Interview with Jane Friedman

Interview in Forbes with Jane Friedman, CEO Harpercollins.

Forbes: When you look out into the future of publishing, what do you see?
JF: I think the book business is the healthiest I have seen it in a very long time. We are seeing a breadth of titles selling in many different channels of distribution. We are no longer publishing for the independents only, the chains only, the big box merchandisers only, the online sellers only. We are selling across the board. The health is the breadth, diversity and range. That's good for business, and more importantly, it's good for society.

Rest of the interview here.

File Under Any News is Good News

Personally, my interest in the Tour Dey France ended the day after Floyd Landis won last year and we found out he was a doper. The feel good story bleed to death. After watching the tour through the Lance years Mrs PND and myself now have no interest; however, we are unique because Versus (candidate for dumbest brand name change of the year) the cable channel is reporting the highest viewship ever. This proves that any news is good PR and notoriety is paramount.

E-book Reader for IPhone

Via teleRead an application for the IPhone that enables the reading of over 10000 books on the IPhone.

Adam at Exact Editions will be excited.

Note one of the comments (not sure if it applied to the IPhone or not):

Having played around will all the current iPhone ebook “solutions”,
including the one mentioned here, I’m afraid none of them will really fit the
bill for a serious ebook reader. There are two major problems:
1. Lack of local storage. If the book is stored on a server then the reader is pretty much out of luck in areas of poor cell or wifi coverage.
2. Inconvenience. Reading a book in a browser doesn’t work well because you can’t bookmark your page. Several times I’ve had Safari quit on me and then had to re-open the book and scroll through 250 pages to get to my place. Storing the ebook as part of the url solves the local storage problem, but doesn’t solve this one.

NewsCorp Deal for Dow Jones All But Done: Now Done

Update: Pop the corks: Reuters

Reuters is reporting that the deal is done - then they changed their headline to 'deal expected Tuesday'. Assuming definitive agreement is reached at the DJ board meeting later today, Rupert Murdoch gets the biggest name in financial news reporting. Don't be surprised if we see him wrap the WSJ brand around his new financial news cable channel.

From the report:

"The Bancroft family has accepted," John Prestbo, editor and executive director of Dow Jones Indexes, told reporters in Chicago. He said Dow Jones "will be part of News Corp." Prestbo said the information came from an internal company memo.

New York Times: Murdoch Wanted it More

Simon & Schuster Report Strong Revenue Growth

They don't get a lot of play in the press release, but operating results for S&S were up sharply against the same period last year. For the first half, revenues were up 20% to $429mm and operating income was up 169% to $44mm.

For the quarter:

Publishing revenues for the second quarter of 2007 increased 14% to$200.3 million from $176.0 million for the same prior-year period,principally reflecting higher sales from best-selling titles, including Blaze by Stephen King writing as Richard Bachman and The Secret by Rhonda Byrne. OIBDA increased to $20.1 million from $10.6 million and operating income increased to $18.1 million from $8.2 million, reflecting the revenue increase partially offset by higher production and royalty costs.Publishing results included stock-based compensation of $.9 million and $.5million for the second quarter of 2007 and 2006, respectively.

Press Release

It may be no secret why the S&S results are so good. Assuming Bryne's book continues to sell into the third and fourth quarter and with the addition of ancillary titles, then S&S executives at S&S should be in line for nice bonuses this year.

Dow Jones Cliff Hanger

Apparently, things are on a knife-edge at NewsCorp. The deal deadline was set for Monday 5pm but not all the legal documentation was submitted on time. Murdoch awaits the news with increasing impatience and at the least it appears the margin of victory is going to be very close. Murdoch may win a significant portion of the vote but it looking for a major endorsement of the deal. Analysts suspect he is looking for more than 30% of the Bancroft shareholders to support the deal. Some insiders suggest he has this: With the stock price ready to tumble if the deal falls through - and the stock price fell 5% yesterday - some shareholders may cave and vote with their wallets.

Trib
Forbes: News Corp Unlikely to Proceed with Bid
Reuters
Forbes: The MySpace Guy

Pearson Profit Triples

Pearson posted revenue gains of 3% - up 6% on a constant exchange basis - and profit from continuing operations tripled from £14mm to £40mm for the first six months of 2007. Net income was lower for the period due to a charge of £123mm for the sale of its government services group earlier this year.

For the first half education revenues were up 7% and profit also increased. The company's earlier statements regarding revenue growth particularly in education seemed conservative especially given the add on acquisitions the company has made in the past 18mths. Regardless, some analysts were surprised that the company has raised its growth expectations for the total to between 5-7% driven in part by the strength of education.

Marjorie Scardino, chief executive, said:

"Our half-year results are always just a hint of our potential for the year, but
certainly a strong hint this year. The Financial Times Group is showing the
value of its unique strategy; Penguin's publishing and profit are both solid and
promising, as is its approach to change in publishing; and in Education we
continue to set the pace as we use technology to personalise learning

Scardino also said on the conference call that the company was not completely seriously interested in the WSJ meaning that they were never going to put cash into a deal or make a deal that would have diluted EPS. However, she also said that when a competitor is being sold as an executive she is obliged to review all options which seems to be what they were doing.

Pearson's share price went up 2% yesterday on the news. On the back of these results and the others in the past few days, the publishing and information business seems to be doing quite well.

Pearson PR
Forbes

Webkinz World: Trend-spotting in the Under-8 Crowd

The following post is by Susan Ruszala who is a freelance marketing consultant to publishing technology companies and was formerly responsible for international marketing activities for VISTA (now Publishing Technology Plc). She is an avid reader. You can contact Susan at sruszala@gmail.com.

Children often have as much to teach as to learn.

My 6-year old son has recently become enamored by Webkinz, stuffed animals that come with a password which opens the door to a virtual world where you can house, feed, dress, accessorize and amuse your pet (complete with playdates through online chatting) to your heart’s content. The site rewards usage through the accumulation of Kinzcash, virtual money earned through clever games (pseudo educational), online “jobs” and kids gambling in the form of bingo and slots. All of which allows your child to buy even more virtual items for their pet (or pets—link your rooms together for more fun!), including “rare” items in the Curio Shop, sale items or items which require a coupon. Cleverly scary, huh?

If you haven’t checked out Webkinz yet, and if your job involves even a tinge of digital-ness (for example, you have a computer), I advise you to logon today. Here are a few quick observations:

1. In Webkinz World, kids go online to the Reading Room to access virtual books with their pets and their friends—and I don’t see any complaints about format, metadata, reading devices or preference for printed matter. Kids don’t care how the content got there (and as adults they won’t either), and they are equally comfy curled up in their bed or a virtual couch.
2. Why aren’t there Webkinz books in stores today? Point #1 taken, there is still a market for printed Webkinz books which would extend the brand to bookstores and feed this current hot trend. I could see “Choose your Own Adventure” succeeding—combining static with dynamic content, which is what kids today are doing all the time with no trouble at all.
3. We know that the assault of content that exists today is just a dribble compared with what is to come. Ensuring that books stand out of the pack of potential media choices means being creative with how content is packaged, marketed and sold. Working with traditional publishing companies, I’d say it’s about 1 for 1 on those who are embracing new media tactics and those who insist that “it won’t work for our titles.” What do you all think?

I don’t know what Webkinz plans to do with their captive audience—or what I will have to pay to keep my son’s outdoor play yard (1000 Kinzcash) after the one-year trial—but I’ll probably do it. And though I don’t like the hyper-consumerism promoted by the site or the hysterics to be “in or out,” I have this vague awareness that the deftness he’s picking up clicking and buying and chatting and multi-tasking—well, that’s something I could learn from him.

Thomson Learning Name Change

Thomson learning will change their name to Cengage as of the end of August. The company HQ will also stay in Stamford as expected.

PR Newswire (As yet, not too much circulation on this story).

"Increasingly, our customers recognize that their success depends on being constructively engaged with others involved in teaching, learning and research," Ronald Dunn, chief executive officer of Thomson Learning, said in a statement. "The name Cengage Learning reflects our commitment to promoting engagement and improving results for all of our customers."

The company also emphasized that they will continue to leverage the stable of strong "brand-name" imprints such as Heinle, Gale, Wadsworth, Delmar Learning, Brooks/Cole and South-Western, among others.

Hachette (Lagardere) Reports

The US and UK arms of French media company Lagardere helped the company to grow revenues 7% for the first half. Lagardere is now a $10bill (approximately) company with interests in media and defense. From pr-inside

Lagardere's publishing division saw revenues up 11 percent to E897 million(US$1.23 billion), with the Time Warner Book Group providing a E82 million(US$112.7 million). The unit was not consolidated into the company results until April 2006.On a like-for-like basis, the publishing division's revenues rose 1.7 percent. Lagardere said the division's second-half revenue growth will be hit by weak sales in its French literature and Larousse dictionary businesses.

Lagardere's publishing units operate in Spain (Education), France (literature and education), the UK (Hodder) and US. Publishing revenues without the US only rose 1.7% and reflected conditions in France (market issues) and Spain (timing). The company press release did note strong growth in the US due to title growth.

For their outlook for publishing they noted the following:

The 2007 second-half prospects for Lagardère Publishing are good, especially for Education in France and Spain (where the effect of publication timing differences is set to be recouped in the third quarter) and for Literature in the United States. However, sales growth will as expected be dented by weak sales in Literature in France (a low-margin business) and at Larousse(elimination of loss-making editorial lines).

Businesswire

All in all a strange combination of assets when it is stated in black and white. In the US it is all the rage to de-comglomerate...one wonders.

Thomson Reports Second Quarter

It is reporting day today for a number of publishing companies. Earlier Reed reported decent gains in revenues and profit across business units and later in the day Thomson does the same.

• Revenues increase 11%; organic revenue up 6%
• Operating profit grows 15%; operating profit margin increases in all segments
• Diluted EPS increases to $0.58, from $0.26 a year ago
• Proposed acquisition of Reuters progressing

With the divestiture of Learning Thomson now divides itself into five operating units: Legal, Fiancial, Tax & Accounting, Scientific and Healthcare. Revenues were up sustantially in all segments with the big units Legal and Financial up 9% and 8% respectively. (Organic growth was up 6% and 4%). Double digit gains were seen in Tax (+23%) and Healthcare (+43%) indicating that while much smaller than the larger two units their revenue growth paths will soon materially impact topline revenues.

For the full six month period, revenues are up 11% and operating profit is up 12%. The company also stated that they continued to make significant product line investments and that these results included those investments. Additionally, the company expects to continue to make material improvements to operating margins into the future. CEO, Harrington:

"Building on a solid start to the year, the business continued to gain momentum in the second quarter. We achieved solid growth in revenues, operating profit, margins, and earnings. Organic revenue was up 6%, led by our Legal and Tax & Accounting business segments. “We also continued to make significant progress driving operational efficiencies throughout our company, resulting in a 15% increase in operating profit. Our success was reflected in substantial increases in operating profit margins in each of our business segments, which included the benefits of our THOMSONplus initiatives. THOMSONplus remains on track to generate run-rate savings of $150 million by the end of 2008,”

The company beat by 2cents the prevailing analyst forecast for EPS. The company is not making any detailed forecasts on performance until the Reuters deal is completed only to say things look good.

With respect to Reuters, the company detailed the deal and also noted the regulatory hurdles that the company must make both in the US and Europe.

“Given the complementary nature of the two companies’ businesses and the highly competitive nature of the financial information services industry, we remain confident that the transaction will be approved,” Mr. Harrington said. “Upon completion of the transaction, Thomson-Reuters will be well positioned to capitalize on the positive trends driving growth in our markets. The combined business will also benefit from significantly greater global diversification and a broader and more deeply integrated product mix. We are confident this combination will equip us to meet our customers’ growing needs in an expanding and dynamic worldwide market translating into faster growth and higher profitability.

Thomson Press Release
Bloomberg

Reed Elsevier Reports

Sir Crispin Davis noted that the sale of Harcourt was made on 'favorable terms' and it looks like the company will net over $2.0billion from this sale. Proceeds are said to be dividended to shareholders sometime next year. (In a related note, Pat Tierney the head of Harcourt will retire when the sale is completed).

The first half results as reported today were mixed with revenue flat but in excess of many analysts estimates. The company confirmed they are on target for a 10% increase in EPS. Revenues were up 6% and operating income up 10% in constant terms. All operating units performed consistently in revenue but Lexis Nexis lead the group in operating income growth of 13% and Business Information lagged at 7%. (The company is impacted by the weak dollar and taking into account currency changes total revenue growth was only 1% ).

Outlook:

• Elsevier: good momentum, strong renewals, good book revenue, growing online sales
• Lexis: positive outlook, good demand for online services and total solutions, and risk and analytics
• Business Information: cycling in of biennial shows, online revenue growth more than off-setting declines in print.

The company sees a positive market environment and good business momentum across all its businesses which will drive the EPS growth. Additionally, they have a renewed initiative on cost reductions across the businesses and have hired senior level managers to support particular initiatives.

Other highlights:

• Digital revenues are on target to represent 45% of total revenue
• To focus on additional cost efficencies the company has hired c-level positions in outsourcing, procurement and technology
• Davis commented to journalists that the company rejected a P/E approach for the business information division in 2006. The unit could be worth over $2.0bill
• Davis also said he continues to look for acquisitions and is particularly interested in those over $100mm.

Reuters
Reed Presentation
Hemscott

News Corp and Dow Jones

So we should find out within the next week whether the Brancroft family will accept the NewsCorp offer, but I have to wonder whether some type of all-points bulletin went out across the NewsCorp empire: "Don't publish anything low-brow, scandalous or let The Boss influence your thinking". At least until this business is over. It would be bad timing of a momentous nature that could have the Bancroft family perusing some questionable covers of The Post or The Sun or even reading some politically charged editorial in The Times while meeting to determine the fate of the company. And of course if for some reason they missed these indicators, there are rivals like The Daily News that joyously draw them to their attention.

Coincidentally, The New York Times released some private archive material of the owning family, Ochs Sulzberger to the New York Public Library. There is nothing recent yet (although additional material is anticipated to be made available soon) but there are interesting items relating to the relationship between the Editorial philosophy and that of the owners,

Many of the documents reveal the newsroom’s sometimes prickly relationship with its owners. “It’s difficult for me personally to take a position not in accord with the wife of the Publisher,” Edwin L. James, the managing editor, wrote to Arthur Hays Sulzberger on June 22, 1949, after Iphigene Sulzberger complained about placement of a story involving Cardinal Francis Spellman. (A spirited defense of the news desk’s judgment followed.)

Will we ever see Murdoch's personal archive...? Do we want to? What happens if the deal doesn't is not accepted? You can bet that News Corp has an alternative plan ready to roll if the Dow Jones bid fails.

Educational Text Book Bias: The Winners Get to Write History

We are not unfamiliar with 'activist' reviewers of textbook content in the US where it is not unknown for a textbook to have different versions depending on which state it is sold. The Lede (NYTimes blog) notes this is not an uncommon issue in international markets and notes a controversy in Israel but also goes on to say,

This seems to go on all over. After communism collapsed in Eastern Europe in the late 1980’s, for example, countries there began rewriting their history texts wholesale, to correct the distortions, omissions and ideological slant introduced by the dictatorships - and some of those efforts were then criticized for going too far in other directions. And such controversies are far from unknown in the United States, where everyone from Native Americans to Hindus have objected to the way they have been treated in some states’ history textbooks.

I read Lies My Teacher Told Me a few years ago and found it most interesting.

Keefs Book

Bill Wyman was ostracized, Mick lost interest, Pete has been blogging about it, but against the some rather considerable odds, Keith Richards may get $7.0mm for his story. On record as saying he doesn't remember some of the Exile sessions, I wonder what we will find out that we don't already know.

Yeah give me money, yeah, yeah, yeah (thats what I want)
Lots of money, yeah, yeah, yeah (oh yeah, thats what iWant)
If you want me to love you (thats what I want)
Give me money (oh yeah, thats what I want)
If you want me to squeeze you (thats what I want)
Give me money (oh yeah, thats what I want)
Thats what I want, oh yeah (thats what I want)
Thats what I want (oh yeah, thats what I want)

The Beatles also did that song...

McGraw Hill Posts Strong Quarter

McGraw Hill reported second quarter results this morning with their financial services group (Standard and Poors) reporting a 21% increase in revenue and a 28% increase in operating income versus the same period last year. Overall revenue and profit rose 12.5% and 25% respectively. Income per share was 79cents versus 60cents in the period last year.

The McGraw Hill School education division reflected industry growth trends and full year revenue growth is on track for a 5-6% increase.

"A very strong performance by Financial Services was a key factor in our second quarter," said Harold McGraw III, chairman, president and chief executive officer of The McGraw-Hill Companies. "We also benefited from the McGraw-Hill School Education Group's strong start in this year's state new adoption market and solid performances in higher education, professional and international markets.

In education, the company expects a strong adoption cycle to offset mediocre growth in open territories. The company is also seeing strong performance in College and international markets.

"Revenue for this segment increased 5.8% in the second quarter to $647.3 million compared to the same period last year. Operating profit grew by 18.6% to $80.4 million. Foreign exchange rates added $4.5 million to the growth in revenue, but had an immaterial effect on operating profit growth

The outlook for McGraw Hill is as follows:

"We expect to achieve our goal of double-digit earnings growth in 2007 even though the growth rate will probably slow during the second half of the year as compared to our very strong first half performance. Although we expect low double-digit growth from Financial Services in the second half, tougher comparisons will make the fourth quarter more challenging. Some operating margin compression may occur in our segments in the second half, but we still expect improved operating margins in all three segments for the full year".

Press Release
Investor Relations

Marchesano Joins Jordan, Edmiston

The Jordan, Edmiston Group announced today that Michael Marchesano, the media industry veteran and a former top executive at The Nielsen Company, is joining the firm as Managing Director, focusing on JEGI’s leading M&A advisory practice to the business information services sector. Mr. Marchesano commented,

“It is a great thrill for me to join the media and information industries’ leading and most active investment bank. Over the years, I have watched JEGI’s reputation grow and its deal volume increase. I very much look forward to helping the firm expand its footprint in the vibrant business information services sector, which offers its customers a growing number of must-have products and services.”

Prese Release

Scholastic: The Future

As the end of the Harry Potter era dawns - with millions still to be made from product extensions and paperback rights - some are wondering whether the time is ripe for the sale of the company. The most likely buyers would be (no surprise) private equity; however, there remains an obstacle in the form of the owner. Richard Robinson inherited the company from his father and has grown it into a $2.0billion diversified trade publisher and, while the company is public, he controls 4/5's of the board seats. It is unlikely that the company will be sold despite the arguments contained in this article by Bloomberg.com,

shares of Scholastic, the book's U.S. publisher, are trading at 0.66 times annual sales, compared with 1.04 times sales for rival U.S. book publishers. The shares would be worth more than $50 each, or 48 percent above their current price, if the company were to sell itself, Boyar and Stifel Nicolaus & Co. analyst Drew Crum said.

The Bloomberg authors argue that because Scholastic has not adequately reinvested the Potter windfall and found replacement revenue sources, now is the time to generate a high sale price. In reality, there can't be too much motivation to sell from Robinson since the company will continue to make reasonable profits and high cash flows. In addition, the company has had similar transitions before (Goosebumps and Clifford, the big red dog) - although the Potter franchise dwarfs earlier product successes - and at those junctures commentators wondered where the next earnings generator would come from.

The Bloomberg article does discuss continued operational issues most recently in their direct mail business,

Scholastic's latest stumble is in its direct-mail business, where subscriber delinquencies are rising. Yesterday, the company reported fourth-quarter profit of $40.4 million, or 93 cents a share, missing analysts' average estimate.

Nevertheless, the company has a plan to address these issues and shows no sign of preparing itself for an auction. As the largest Childrens' publisher, the company will have its pick of the best new children's products and, as it has in the past, will re-establish a new product franchise. The company may also acquire companies where the product mix could be leveraged to greater extent via Scholastic's distribution and management structure.

As a shareholder, there should be some concern over earnings growth in the next 12-24mths; however, assuming a premium will drive the stock price because of an anticipated acquisition would seem to be ill-advised.

Weekly Update: July 22

Publishing:
Dow Jones Yes or No? BBC
Dow Jones MySpace Revenge? PRNewswire
Gratuitous Potter Article: CNN
Christian Retail: WaPo

Information:
Thomson Financial using Generate to build Private Company and Executive Profiles: CMP
EBSCO's New Novalist Portal: Library Journal

E-Books
Wilkins in The Age
Japan's Tiny Books: Wired
Standards Program for Downloadable Media: MediaPost

Libraries:
If Libraries Didn't Exist Would they Be Invented Today? Freakononics

M/A
Acquire Media purchases NewsEdge from Thomson: PRNewswire

Online:
Interview with Vivian Schiller, NY Times.com: MediaPost

Derbyshire Bed & Breakfast

Well if the floods in Oxfordshire and Gloucester might have you rethinking the camping trip to the UK this summer how about a visit to a lovely b&b in the Derby hills. Here they treat you like family and indeed in my case they are. Hodgkinson's is run by my cousin (with some help from Gemma age 7) who was written up in the Guardian this weekend. This is somewhat of a double edged sword as will go unexplained.