Another Day another Deal: Springer Science

According to sources Springer Science has hired Goldman Sachs and others to prepare the company for an IPO valued at over 2.0bill Euros. Springer Science is the result of a prior combination of Bertelsmann Springer and Kluwer Academic. The company publishes of over 1400 journals and 5000 academic book titles per year. The main subject areas for both are science, medical and technology.

Simon & Schuster Strong Finish

CBS reported fourth quarter and and full year numbers this morning with the publishing unit (Simon & Schuster) up 6% over last year and as a result helping to cover some of the decline in radio at CBS.

The publishing unit revenues were $252.5 and $807mm for the quarter and year respectively and operating profit was $38.9 and $78.0mm. A full year operating margin of just short of 10% is good going in the consumer market and is virtually unchanged from last years margin performance. Penguin reported yesterday (with Pearson) and their operating marging was slightly lower than S&S at 7.8% on higher sales.

Here is more detail from the CBS press release:

For the quarter, Publishing revenues increased 7% to $252.5 million from $237.0
million, reflecting sales from top-selling fourth quarter 2006 titles, including YOU: On a Diet by Michael F. Roizen and Mehmet C. Oz, Lisey's Story by Stephen King and Joy of Cooking: 75th Anniversary Editionby Irma S. Rombauer, Marion Rombauer Becker and Ethan Becker. OIBDA increased 8% to $38.9 million from $36.1 million, and operating income increased 7% to $36.3 million from $33.9 million, reflecting the revenue increase partially offset by an increase in bad debt
expense.

For the year, Publishing revenues increased 6% to $807.0 million from $763.6 million in 2005 due to sales of top-selling titles as well as higher distribution fee income. OIBDA increased 5% to $78.0 million and operating income increased 4% to $68.5 million, reflecting the revenue increase partially offset by higher expenses, primarily resulting from an increase in bad debt expense and higher production, employee-related and selling and marketing costs. Publishing results included stock-based compensation of$1.9 million and $.5 million for 2006 and 2005, respectively.

Sounds like the AMS situation had some impact but on the other hand it looks like the bonus' this year were relatively better than last year.

Rumor Mill and Thomson Learning

An interesting search string appeared in my site stats a few days ago: "Bertelsmann and Thomson Learning." What could that mean - if anything? Bertelsmann's foray into educational publishing could be quite interesting and given their achievements in the US with Random House it would be something that the other educational publishers would want to monitor closely. The company doesn't have quite the cash cushion that they had before they were forced to buy out a minor partner last year; however, it seems highly unlikely that if they wanted to make a purchase of this size that they wouldn't be able to find ready suppliers of financing. They recently restructured some of their debt to reduce interest payments and had little difficulty with the offering.

It is all speculation and you have to believe the betting is on pure Private Equity. Bertelsmann is a diversified media company but clearly not adverse to paper based publishing operations and in this case they may be especially interested in the electronic revenue potential that Thomson Learning could offer. Wait and see.

Pearson Post Record Results

Pearson have been cagy all year regarding where they would end up and downplayed the full year impact they expected even after they posted very strong half year numbers. As anticipated they have posted results at the top end of analysts expectations with profits up 19% over last year to 502million pounds. EPS slightly exceeded guidence at 40.2pence. Here is the Reuters release.

In the company's release they pointed to the strong performance of all groups including the education group (both higher ed and k-12) which has been strong all year, FT group ad revenues and Penguin. The Penguin numbers may be at or slightly higher than other consumer publishing companies may be expecting. Here are the highlights from the Pearson release:

Record results. Pearson reports its highest ever operating profits (adjusted operating profit up 15% to £592m), earnings (adjusted eps up 18% to 40.2p) and cash (free cash flow up £2m to £433m).

Sustained growth and market share gains. School sales up 6% and Higher Education sales up 4%, benefiting from leading position in content, assessment and technology; FT advertising revenues up 9%; Penguin sales up 3% despite tough consumer publishing market. Stronger margins and double-digit profit growth in all businesses.

Pearson margin up a percentage point to 13.4%. Education margin up to 14.1% and profits up 12%; FT Group margin up to 17.3% and profits up 18%; Penguin margin up to 7.8% and profits up 22%. Higher returns. Return on invested capital up to 8.0% (from 6.7% in 2005), above Pearson's weighted average cost of capital; dividend increased by 8.5% to 29.3p, the largest increase for a decade.

In their preview of 2007, it is basically more of the same with essentially the same outlook for education that they gave this time last year with growth in the 4-6% range with margin improvement in School and professional. Penguin margins are expected to continue to improve (and at 8% are already quite good for trade) and the FT group is expected to continue to benefit from the reorganization that they have implemented during the past 18mths or so. Margins are expected to improve there.

Naturally, there is no word on future acquisitions but growth from acquisitions has been critical to Pearson in growthing top line and margins recently - although underlying growth has been significant as well. Look for Pearson to continue to be active on this front particularly as Thomson Learning and Harcourt will be distracted by their respective divestiture processes.

Deals News: Harcourt, Reed, Riverdeep, Borders, B&N

It was a relatively slow week given all the excitment last week. Thomson are looking for a quick resolution to their Learning disposal; having made everyone wait until mid February for the deal book they now want responses in only a few weeks. It does reflect the fact that they have put some time and preparation into the documents having announced the disposal late last year. Perhaps the same cannot be said for Reed who are looking for a close in July.

In what could be construed as incredibly bad timing Riverdeep's accounting firm Ernst & Young resigned last week because they believed that "professional relationship between us and the company has irretrievably broken down." Too early to tell if this will be significant at all in Riverdeep's acquisition binge but Moody's is suggesting it will review their rating towards the end of March.

Martyn Daniels at the Booksellers Association reminds me of speculation (muted I would suggest) about a merger between B&N and Borders. Personally, nothing seems less likely. I think if B&N were to make any store related acquisition they would buy Chapters in Canada. That is if the government would allow and B&N decide going International would be a good thing.

Ebay Media Marketplace

Some may be aware that Ebay jumped into the advertising media market last year by agreeing to build a marketplace site dedicated to buying and selling media space. It will be a facinating thing to watch since I believe this initiative could have the same impact on media buying as going to electronic settlements (The Big Bang on the LSE) had on the financial markets. That is more transparency, more transactions, higher margins and more effectiveness.

The media buying process is fairly rudimentary, inefficent and process bound. Staffed by under-paid and over worked ad reps/media buyers who cut their teeth in the business by executing media buys the marketplace has been ripe for change for many years. Curiously, it is not the media venues (networks) who are avidly pushing this concept rather it is some high profile and powerful advertisers who see an opportunity to increase their reach and effectiveness while at the same time paying a market driven price for the space.

MediaPost describes what the first version (beta) version of this product will do:

A copy of a document detailing the beta version that's being circulated for review reveals just how detailed and thorough the system that eBay has developed is. The exchange can go in either direction, where a marketer submits an RFP for a network to respond to, or a network posts inventory out for sale.

A buyer's RFP allows it to request that a network offer it a deal based on desired GRPs or budget it has to spend. The buyer can also request preferences, such as a primary and secondary demographic target; length of spots it wants to air; programming genres it is willing to run in; flight dates; and dayparts it would
air in. Requests can even extend to offerings such as product placement,
corollary Web placement or billboards.

It is a little jargony but esentially the system will automate what is currently done via phone, fax and email with several potential 'networks' all at the same time. The media rep has to gather and analyse what is available from the multitude of available space, pick the right mix and then get back on the phone and do the deal. This system has the potential to inventory all available media space, with associated demographic and Gross Rating Point info, potential ad conflicts, etc. and enable a media buyer to create an appropriate plan that meets their goals and budget. Once the 'RFP' has been created by the media buyer they offer it to the market (networks) for negotiation/bidding.

Selected networks could then respond with an offer indicating GRPs and CPMs it
would go with, as well as the number of ad units and other benefits (product
placement, Web presence, etc.) it is willing to offer.

The program is very much in its infancy and will not replace any complex or first run (upfront) media buying that generally require one-to-one negotiation. Nevertheless, a considerable amount of media spending is made day-to-day across a wide array of outlets (scatter) and this Ebay led marketplace has the potential to create significant efficiencies and better ad buys for advertisers.

Pat Sommers

Is apparently out at Sirsi/Dynix which is a shock. You take a company from the brink of disaster and that's the thanks you get. Regretably, I can relate.

The tip came from Laura Dawson who has more details.

WorldCat Registries

The new product initiatives are coming fast and furious at OCLC; I mentioned WorldCat Identies last week and this week we have a WorldCat Registry product for library institutions. I suspect the concept will be extended to other topical areas. In concept, registries combine existing database information resident with OCLC (making data work harder) and wiki-like functionality or social networking. Additionally, bulk data import may also be possible such as USPO change of address information but the end result is a resource for anyone interested in information about (in this case) libraries: their address and opening hours, their IP ranges, a profile of their collection and the products they subscribe to.

There are many other elements and functions which at this early stage will not be populated consistently however, the possibilities exist to create a 'community' site for library information. Registered librarians are able to designate an editor or administrator who can validate information about specific libraries and the idea is to create valuable information that can be used by patrons, sales reps, publishers, and anyone interested in library specific information.

What is great about this is that it is a web product that gets a running start because it is taking information that existed for other purposes and reasons recasts it and creates something new that has both relevance and scale. In other words, there is reason to come to the WorldCat Registry because from day one there is material amounts of data in the product.

More details are available via Lorcan Dempsey's Blog.


Here is a sample screen shot:
Access is currently free but registration is required and for anyone currently subscribing to American Library Directory, this is an interesting alternative to keep track of.


This is the ALD marketing blurb for those who are not familiar with the product:

"This acclaimed reference guide has provided librarians and library users with the most complete, current, and easily accessible information on libraries across North America for over half a century. In this new Web version, subscribers can find and view detailed profiles for more than 35,000 public, academic, special and government libraries, and library-related organizations in the United States, and Canada — including addresses, phone and fax numbers, and e-mail addresses, network participation, expenditures, holdings and special collections, key personnel, special services, and more — over 40 categories of library information in all.Free registered users can view physical address information only."



I think the free WorldCat registry product may already have more information than the free version available from ALD. In the case of the OCLC product the librarian is both customer/user and editor so they become engaged with the product in two ways which can be quite powerful. It will be interesting to see how the social aspects of this product develop and whether we will see a real community of interest(s) develop with the introduction of further technology.

Chick Lit

Personally, I thought all the indignation expressed about Maureen Dowd's recent visit to a bookstore and exclaiming about pink covers was a little much. Here is a slightly more balanced view all the way from Australia.

Disney Wants the Honey Jar Too

Disney (although not the plaintiff) lost a court case to have the rights to the Winnie the Pooh characters returned to the family of AA Milne and illustrator E.H Shepard. Disney and the relatives were seeking to overturn an earlier case that said that Clair Milne could not void an agreement that renewed the license to Stephan Slesinger in 1983. Slesinger obtained the original rights in 1930 and in 1961 passed those rights to Disney in exchange for royalties. The Slesinger family have also been fighting Disney for more than 10 years for unpaid royalties which they estimate could exceed a $1.0billion. According to Reuters, Pooh generated over $6.0billion in retail sales in 2005 alone.

Missing News: NBC

I have commented on this before. The lead on the BBC broadcast news here last night was the battle plan that has been devised for Iran. No such story was mentioned on NBC 30 mins before. I guess it is not that important. BBC had a map showing targets. It's always good to be prepared....

Monday Presidents Day

Somewhat of a holiday here today. Markets are closed, streets are clear and MSNBC can't choose between psycho-analyzing Britneys' coif or ANS's will. And it was a slow weekend in publishing...

I mentioned Worldcat Identities last week and Tim O'Reilly had a nice plug for it as well. He also mentions the idea of some incorporation into wikipedea which has come up in conversation. Adding a resource like Worldcat to wikipedea would aid both authority and functionality. On any particular subject an editor or user has an ability to link to an appropriate and unambiguous data record - in this case a Worldcat Identity - via very simple linking functionality. They will add value to the item they are creating in wikipedea and can be confident in the accuracy and depth of the Worldcat Identity they have linked to.

This video from Librarybites. has been circulating the web for a few days and it is very well done. It comes from Kansas State University and attempts to show how rapidly our relationship with search, content and networking can change. It is about five minutes.

Google has an impressive list of employee benefits which includes inviting authors to speak to employees about their books. They also video the meetings/presentations and they are available to all here. I often wonder why B&N and Borders don't video their author readings....

There is a lot of hype about Second Life and just about everyone is setting up shop there or making some political announcement (that they could make just as easily on Speakers Corner), but is it all over-hyped?. Are there really millions of people populating the site or are there millions like me who tried it once to see what it was all about and have never been back? That and some other comments make this blog post from TeleRead thought provoking for any library(ian) or publisher that is thinking of setting up residence on the site. As he comments:

If libraries decide to invest in SL properties, they may suffer a virtual repeat of the Florida land boom of the 1920s. None other than Electronic Arts, the giant games company, is already bent on competing with SL.

Now don't get me wrong, experimentation is a great thing as is becoming simpatico with the customers/patrons you are trying to service. Just don't loose perspective that's all. Also the following warning is also relevant given the silliness around a recent children's book ban:

The real mainstays of SL at this point are gambling and sex. Don’t libraries and schools have enough problems with American ayatollahs? No prudery here, just practicality. A virtual library should be able to integrate itself well with the rest of its cyberworld, but currently, youth-oriented library areas have to be isolated from SL as a whole.

The European Commission is continuing a policy debate on the scientific publication system. Here is the text of their announcement. No word yet on any outcomes from the meeting last week.

In the context of the beginning of the Seventh Framework Programme, the research Directorate-General has launched a policy debate on the functioning and efficiency of the scientific publication system, understood as the practices, rules and mechanisms defining the process of scientific publication, as well as its exploitation. A first contribution to this debate is the EC-commissioned "Study on the economic and technical evolution of the scientific publication markets in Europe". This Study provides an economic analysis of European scientific publication markets and makes a series of policy recommendations. A public consultation was held from 31 March to 15 June 2006 on the basis of this Study.

An important milestone in the policy debate on the scientific information system is the joint Communication on "Scientific information in the digital age: access, dissemination and preservation" , presented by J. Potočnik, Commissioner for Science and Research, and V. Reding, Commissioner for Information society and media, and adopted in February 2007. This Communication offers an entry point for discussion within the Council of Ministers, at the Member State level, and within funding bodies and intergovernmental research organisations. Issues to be addressed include dissemination and access strategies (e.g. Open Access), publishing business models (e.g. reader-pay, author-pay), and the relation between scientific publication and research excellence. A further impulse was given by a conference hosted by the European Commission on 15-16 February 2007 in Brussels at the Charlemagne building.

No doubt the above is similar to a study the UK Parliament conduct two or three years ago. I wonder if the outcome will be any different.

Sunday Funnies and Giggles

Among the search queries that led searchers to the blog recently were:

"pronunciation Eoin" - This person would no doubt have a problem with "Dun Loughrie" or "Ioan"

"Lindsay Lohan bra size" - which had me stumped I must say, but I subsequently found some spam on one of my old posts.

"What is the city of publication for King Lear" - I think this was my favorite.

"Suicide poems + reasons why" - Not getting this one at all.

The good people from latex.org paid a visit but it was fleeting.

Lastly, Mrs PND is brunette otherwise I would be in trouble for showing this video for a Mercedes Benz ad. You may have seen it.

http://www.youtube.com/watch?v=nAs8_N_tDoE

Deals: Harcourt, Reed, Riverdeep

The comment to the post yesterday regarding the divestiture of Harcourt from Reed made me recall the time when Reed bought the company in 2000. At the time, as an employee of Reed I think we all rejoiced in the acquisition because for at least the prior two years the company had meandered most notably in its efforts to find a CEO. Crispin Davis was finally appointed in 1999, and started to rapidly fix the company and set a new direction. (Bowker got sold as part of the 'fixing' which was no bad thing for us).

The acquisition signified in a way that 'we were on our way' and that the company was forging ahead and fulfilling a strategic direction. Acquiring Harcourt seemed at the time to be something of a hedge; it was entirely unclear where the journals electronic revenues were going to end up. Elsevier Science was nascent and the journals business generally was getting a lot of flak from the market regarding pricing, archiving and access. The market was in total flux. On the advertising side, the business publications of Cahners (now Reed Business) were also starting to show declines in revenues and this became a major management issue. In this context acquiring Harcourt seemed a strategic attempt to spread revenue risk a little wider.

In news reports over the past day or so some analysts have suggested the acquisition may have been a mistake but this seems doubtful to me. If anything, selling the business is smart business because in today's Reed business it is easier to see where their core strengths are and they are not in education. There is a little confusion (maybe it is me) regarding the original purchase price since some assets were shared between Thomson and Reed. I am not certain if the original purchase of $4.5bill reflects the total or the portion of assets Reed got from the deal. I believe it represents the total since Reed Education has a current book value of $2.6billion. (Reuters) .

The FT reports that Riverdeep are prepared to pay £2.0billion which would make for a tidy profit on the original purchase. (The FT article says the assets purchased were worth $2.0Billion and Reuters says $4.0billion). Analysts suggest the ultimate purchase price will be between £1.8 and 2.2billion and management suggests a sale to be announced towards July.

Reed Elsevier Selling Harcourt Education

Perhaps on reflection this is no surprise as the results at Education had been lagging for sometime. The motivation to sell is similar to that expressed by Thomson Learning in that online and electronic revenues are growing faster and opportunities there are greater than they are in education. Reed Elsevier has significant online revenue at Elsevier (Journals), Lexis Nexis and in Legal & Regulatory (Martindale).

During his analyst presentation Sir Crispin Davis said that Harcourt increasingly differs from the core RE business units in market growth expectations and revenue model and that the opportunities for electronic and online revenues are "less clear". This also comes in the context of a 20% drop in operating profit for the unit.

For the year RE Group revenues were up 6% with 5% from organic growth and operating profit (despite the 20% drop for Harcourt) was up 9% for the 12mths. Here is the analyst presentation. Here is their summary press release.

Davis went on to say that the divestiture would probably occur in the second half of 2007 and that the proceeds would be divested to shareholders. The unit would be expected to sell for over £1.0billion however, the market for large educational assets is a little glutted right now.

Importantly, Harcourt is focused on k-12 so revenues are focused and RE expects some key adoptions during 2007 - for which they have invested pre-pub expense - and if those are won then the company will be more attractive (obviously). They may have some advantage but we will see. Private equity has to be the prime candidate for acquisition.

Here is a Times article.
Here is a local Oxford Mirror article

Interestingly, I can't help thinking that because Thomson and Elsevier compete aggressively in certain areas that RE do not want to loose out if Thomson take their Education Divesture dollars and go after something big that places them either in greater competition with RE or takes off the market a business that RE could also logically acquire. Their stated strategic goals are similar - grow electronic and recurring revenues and provide integration tools for users of their products. Both see the last part of that strategy as vitial because achieving it can raise switching costs for customers and effectively embed the publishers products into the work flows. Once one of these players gets a leg up the market could become hard to crack for the "looser." Despite suggesting they will return the money to shareholders, RE has no reason to do this and watch as a prime asset goes (cheaply) to one of their primary competitors. It may be fun to watch.

WorldCat Identities: Making Data Work Harder

What is cool about this project that OCLC is announcing today is that the data was already in Worldcat and this is a new and different way to view the data. Worldcat is a bibliographic database of over 65million records and 120mm items. It is huge, and represents the data from some 60,000 local library collections. Making data work harder isn't a formal initiative but it should be a mantra any database manager would live by and in this case the results are quite interesting. It is represents the work of the OCLC office of research and principally Thom Hickey (blog) and it will be interesting to see how this initiative evolves and develops over time.

Especially interesting will be whether/if other database providers such as wikipedea or Amazon would value this representation of Worldcat. No word yet on how this would be effected in a formal way but any user can create a url string that creates a search of Worldcat and perhaps the Identities could be searched in the same manner. Lorcan's site (linked to above) enables you to search on 'canned' searches listed (including Kyle Minogue who seems to be a personal favorite) as well as a browse by subject which from a serendipity standpoint is fun to play with.

Here is a sample screenshot:

Rolling Stones Rock n Roll Circus

It was sweeps week on PBS last week which is patent made for TIVO and I happened to note that they were playing a restored version of the Rolling Stones 1968 TV show Rock and Roll Circus. Apparently most of the film of this show was lost soon after performance because some say the Stones were mediocre and The Who were fantastic. It was never broadcast. Others on the show include John and Yoko, Eric Clapton and Taj Mahal. The Who do indeed play a great set and there is also an adhoc super-group (The Dirty Mac) with Clapton, Lennon, Richards and Mitch Mitchell. Later Yoko joins in with an infamous wailing tour-de-force. (Townshend says in an interview on the DVD that this didn't bother him, but thank god for TIVO that's all I can say).

There is more on the DVD than was broadcast on PBS including a longer set from Taj Mahal. He still comes to NYC regularly and I hope to check out a concert the next time he is here. Watching the show inspired me to start reading According to The Rolling Stones published by Chronicle Books. It has been sitting on the shelf for two years gathering dust. So far it is incredibly interesting to learn how they all came together in Ealing and Edith Grove. Curiously, there is virtually nothing in this book about the Circus. (So, here is wikipedia). Maybe there is something to the notion that they thought they were out-done by The Who. I thought The Stones sounded great but I did notice that there seemed to be no interaction at all between the members of the band. Poor Brian was dead 7 mths later.

Tuesday Take-up

It took Books In Print over 130 years to get to 10million books. Here Librarything.com seems to have done it in two years. Of course, the databases are not directly compatible but it is nevertheless quite a powerful statement for croudsourcing and social networking.

Since it is coming into Academy Award season here is a list of popular books that haven't made it onto the screen. The list includes The Catcher in the Rye, Atlas Shrugged and Mein Kampf (Selznick produces and Hitch directs).

The posts on Hitwise are always interesting and here is a recent one on search terms.

From Public Lending Right in the UK is an annual listing of the most popular titles checked out of UK libraries. The winner is a children's writer Jacqueline Wilson.

Titles by the immensely popular children’s writer were lent almost two million
times between July 2005 and June 2006. Wilson’s nearest rivals are the adult
novelists, James Patterson, Josephine Cox, Danielle Steel and Ian Rankin who
each need to clock up at least another half million loans annually before they
can pose a threat to the "queen of library lending".

The article also notes the strength in lending of Dan Brown and J.K. Rowling which is interesting to me given the huge numbers of copies sold through retail, the abundance of second hand copies, continued strength of paper and mass market versions and yet they are still strong through the library. What does that mean?

When Martha Stewart published her first cookbook there were rumors the recipies hadn't been fully tested. I don't know if this was true or malicious however Mrs PND has never cooked a bad meal out of one of the MS books. Along the same lines is a cautionary tale from India. Do not include meat in your recipies.

New Shoes, New Music

Over at The Bookbar Jessica had a post today about shoes which ordinarily wouldn't have caught my attention other that the fact that I just heard about Paulo Nutini who has a song 'New Shoes' and was on the Today show. MRS PND can't seem to get enough of the song and the video. He as on the today show a week ago and she won't erase it from the tivo. The CD is actually pretty good.

http://www.youtube.com/watch?v=EiXD2eAFxE0

As I understand it, Paulo's mum and dad live over a chip shop. Boy's definitely on his way.

Thomson Learning: Let the Auction Begin

Now that the year end numbers are out of the way, expect to hear more frequent discussion about the sale of the Thomson Learning unit of Thomson. Full year results were summarized by Reuters and the Thomson web site has more detailed information. Once the Learning segment is sold it will be interesting to see where Thomson spends the expected $5.0billion proceeds. It just means more deals to come as the company already has free cash over $1.obillion. They should be able to splurge and we may see them to execute a rights issue if they find something especially expensive (Bloomberg for example).

The Learning segment has been classified under discontinued operations and the overview comments are as follows:

Thomson Learning accounted for the majority of results in Discontinued
operations, with revenues of $672 million in the fourth quarter and $2.4 billion
for the full year of 2006. Thomson Learning’s operating profit was $161
million in the fourth quarter and $383 million for the full year. The
majority of Learning’s results were generated by the higher education, careers
and library reference businesses as well as NETg and Prometric, which were
announced for sale in the fourth quarter of 2006.

In their executive presentation the detailed results for Learning show decent results as compared with industry leader Pearson. Top line gained 5% and Operating Profit of $359MM was 6% better than prior with a very slightly higher operating margin. Pearson which will report at the end of February has consistently grown a 1-2pts better than Thomson over the past five years and their operating margin has steadily improved over the same period. It will be interesting to see the comparison at the end of the month.

It would be a big surprise if Thomson Learning does not go to a private equity buyer; there has been a lot of interest thus far.