 2000 study by Timothy Besley and Robin Burgess of the London School of Economics proved Sen to be right: governments in India provide more public food and disaster relief in hard times in states where newspaper circulation is higher.

It’s easy to forget the role of an independent press in the development of democratic institutions in the United States. Through much of the 19th century, newspapers were mostly partisan mouthpieces. But as circulation and advertising grew, they shed political allegiances and started competing for customers by investigating shady deals and taking up populist causes.

Thinking about The Satanic Versus (BBC):

For Professor John Sutherland, critic and Booker prize judge, The Satanic Verses should now be seen as Rushdie's best novel, prophetic and the fruit of his obsession with on the one hand the magic of the Arabian Nights and on the other the literal truth claimed for the Koran.

"Rushdie is fascinated in the way that novels are true and the ways in which they become true through multiple untruths," he said.

"People looking for something offensive, heretical or blasphemous won't find it. It's not a diatribe, a calculated insult. It's an extremely good novel."

Jean Srnecz Dies In Crash

Noted via Publisher's Lunch the very sad news that Jean Srnecz SVP Merchandising at B&T was aboard the Continental flight that crashed in Buffalo. I didn't know Jean well but served on the BISG board with her and also sat with her on numerous panels. She was very well respected by me and many in the industry and all will mourn her loss.

Here is a statement for Baker & Taylor:

Baker & Taylor Mourns the Loss of SVP of Merchandising Jean Srnecz
Baker & Taylor, Inc.( 02/13/2009 )

CHARLOTTE, NC, February 13, 2009 - Baker & Taylor, Inc., the world's largest wholesale distributor of books and entertainment products, today mourns the loss of SVP of Merchandising Jean Srnecz. Srnecz was among the passengers of Continental Flight 3407, which crashed late Thursday night outside the Buffalo airport.

"We are all tremendously shocked and saddened at this terrible loss," said CEO Tom Morgan. "Jean was extremely highly regarded throughout the industry. She had tremendous industry expertise and was integral to Baker & Taylor's strategic growth, but was also valued as a kind and good person by all who knew her. She will be greatly missed by scores of people throughout our industry, and especially throughout our company. Our thoughts and prayers remain with her family."

Srnecz held many positions during her 33-year career at Baker & Taylor, ascending to SVP of Merchandising in 2001. She served on the boards of the Book Industry Study Group and Educational Paperback Association.

"I worked alongside Jean for 30 years and there was no one more knowledgeable and respected, as a professional and a person," said Baker & Taylor President Arnie Wight. "Jean truly loved this business and was loved by many in it. She will be sorely missed."

In her most recent position, Srnecz was responsible for all buying and inventory management activities, including Children's, General Interest, Adult, Academic, Professional, Higher Education, Mass Market and Audio. She was also responsible for Publisher Services, Publisher Sales Reporting, Inventory Analysis, Publisher Relations, and Advertising in B&T publications.

Source Interlink Wins Temporary Restraining Order

Lawyers representing the publishers in the suit brought by Source Interlink have been able to convince a Judge that the case should be heard in New York rather than Florida. Subsequently, the judge in the case agreed to an 'expedited' temporary restraining order requiring publishers to continue to ship their magazines to Source Interlink per their existing distribution agreements. A longer preliminary injunction hearing is set for February 23rd. (BusinessWire). It's probably never a good thing to sue your customers and one wonders how SI is ever going to regain publishers confidence regardless of the outcome of this legal tussle.

Time, American Media, Hachette Filipacchi, and Bauer are the major publishers currently using SI and must comply with this order.

ABA Takes it on the Chin for Booksellers

The ABA is reducing annual membership fees by 50% and implementing an assortment of other cost cutting programs to "to help and support booksellers in these extraordinarily difficult economic times." ABA

Among the policies they are implementing are the following:

1. Institution of a hiring freeze, resulting in a reduction of ABA staff by 5-1/2 FTE (full-time equivalents) -- or 12 percent -- achieved through attrition.
2. Implementation of a total wage freeze.
3. Suspension of ABA contributions to the association's 401(k) and SEP plans.
4. Elimination of all discretionary travel.
5. Elimination of all discretionary spending unless prior approval from the CEO or COO is obtained.
6. Increased implementation of web-based communication and webinars for delivery of ABA education programs.
7. Cancellation of ABA's annual spring forum schedule.
8. Revamping of the group medical benefit, with a move to a higher deductible and the implementation of a Health Savings Plan.

The organization has attributed the 50% dues reduction to the 2009 calendar year and has said any new members during this time would also pay the lower rate. Any member that had the temerity to pay already have paid their 2009 dues will get a refund. The announcement did not make any note of the current search for a CEO and whether that position was to be amended in any way as a result of these changes.