London Bookfair

It is a fabulous venue for LBF this year; I missed last year's disastrous trip to the Docklands but against Olympia the venue at Earls Court is far superior. It also helps that the organizers have listened to the attendees and the publishers to make the aisles wider, the furniture and fixtures more accommodating and pleasant and made sure there were enough food outlets. Olympia was especially bad at food and drink outlets.

It is also an active show with a lot of seminars to attend but the traffic on the floor is also robust. There is more than enough discussion about the state of the business both from the perspective of publishers and retailers. There has been some expressions of concern I have heard about the state of book retailing in the UK and the unknown impact of the Border's divestiture. There have been rumors that Richard Branson is interested in acquiring the chain and if that were to happen perhaps it would invigorate the book segment. There is a pervading emotion of disappointment by publishers in the way book retail has been managed in the UK and there is a general feeling that publishers can not expect improvement any time soon. It is a sad circumstance.

Given the level of acquisition activity in education publishing, there is a sense from publishers I spoke with that this is going to continue to be a very active year. There is an expectation that the Harcourt and Thomson deals are only the beginning and that trade will also see at least one major house put on the block before the end of the year.

Weekly Update

As mentioned London Bookfair is next week and posts will be sporadic.

Deal News:
Wicks buys Thomson Education Direct (Distant Learning) Times Tribune
Torstar may be under attack and what of Harlequin? National Post
A possible buyer of the Borders' Australia and New Zealand stores. NZ Herald
Media finance conference in Europe announced. Release
Buyers are less then enthused with Primedia enthusiast magazines. Reuters
Reed Elsevier advised to gear up. The Independent
Nancy McKinstry thinks Germany is ripe for new deals. Reuters
Axel Springer likely to do more deals soon (doubtful in publishing). The Australian

Google News
Lorcan Dempsey linking to comment on Google and Publishers Blog
Adam Hodgkin on publishers grumbling about Google Blog

Education:
Harcourt have had a lot of problems in School academic testing this year. Casper Trib. ZDNET
Thomson revolutionizes marketing text Release
There will be more on this: Wikipedea 'broken beyond repair' according to founder. ITNews

Other News:
Penguin obsession Blog
Peter Brantley's lively discussion over a $58 Paperback Blog
Mike Hyatt on Imprints and the decision to do away with them Blog
GalleyCat linking to a Bookseller article about what works here but not there. Blog
Joe Wikert gets all riled up about the logic of Print Blog
Reed Elsevier can't trade mark 'Lawyers.com' Bloomberg
SmartMoney wonders why no one is excited about Gannett. Smartmoney
The commercial E-Book market is broken. Blog

People:
McGraw Hill Hire Dan Caton as Head of Learning Group Release
New Board Members for SIIA. Release
Riverdeep/Houghton Mifflin announce appointment of President. Release

Sport:
Man Utd into the Champions League semi-final in style BBC

Reed Speculation

Via the Independent (UK), an investment analyst is suggesting that Reed Elsevier is under-valued and that a PE bid could push the share price up 85% higher than yesterdays close of 619p.

Collins Stewart adds that, with a current debt weighting of just 1.4 times earnings, Reed is under-leveraged and if it does not gear up its balance sheet "maybe private equity will do the job instead". The broker estimates at a debt multiple of 8 times earnings the shares could be worth up to 1,147p

Once the sale of Harcourt is done perhaps some activity will heat up. I see them being very interested in Bureau van Dijk as it would fit nicely into their legal and regulatory segment. Interestingly, the international spread of BvD could also aid Reed in expanding legal and regulatory into wider global penetration with new products and data/information.

Media Deal Confusion: But Lots of Them

From Financial News Online (US) there were 282 disclosed deals valued at $114.6bn (€87.3bn) in the entertainment sector in 2006 according to PricewaterhouseCoopers , marking the best year for M&A in the media and entertainment sectors since 2002, when there were $118.6bn of mergers done. According to PwC the outlook for 2007 looks stronger, with a backlog of 132 deals worth $103bn. Those deals, which have been announced but not completed, include the proposed buyouts of Clear Channel and Univision,valued at $26.7bn and $13.5bn.

Given the activity that folk in the publishing and business information segment have seen in the past 12mths, it is no surprise that the numbers year on year look impressive. Two very active investment banks in our sector also publish annual reports on their views of the business. (Veronis Suhler also active in this space publishes a fat annual report which is sold so I didn't access it).

In their report presented in January The Jordan, Edmiston Group contended that there were 621 deals worth $57.3Billion in 2006 and 542 deals worth $54.0Billion in 2005. The JEGI report covers 11 media segments with Marketing and Interactive Services with 138 deals and Online media with 174 deals leading the way. A short synopsis of each segment and the notable deals for each is also presented in the report. By way of forecasts, they only project what they expect to see happen in the trade show space which increased in the number of deals between 2005/6 but saw a decrease in the value of total deals. (In each of their periodic reports they pick a segment to forecast and more of these past reports are on their web site).

Desilva and Phillips has also done considerable business in the past year - by their own admission more than their pessimistic 2005 forecast - and while the numbers are again different from those above they do show impressive growth. From Desilva and Philips 2006 Market Report there were 151 deals worth $20.5Billion in 2006 and 115 deals worth $6.0Billion in 2005. They do take a look into the future:

Just as the economic outlook continues – even improves – in 2007, we see a continuation of a great deal market. We expect the number of deals and the dollar volume to continue – at least – at the record level of 2006. We are also aware of a very full deal pipeline. We expect to see more public companies going private, just as Reader’s Digest did – and it’s not just Sarbanes-Oxley. As we’ve seen, media executives now know that they need to transform their companies into platform-neutral content enterprises combining strong traditional and new-media distribution channels. But to do this makes it even more difficult to manage earnings from one quarter to the next, as the public markets demand. One result: the solution offered by buyout firms looks ever more attractive.

The outlook for M&A in 2007 is as good as we’ve ever seen. All the pieces are in place: availability of funds, favorable interest rates, eager buyers without the time to build rather than buy, brands that need to find new delivery platforms, and a regulatory climate that all but deliberately discourages new companies from going public and existing public companies from controlling their own fates. There is yet another population of buyers perhaps waiting in the wings – European media businesses newly flush with a strong Euro and, finally, thriving domestic markets. To say we’re looking forward to the excitement is an understatement.

No matter how the numbers are tabulated, given the activity already announced at the tail end of 2006 and the first quarter of 2007 it is hard to see 2007 not being a banner year for M/A activity in the media space. Already Wolters Kluwer education has gone for over $1.0billion, Veronis (Private Equity) has purchased Advanstar for over $1.obillion and Houghton Mifflin has been purchased by Riverdeep. In the wings are expected $4-5Billion deals for Thomson and Harcourt and $1.0billion for Bureau van Dijk. If Pearson or Reed are gobbled up by PE then it really will be a banner year.

There is a key comment in the above forecast which studiously points out that some very big and seemingly sophisticated media companies still have a lot to do to re-make their companies into 'new-media' content providers and not print companies. Five years hence the companies purchased by private equity will burst forth into the public markets in almost unrecognisable form having gained the flexibility to transform their companies into true online and new media players.

Deal News: Bureau van Dijk On the Block

The Daily Telegraph is reporting that Bureau van Dijk has hired LongAcre Partners and Goldman Sachs to review the company's strategic options. Generally a prelude to a sale.

Industry sources said Bureau van Dijk is likely to generate bidding interest from business information publishers Reed Elsevier, Reuters, Pearson and Incisive Media, which was last year acquired by private equity firm Apax. US bidders such as Dow Jones & Co, publisher of the Wall Street Journal, Standard & Poor's owner McGraw-Hill and Factset are also likely to be interested.

BvD was sold to Candover a number of years ago when the founder and owner sold 60% ownership. Senior management own the balance of the stock. The company publishes business and company information on millions of companies (private and public) around the world. From their web site:

We provide detailed, analytical databases, for in-depth research, such as AMADEUS (a pan-European database), ORBIS (33 million companies around the world) as well as extensive country-specific databases (FAME, DIANE, DAFNE). These products are ideal for in-depth research of individual companies, identifying
companies complying with specific criteria plus detailed analysis of company
peer groups and benchmarking. In addition, our ZEPHYR database covers M&A
deals and rumours around the world.

The Telegraph suggests the company could be worth over $1.1billion; however, financial information is sparse and this company could be a one of a kind deal given the value of the type of information it collects and the depth of its databases.

Bloomberg LP

The NY Times has a short item regarding the $20Bill Fortune valuation of Bloomberg LP. In happy news to all the potential operating company acquirers, when Bloomberg is asked if he could watch the company be acquired by private equity he says no. There is no indication that a sale is in the works (an offer was rumoured last year) and other than the unlikely event that Bloomberg will run for President it doesn't look like anything will change until he has finished his term as Mayor. As The Times alludes, real numbers are hard to confirm but with operating margins of 30+% and a commanding market share this could be an expensive purchase for someone; whether it would go for the multiple Fortune suggests is hard to believe but I am prepared to be surprised.

With the cash that Bertelsmann, Reed and Thomson have or will have there could easily be some competition for this one in the next 6-18mths.

BookExpo America Conference Agenda

The pre-show education and seminar program has been announced by BookExpo America and I wanted to draw attention to my contribution. A few months ago, I thought it would be interesting to hear from some publishers who are using blogging to get their message out and to understand the issues, surprises and successes. The organizers have used my idea to build a program around this theme and I hope you will join us and support the rest of the program.

Here is the day/time and description of the seminar. As you can see, I will be supported by a purposely divergent group of publishers.

Thursday, May 31, 2007
2:30 – 3:30 PM
1E04
Corporate Social Media Platforms: A Case for Publisher Participation
Corporations in all industries are experimenting and effectively using social networking tools to build product awareness, communicate and converse with customers and experiment. In the publishing environment, books provide an easy platform for the many individual consumer and author blogs that exist – and there are many – but what of the publishers?
For publishers, the question is not whether they should be involved in social networking activities (blogs, RSS, podcasts, etc.) but HOW should they go about experimenting and launching effective social network programs. This session provides an overview of the activities of various publishers and provides a window on their motivations, successes and expectations. Audience members will hear how these publishers are creating a ‘social’ identity to leverage their brand, content and authors and support marketing and sales goals.

Moderator: Michael Cairns, Information Media Partners
Panelists:
Karen Christensen, CEO, Berkshire Publishing
Jimmy Behrle, The Overlook Press
Mike Hyatt, CEO, Thomas Nelson
Carrie Kania, Publisher Harper Perennial, Harpercollins

London Bookfair

LBF starts a week on Monday and I shall be there. Let me know if you would like to meet at the show or later in the week in London. I am looking forward to it and perhaps will report on some of the sessions I plan to attend and whatever else I hear about during the week.

Email: michael.cairns@infomediapartners.com

Richard Dawkins: The God Delusion

Well it is Easter weekend and I thought appropriate to mention that I just finished The God Delusion by Richard Dawkins. The book is only one of several the author has written over the years and if they are as readable as this one they might be good to look for. This book is very entertaining and believable (although I suspect if you are staunchly religious you might not think the latter), and the writing style is less heavily dogmatic than it is conversational. It makes fairly easy going even though some of his arguments are complex. Here is an short interview with him on the UK news show Newsnight.


The title has been out for months and is a best seller in the US and UK, and it may have tapped a nerve with respect to the increasing representation of religion in politics and political life. It is interesting to read that he makes an assertion (as other writers cited by him have also concluded) that many of early leaders of US political life (notably Jefferson) were probably atheists. Given this shared perspective that the founding fathers had in creating the constitution I wonder what they would think about the current mingling of religion and government - not just here but all around the world.


Lastly, I am unsure of the motivation for the design of the US book cover but I was struck by the association with the (stupid) mirror on the cover of Time's Person of the Year issue. The God Delusion has a bright silver mirror like cover and in reflecting your image to you it seems to emphasise Dawkins view that "we make our our purpose in the world" and our purpose and morality in life should not governed by organized religion.


Dawkins website

Borders: The Gang That Couldn't Shoot Straight

Quick on the heals of their mediocre strategy declaration a couple of weeks ago the company announced yesterday a reasonably significant recapitalization of their current and revolving debt facility. True to form, the details were not exactly clear in the press release why this strategy made sense and why their financial advisers seemed to have a material stake in the effort. So arcane is the description of what they intend to do with the $250mm that I have yet to find a financial report deciphering it.

Borders Group has been advised that, in connection with establishing a hedge of the convertible note hedge and warrant transactions, the counter parties to those transactions or their affiliates expect to enter into various derivative transactions with respect to Borders Group's common stock concurrently with or shortly after the pricing of the notes. The counter parties or their affiliates may also enter into or unwind various derivative transactions with respect to Borders Group common stock and/or purchase or sell Borders Group common stock in secondary market transactions following the pricing of the notes (and are likely to do so during any observation period relating to the conversion of a note).

The lack of reporting could also be the result of their apparent omission of any reference to an action like this in aforesaid strategic plan. Nevertheless, it doesn't really matter since this morning they decided that they needed to reconsider and that they were cancelling the offering. They blame shareholder feedback - which must have been pretty swift - and my guess is that the existing shareholders were not at all convinced that this financial restructure wasn't going to be immediately dilutive. It is also likely the shareholders found out via the press which doesn't seem ideal....

Borders Group, Inc. (NYSE: BGP) has determined, based on shareholder feedback,
to re-evaluate its proposed offering of $250 million of Convertible Senior
Notes, announced yesterday. The offering will not proceed today as originally
planned while the company re-evaluates this and other financing alternatives.
Upon completion of this re-evaluation process, Borders Group will issue an
update at a later date.

April Forewarning

On the back of their self-regulation of the famous swimsuit issue, Sports Illustrated announced that they would no longer report on women's professional volley ball. In comments, the company stated that the decision to restrict circulation of the swimsuit issue to libraries had led to some internal 'soul searching' and, as a result, the company had decided that they would no longer picture the scantily clad and excessively athetic atheletes of the PVA in the magazine. No word yet from the library community.

In other news, the ISBN community reported that they are considering adding a suffix to the recently adopted 13 digit ISBN syntax that will enable ISBNs to include additional characters and/or numbers for parts of products. The proposal would add a decimal point followed by whatever series of numbers and symbols the publisher required. The agency commented that the additional characters would not be confusing - unless the publisher chose to use a rune - and that they would be basically ignored by electronic bar-code readers. The decimal point would be calculated as a zero.

Borders (Lack of) Strategic Plan

The WSJ took a look at Borders today but not in any great analytical sense (subscription required). There is much to think about from the perspective of shareholders but this perspective seems to be missing from the discussion thus far. Perhaps some of the analysts that follow the company are preparing their position reports. The Journal did allude to the possibility that Borders could be a PE target: I would wonder about that although they believe this seems to be buoying the stock. In my opinion given the newish management, I think any Banker would want to see some improvement before they jumped in. Over the past six months there have been precious few positive actions out of the company but only a few people seem to be concerned about the long timetable to improvement.

My post from earlier this week.

Here were some other blog posts:
The Publishing Contrarian
Booksquare

The Road - Cormac McCarthy. An Oprah Pick

Oprah announced an unusual choice for her Book Selection today. Cormac McCarthy's The Road which I read in November is a frightening book and I recommend it. Here is my take.

If you saw the movies 21 days or Omega Man or Plant of the Apes you will know that in the post apocalyptic world we will be separated into two classes. Those that remain human and those that have become something terribly mutated. So it goes with The Road by Cormac McCarthy.

The book is immediately powerful because the reader sees this post-Armageddon future as entirely likely and the ravages forced on society as absolutely plausible. There are two characters in the book - father and son - and so depraved are the antagonists that the father concentrates on retaining one remaining bullet for his gun so he can shoot his son should they be captured. He cannot let the son become victim to a certain end that is revealed episodically until a climatic moment near the middle of the book. As they stumble along the road in a daily struggle for food the possible future is horrifyingly recounted when they nearly interrupt a cannibals smorgasbord replete with cauldron in the yard.

The book depicts a greyed out world where nothing apparently grows, all structures have been stripped by some locust of human desperation and death is found everywhere even in the tarmac of the the road they are travelling. It is not entirely clear where they are travelling or what has lead them to make this journey - there are several explanations which adds to the mystery. The book is riveting and is a stylized conversation between father and son which flows fast and sure. The Road, which I read in two days will live in my mind for a long time, but as horrific as this story is, I am sure the real thing will be worse and that is saying something.

Metadata, identifiers and a challenge ahead ….

Another rehash from March 28, 2007 this time a post written by Michael Healy who at the time was the Executive Director of the Book Industry Study Group. Michael has since moved on to Copyright Clearance Center but all of these issues he spoke about in 2007 remain relevant.

I am (unsurprisingly) in complete agreement with Michael’s comment in his thought-provoking piece on metadata that publishing businesses “must continue to focus on product information”. No one would seriously argue with his assertion that the quality of metadata has risen in recent years.

Several factors have influenced the improvements we have seen. International standards, notably ONIX, have been helpful to this process and many publishers, booksellers and data aggregators have adopted it to organize and communicate information in a standardized way. Practical guidance has also been made available. The Book Industry Study Group has prepared Product Metadata Best Practices, a set of voluntary guidelines that aims to help publishers improve the quality of their product information throughout the supply chain and speed the delivery of that information to the vendors’ trading partners. Innovative services from companies like Quality Solutions and Netread have also played their part.

I think also the general level of awareness in the book industry of the role product information plays in selling books has risen substantially. This has been helped by leaders like David Young at Hachette, Joe Gonnella at Barnes & Noble, and many others evangelizing on the subject for many years.

Under normal circumstances when improvements like those we have seen are made there is a danger of complacency setting in, but I see encouraging signs that this is being avoided. In many of the larger publishing houses, where investment in quality metadata has already been significant, I find abundant evidence of a commitment to raise standards even further. Many examples of high-quality data can be found outside these large houses, but I think it remains true that many smaller companies, working with fewer resources, have a lot to do raise their game. Organizations like BISG must face the challenge of how to reach these companies with clear, straightforward advice and with tools to help them deliver good metadata. We will be announcing some initiatives in this area shortly.

More work is certainly needed in the standards area and much of this is underway. A new release of ONIX is expected later this year which, among other things, will improve its handling of digital publications. An entirely new standard now under development, the International Standard Party Identifier (ISPI), will in time establish a unique identifier for authors, composers, performers and others in the creative supply chain. We are all aware of how unreliable personal names are as a means of identifying individuals, especially when we consider how many people share the same name and how many authors use pseudonyms. The adoption of a standard ID for personal and corporate names will be a big step in eliminating ambiguity when searching and in facilitating transactions such as the remittance of royalties.

RFID also appears to offer interesting opportunities. As the price of tags continues to fall we are beginning to see some large-scale adoptions in libraries, notwithstanding well-documented concerns about privacy issues. In bookselling, at least so far, the response has been more cautious. The adoption of RFID by the leading Dutch bookshop chain, BGN, has certainly stimulated interest among American booksellers but at the moment most of them appear to be waiting for more compelling cost benefits to emerge.

As we look further ahead into a future in which more fragmented content is sold, distributed and traded digitally, whether it’s cookery recipes or individual chapters from textbooks, one key question is how the industry will cope with the metadata challenge. If publishers are finding it demanding today to provide comprehensive, accurate and timely product information to support a universe of more than 3.0 million US titles and 200,000 new books a year, what happens in a market where available product is set to grow exponentially?

Michael can be reached directly at CCC.


Links: Metadata: What does it all mean

Thomson Learning Sale Update

The Globe and Mail (Toronto) is naming the names of those who are bidding for Thomson Learning. No real surprises and it would appear that the only operator that may emerge as a potential party to an acquisition is Bertelsmann. The only reason for that would be the announcement last week of Bertelsmann's establishment of a private equity fund. Perhaps if that announcement had not been made this list would be exclusively PE. Those named in the article are Bain, Thomas Lee, Blackstone, Warburg and Apax. Pretty much the top of the pile.

According to the article the dd meetings are underway and a deal is expected in the next two months. It seems likely that the Reed/Harcourt divestiture timetable may be set back into the third quarter due to this activity. Now that the WK education deal is done activity and attention will move to Thomson so look for more articles.

Globe & Mail

Wolters Kluwer Education Sale Confirmed

WK confirmed the sale of its education unit to Private Equity fund Bridgeport Capital for $1.0billion. As mentioned last week this represents a good price and WK, Reed and Thomson Learning should all be happy with the valuation.

Reuters

Englishman in New York

One of the great things about living in New York (technically, I live 1.5miles to the west) is that you can find just about anything and if you work it right you can live in a neighborhood or interact completely with people from your own land. In my case, there are numerous opportunities to bond with fellow English (or Greater England) in bars and stores in lower Manhattan. On Saturday afternoon, I visited my favorite corner shop for a few pork pies, sausage rolls and some bangers. As a quite considerably displaced English person (via Thailand, New Zealand, Australia and Hawaii), I can still remember the first time I walked into Myers of Keswick. (This is not a good picture). I almost expected Ronnie Corbett to to be standing behind the counter. (Thankfully the shop assistants are considerably better looking). At Myers, you can find everything from Flake and Crunchie bars to Ribena to Branston Pickle all of which are favorites of mine. A side effect of the limitation on traveling with liquids has been a significant reduction of my direct importation so I am lucky to have Myers.

At the store, I also found out for the first time that a number of local West Village stores are attempting to designate the area bordered by W14th, Greenwich Avenue and W10th as “Little Britain”. The campaign was undertaken by Tea and Sympathy (a tea shop) and is also supported by Virgin who bring loads of us back and forwards from the UK. There does seem to be some support for the idea. If you navigate to the ‘map’ segment on the web site you will find all the local ‘little Britain’ attractions. Highlights are Myers, A Salt and Battery and The Spotted Pig.

Following my shopping visit to Myers, I wandered around the west village neighborhood and at one point joined a crowd outside a full pub named The Red Bull where the group were watching South Africa attempt to match the incredible 40 over total of Australia (377 and they won). Standing outside in a group of about 20 were people from England, South Africa and New Zealand all joined by their interest in Cricket. At the same time on a TV screen further inside the bar England were dismally performing something closely resembling football. I love New York.

Krakoff Dies

From PaidContent.org: Bob Krakoff died suddenly last night at the age of 72. Krakoff, had recently taken over the VNU business media properties in the wake of the Nielsen privatisation. In his sucessful media career, Krakoff ran many of the Reed Business magazines and reference companies and rose to vice-chairman at RE.

Paidcontent.org.

Harlequin: An Augmented Man Is Good to Find

If you happen to be in Toronto this weekend and you are male you may want to try out for the open 'casting call' to be a cover model. Apparently, they are having difficulty finding the right sort of bloke and are going to look beyond the typical modeling agency fodder and take walk-ins. The modelling agency hurdle had always been my biggest obstacle but sadly I am not able to make it to Canada this weekend. Regardless, the rather sizable 'alternate lifestyle' community of Toronto should have some fun with this one. From The National Post:

"Ms. Reynolds also said Harlequin, which typically relies on a male protagonist of chiselled physique for its titles such as Slow Hand Luke and Jack & Jilted, is often looking for more muscular models that her agency typically wouldn't carry. "It's difficult because we only have a limited pool of guys who might be able to--even if they're slightly augmented -- look right. It's easier for us to provide the James Bond guy or the New York, sophisticated-businessman guy."

"Peter Duck, a professor in Ryerson University's School of Fashion, said he was not surprised to learn Harlequin is facing a shortage of manly models, given trends in the fashion industry. "The agencies, I'm sure they're getting this look that's been popular for the last few years, which is very skinny, tall and young."

I swear that was the first cover I came across.

Pearson Teams With Google

Educational publisher Pearson has linked up with Google Video to offer students quick video programs of educational programs.

Lecture and Test Prep videos for seven additional Martin-Gay titles from Pearson Prentice Hall will be available for download by summer 2007, covering basic college mathematics, introductory algebra, and, intermediate algebra. Students can purchase sections of the Lecture Videos for $0.99 each; a chapter of the Test Prep videos for $1.99; and a full chapter of the Lecture Videos for $3.99.

The quick video content is designed to support in class and text material and a 'great way to get extra support'. Parents may anti-up for the videos but I wonder whether the kids will. How soon will the videos be available for free on YouTube? You do have to recognize that Pearson comes up with these interesting ideas to extend content into different distribution channels and to go where the customers are.

Also, it being Friday and there being excitment over Wolters Kluwer, the Pearson plc stock is up (again) this morning on speculation of a break-up.