Reed Elsevier Acquire Choicepoint

In my predictions for 2008 I noted that we would see increased activity in the insurance business information space. In my view, this space is ripe for the type of consolidation seen in law, tax and business information that results in dedicated and must have information platforms for practitioners and analysts. Both Thomson and Reed dominate the law and tax segments and it looks like Reed is taking the first step to dominate and create a platform application for the insurance industry. Reed announced this morning that they will by Choicepoint for $3.5bill and assume $600mm in debt.

Commenting on the acquisition, Sir Crispin Davis Reed Elsevier's Chief Executive Officer, said: "The acquisition of ChoicePoint represents a major further step in the building of our risk management business and in the development of Reed Elsevier's online workflow solutions strategy. The market growth in risk information and analytics is highly attractive and ChoicePoint brings important assets and market positions that fit well with our existing business and, in combination, can be leveraged to very good effect.

The new unit will be combined with existing risk management revenues in the Lexis business unit that will result in a business unit with over $1.5billion in revenue.

Other points from the press release:

• ChoicePoint has a leading position in providing unique data and analytics to the attractive insurance sector (over 50% of Choicepoint's $982 million revenue and 80% of its business operating income from continuing operations in 2007) and highly complementary products and new capabilities in the screening, authentication and public records areas.
• The combination of ChoicePoint's highly regarded data and analytics assets with LexisNexis's market leading technology can be leveraged to create greater opportunities in addressing the growing risk information and analytics needs in insurance, financial, legal, screening, law enforcement, public safety, healthcare and other sectors.
• The combination will improve top line growth and deliver considerable synergy benefits through the application of powerful technology, increased scale and integration of resources.
• The acquisition will accelerate Reed Elsevier's revenue and profit growth; is accretive to adjusted earnings from the first year; and is expected to deliver a post-tax return on capital in excess of Reed Elsevier's cost of capital by the third year, with returns continuing to climb thereafter.
• Consideration of $50 per share in cash; unanimous recommendation of the ChoicePoint board; subject to ChoicePoint shareholder and regulatory approvals. Acquisition to be financed from committed new bank facilities.
• The acquisition significantly enhances Reed Elsevier's portfolio through expansion in these attractive long term growth markets, and accelerates Reed Elsevier's progress in providing online solutions embedded into customer workflows.

The strategic importance of this acquisition for RE is noted in the last bullet where the company emphasizes the importance of workflow solutions for their customers. Information is not a commodity, but is only a component of a broad market offering. A company offering monolithic data products; that is the online equivalent of a printed database, will continue to face market challenges in competition with more integrated offerings where content is a component in a larger holistic workflow tool.

In a closely related story, Reed also announced that they will sell the Reed Business Information unit. This sale has long been rumoured and analysts have suggested that Reed should have vacated the space long ago; however, Reed were progressing through a logical strategic revamp which has culminated in the acquisition of Choicepoint, the divestiture of Harcourt and now the sale of RBI. The company says the divestiture will reduce exposure to the cyclical advertising markets, which of course was as true today as it was five years ago. Best guess would be private equity.

The same press release also notes their full year 2007, results with underlying revenue growth of 6% supported by online information and workflow solutions. Topline reported revenue was £4,584m up 2%. The company also saw operating margin improve as a result of favorable product mix with underlying margin up over 100 basis pts. Adjust EPS was up 12% in constant currency. The company noted that adverse exchange rates materially impacted the results. More in the press release.

Lulu Publishes 4,000 Titles per Week

The Guardian takes a look at the US self-publishing market and notes some impressive statistics fron Lulu.com.

Lulu says it publishes 4,000 new titles each week and already has a catalogue of 232,000 books. "Our success is that each week we publish between 10 and 20,000 titles; one at a time," said , the senior vice president of operations at the company, Andrew Pate.

The company is only five years old and says it is doubling in size every year. Earlier this year, I noted the growth of Blurb.com which published 80,000 titles during 2007.

The Guardian also discusses Booksurge.com and AuthorHouse as variations on the theme and notes the recent new relationship between Borders and Lulu. More from the article:

It is not only business people who want to self-publish. Lulu's Pate says an ageing population, with more money, more life experience and more time on their hands to write will combine with the new and improving technologies to help drive the self-publish business. The ubiquitous use of Microsoft Word together with desktop publishing software, digital printing technologies and workflow solutions linked to the internet and "bang, you have got a whole new market that could not exist without each of those pieces together".

Cengage Reports Second Quarter

Second quarter revenues and EBITDA were negatively impacted by a change in accounting for deferred revenue and as a result Cengage reported slightly lower (1.2%) revenues versus their prior period. Revenues were $496mm and $502mm for 2008 and 2007 respectively. The impact of the change in deferred revenue accounting had a 100% flow-through impact and as a result EBITDA was 7% lower than the period last year ($148mm versus $160mm).

The company recorded a strong first quarter and despite the account change year to date revenue and EBITDA were 2.3% and 3.0% higher respectively. Year to date revenues were $1,146mm and EBITDA was $409mm. Margin is holding steady at a healthy 35.7%.

Other highlights:

• Academic and Professional YTD revenues and EBITDA are up 4.9% and 5.6% respectively. YTD revenues and EBITDA are $791mm and $347mm
• Gale YTD revenues were lower by 4% but EBITDA was up 2.1%. YTD revenues and EBITDA were $167mm and $63mm
• International YTD revenues were higher by 7% but EBITDA was lower than prior year by 4%.

The company indicated that their plans are ahead of schedule on cash flow, cost savings initiatives and projected EBITDA.

Cengage

Defections

Another big name author has followed the money and moved from his long term publisher. Richard Ford has moved from Knopf to Ecco after 17 years, and he follows Tom Wolfe who earlier in the year moved from FSG to Little Brown. Who can blame them? This is not a trend, as authors do move around periodically (and take their editors with them). It will have little impact on traditional publishing. The mid-market and specialty author is not suddenly going to be in a better competitive position vis-a-vis the publishing houses. What strikes me as curious, though, is that we haven't seen incursions by web companies such as Google, Microsoft, Amazon and Ebay into the original content business. Yet.

It seems so logical that one or a few of these companies will experiment in some way with branded authors. We all know the author brand is primary and we also know that some authors have become aggressive in expanding their brand - Patterson as the prime example. It may be inevitable that a major author(s) signs a three book deal with Google or Amazon. According to Publisher's Lunch, Wolfe received between $5mm and $7mm (these numbers from several sources) for his deal. It is a sad reflection on the publishing industry that these figures represent little more than gas money for the larger internet companies. Skills in book production, design, marketing and promotion, etc. are readily available and would not represent an impediment to success. It is really the expanded catalog of skills and expertise that an internet company could bring to bear that could be really interesting for authors and consumers.

Launching Major Author X via 'GooglePub' or similar would transcend the traditional publishing model and, perhaps, return it to something more like the publishing of the late 18oos where serialization (blogging) and direct reader involvement (social networking) were fundamental elements of trade publishing. (Remember Doyle trying to kill off Holmes, resulting in near riots from readers?) One of the most interesting aspects of the Radiohead experiment was that they finished their album only two weeks before it was available for download. In the world of publishing, the length of time from finished manuscript to bookstore can be years. Not only would consumer access be much faster in a 'GooglePub' world but the engagement with the author and the authors' work could be far more intense (and positive) for both author and reader.

Imagine the author maintaining an ongoing rapport with readers as the book is written. The author blogs about the process, posts excerpts, background material relevant to the story, and plot and character notes. The author publishes finished excerpts (ie. serialization), as development continues. Perhaps derivative titles or sequels are also initiated. Audio, Podcasts and video is made available. At the launch of the title, the book will have been exposed to millions of readers - perhaps all of the title has been published in parts or not - but the excitement will be significant. During this time, site traffic will also have grown and perhaps an advertising revenue share for the author will also augment their annual guarantees.

As in the Radiohead example, a physical version will be produced but, even here, the model could change. Perhaps 'GooglePub' strikes separate deals with B&N, Borders or others who produce their own versions of the titles by selecting from the wealth of content available as a direct result of the content created during the process. Basically, the author and 'GooglePub' leave it up to the physical publisher to create the physical product and just take a (painless) cut of revenues.

Publishers can't compete with this model. By the same token, the process could give rise to a new caste of publishing staffers who are familiar with the web-publishing model, social networking and engagement and who become required assets as authors migrate their brands to the internet. An interesting scenario: How prepared are large trade houses if their top-ten branded authors defect to 'GooglePub'?

Livemocha in NYTimes

I have commented on the language learning provider Livemocha and they were profiled in the NY Times over the weekend:

LiveMocha introduced its Web site in late September 2007, said Shirish Nadkarni,
chief executive of the company, which is based in Bellevue, Wash. Since then, he said, about 200,000 users from more than 200 countries have joined. “It’s a community of like-minded learners who can leverage their native language proficiency to help one another,” he said. The name “LiveMocha” is meant to evoke the relaxed atmosphere of a coffee shop. The site is still in beta, or testing, phase, Mr. Nadkarni said. Advertising will soon be added, as well as charges for some premium content and services.

The company recently closed on $6mm in additional funding.

San Francisco

I spent most of last week in San Francisco. While NYC received its first appreciable snow (and then heavy rain to wash it all away), I was wandering around in almost 70 degree weather and havinig a lovely time. I did do some work as well.






Created with Admarket's flickrSLiDR.

Click on each image to see brief descriptions of the image.

175,000 First Chapter Excerpts (And Counting)

I wasn't excessively clear in my description of the Dial-a-Book model and Mr. Greenfield has rapped me on the knuckles and asked me to correct the article. Obviously, he is quite correct to ensure we understand his business model. From Stanley,

You write:

"The idea of building a business (let alone expanding as he continues to do) on the precept that he will scan and re-key the first chapter of a book so that the content can be distributed as merchandising material in this day of e-content seems anachronistic. No telling how long it will continue to go on and many (including me) have expected publishers to take this over themselves and obviate the need for Dial-a-Book. Yet, he continues to flourish."

Michael, were this the case Dial-A-Book would not exist.

Most of the major publishers do create there own excerpts which they mount on their own sites .... and send to us for reformatting and distribution.
Our value is not that we create excerpts but rather that every excerpt we distribute is automatically mounted by

Barnes & Noble, Baker & Taylor, Ingram, EBSCO, Books-in-Print,
Buy.com, OCLC .... if they handle the books

… and by more than 1,600 library OPACs (e.g. San Francisco, Cleveland,
Seattle Public Libraries) if they hold the books in their collections.

Moreover we are the exclusive excerpt providers to all of the above, with the exception of Barnes & Noble. None of the others will mount any except unless it comes from Dial-A-Book. Every excerpt in any on-line public access catalog (OPAC) in the US is a Dial-A-Book excerpt.

The reason is that we provide an AGGREGATION function.

They would rather pay our modest charges to recieve 50,000 excerpts a year, in two deliveries a month, in a consistent format, which they can algorithmically access, or enter into their systems and servers, than receive 300 Random House excepts on a Monday, 200 Harper Collins on a Tuesday, 150 Simon & Shuster on a Friday, etc, in a variety of formats..

Dial-A-Book delivers an essential service for publishers, web sites and OPACs by the aggregation function it performs. Its unique data base contains 185,000 first chapter excerpts prepared and distributed with the permission of more than 1,400 imprints/publishers.
I would greatly appreciate your rectifying this matter for the readers of Persona Non Data lest they believe the need for Dial-A-Book can be obviated.


The original post as follows:

My friend Stanley Greenfield tells me he now has an astounding 175,000 first chapter excerpts and to think I knew him when he had less than 5,000. The idea of building a business (let alone expanding as he continues to do) on the precept that he will scan and re-key the first chapter of a book so that the content can be distributed as merchandising material in this day of e-content seems anachronistic. No telling how long it will continue to go on and many (including me) have expected publishers to take this over themselves and obviate the need for Dial-a-Book. Yet, he continues to flourish.

Here is more material from Dial-a-Book:

During 2007 Dial-A-Book continued to drive book sales and library readership as it delivered more than fifty thousand new first chapter text excerpts to its partners, e-commerce sites, media, bibliographic services, library on-line public access catalogs. The Dial-A-Book data base now contains excerpts from 175,000 ISBNs. All excerpts are produced and distributed with the permission of 1,400 imprints/publishers. The DAB Chapter One program is the exclusive excerpt provider for Baker & Taylor, Ingram, Books-in-Print, OCLC, EBSCO, Buy.com, Diesel e-books, and library on-line public access catalogs. Every excerpt appearing in any US library-on-line public access catalog (OPAC) is provided by DAB. In our continuing effort to support our partners we have enhanced our systems with a new mobile platform. The platform will allow more than five millions iPhone, iTouch and Windows Mobile users to browse our 175,000 book excerpts. Software development continues to extend the use of excerpts to other devices.

The Dial-A-Book Publishes Portal™ was successfully launched in 2007. It has been promoted by the International Publishers Association (PMA), Independent Publishers Group (IPG), Midpoint Trade Books and author services companies like AuthorHouse, Lulu.com and Infinity Publishing. Publishers Portal guarantees the display of book first chapters by the web sites and library on-line public access catalogs for which Dial-A-Book is the exclusive excerpt provider, if they handle the books or hold them in their collections. Our thanks to all our partners whose cooperation made this progress possible. Text excerpts are being increasingly displayed. This is testimony that CONTENT SELLS. We invite inquiries about how you can derive the greatest benefit from participation in Publishers Portal and Chapter One.

To learn more about Dial-a-Book contact Stanley Greenfield at 718 432 0014 or email:
srg@dialabook.net