Google Orphans: What Revenue Opportunities?

Mike Shatzkin (and I) look at some potentially untapped IP in the GBS orphan class: Link

"Let’s say there are 5 million orphan works and 1/2 of 1% of them are worthy of a press run of 5,000 or more. With a few bigger winners in there, let’s say that’s an average of 6,000 press run across the 25,000 estimated titles. That’s 150 million units. Average retail of $15, average discount of 50%, conservative royalty of 5% of retail calculates to $1.125 billion in revenue to publishers and $112.5 million in royalties.

"Cairns says that maybe these numbers are too high by a factor of ten. If he’s right, we’re still talking about $112.5 million in revenues to publishers and $11.25 million in royalties to authors. I have to believe those numbers are still larger than licensing revenues will be, although Cairns and I have not explored that more complicated question seriously yet. And the truth of the press run potential probably lies north of Cairns’s number (although perhaps south of mine.)

"Why was that element left out of the settlement? Did the negotiating parties even contemplate it? And exactly how useful is the “orphan” relief if this huge portion of the potential revenue (and public value) is omitted? Were the parties so fixated on electronic exploitation that they just didn’t notice this? "

Best of PND

With over 1000 blog posts since I started back in mid 2006 some of the more interesting material is now buried, so I have decided to retrieve a wide selection of material which I consider a level above the average. I have manipulated Blogger a little by creating a new blog and I have linked from the new site back to PND for the full content.

As always, feel free to email any of these blog posts to colleagues since I am always looking for more subscribers.

The Best of PND is located here.

Also don't forget I am on Twitter @personanondata.

I have also created a web site for Information Media Partners which gives some information about my consulting practice.

Springer On the Block

The Guardian is reporting that private equity owners Cinven and Candover are seeking 'strategic advice' from Goldman and UBS with respect to a possible sale of Springer Science. Springer Science and Business Media is the love child of a combination of Springer and Kluwer back in 2003. At the time, it is believed the private equity owners were attempting to roll up several properties (including Informa) in advance of a listing.

Where they are now will be difficult to ascertain. Today, their business could be fairly stable but most executives I speak to who have significant revenues in the academic, library and media segments believe that this coming year and 2010 will represent real tests just to keep revenues from falling off a cliff. Any publisher with 'second tier' products is going to face a torrid time keeping their subscription base. It is the subscription model that has helped many of these publishers weather the storm thusfar; however, this will not last as library and academic funds are slashed.

Candover and Cinven will face a difficult task and if they want £2bn as the Guardian suggests then this will be a big ask. Everyone is familiar with the protracted Reed Business auction that was ultimately abandoned and while this is a different market the example is indicative of the risk-averse nature of the M&A market for media properties.

From the Guardian article:

Rival private equity groups are regarded as the most likely buyers, although the head of one competing venture capital firm said he thought it was unlikely Springer would attract much interest, given the poor short-term prospects for the global economy.

Media companies have also seen their valuations fall in the wake of a global advertising downturn. However, unlike other media groups, many of which are heavily reliant on advertising, Springer has a relatively secure source of revenue. It publishes more than 6,500 new book titles every year and owns 60 publishing houses in about 20 countries in Europe, Asia and North America.

The company employs more than 5,000 people and its British operation, based in Surrey, oversees the publication of 20 journals.

Springer has been (from the outside) fairly innovative with respect to eBook and new publishing models. They were one of the poster children for the Google Book program and professed to have seen impressive sales results from many older titles that they had given up on years before. Perhaps, the eventual buyer will be taking as much a flyer on Springer as they will be on the potential for the wider market to turn around in the short to medium term. Good luck with that.

Archer Trophy Wall

Apparently, Jeffrey Archer is looking for every edition of his 'break-out' book Kane and Able. No reason is given for the requests although I believe he is building a giant trophy wall of bookshelves of every edition of every title he has published. Periodically, he will scan the titles in awe and perhaps turn some of the titles so they are face out. In a mosaic of sorts.

Independent

FiledBy Announces Launch of filedbyauthor website

I have noted the early development of FiledBy before and here is an announcement of the launch of their site:

FiledBy, Inc. today announced the Beta launch of filedbyauthor. The site is the first large-scale author-centric promotional platform to provide every author that has been published in the U.S. or Canada a free, hosted, ecommerce enabled web page ready to be claimed and enhanced. With more than 1.8 million pre-assembled author web pages and over 7 million book titles, filedbyauthor is the most complete site for finding and engaging with authors and their work.

“All authors, regardless of publishing category are encouraged to visit the site, claim their page, make corrections, and enrich them in a variety of ways," says Founder, President & C.E.O. Peter Clifton.

Any published author or co-author can easily and immediately update their author page which is linked to individual work pages. In addition to the free level, FiledBy announced two new membership levels designed to make additional web marketing tools available at low cost. These additional levels include blog tools, additional linking and media postings, event listings, online press kits and banner customization.

And, any reader can join the filedbyauthor community and start connecting with authors. Readers can fill in their own pages, collect favorite authors and books, write reviews, rate works and authors, and comment through wall postings.

“We hope to level the web marketing playing field for all authors, eliminate some of the challenges authors face when designing their online presence, and help every author become more easily discoverable through a highly optimized site,” added Clifton.

FiledBy, Inc. is a digital marketing services company providing membership sites, web tools and community building solutions to authors and their fans. The Company, based in Nashville, TN, was co-founded by Peter Clifton, a former Ingram executive and Mike Shatzkin, a publishing industry strategist.

Google Book Agreement

Mike Shatzkin has been thinking about what the Google Book agreement with AAP and AG could mean for revenues: Where will the money come from? (He's roped me in as well):

The part that interests me most is the potential revenue beyond the settlement. Where is the revenue for this going to come from? Who will buy what from the material Google has digitized and what will the revenue opportunities really be for those who “opt in”? And what will Google really have to sell?

I went to Michael Cairns, former CEO of Bowker with this question and he and I are starting to think it through.

All the focus on revenues in the conversations I’ve heard, including a very stimulating seminar at Columbia ten days ago, has been about digital revenue. And that’s what Cairns and I were thinking about too. What, besides the pre-1923 PD stuff do they have in the databases they can license to libraries? So how much can they charge? We saw Google’s pricing idea for ebooks. What will copyright owners do about pricing? And will copyright owners give Google books under this program, or under the Google Partnership Program? These are complicated questions.

Distracting, even.

More

MediaWeek (Vol 2, No 11): Voyager Learning, ReedElsevier, CBS Radio, Libraries

Near Norwich, Bertrams were sold for £8.6mm and all 600 staff were kept on. A remarkable event given the state of UK bookselling. Smiths News is the purchaser. Reed is paying Pat Tierney a £2.4m bonus and The Times suggests shareholders will be pissed. Tierney ran the educational unit (Harcourt) which Reed sold for a large premium over what they purchased it for. In addition, Tierney deferred retirement to take care of the sale process. A good backgrounder on how legal publishing works from a taxonomy and text mining perspective. (Legal Technology). ReedElsevier's earning call transcript (SeekingAlpha).

As far as the 2008 financial performance, 15% earnings growth and that is our highest for many years, and I think in this market, it is an excellent performance. Good above-market revenue growth we’ve seen for Elsevier, LexisNexis, and Reed Exhibitions, our core businesses. All three of those businesses, I think, did very well in terms of organic revenue growth.

Our focus in the last two or three years on accelerating margin improvement is paying off with 110% basis point margin improvement. We had a record year in terms of cash conversion, 102% of operating profit into free cash flow, that’s just £1 billion, which is an extraordinary number of free cash flow. Return on capital employed rose for the fifth year in a row. It is now about 12% and obviously significantly ahead of our cost for capital, and I think after the 1.5 billion corporate bond issue in January and the renegotiation of the revolving credit facility, we are now financially in a good position and with well-spaced debt maturities going forward. - Sir Crispin Davis

A shareholder suit against the remaining parts of what was Proquest and is now Voyager Learning is going ahead. (Law360). Voyager also announced their full year 2008 results (Press Release):

• Net sales for 2008 were $98.5 million, a decrease of 10 percent from net sales for 2007 of $109.6 million.
• Gross profit decreased $10.8 million in fiscal 2008 to $62.6 million compared to $73.4 million in fiscal 2007. The gross profit margin also decreased to 63.5 percent in 2008 compared to 67.0 percent in fiscal 2007.
• Loss from continuing operations before interest, other income (expense) and income taxes was $83.3 million in fiscal 2008 compared to $104.4 million in fiscal 2007. The Company had adjusted EBITDA, reflecting ongoing business operations, of $15.8 million in 2008 compared to $28.7 million in 2007, where adjusted EBITDA excludes depreciation and amortization expense, goodwill impairment charges, costs to terminate leases in Ann Arbor, Michigan, and corporate overhead costs which were predominantly for restatement related activities in 2007 and 2008.

The good news is the company is 'all caught up' in their long running financial reporting saga. (PND) The company is still looking to be acquired. The Chronicle reports on belt tightening in the library world (this year and next will be tough for vendors).

Greg Doyle, electronic resources program manager of the Orbis Cascade Alliance, in Portland, Ore., describes his group as "a buying club" that represents 36 academic libraries at public and private institutions in Oregon and Washington. I buttonholed him after he made lengthy stops at the Oxford and Ebsco exhibits.

Mr. Doyle is not afraid to use the word "dire" to describe the economic situation that faces his alliance's members. "Right now everybody's budget is terrible," he said. Many don't yet know just how bad the cuts will be. To prepare for the worst, though, they "are actively identifying databases to cut."

HyperLinked data from Tim Berners-Lee (TED Video). There is also a related video from 2006 meeting about using data sets in new ways which is very interesting. (TED Video) The library of the future being built in Palo Alto? Not really but this is an interesting article on how (public) libraries will evolve from an unusual source. I liked this bit:

Loertscher teaches his library-science students to use the "learning common" tool, in which an information professional sits in on an online conversation, helping teachers and students who have created assignments and projects on iGoogle pages. The librarian in coming decades "will burrow right into the center of where the clients are now," commenting on assignments and offering reference and research materials that support projects, Loertscher predicted. In his model of the future, the librarian goes into the student's space, rather than the student coming to the building, he said. "It's very proactive and moving into the space where kids (are comfortable). You have to take their social-networking skills and bend them over into their learning skills," he said.

Some lessons to be learned in the way CBS is managing their radio stations and the seemingly misguided understanding of their key market. (CrunchGear).

We now turn to Mr. Bouloukos’ comment, that young people—most of you guys are young people, I would guess!—are “using the radio to discover today’s most popular music.” First off, that wording is just wrong. If a song is already popular—remember, 92.3 Now will only only play “hit music”—then the odds are that people have already heard it before; in other words, hit music is already popular! A song becomes popular when a lot of people know it, and enjoy it. If a song is popular, then people aren’t, by definition, “discovering” it! (Amateur Hour at CBS Radio, apparently.) Even giving Mr. Bouloukos the benefit of the doubt, that what he meant to say is that people are using radio to discover new music… well, good luck bro. I’d like to find the last 17-year-old in America who is using commercial radio as his primary source of new music. I mean, it’s not like these kids are using THE INTERNET to find new music, right? MySpace Music, music blogs like Hype Machine, sites like Imeem and YouTube, etc. (Then these kids turn around and buy said music either directly from the band’s Web site, or use iTunes or, yes, download it “from BitTorrent.” (BitTorrent is an Internet protocol; you don’t download things “from it.”)

Playboy Archive Launched on the Web

If you are looking to read some really great articles, short stories and profiles, well your boat just came in.

My friends at Bondi Digital have launched the playboyarchive which covers the years 1954 to 2007 of one of the iconic brands in publishing and media. Each edition appears as it did when published, complete with articles and advertising and there's even some photography! The company behind this effort - Bondi Digital, has a growing track record in taking the archives of well-known magazines and creating a database and visual representation of the original verison. Launched under the Cover-to-Cover brand, the company has done this with The New Yorker, Playboy and Rolling Stone. Each of these titles was orginally published on DVD form and packaged together with a companion book. In the case of Playboy, the original idea had been to launch the Playboy collection by decade and Bondi began that process 2 years ago with the 1950s issues.

In addition to launching the Playboy web version they have also announced that they will launch a similar online archive using the Rolling Stone content. Currently access is free to the archive and they don't have current plans to charge.

I interviewed David Anthony one of the company founders just after they completed the first Playboy DVD - here.

Australian Parallel Importation

In a story line we have been following from a distance, the Australian government has been attempting to address the impact of their protected market for books. Does it help indigenous publishing or cause consumers to pay higher prices? The commission has taken testimony from all sectors of the market (submissions are published on their web site) and have now published their preliminary findings.

There is no formal policy change at this point but they appear to be recommending only minor changes to the existing policy.

Here are the summary findings: (Report)

Key points

• The Commission has been asked to assess the benefits and costs of Parallel Import Restrictions (PIRs) on the importation of books that are published in Australia, and to examine the merits of options for reform.

1. The PIRs are contained within the Copyright Act, although they are additional to its core protections.
2. Changes to the PIRs in 1991 have overcome previous concerns about the timely availability of books in Australia.

• PIRs, by restricting competition, place upwards pressure on book prices in parts of the market:

1. most of the benefits of these higher prices accrue to publishers and authors, with demand for local printing also increased most of the costs are met by consumers.

• While these benefits and costs are largely offsetting, there are some resource costs for Australia, including a leakage of income to overseas authors and publishers.
  
  
• At the same time, the PIRs help to support the ‘cultural externalities’ associated with Australian publishing. These are assessed as policy relevant, but unlikely to be large.
  
  
• An explicit subsidy to support the cultural externalities would avoid a leakage of support overseas, but the approach would have practical drawbacks.
  
  
• Abolition of the PIRs and reliance on consumer demand for Australian stories to deliver a sufficient level of local writing and publishing activity, while having some merit, would not be prudent at this time.
  
  
• Changes should be made to the current PIR regime to increase competition in those parts of the market where the restrictions put most upward pressure on book prices and/or where the cultural externalities are likely to be smallest. To this end:

1. PIR protection should only apply for 12 months from the date of first publication of a book in Australia (while retaining the 30 day release rule) the 7/90 day resupply rule should be abolished booksellers should be allowed to overtly offer an aggregation service for individual import orders under the single use provisions.

• A further review should be held five years after implementation of the changes arising from this study.

Find more information including the submission from Leading Edge which has some good background information here: Delicious Bookmarks

Chaney to Ghost Write Bush Decisions - Again?

It's in the HuffPo so it must be true. Or not. Link

But according to sources close to the former president, Mr. Cheney was his second choice to write the memoir after Mr. Bush was turned down by his first choice, author James Frey.

Mr. Bush, who reportedly "likes the way he makes things up," had asked Mr. Frey to pen the memoir under the title A Million Little Decision Points.

I actually think that kid from Brown might have done a better job with this.

Shatzkin with Agents and FiledBy

Mike Shatzkin who needs no introduction nor help from me for that matter had an interesting post today about a panel discussion he participated in on the future of publishing. Importantly, however he also announced that his new business FiledByAuthor is now live:

This is the same phenomenon that has made it harder for new bands to break out for years: a kid today can still “discover” the Beatles or Bob Dylan and have dozens of songs to listen to and learn without any regard to what is “new”, because the Beatles and Dylan are new to them! We haven’t (yet) had the situation where a multi-book novelist from the 1880s or the 1930s becomes a new addiction, but we’re bound to eventually. And in the meantime, all those Long Tail units are just making the slope to success a little steeper for every new book.

I also told the agents (and, because I did, I want to tell you) about a brand new business I’m involved in called Filedby which, I’m happy to say, is addressing the Long Tail question from another direction. Filedby is now live with a web page for 1.8 million authors — every single one with a live ISBN in the US or Canada. The pages, already mounted, are “claimable” by the authors, providing a big head start on a personalized web page that Filedby has provided largely through automation. We see an enormous opportunity in helping authors help themselves. There are a lot of them not getting much help from their publishers. Frankly, except for Morgan Entrekin — who explictly spoke about working the internet finding the audiences for books that would sell between 6,000 and 25,000 copies — nobody was offering much hope that the publishers would be doing more for the authors in the days to come. Everybody seems to be looking to authors to do more for themselves. I think my co-founder Peter Clifton and I picked a very good time to be starting this business.

Six Things to Change Publishing But with Video!

Here is the link to the post earlier in the week with the powerpoint presentation:
(Link)