Olson to Leave Random House (+ Middelhoff News)

The NYTimes has confirmed via two executives at Random House corporate owner Bertelsmann that Peter Olson will be leaving his position as CEO of Random House in the next few weeks.

Mr. Olson, who has run Random House, the world’s largest consumer publisher, since 1998, has come under mounting pressure in recent months as Bertelsmann’s financial results have been damaged by lower profits at Random House and steep losses in its American book clubs, which he also oversees.

It was not yet clear who will replace Mr. Olson, although these executives said it would not necessarily be a prominent figure from New York publishing, and maybe not even an American.

Surely not a non-american!

On a related note, Thomas Middelhoff took exception to comments The Economist made in an article on Bertelsmann under incoming CEO Ostrowski. Among them the following:

Perhaps because he has Arvato up his sleeve as a source of future growth, Mr Ostrowski appears to be far less interested in the internet than other media bosses. Losses made by Mr Middelhoff's internet ventures may also contribute to his caution. “I will not put a bet on one or two big internet investments; we must build an online presence organically,”

His rebuttle in the letters to the editor was as follows:

Bertelsmann's performance
SIR – I do not agree with the statements in your recent article (Face value, March 22nd) concerning my term as chief executive of Bertelsmann. The development of the company between 1998 and 2002—ie, the creation of the RTL Group, the acquisition of Random House, etc—have not “strained” Bertelsm€ann's finances in any way. At the time of my retirement its debt amounted to €334m (with revenues of €20 billion). RTL Group today contributes more than 50% towards Bertelsmann's profit.

I also do not agree that my “internet ventures” were costly in general. Selling the company's AOL shares and its 50% stake in AOL Europe and the sale of mediaWays, an internet-service provider, generated a profit of €10 billion.

In the three-and-a-half-years of my leadership Bertelsmann doubled its revenue, tripled its operative profit and quintupled its net equity. Not a bad result compared
with the company's present situation, almost six years after my resignation.

Thomas Middelhoff
Chief executive
Arcandor
Essen, Germany

€10 billion profit isn't too bad now is it?

Pearson Buying Language School

Only 1% of Pearson's revenue is generated in China and they like many other companies hope to improve on that percentage in one of the fastest growing markets in the world. The company is in the process of acquiring a chain of private language centers in Shanghai which will leverage some of the language teaching product the company publishes through Longman. Several newspapers are reporting on the acquisition (which isn't completed). From The Telegraph:

The FTSE-100 media group is near to finalising a deal to buy LEC, a group of 15 Shanghai private schools, The Sunday Telegraph has learned. The deal, likely to be announced this week, underlines Pearson's aim to expand its Chinese operations as the country's economic growth presents opportunities for foreign companies. Demand for English language tuition is at an all-time high in mainland China as a result of the country's continuing integration into the global.

Pearson has been buying educational assets aggressively in the US for several years; however, they have not purchased schools per se. In China, they may be considering a more expansive expansion across the entire education value chain from content creation to delivery. In other developed Asian markets such as Korea and Japan, private education plays a significant role in the education of Children and a similar structure is developing in China. For Pearson to participate in that market development only makes sense.

Crowded House and PS22

New York's vast social patchwork was on vibrant display last week when Neil Finn of the band Crowded House started their set with the choir of PS 22 from Staten Island. Normally, when a band launches into their set they do so with gusto, but on Wednesday night Finn, wandered casually out to the microphone and announced we were in for something special. He commented that someone had forwarded a Youtube video of the PS 22 choir doing high justice to one of the bands signature songs and he was going to bring them on stage.

On came the choir first to do several song on their own and then to join Crowded House on the first few songs of their 2 hour plus set. It was magical. The kids were great, their joy was transparent and they showed no stage fright with a couple of the kids doing solos.

As you watch the video (which is the first song of the Crowded House set), look at the faces of the kids and think about the breadth of the backgrounds, experiences and ethnicity that they represent. It is quite incredible and it's what New York is all about.





Needless to say, it was a great night out.

Harlequin Shows Disappointing Form

Torstar the owner of Harlequin published their first quarter results this morning showing Harlequin revenues fell $15mm versus the prior period. $11mm of the short fall was due to the decreased value of the US dollar versus the loonie. The company also suggested that the comparison favored a much stronger first quarter 2007 when Harlequin had a stronger publishing schedule. (I believe this is the same 'publishing schedule' that strategically they have looked to trim). Reported revenue was $109.7 million in the first quarter, down $14.8 million from $124.5 million in the same period last year. (In 2006, 1Q revenues were $116mm. Under lying revenue growth for the 2007 quarter was only up $1mm with forex delivering a $5mm gain on the 2006 level).

First quarter underlying revenues have been a mixed bag at Harlequin over the past four years: Up big in 2006, down big in 2008 and 2005 and it is hard to discern any real pattern.

The following is from their press release:

Book Publishing revenues were down $3.9 million in the first quarter of 2008 excluding the impact of foreign exchange. North America Retail was down $2.8 million, North America Direct-To-Consumer was down $1.2 million and Overseas was up $0.1 million. Book Publishing operating profits were down $0.6 million in the first quarter of 2008 excluding the impact of foreign exchange. North America Retail was flat, North America Direct-To-Consumer was up $0.3 million and Overseas was down $0.9 million.

Torstar stated that "Harlequin’s outlook is positive" except if there is a major economic down turn in the US. (Which I believe we are in). Any further decrease in the value of the dollar will continue to result in a material impact on results. As an aside, the company doesn't note any hedge against the US dollar fall which seems somewhat irresponsible given the US outlook although they have hedged in the past. The company went on to state that "Harlequin is also experiencing accelerating progress with its digital media strategy which will contribute to earnings growth in 2008 and beyond."

Operating profit was also impacted by the unfavorable impact of foreign exchange. Operating profit of $16.2 million in the first quarter of 2008, down $2.9 million from $19.1 million in 2007 including a decrease of $2.3 million from the unfavourable impact of foreign exchange rates.

Torstar announced a restructuring program earlier this month but Harlequin was not mentioned.

New Fake (With Branding)

JK Rowling can't catch a break. The Guardian blog points to an infraction by Bloomsbury but does so by using the name of Rowling to draw attention, thus;

The latest of these comes from JK Rowling's publisher, Bloomsbury, which was due to publish on May 5 a new biography of Louis XIV's mistress and "secret wife" Madame de Maintenon, by Veronica Buckley.

Turns out Ms. Buckley quotes a document in her book that was outed as a fake a number of years ago. The publisher is recalling the title as they were notified of the error during the review cycle. While there is no 'crime' here on the order of some of the more recent fakery and Bloomsbury is recalling the title, it still points to the rather shoddy fact(less) checking that seems not to occur. It appears that it was well known that this document was a fake.

But what does Rowling have to do with this? Some in the comments section noted the same thing.

Miss Pettigrew

Some times there is gold in them thar hills. The Guardian this weekend profiled the book that became the under-the-radar hit movie Miss Pettigrew Lives for a Day. From the article:

The novel was a small sensation in the 1940s, but has gone on to sell far more copies after being republished by Persephone, which specialises in forgotten women's literature from the inter-war years. In the month since the release of the film in America, 12,000 copies have been sold, while British sales have topped 24,000, a remarkable feat for a book in this niche market.

The author of the book Winifred Watson gave up writing only a few years after penning this book when her house was bombed in 1940. Her family couldn't convince her to start writing again.

Francis McDormand, the lead actress in the movie has also contributed to a new audio version of the book that will be out later this year.

S&S Revenues Off 12%

Directly from the CBS press release on the performance of Simon & Schuster,

revenues for the first quarter of 2008 decreased 12% to$201.6 million from $229.3 million for the same prior-year period, as best-selling titles in the first quarter of 2008, including Duma Key by Stephen King, Where Are You Now? by Mary Higgins Clark and Change of Heart by Jodi Picoult, did not match contributions from prior year titles, which included The Secret by Rhonda Byrne. Publishing OIBDA and operating income decreased 28% to $17.1 million and 32% to $14.6 million, respectively, principally reflecting the decline in revenues partially offset by lower royalty expenses, production costs and selling and advertising expenses. Publishing results included stock-based compensation expense of $1.0 million and $.7 million for the first quarter of 2008 and 2007, respectively

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