Bertelsmann Reports Half Year - Lowers Full Year Estimate

From the company's press release:

• Group revenues rise to €7.2 billion
• Operating EBIT high again at €737 million
• Return on sales continues in double digits at 10.3 percent
• Group profit improves to €269 million

In the first half of 2011, the international media company Bertelsmann built on the strong results of the previous year and further increased key indicators. For instance, the company increased its revenues and group profit once more and achieved a high level of operating profit again. 

Group revenues from continuing operations increased by 1.9 percent to €7.2 billion after €7.0 billion in the comparable period last year. Excluding portfolio and currency effects, organic growth came to 2.4 percent; all divisions contributed to this. Operating EBIT was €737 million, down only slightly from last year’s record figure of €754 million. Return on sales amounted to 10.3 percent (H1 2010: 10.7 percent), putting it in the double digits once again. The Group profit rose by €23 million or 9.3 percent, to €269 million. This was due primarily to Bertelsmann’s content businesses. A further contributor was a substantially improved financial result that reflects lower interest charges in the wake of successful debt reduction and the discontinuation of negative income effects from the buyback of profit participation certificates in early 2010. The Bertelsmann Value Added (BVA), which measures the profit realized above and beyond the cost of capital, reached €88 million in the first half of 2011 (H1 2010: €82 million).

Comments on Random House

• Random House profits rise substantially driven by U.S.
• Triple-digit percentage sales growth in e-books
• Digital revenue potential strengthened through acquisition of digital media agency Smashing Ideas

The world’s largest trade book publisher significantly increased its operating EBIT in the first half, while recording a slight dip in revenues due to unfavorable exchange-rate effects. Revenues reached €787 million (H1 2010: €791 million) and operating EBIT €69 million (H1 2010: €40 million). The Random House operating EBIT benefited from a strong U.S. performance despite insolvencies and ongoing consolidations in book retail. Overall gains were driven by an outstanding portfolio of titles worldwide, with several million-copy print bestsellers, and the continued rapid growth in e-book sales across all territories. In the U.S., digital sales accounted for more than 20 percent of all revenues. At the reporting date, Random House imprints had more than 27,000 e-books available worldwide. Random House placed 145 titles on the “New York Times” U.S. bestseller lists in the first six months of the year, including the #1 bestselling “Unbroken” by Laura Hillenbrand, and sold nearly four million copies of U.S. author George R.R. Martin’s epic fantasy series “A Song of Ice and Fire.” Random House Group UK increased its year-on-year sales and profits and published more than a quarter of all “Sunday Times” bestsellers. In Germany, Verlagsgruppe Random House improved its revenues and market share in a difficult overall market, and Random House Mondadori also outperformed the market in Spain. During the period under review, Random House, Inc. author Jennifer Egan won a Fiction Pulitzer Prize for “A Visit from the Goon Squad,” and Philip Roth won the Man Booker International Prize.

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MediaWeek (V4, N35) Distance Learning, Libraries and E-Books, Digital Textbooks + More

Online enterprises gain a foothold in traditional education (NYT):

While many students at the nascent institutions offer glowing reviews and success stories, a recent study by Teachers College at Columbia University that tracked 51,000 community college students in Washington State for five years found that those with the most online course credits were the least likely to graduate or transfer to a four-year institution. And traditional professors like Johann Neem, a historian at Western Washington University, see places like Western Governors University as anti-intellectual, noting that its advertising emphasizes how fast students can earn credits, not how much they will learn.
“Taking a course online, by yourself, is not the same as being in a classroom with a professor who can respond to you, present different viewpoints and push you to work a problem,” Professor Neem said. “There’s lots of porn and religion online, but people still have relationships and get married, and go to church and talk to a minister.”
But Anya Kamenetz, whose 2010 book, “DIY U: Edupunks, Edupreneurs and the Coming Transformation of Higher Education,” tracks the new wave of Web-based education efforts, says the new institutions will only continue to improve and expand. “For some people, it will mean going from a good education to a great one,” she said. “For others, it will mean getting some kind of education, instead of nothing.”

Trade publishers beginning to look hard at practical ways to deal with libraries for their electronic content (LJ):

David Young, the chairman and CEO of Hachette Book Group, acknowledged back in May, during a Publishing Point Meetup interview with Michael Healy, the executive director of the Book Rights Registry, that the company wanted an accommodation with libraries but that it was a challenge finding the right business model.
"That is, I think, a really really big question, and I wish I knew the answer to it. All I know is we're putting a lot of thought into it. I'm meeting the president of the ALA in New Orleans in June and we're talking with our various partners around that. I think it's something that needs a lot of careful thought because if you let that particular genie out of the bottle and get it wrong then you could get yourself in all sorts of trouble. Should there be a library solution? I'm certain there should be, but what it is we haven't figured it out. We're putting a lot of thought and effort into it."
Carrie Russell, the director of the American Library Association's Program on Public Access to Information, confirmed that then-ALA President Roberta Stevens and ALA Executive Director Keith Fiels met with representatives from Hachette and HarperCollins at the annual convention to discuss publisher-library collaboration.

The year of the digital textbook is upon us (IHEd):

In recent years, the focus on digital has been eclipsed by a surge in print textbook rentals. Companies such as Chegg.com and BookRenter.com — along with thousands of campus bookstores — have captured students who would prefer to consolidate the process of buying and then reselling textbooks into a single exchange at the outset of the semester. According to Student Monitor, 24 percent of students at four-year institutions rented at least one print textbook last spring — three times as many as purchased an e-textbook.
But recent search data from Google suggest that digital textbooks may prove to be a contender this year. According to the company, Web queries for “Kindle textbooks” are up 60 percent from this time last year. Same goes for “Nook textbooks.” Searches for “iPad textbooks” are up 40 percent. Whether or not students are buying e-textbooks this year, they seem to be shopping for them.
Google search data also suggest that more students are looking to curb costs by renting textbooks instead of buying them. Searches for "textbook rentals" are up 20 percent. Searches for "cheap textbook rentals" are up 40 percent.
So what happens when the digital and rental trends overlap?
One way of answering this question is to say that they already have. CourseSmart, a consortium that sells e-textbooks on behalf of the five major textbook publishers, has never sold permanent licenses for its digital textbooks. “Your use of the service does not give you any ownership rights in the e-textbooks; rather, you only have a limited right to access such e-textbooks,” CourseSmart asserts in its terms of service.
Another way of answering is to say that digital and rental will never overlap. That is because, unlike print, e-textbooks are never sold; they are licensed. Without the permissions conferred by the “First Sale Doctrine,” which bars publishers from dictating the terms of secondary sales (or rentals) of their books, Chegg and other vendors can only serve as alternative platforms through which students can buy or rent e-textbooks from publishers. They cannot set their own prices.

Fairfax County libraries switch focus to electronic content: WAPO

Electronic formatting has shown to be more popular in some genres, such as adult fiction, where it captured 13.6 percent of the net revenue market share. Area librarians said children’s books, specifically picture books, are not very popular among e-readers yet because the format does not translate as well as do text-only books.
“Our collection is driven by budget and demand,” said Trish Van Houten, assistant coordinator for collection management and acquisitions for the county library system.
In November, just before Christmas, the system had 2,177 electronic titles checked out. In July, more than 6,250 titles were checked out.
“It’s always interesting to watch new technologies take hold and become standards,” Van Houten said. “We saw the same thing 10 to 15 years ago with tapes and CDs. Any time there’s a new technology, everyone has to learn how to use it.”
Many public libraries use OverDrive, a digital distributor founded in Cleveland in the 1980s, to provide their digital stacks for readers. Learning to make the switch from buying e-books to renting them can take some getting used to, library staff said.
“I think the technology is in transition right now,” Smith-Cohen said. “It’s not where [readers] want it to be. It’s clumsy for most first-time users.”

Are research papers a waste of time? An online debate at the NYTimes:

The trouble with the question of whether research papers or essays are a better assessment of acquired knowledge is that it’s based on a false distinction. Any good research paper must have an argument, and any good essay must support its argument with evidence.

It’s certainly true that the nature of research changed with the advent of search engines that can do the looking and sorting and even some version of thinking — all things that students were once supposed to learn how to do for themselves. It doesn’t take long to gather lots of sources, fit them to whatever claim one wants to make, and thereby produce something that looks like the result of hours in the library spent reading and deriving conclusions from what one has read. But now, as in the past, a good teacher should be able to tell the difference between a phony piece of writing and an honest one.

From Twitter this week:

Why Did Borders Fail in S'pore? http://jglo.be/bgsg "tired selection of books confused music/film section relentless promo of bestsellers.

Ann Patchett’s Book Tour: NYT

Representative John Conyers Wants Copyright Law Revision: http://nyti.ms/mQ1DdT. Would it be consumer friendly though?

McGraw-Hill eyes education unit spin-off - FT.com -

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John Newcombe Kooyong 1976

John Newcombe Kooyong 1976

Another weekly image from the archive. Click on it to make it larger.
Close readers of the blog will recall the PND family lived in Melbourne Australia between 1973-77. The Australian Open was held over Christmas and New Years in those days and I was lucky enough to be able to attend many matches at Kooyong where it was held. This day was a little more special than normal because I and the parents were sitting in a court side box. Someone in the box loaned me their camera that day and for the first time I was allowed to shoot my own 35mm images. Unfortunately my parents didn't take the hint and I had to go back to my Kodak instamatic once the day was done.

Here John Newcombe - who may have been number one in the world at this point - has just beaten a young guy named Ross Case 6-4, 6-4, 6-1 in the quarter finals. Newk made it all the way to the final where he was beaten by Mark Edmonson.

The rest of the images are located here.

In addition to the images I've posted on Flickr and those I've periodically posted on PND, I have now produced a Big Blurb Book: From the Archive 1960 -1980 of some of the images I really thought were special.

I now have an iPad version of this book for sale ($4.99) on the Blurb site which you can find here: STORE

I have to say, even on the iPad the book looks pretty good.

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From BISG: Consumer Attitudes Toward E-Book Reading - Now Shipping

A comprehensive study of U.S. e-book consumer behavior and preferences:

Since November 2009, BISG’s ongoing Consumer Attitudes Toward E-Book Reading survey has been tracking the habits and preferences of print book buyers who say they have acquired an e-book or dedicated e-reading device within the past 18 months. Companies can use the information gathered in Volume Two, Report 3 of 4 to understand:

• How did e-books and e-readers fare after the 2010 holiday season?
• Are e-book sales driving increases or decreases in overall book revenues?
• What do Power Buyers (those who acquire e-books at least as often as weekly) prefer to use for reading e-books?
• What devices are they planning to buy in the near future?
• Where are consumers buying their e-books?
• How are customers using e-readers versus tablets?
• Which digital devices are most popular with readers, and why?
• What features are consumers seeking in the next generation of e-books and digital reading devices?
• What factors will shape the evolution of this market for the next few years?

Visit BISG to get more information.

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BISG BookStats - Live Webcast

BISG has announced two webinars to discuss the recent release of BookStats:

During each Webcast, representatives from the BookStats data team will provide a comprehensive look into how BookStats was developed and what trends were discovered. The presentation will include analysis of several top line data points as well as a tour through the interactive BookStats Online Data Dashboard.

Register Wed, August 31, 2011 1:00 p.m. to 2:00 p.m.

Register Wed, September 7, 2011 1:00 p.m. to 2:00 p.m. Eastern

Spanning 2008-2010, BookStats offers data and analysis of the total industry and the individual Trade, K-12 School, Higher Education, Professional and Scholarly markets. Produced jointly by the Association of American Publishers (AAP) and the Book Industry Study Group (BISG), its highlights include:

• Overall U.S. publishing revenues are growing
• Overall U.S. publishing unit sales are up as well
• Americans, young and old, are reading actively in all print and digital formats
• Education publishing holds steady and, in some segments, shows solid growth Professional and Scholarly publishing shows gains

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MediaWeek (V4, N34): Content Management Systems, Student Knowledge, Textbook Rentals, Archives + More

Thinking of a content management system (or why yours doesn't work) then read this (AdAge):

BusinessWeek, however, is just one egregious example of an ugly truth: There’s no such thing as a CMS success story. At least, successes are elusive, which is a problem for anyone in media, as content management systems—the software used by writers, editors, and producers to create digital content for websites—have become as essential as oxygen.
“There’s nobody that can walk in the door for any price tag and say, ‘We have the solution,’” laments Time Inc. CIO Mitch Klaif. “If someone had a silver bullet, I don’t know if I’d have them shoot it at the sites or at me.”
Until recently, those dependent on websites—everyone from The Huffington Post to a Fortune 1,000 brand—had seen little change in the systems needed to build them, says Brian Alvey, CEO of CMS platform Crowd Fusion. “The only innovation in [the last] 15 years was blogging and blog platforms,” he adds.
Unfortunately for these companies, the onrush of social networking—part of a larger shift in which sites are moving from static Web pages to pages assembled on the fly in real time—has overwhelmed the abilities of CMS software. In Alvey’s view, most of those systems could barely handle the existing content mix they were producing, including blog posts, stories from print editions, photos, videos, and online polls. “The tools suck,” he says.

From Inside Higher Ed, "What Students Don't Know" (IHE):

The most alarming finding in the ERIAL studies was perhaps the most predictable: when it comes to finding and evaluating sources in the Internet age, students are downright lousy.
Only seven out of 30 students whom anthropologists observed at Illinois Wesleyan “conducted what a librarian might consider a reasonably well-executed search,” wrote Duke and Andrew Asher, an anthropology professor at Bucknell University, whom the Illinois consortium called in to lead the project.
Throughout the interviews, students mentioned Google 115 times -- more than twice as many times as any other database. The prevalence of Google in student research is well-documented, but the Illinois researchers found something they did not expect: students were not very good at using Google. They were basically clueless about the logic underlying how the search engine organizes and displays its results. Consequently, the students did not know how to build a search that would return good sources. (For instance, limiting a search to news articles, or querying specific databases such as Google Book Search or Google Scholar.)

The Heller Report takes a look at the business of Textbook rentals (Heller):

In the past two years, the post-secondary textbook rental market has exploded. Driven by the outcry over book prices, federal legislation, readily available pricing information on the Internet, and sophisticated web-based rental management platforms, old and new competitors are disrupting the $10 billion college textbook business. Book rental isn’t really a new phenomenon—a few college stores have been renting books since the Civil War. The National Association of College Stores (NACS) proclaimed fall 2010 as the “Year of the Rental.” Players include long-timers like Follett and Budgetext, institutional stores and fast-growing start-ups. BookRenter, started in 2008, netted $40 million from investors in a funding round this past February. Chegg, started in 2007, has raised $200+ million in venture capital and attracted senior management from Yahoo and Netflix. The same drivers are growing trade in used books, eBooks, and online instructional content. Rental is also driving new business models for sourcing and distributing educational materials that may carry the industry forward into digital. Having book inventory isn’t necessarily required—at least one high-flying firm, BookRenter, exists mainly as an online marketplace. Read on to see how this change in distribution is impacting the higher education market.

The economist suggests that the papers of literary folk don't necessarily need to be housed where they lived (Economist):

That should mean more writers can earn a pension by offloading their archives without seeking a foreign buyer. But does retaining writers’ collections really offer a broader cultural benefit? British libraries scrimp, save and appeal to lottery and charitable funds to buy collections, but cataloguing, the next stage, is also pricey, so some archives are inaccessible for years. The most important results of plundering authors’ stores are biographies, collated letters and literary criticism, which can be read anywhere. And even book-lovers may find musty papers harder to appreciate than, say, art by Titian (Italian) or van Dyck (Flemish), whose works have also been “saved” under this scheme.In any case, literary protectionism may have passed its peak. Authors increasingly use computers, rather than pens or typewriters: it is hard to say if a hard drive will conjure the same aura of fascination as a personal letter, says the British Library’s Rachel Foss. Electronic records should also be instantly replicable—all of which may rob literary archives of the magic and exclusivity that currently gives them their financial value.

Also from the Economist a look at vinyl record sales (Economist):

What is going on? Oliver Goss of Record Pressing, a San Francisco vinyl factory, says it is a mixture of convenience and beauty. Many vinyl records come with codes for downloading the album from the internet, making them more convenient than CDs. And fans like having something large and heavy to hold in their hands. Some think that half the records sold are not actually played.
Vinyl has a distinction factor, too. “It is just cooler than a download,” explains Steve Redmond, a spokesman for Britain’s annual Record Store Day. People used to buy bootleg CDs and Japanese imports containing music that none of their friends could get hold of. Now that almost every track is available free on music-streaming services like Spotify or on a pirate website, music fans need something else to boast about. That limited-edition 12-inch in translucent blue vinyl will do nicely.

Is the US Statistical Abstract now doomed (WaPo):

I am a devoted fan of the Stat Abstract. In four decades of reporting, I have grabbed it thousands of times to find a fact, tutor myself or answer a pressing question. Its figures are usually the start of a story, not the end. They suggest paths of inquiry, including the meaning and reliability of the statistics themselves (otherwise, they can mislead or tell false tales). The Stat Abstract has been a stalwart journalistic ally. With some interruptions, the government has published it since 1878.

No more. The Stat Abstract is headed for the chopping block. The 2012 edition, scheduled for publication later this year, will be the last, unless someone saves it.

From the twitter:

Vocational Schools Face Deep Cuts in Federal Funding: NYT

College One-Stop Shop: Chegg Buys Web Tutoring Service - Digits - WSJ

Librarian of Congress James Hadley Billington on leading the nation’s library - The Washington Post

McGraw-Hill retains investment bank to explore spinoff of its education division (NYT)

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Queen's Spiral

Queen's Spiral

Another weekly image from the archive. Click on it to make it larger.

Not too far back this week. I visited Greenwich for the first time in twenty years when I was in London in July and this image is from the Queen's house. Visit if you get the chance. While the 'complex' was busy with many tourists - especially the Royal Observatory and the surrounding park - Queen's house was very quiet. There's almost too many pictures of boats for me but I really enjoyed some of the pictures from Cook's Pacific excursions.

There's no magic to this photo either: I sat on the ground and turned the camera upwards, but it came out quite well. I wanted to take one from the top but it was closed off.

I may be incorrect but I think the scene at the Circumlocution Office in Little Dorrit was filmed here (from last years tv production).

In addition to the images I've posted on Flickr and those I've periodically posted on PND, I have now produced a Big Blurb Book: From the Archive 1960 -1980 of some of the images I really thought were special.

I now have an iPad version of this book for sale ($4.99) on the Blurb site which you can find here: STORE

I have to say, even on the iPad the book looks pretty good.

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Cengage Full Fiscal Year Results Disappoint

Cengage Learning, the large privately held educational publisher, recently announced (PDF) disappointing full year 2011 financial results; but in their presentation, the company did endeavor to communicate how material their transition from a print centric to an electronic publishing will be for the company.

Leading with the good news, management focused on how much additional value Cengage will be able to extract from students purchasing their content once the material is available online. The company suggests that while prices for electronic content may be reduced, the penetration rate into the typical class will be significantly higher once that content is delivered electronically. For example, in a class size of 600 (over three years) the publisher may currently only sell to about 33% of students but, in the online scenario, the penetration rate could be 90%. As noted, while revenue is potentially higher, gross margin is markedly higher by about 10 percentage points (75% versus 85%) according to their example (slide 6).

Since Cengage was purchased from Thomson Reuters the company has been in a race to migrate and/or convert their content into electronic form. In this presentation management underscored some important milestones in that effort. Over 70% of their products now have an electronic component which is expected to rise to 75% by the end of fiscal 2012. Both sessions and activations are up in percentage terms but these stats are harder to place in context. The company also noted the recent acquisition of National Geographic School Publishing which now makes Cengage a leading English language provider in the US.

However, the discussion of the financial results was less positive. A weak third and fourth quarter resulted in a significant drop in top line revenue which has been attributed to timing of orders and the loss of some adoptions. Interestingly, the company also noted that the increase in textbook rental programs may also have adversely impacted their revenue. Cengage launched their own textbook rental program recently but Chegg will be the prime offender in this category.

Other areas of concern included lower gross sales in their career segment (reflecting sales made to career and vocational schools) and Research (Gale) which declined $25mm due to lower print and online sales.

In summary, the financial results were as follows:

Fourth Quarter:

($ Millions)	2011	2010	Change
Revenue	472.9 $	$ 553.4	(14.5)%
Adjusted EBITDA	$ 201.5	$ 234.0	(13.9)%
Margin	42.6%	42.3%

Full Year:

($ Millions)	2011	2010	Change
Revenue	$ 1,875.9	$ 2,017.6	(7.0)%
Adjusted EBITDA	$ 780.4	$ 840.1	(7.1)%
Margin	41.6%	41.6%
Capital Expenditures	252.5	203.0	24.4%
Unlevered Free Cash Flow	$506.7	$596.7	(15.1)%

For a full explanation of the results check the Cengage investor presentation here.

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