Penguin & Random House Merge

News on Sunday that News Corp were considering a look at Penguin suggested that the dealings could get exciting but with this morning's announcement of a merger that will combine Random House and Penguin in a new structure makes clear these discussions were already well advanced. As The Guardian notes the new business will b 53% owned by Random House and Pearson will retain a 47% interest. The management team will be lead by Random House CEO Marcus Dohle. The combined company will have sales in excess of $3billion although this is likely to be subject to some competition scrutiny over the next several months as the deal is reviewed by authorities in the US and Europe. From their press release:

Bertelsmann will nominate five directors to the Board of Penguin Random House and Pearson will nominate four. John Makinson, currently chairman and chief executive of Penguin, will be chairman of Penguin Random House and Markus Dohle, currently chief executive of Random House, will be its chief executive.

In reviewing the long-term trends and considerable change affecting the consumer publishing industry, Pearson and Bertelsmann both concluded that the publishing and commercial success of Penguin and Random House can best be sustained and enhanced through a partnership with another major international publishing house. They believe that the combined organisation will have a stronger platform and greater resources to invest in rich content, new digital publishing models and high-growth emerging markets. The organisation will generate synergies from shared resources such as warehousing, distribution, printing and central functions. Pearson and Bertelsmann intend that the combined organisation’s level of organic investment in authors and new product models will exceed the total investment of Penguin and Random House as independent publishing houses.

The two companies believe that the combination will create a highly successful new organisation, both creatively and commercially, with the breadth and investment capacity to deliver significant benefits. Readers will have access to a wider and more diverse range of frontlist and backlist content in multiple print and digital formats. Authors will gain a greater depth and breadth of service, from traditional frontlist publishing to innovative self-publishing, on a global basis. Employees of the new organisation will be part of the world’s first truly global consumer publishing company, committed to sustained editorial excellence and long-term investment in a rich diversity of content. And shareholders will benefit from participating in the consolidation of the consumer publishing industry without having to deploy additional capital.

Interestingly, with Pearson's big acquisition of EmbanetCompass (for $650mm in cash) earlier this month the company also said that they would be somewhat limited in the amount they could spend on future acquisitions given the size of the EmbanetCompass deal. The Random House deal does not appear to improve that situation and the press release specifies that neither party may sell their shareholding in the combined business for three years.

Finally, this is the big Trade House deal we've been waiting five years for. Will there be another?

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Boston 1984 - The Red Hat

This image will be in the next collection and is from The Christian Science Center one very cold winter morning.  I have no idea who that is.

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

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

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In RE Books: Conference on law and the future of Books

I'll be going to this on Friday and Saturday.  It may already be full but looks interesting from New York Law School.  More details HERE:

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MediaWeek (V4, N44): McGraw Hill Education, Pearson Acquires, Open Access, TIme Mag's Education + More

Brian Kibby, President of McGraw Hill Higher Education interviewed in Inside Higher Ed

Question 4: It seems to me that in your position as president of McGraw-Hill higher education you have before you the very difficult task of leading an enormous change in how your company operates. For many many years the big educational publishes have made very good money with a model of printed books and digital add-ons. You are saying that by 2015 that traditional educational publisher model will be as dead as Blockbuster video, as dead as the old record stores. How are you going to transform your corporate culture and lead your employees to embrace this change? And why should we expect that any big traditional publisher will be able to evolve to embrace this new digital world, as there are not many very good models in other industries of other legacy companies making similar transitions.

Answer 4: McGraw-Hill Education is a company with over 100 years of experience in education, so obviously it’s a place with some history. But the world and the needs of our customers have changed dramatically, as has the technology now available to help satisfy their demands. Our team has embraced this change whole heartedly. Our culture has become one where we have a passion for creative disruption, especially as it relates to what is important to our customers: improved results, retention, and the ability to become even more competitive in the marketplace.

We’re focused on technology now in a way that we’ve never been before, but we still have that deep respect for content, and I think that our employees really appreciate that.

With regard to other models/industries, I think we’ve had something of a late-mover advantage. A lot is made about how education has lagged behind other areas in adopting technology, and I won’t go into that but to say that the more gradual transition in our space gave us the chance to sit down and really figure out the best way to do digital from a business perspective. Newspapers had to make that choice back in the mid-90s, and the music industry had to face it in the early 2000s. Like everyone else, we needed to figure out how to get people to think about digital as something you pay for, and our answer to that was to make digital products that were worth paying for. I think we’ve been able to do that pretty successfully, and the market has responded well.

Pearson announced its largest acquisition in over five years on Tuesday with the purchase of EmbanetCompass, a provider of digital services such as online degrees to leading non-profit colleges and universities in the US (FT).  From Embanet's website:

EmbanetCompass is the premier provider of online learning services and technological solutions for top-tier academic institutions. We are acutely aware of the dynamics that drive higher education and utilize our experience and expertise to assess, finance, develop, recruit for, market and support online learning solutions for our academic partners.

 A new study suggests that open access publishing is larger than expected (Guardian):

They should be encouraged by Laasko and Björk's study which, fittingly, is published in an open access journal. The Finnish researchers found not only that nearly 17% of research papers worldwide are now published in open access journals, a figure that is two to three times higher than was previously supposed, but also that the exponential rise in open access publishing shows no sign of slowing down.

In the UK, since about 35% of papers are reckoned to be made available through deposition in repositories — the green route — the total percentage of open access papers (52%) looks like it has crossed the half-way mark.

Time Magazine devotes most of its current issue to education.  Here is a sample on MOOCs (TIME)

To compare my online experience with a traditional class, I dropped into a physics course at Georgetown University, the opposite of a MOOC. Georgetown admitted only 17% of applicants last fall and, with annual tuition of $42,360, charges the equivalent of about $4,200 per class.
The university’s large lecture course for introductory physics accommodates 150 to 200 students, who receive a relatively traditional classroom experience — which is to say, one not designed according to how the brain learns. The professor, who is new to the course, declined to let me visit.
But Georgetown did allow me to observe Physics 151, an introductory class for science majors, and I soon understood why. This class was impressively nontraditional. Three times a week, the professor delivered a lecture, but she paused every 15 minutes to ask a question, which her 34 students contemplated, discussed and then answered using handheld clickers that let her assess their understanding. There was a weekly lab — an important component missing from the Udacity class. The students also met once a week with a teaching assistant who gave them problems designed to trip them up and had them work in small groups to grapple with the concepts.
The class felt like a luxury car: exquisitely wrought and expensive. Fittingly, it met in a brand-new, state-of-the-art $100 million science center that included 12 teaching labs, six student lounges and a café. It was like going to a science spa.
Elite universities like Georgetown are unlikely to go away in the near future, as even Udacity’s co-founder (and Stanford alum) David Stavens concedes. “I think the top 50 schools are probably safe,” he says. “There’s a magic that goes on inside a university campus that, if you can afford to live inside that bubble, is wonderful.”

Where does that leave the rest of the country’s 4,400 degree-granting colleges? After all, only a fifth of freshmen actually live on a residential campus. Nearly half attend community colleges. Many never experience dorm life, let alone science spas. To return to reality, I visited the University of the District of Columbia (UDC) — a school that, like many other colleges, is not ranked by U.S. News & World Report.

Disruption in the news business from Nieman Report:

With history as our guide, it shouldn't be a surprise when new entrants like The Huffington Post and BuzzFeed, which began life as news aggregators, begin their march up the value network. They may have started by collecting cute pictures of cats but they are now expanding into politics, transforming from aggregators into generators of original content, and even, in the case of The Huffington Post, winning a Pulitzer Prize for its reporting.

They are classic disruptors.

Disruption theory argues that a consistent pattern repeats itself from industry to industry. New entrants to a field establish a foothold at the low end and move up the value network—eating away at the customer base of incumbents—by using a scalable advantage and typically entering the market with a lower-margin profit formula.

It happened with Japanese automakers: They started with cheap subcompacts that were widely considered a joke. Now they make Lexuses that challenge the best of what Europe can offer.

It happened in the steel industry, where minimills began as a cheap, lower-quality alternative to established integrated mills, then moved their way up, pushing aside the industry's giants.

In the news business, newcomers are doing the same thing: delivering a product that is faster and more personalized than that provided by the bigger, more established news organizations. The newcomers aren't burdened by the expensive overheads of legacy organizations that are a function of life in the old world. Instead, they've invested in only those resources critical to survival in the new world. All the while, they have created new market demand by engaging new audiences.

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Falls Don't Change 1968

Niagara, New York 1968

The PND Seniors visited in 1968 when PND senior was attending Cornell for the summer.  I've never been but I am thinking of ways to put it in my schedule.

Mrs PND recently unearthed some of her family's slide collection and sure enough there's an image similar to this one from 1958.  Not that much different admittedly hence the title.

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

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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Teaching the Kids to Hate

The economist has a longer piece this week on educational textbooks and the manner in which they are manipulated to match various political and social objectives (read bias). Separately, in the Daily Beast today several publishing executives called on Saudi Arabia to address their appalling record on educational content. First here is the economist's take:

Other people’s textbooks have long been a source of worry. After the first world war, the League of Nations sought to make them less nationalistic. Anxieties increased, though, after the attacks on America on September 11th 2001, when some in both America and Saudi Arabia, including officials, supposed that Saudi Arabia’s curriculum of intolerance was responsible, at least in part, for the emergence of al-Qaeda’s brutal brand of jihad. Buffeted by the criticism, Saudi rulers promised reform. From King Abdullah down, Saudis have insisted repeatedly that the intolerant bits of their teaching materials have been removed. But in a stubbornly autocratic country that adheres to a puritanical Wahhabism, there is a lot of intolerance to go round.

The Institute for Gulf Affairs (IGA), a think-tank and human-rights lobby in Washington, DC, reports that much of the material that provoked fury in the West after September 2001 is still used in Saudi classrooms today. Ali al-Ahmed, director of the IGA and author of a forthcoming work on Saudi textbooks, cites such examples as “The Jews and Christians are enemies of the believers”, and “The Jews occupied Palestine with the help of the crusaders’ malevolence towards Islam… But the Muslims will not remain silent”. The Saudi education minister says the books are being revised—but that it will take another three years. Mr Ahmed says change is not happening sooner “because the state would be putting its survival at risk. The purpose of education is to ensure social obedience to the ruler.”

From the Daily Beast:

Children who are indoctrinated with such hatred are susceptible to engage in bigotry and even violence. Hate speech is the precursor to genocide. First you get to hate and then you kill. This makes peaceful coexistence difficult, if not impossible.
...
Despite repeated promises to reform Saudi textbooks, the most recent books remain full of bigotry and intolerance. We call on Saudi Arabia to immediately stop distributing and printing children’s textbooks that incite hatred of others.

While Saudi Arabia maybe one of the most intolerant and dissembling, The Economist took a much wider look and noted well that Saudi Arabia is just one of most countries that attempt to manipulate what their children learn and they conclude rather dismally:

Fortunately, the spread of digital technology makes such revisions easier—even if it does nothing to resolve disagreements over what revisions should be made. The days when textbooks were covered with the scrawl of pupils in long-ago classrooms may be coming to an end. Digital books, which can be updated cheaply and often, will probably come to replace their paper counterparts. Some school systems are already embracing this. In September California’s governor, Jerry Brown, signed a bill to create a website where students can download popular college textbooks free of charge.

As long as textbooks in one form or another are used, says Ms Lässig, and as long as they are issued or approved by the state, they will remain a political issue. But as access to other texts is enjoyed more widely, some of the dominance they now enjoy will wane.

As indeed will the power of teachers—whose prejudices may often be just as ingrained as those found in textbooks, and rather harder to pin down. Henning Hues, a researcher at the Georg Eckert Institute, has studied South African textbooks and teaching. In one class he observed, a book issued since the rise to power of the African National Congress featured a picture of Nelson Mandela with, alongside it, a question about why the country’s first black president was a hero. The teacher, a white Afrikaans-speaker a few years away from retirement, ignored the task set and described Mr Mandela as an armed guerrilla and assassin.

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Do You Sincerely Want to Sell Your Publishing Business?

A re-post originally from June 29, 2010.

There are various approaches to selling a business and selling a publishing business is no different. The circumstances surrounding the decision to sell can greatly influence how smoothly the process goes; however, as with many things, the amount of preparation that goes into the process will ultimately determine whether there is a successful outcome.

As a seller, your immediate task is to eliminate questions, cynicism and doubt about your business in the minds of potential buyers. No matter how excited the potential purchaser seems to be about your company, they are going to be skeptical about key information. Their job is to (cynically) use anything negative to undercut a purchase price; your job is to be open and effectively back up any questions they will have with facts. (Bear in mind that adequately addressing these issues to their seeming satisfaction early in the process doesn't mean the purchaser won't raise them again during negotiations, so keep your story straight and simple).

If, as an owner, you always believed you would sell the business, then you should have a reasonable understanding when you would like this to happen. As a prelude to this event, you will want to focus on a number of key areas.

First, your financial statements: If Aunt Sally has been doing your taxes for the life of the company and you have never had periodic management accounts, then you are not in a position to achieve full value for your company. Treat Aunt Sally with respect but get yourself an accountant and a bookkeeper to put the numbers in order. At least a full year's audited financials and management accounts should be considered the basic financial reporting requirement when done by a qualified financial accountant. (They do not need to be full-time staff).

Second, if Aunt Sally is just one of several family members taking a salary in the company, you may want to think about their continued involvement in the run up to the sale. A buyer will want to know the actual operating cost of the business and you, as a seller, want to provide the best possible view of the business (that is, without extra expenses). Now, if the family member(s) has a legitimate and key role, then you may have other issues to address (such as their position with the company post-sale).

Third, many buyers will focus on future revenue growth. Do you have formal contracts or handshake deals? Is revenue dependent on one source? The buyer is going to second-guess your revenue projections; therefore, if there are any 'soft spots' it will undercut their confidence in the business overall. Saying so and so has always bought from us is not as valuable as being able to say 'we have a negotiated five-year deal' and we are currently in year two. If your revenue growth is rock solid - even if it is based on a small number of authors, commercial accounts or subscribers but supported in each case contractually - that will place you in a stronger position.

Fourth, your accountant will also create a balance sheet for the company and the key items concerning a buyer are those things that deal most immediately with cash. As a seller, you need details about your inventory turn, accounts receivable collections and accounts payable. Assuming you have prepared for the sale of the business more than twelve months in advance, you should have a clear picture of these items. Just because an item is listed as a company asset doesn’t mean a potential buyer is going to agree as to its value.

Other balance sheet items that require attention are fixed assets, which may include the building in which the company is located. Sometimes a seller wants to keep the building (if they own it) in which case you and your accountant will need to determine the best way to handle this. Bear in mind that the property could be the most valuable asset owned by the company. Similarly, the company may own patents and intellectual property that must be properly accounted for and (for the benefit of the acquirer) properly documented.

In summary, get your accounts audited, create a 'clean' income statement, deal proactively to get your revenue sources locked down and establish formal procedures to manage your cash flow and balance sheet items.

Obviously, the value of a business is stated in black and white in its financial statements but to the potential buyer they will be just as interested in the products you're selling and their future value as they are in your accounting policies. You must have clear ownership rights to any content or technology that represents a primary asset(s) of the company. If contracts aren't transferable, if certain rights are retained by content producers or if you 'collected' data to create your products without proper authority, these issues and others like them should be addressed and resolved before you market your company. If there is any doubt in the mind of a buyer that they will be able to carry the business forward, this will either scuttle a deal or significantly reduce your purchase price. And don't think they won't find out.

Sixth, your organization's human capital is important to the business for continuity reasons (if not for other reasons). Don't believe that you can keep the selling process a secret because even if your employees don't know everything, they will make up the rest. As a seller, you must maintain momentum and, for that, you need to maintain decent employee morale.

Bonuses and incentives can play a role, as can simple communication. Unfortunately, you can't control what the purchaser chooses to do with the business and placing restrictions on post-sale activities - even if you can get away with this - will only reduce your take. Key employees are important to the purchaser and they will want to know who these people are. The purchaser may want some guarantee that these key employees will remain with the business for some stated period after the sale and will be willing to pay the employees a bonus to stay.

As an owner, you may have provided equity to employees over the years, which would give them a piece of any sale. Often these deals can be 'casual' which is not what a buyer wants to hear. The last place a buyer wants to find him or herself is in the middle of an ownership dispute, so, no matter how painful this process may be, get those agreements formalized in advance of a sale.

Finally, as a seller you will want to practice speaking about your company so you are effective in communicating to potential buyers why acquiring your company represents good strategy. Your understanding of your market, your competitors' market positioning and market trends and opportunities all represent key components of your company's selling attributes - and reasons why a purchaser will see opportunity in acquiring your company. Work to prepare a briefing document of your company which you can use in presentations and discussions. Importantly, at industry events, seek out speaking and panel discussion opportunities where you can both present your company and your understanding of the market, as well as learn about what other similar companies are doing in your marketplace. Not everyone is comfortable with this type of communication; however, during a sales process the buyer is going to rely a lot on your perspective about the business, and the more comfortable you are, the better your views will come across. The only way to become a better and more effective communicator is through practice.

In summary, any hiccup in the process of acquiring your company could result in a buyer or buyers either getting cold feet or simply moving on to something else. There are lots of companies drawing acquisition attention and, having gained attention, you don't want to lose it and fall to the bottom of the pile. By the time you regain their interest, circumstances could have changed significantly and no longer exist to your advantage or worse - the opportunity maybe permanently lost to you.

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Frankfurt: Selections from the Show Dailies

Highlights from the show Dailies:

PW Show Daily October 10th:

Interview with James Daunt of Waterstones (Page 12)

So is Daunt’s new boss happy with the way things are going? The Managing Director in whose steady hands so much rests points out that Alexander Mamut, a long-time customer of Daunt Books, lives in Moscow and isn’t here that much, but yes, he’s pleased. Was it a big decision to step back from the chain he founded and had so lovingly created to take on the nightmare that was Waterstones? He turns slightly mischievous. “Waterstones was about to disappear and I don’t think that was going to be great for the British book trade. I’m not sure how Daunt Books was going to survive in that environment. Random House doesn’t run a warehouse to supply the likes of Daunts; it’s to supply Waterstones. Where would we have been a year on from there being no Waterstones? I don’t know.” A thought bubble seems to hang over Daunt’s head. “Waterstones not being there was going to be extremely damaging to our ecosystem. A world of supermarkets and online would have been a pretty bleak one. Independents would have found it very hard to carry on. The writing was on the wall for a very long time. Somebody had to do something.”

Doug Wright on the Future of Content Delivery (Page 34):

Professional networks are increasingly being used to provide services that give real value to the community and improve engagement, alongside content delivery. Examples of this credentialed, peer-to-peer approach include the Researcher Exchange from GSE Research. It has the facility for members to comment on journal content via the open peer-review model or to ask questions of their peers ;and it enables corporations to find expert consultants, and authors to find collaborators, via a sophisticated author search whereby a user can pinpoint experts within a particular field within a particular organisation

Cory Doctorow urges publishers to support ideas such as the Humble eBook Bundle (Page 38)

Yet, one of the biggest surprises to me in curating the HumbleEbook Bundle has been some publishers’ unwillingness to experiment with just one or two DRM-free titles in a new kind of promotion that carries a proven track record of success in a related field.I understand the industry is concerned that the perceived value of an ebook is a matter of credit and psychology, and that no one among the Big Six American houses wants the “fair price” for an ebook to drop. But I also don’t think they can do much about this: there are, by orders of magnitude, more amateur and independent ebooks entering the marketplace than the Big Six produce, and many of them are at low price points. At the same time, the Humble Indie Bundles have a record of enticing people to pay more, on average, than they would pay for the unbundled items. Sure, some people pay nothing. But why not experiment? Isn’t the idea of a successful business to make as much profit as possible; not as much profit as possible from each separate customer

PW Show Daily October 11th:

Michael Bhaskar: Working Together - Digitally (Page 8)

Here’s the rub. Digital is difficult and expensive. Simply to compete with all the other digital media producers out there means constantly raising the bar. We are in a kind of functionality and design arms race, where coming out with what wowed people last week bores them the next. You have to constantly push the envelope and you have to do this in a blizzard of competition in an environment of colossal risk, where abject failure is worryingly common. You are dealing with high upfront costs, at best uncertain demand, unstable, usually low pricing necessitating a high volume of sales and much control ceded to giant technology corporations. Yes, it’s like books–only more so.

Nikko Pfund - A Billion Dollar Process (Page 10):

PW:
Speaking of OSO, you’ve now expanded it into University PressScholarship Online (UPSO), and inked deals with publishers, including major presses such as California and Chicago. What is it like to be sharing your platform with publishers who are technically competitors?
NP:
It has been far more natural and uncomplicated than we’d dared hope. It helps that t he university press world is one of mutual support and commonality of purpose. Ultimately, I think the benefits to the scholarly and the university press community–in terms of access, learning, collaborating with other mission-driven not-for-profits, and tackling some challenges together as a community–far outweigh any competitive advantages that may be derived from our platform. So I don’t fret about the competitive aspect of UPSO at all. Technology is important, but university presses have strong personalities

Making Copyright Work in a Digital Age (Page 22)

The aim of the LCC is that through interoperability, the use of existing open standards (such as the International Standard Text Identifier and the International Standard Name Identifier , and commonality in the area of rights management, to produce a cross-media framework for a standards-based communications infra-structure that will enable businesses and individuals to man-age and communicate their rights more effectively online. The idea is for an automated rights clearance system in which content from all sectors is tagged and can be identified with a single click. The system would then allow users to request permission for specific uses and access the appropriate licences.

Open Access or Open Season (Page 46)

The burning question for publishers is how this greater open access might be achieved without causing the collapse of the publishing industry. One of the options considered by the Finch committee was the mandatory across-the-board introduction of the Green Delayed Access model after a six-month embargo, regardless of the discipline served by the journal or its estimated half-life. The Publishers Association and the Association of Learned, Professional and Society Publishers together commissioned a piece of work to try to ascertain what the likely effect of this would be on academic journals subscriptions (available at www.publishingresearch.net); its headline findings are displayed in the graphs.

PW Show Daily October 12:

Prepare for the Subscription Economy (Page 28)

We talk about data a lot in publishing: “Data is the New Oil” was the mantra of the BICNew Trends Summer Seminar in London. But when print publishers talk about data, theyare talking about product data: metadata. And metadata is crucial to the supply chain. But what we have missed is that when t he rest of the world talks about data, they are talking about “big data”: personal data, customer data, usage data, transactional data etc. They are talking about using data to reach and be relevant to individuals. We need to wake up to this; and when we do we are going to wake up to an unholy mess in our back offices. We already find it difficult enough to use data well at re-seller level (not customer or use level) let alone monetizing on a use basis (unless it is via an aggregator saving us the pain of ever getting to grips with new transactional business models). And it is this that makes Zuora (used by Pearson, by the way) so fascinating to me. They have understood that the internet has changed the whole context and therefore the fundamental basis of commercial transactions.

Publishing Perspectives:

E-Books Offer Silver Lining for Australians:

And all this despite the Fifty Shades of Grey dividend: the three books in the trilogy have sold 2 million copies this year, or over 5% of all sales. Without E. L. James’ enlivening of Australian marital life, volume sales would have been down by over 15%.
Two tough years back-to-back has created casualties. Last month, one of Australia’s hitherto most dynamic trade publishers, Murdoch Books, finally gave up the fight and has been bought by the largest local publisher, Allen & Unwin, with a large number of jobs lost. Specialist R&R Publications has gone into liquidation, and Melbourne University Publishing posted a $2.1 million loss. Sales forces and lists are being trimmed, while one of Australia’s two remaining book printers, OPUS Group (which missed out on printing Fifty Shades), is also downsizing after posting large losses. Adding to the gloom, major educational bookseller Education Works has gone into liquidation following an unsuccessful brush with venture capitalism.

IPA’s Global Ranking of Publishing Markets—US, China on Top

B&N in Frankfurt: We Come in Peace

Why no B&N branding? Because their team was there representing an entirely new company, Nook Media, armed with $300 million from Microsoft and another $305 million committed over the next several years.
“Microsoft?” you say, “I thought they were dead, doomed to second-tier status by Apple.” Yes, well, as we noted last week, users of Microsoft devices are the most active buyers of book content on mobile devices, so it would make sense that they would invest in the book business (after, it must be noted, killing off their own book digitization project several years ago).

Not for Nothing - PW and Publishing Perspectives make it purposefully difficult to collect, cite and link to this content. Well done!

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MediaWeek (V4, N43): McGraw Hill, Springer, Hilary Mantel, Amazon, Metadata +More

The tires are being kicked at McGraw Hill Education by a predictable group of private equity players (Cengage is backed by Apax) but the asking price looks steep (Reuters):

McGraw-Hill Companies Inc's (MHP.N) education unit is expected to draw final bids from private equity firms Bain Capital and Apollo Global Management (APO.N) as well as rival Cengage Learning Inc, in a deal that could fetch around $3 billion, several people familiar with the matter said.

Cengage, the No. 2 U.S. college textbook publisher, and the two private equity firms are working on final offers for McGraw-Hill Education, the world's second-largest education company by sales, with the bids due later in October, the people said.

McGraw-Hill, which is running the auction as an alternative to its planned spin-off of the business, wants to get more than $3 billion and could still decide against a sale if the bids fail to meet its price expectations, the people said this week.

Note - If you read my post this week about Pearson the Apollo Group owns for profit University of Phoenix making me some kind of fortune teller.

Journals publisher Springer is up for a recapitalization based on reports from Reuters:

The company has performed well and earnings before interest, tax, depreciation and amortisation (EBITDA) have risen to around 330 million euros, bankers said, from 310 million in 2011, which was quoted on EQT's website.
Although there is no urgency for the company to do anything as its debt does not mature until between 2015 and 2017, conditions in Europe's leveraged loan market are such that it could be good time to do an opportunistic deal.
There have been a number of such deals recently as banks and private equity firms seek to make money and take advantage of stronger market conditions, after a lack of deal activity over the summer, including dividend recapitalisations by the RAC and Formula One.

Hilary Mantel interviewed in The New Statesman:

Mantel wondered if she was being too demanding. But then she thought that to adjust her style in any way would be not only a loss, but patronising (“You simply cannot run remedial classes for people on the page”). Some will be lost along the way, but she doesn’t mind. “It makes me think that some readers read a book as if it were an instruction manual, expecting to understand everything first time, but of course when you write, you put into every sentence an overflow of meaning, and you create in every sentence as many resonances and double meanings and ambiguities as you can possibly pack in there, so that people can read it again and get something new each time.”

She can sound arrogant, Mantel, assured of her abilities and candid about them in a way that seems peculiarly un-English. But even the arrogance is purposeful. It is one of her pieces of advice to young authors: cultivate confidence, have no shame in being bullish about your ideas and your abilities. She was patronised for years by male critics who deemed her work domestic and provincial (one, writing about A Place of Greater Safety – the French 800-pager – dwelt on a brief mention of wallpaper). So she makes no apologies for her self-belief.
...

After all the research, the reading, the note-taking, the indexing, the filing and refiling, it is a question of tuning in. Alison, she says, is how she would have turned out if she hadn’t had an education – not necessarily a medium, but not far off, someone whose brain hadn’t been trained, and so whose only (but consi­derable) powers were those of instinct, of sensing, of awareness. Mantel describes herself as “skinless”. She feels everything: presences, ghosts, memories. Cromwell is researched, constructed and written, but he is also channelled. Occupying his mind is pleasurable. He is cool, all-seeing, almost super-heroic in his powers to anticipate and manipulate. (Craig thinks Mantel made the mistake of falling in love with her leading man and that her version of Cromwell is psychologically implausible for a man we know tortured people.) Mantel relishes his low heart rate, the nerveless approach to life, a mental state unbogged by rumination. She says that when she began writing Wolf Hall, first entering this mind, she felt physically robust in a way she hadn’t for years.

Amazon chief Jeff Bezos was on a promo tour in the UK this week and was interviewed in The Telegraph:

He says the business quickly realised that if they wanted to make ebooks work, they needed to make hardware. Eight years later, the Kindle is into its fifth generation. The latest, film and music playing, multimedia tablet takes on Apple’s iPad and is, on pre-orders alone, the site's number one best seller.

Bezos, though, doesn’t want to take on Apple at their own game. “Proud as I am of the hardware we don’t want to build gadgets, we want to build services,” he says. “I think of it as a service and one of the key elements of the service is the quality of the hardware. But we’re not trying to make money on the hardware – the hardware is basically sold at breakeven and then we have a continuing relationship with the customer. We hope to make money on the services they buy afterwards.”

And make money they do, but Amazon is still not Apple’s size. Would Bezos like it to be? “Even though this device is only £159, in some ways it's better than a £329 iPad – way better wifi, the iPad only has mono sound and the Kindle bookstore is by far the best electronic bookstore in the world.”

Colin Robinson writing in the Guardian suggests ten ways publishing can help itself. Extra points if you can find anything either new in this list (Guardian):

This year, on the face of things, it's been business as usual at the Frankfurt book fair, with some 7,500 exhibitors setting up shop in the gleaming white Messe. But scratch beneath the surface and a tangible unease about the future of the industry is evident: book sales are stagnating, profit margins are being squeezed by higher discounts and falling prices, and the distribution of book buyers is ever more polarised between record-shattering bestsellers and an ocean of titles with tiny readerships. The mid-list, where the unknown writer or new idea can spring to prominence, is progressively being hollowed out. This is bad news not just for publishing but for the culture at large.

Three magazine publisher's experience with Apple's Newsstand (Journalism UK)

When Goldsmith delivered presentations on Newsstand at publishing conferences a year ago, he said he would be asked a common question.  "The first question from the audience would be 'aren't you cannibalising your own sales?' And that question would come from our editors as well."  "But 80 per cent of sales are overseas, 90 per cent of customers are new to the brand." And 40 per cent of all of sales are for subscriptions. "That's brilliant, because it is offsetting that sad decline in print.
It is a similar story for Conde Nast. "We are reaching a new audience, we are able to target them in new ways, we are able to market to them in new ways, it's a pretty exciting new development for us," Read said. "It means that the overall circulations of our magazines in these particular instances are growing very healthily so that we are seeing very big increases in circulation with titles such as Wired and GQ." Overseas sales vary from title to title, Read added, "A magazine like Vanity Fair will see quite a big proportion of its iPad sales coming from overseas, something like 60 to 70 per cent will be international, but that applies to print as well.

Metadata on Stage at Frankfurt reported by Publisher's Weekly:

Indeed this is the thrust of their exchange—the ever-increasing numbers of books and the faulty metadata being circulated about them—over the next half hour. The transition from print to digital has made metadata—which can mean anything from an ISBN to customer ranking on Amazon—not just simply useful, both Dawson and O’Leary emphasized, it is now critical to the ability to find and sell a book. The rise of digital publishing, and the lowering of barriers to entry for just about anyone—from professional publisher to newest self-publisher—has resulted in an explosion of metadata of all kinds. And apparently a sizeable chunk of it is either inaccurate or missing outright, compounding the problem of book discoverability. 

“When it was only the print bookstore, BISAC was a luxury,” O’Leary said, “but with all the digital products, we need accurate and granular metadata. It’s what we need to make book discovery possible.” The explosion in the amount of digital book content, “puts pressure on the metadata,” said Dawson, who pointed out that once inaccurate metadata is published online, “it’s there forever. If you’ve ever tried to correct a mistake in the metadata you know it’s a game of Whack-A-Mole.”
In fact in the olden days of print, O’Leary said, “It used to be that once you shipped the book, that was the end, the metadata was done. But with digital it never stops, there are constant updates and changes.” And as more consumers around the world go online they encounter information on all kinds of books, many of which they will want—but will be unable to buy. “Today, every book you publish is visible everywhere, even if you can’t buy it [because of territorial rights],” O’Leary said, “This encourages piracy, because if people do try to buy it, they find out they can’t.”

From Twitter this week:

From the fashion and style section of the NYTimes (??) The Education of Tony Marx head of NYPL.  (NYTimes)

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Pearson's Future of Education - No Longer Traditional

In the US, Suzie co-ed may be looking at graduating with over $100k in tuition debt and, it’s even true that her younger brother is going to end up with considerably more since tuition rises inexorably each year.  Seen in this context, it may be hard to understand why publishers get beaten up each year over the $4,000 that a student may spend on educational content over the course of their four years in College.  Despite being asked to spend just 4% of their educational ‘budget’ on content, students (and to some extent their parents) frequently voice their opposition to the high price of textbooks and often gain the attention of media and government.  Publishers may be excused for wondering ‘why us’ when the cost of tuition continues to grow year over year but the annual value of the textbook market has remained stagnant at approximately $7.5billion.  Why textbooks are viewed this way is hard to define: Perhaps the student pays for their textbooks out of their own pocket versus tuition paid by parents or, the utility of the textbooks assigned by professors is questioned when they are not used in full or, the shortened shelf life of textbooks means students can’t resell their books.  Maybe all of the above and other reasons as well.

For publishers the dissatisfaction is problematic but they may not actually care too much about the student even though it is the student that makes the purchase.  Their customer is the faculty member.  After all, the professor is often making an annuity-like decision to select one textbook over another and that decision can often stand for several years meaning recurring revenue for the publisher. Increasingly the institution where the faculty teaches is also important and, while the professor remains vital publishers may be increasingly interested in the $100K spent for tuition.

A number of years ago, I made a presentation at theFrankfurt Bookfair Supply Chain Interests Group where I used the example of Reed Elsevier to show how a business could realign its’ business to compete in a much larger market where the opportunities were potentially significantly greater.  Jack Welsh ex-CEO of General Electric, (when not suggesting conspiracy theories) used to challenge his executives to look beyond their traditional markets to expand their opportunities to grow revenue.  As Reed evidenced, it may better to be a smaller player in a $40billion market than to dominate a $100million market.  Strategically redefining your business can’t be done easily but becomes the driver in business planning and over a defined period a business can move itself into one with significantly more opportunity.

At a conference earlier this year, when the student spending numbers were discussed it occurred to me that fighting over an annual spend of $1,000 per student versus an opportunity to grab some of the $25K spent per year would be a strategic win for a publisher.  With the education market expanding – both in pricing and market penetration – and traditional the textbook market flat, where else could a publisher go?  A strategic rethink and change in direction may appear beyond comprehension for the average book publisher but this is what business strategy is all about.  When we were defining Bowker’s business in 2001/2 we could have stayed in low-margin, low-growth metadata management for libraries and struggled.  Instead the company moved into high-margin, high-growth transaction businesses and market intelligence for publishers and we were able to grow the company.  Strategically for Bowker, this transition was logical but was only achieved by stabilizing the legacy business and making a series of strategic acquisitions.

In publishing, there is a more impressive example in the manner in which Pearson looks to be rethinking how they define their educational market.  Pearson has long been the leader in education publishing both in K-12 and Higher Ed since the big acquisitions from Simon & Schuster in the late 1990s.  Indeed in recent interviews, Majorie Scardino the outgoing CEO of Pearson, recalled realizing education was the growth vehicle for Pearson soon after she became CEO 15 years ago.   During her tenure, the company realigned their operations, redefined their market, invested in content transformation and made many strategic acquisitions thereby broadly expanding the content and services customers in k-12 and higher ed can now purchase (and license) from Pearson.  One only need look at the chart below from their recent annual report to recognize how fundamental has the change in market approach been for Pearson.

Pearson PLC Annual Report: Competitors

The companies we in the ‘publishing’ market would consider their historical competitors – McGraw Hill, Cengage, HMH – are only bit players in comparison with Apollo, Benesse, Kaplan and others.  Pearson is not only a content producer but they are also (via a series of key acquisitions) a distribution point for educational learning on par with Kaplan and the University of Phoenix.  Pearson recently won a contract to deliver “Cal State Online” for the California State University System (CSU) which will enable the delivery of a selection of undergraduate degree and professional master’s programs.   In competing to deliver this solution for CSU it is unlikely that Pearson was competing with their ‘traditional’ publisher competitors.

Other publishers may be starting to take notice and John Wiley’s recently announced acquisition of an educational provider is evidence of this attention.  Yet, Pearson looks to have a significant head start and looking at this chart it’s interesting to speculate what the impact of mergers and acquisitions may have on these players over the next few years.  It seems logical that for some the fastest way to catch up to Pearson would be to merge with someone else.  For example, Kaplan doesn’t have much owned content but wide market penetration; whereas, Cengage is a content developer focused on traditional education delivery.  This type of strategic combination may make sense as these players begin to re-think their markets.

An interesting aspect of the discussion about Scardino’s departure has been focused on what Pearson’s new CEO may divest as though divesture at Pearson is something new.  That’s not the case, as Pearson has divested many businesses over the past ten years.  Whether the company divests the Financial Times or Penguin seems far less interesting to me in contrast to what their education business can become over the next five years.  Leveraging what is increasingly a content platform for creation and delivery looks far more interesting and compelling for Pearson in my view and is a direct result of how they re-thought their market to go beyond the parameters of the traditional publishing market.  Looking at the chart from their annual report, all educational companies are going to struggle to keep up.

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Media Week (V4, N42): Pearson, Library of Congress, Education & Technology + More

(Frankfurt - Come by Hall 8.0 R 928)

The Telegraph reviews Majorie Scardino's 15 year run as head of Pearson plc (Telegraph):

Part of the joy for Dame Marjorie was reshaping Pearson from a bewildering rag-bag of a business, which included Madame Tussauds wax museum, half of investment bank Lazard and a sizable cache of Château Latour wine, into today's publishing and education empire. Its current portfolio includes the Financial Times newspaper and Penguin Books, as well as a growing number of English language schools and universities in China and South Africa.

Dame Marjorie, a former rodeo rider, is known within the company for acting on instinct rather than starting out with forensic analysis. Some decisions have been misplaced - she laughs remembering the pink FT mobile phone launched in the late 1990s - but canny investments in digital initiatives and emerging markets have helped the group navigate its way through two recessions, a dotcom meltdown and the structural decline of print media. Pearson's share price has climbed almost 90pc under her 16-year stewardship. Meanwhile, revenues have tripled to £5.9bn and Pearson delivered record operating profits of £942m last year.

The Library of Congress had launched (or evolved based on their explanation) a new magazine and fittingly they are discussing themselves (LOC):

The War of 1812, often called the Second American Revolution, resulted in the burning of the U.S. Capitol and most of its contents. The Library of Congress arose from those ashes to become the largest library in the history of the world. Our premiere issue discusses our history as well as the services we offer to Congress and to researchers today. (Issue-pdf)

Over at Inside Higher Ed, Alexandra Logue writes about evolving idea about how technology continues to change education but it's been going on for a while (Inside):

Although we can all agree that college students are certainly not the same as casino attendees or lab rats, we can also all agree that technology, designed and used correctly, can facilitate instruction through personalization as well as through motivation. (The popular appeal of many online role-playing games is one example of that.)

The teaching techniques and tools discussed here have been promoted by behavioral psychologists for the past century. What lessons can we learn from this? One is that it is possible to facilitate learning using the techniques discussed here, such as personalized instruction, without ever having to use the latest (very expensive) technology. There are times when a relatively cheap programmed textbook will help someone learn, perhaps not as well as the best online programs, but very well.

I've been reading Philip Kerr's Bernie Gunther series since he released his first back in 1989 (or so). Here's an interview with him in The Economist. News that there is an HBO series in the works is worth looking forward to (Economist)

“PRAGUE FATALE” is the latest novel in the Bernie Gunther series by Philip Kerr, a British crime writer. This is the eighth book featuring Bernie, a sardonic Berlin detective with a fondness for cigarettes and women, since he first appeared in 1989. In the books, Mr Kerr skillfully combines noir-crime plots with authentic historical background placing Bernie in volatile times from the 1930s to the cold war.

In “Prague Fatale”, set in wartime Berlin and Prague, Bernie is dropped into his most morally ambiguous case yet. He accepts an invitation to a country-house gathering with Reinhard Heydrich, Hitler’s architect for the final solution (it would be unwise to refuse). During the weekend, one of Heydrich’s adjutants is found murdered. Bernie’s mettle is tested when he must unravel a whodunit involving some of the most savage characters in the Nazi leadership. HBO is in talks to adapt these taut, atmospheric murder mysteries into a TV series.

From Twitter:
George Pelecanos on what makes a good story, which of his books you should start with, & where to eat in DC http://bit.ly/QeeUf5

Booker judge says book bloggers drown out serious criticism, to the detriment of literature Publisher's Weekly”  

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Tin Roof: Auckland City and Harbor 1972

Auckland New Zealand 1972

This is taken from across the bay from Auckland city which is on the other side of the water towards the right.  There's no question this view is probably almost recognizable today but I wouldn't know since I haven't been back since 1976.  The large tower building in the center is the city hospital and just to the left of that is the One Tree Hill and Eden Park.  Sharp eyes will also recognize the museum just to the left of the green patch.

On the right edge of the photo there is another tower building which is the Intercontinental Auckland where we were housed for almost five years.

(And yes, there is a big thumb print on this image; part of the charm and no charge).

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

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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Annual Veronis Suhler Stevenson Media Forecast

Some snips from the annual VSS media forecast:

“Digital’s influence is now a constant and significant factor in every sector, segment and sub-segment of the US Communications industry,” said John Suhler, Co-Founder and President of VSS. “At the same time as digital technology and innovation continue to spur growth in the industry or propel the communications industry forward, emerging digital media and services are significantly changing consumption habits among both institutional and consumer end-users. These developments will drive digital-related expenditures to constitute nearly 40% of the overall U.S. Communications Industry spending by 2016.”

In the Business & Professional Information & Services sector, spending will rise 7.2% to $204.43 billion in 2012 and post a 7% CAGR in the forecast period, fueled by solid growth in both Business & Professional Information and Business & Professional Services, particularly those relating to marketing, financial & economic and scientific & technical Information, as well as technology services, such as wireless data access, Software as a Service (SaaS) and cloud computing.

VSS projects spending on Education & Training Media & Services will increase 4.4% to $252.46 billion in 2012 and post a 4.2% CAGR in the forecast period. Solid gains in College Media and Outsourced Corporate Training will offset more modest growth in K-12 and declines in For-Profit Postsecondary Educational Services.

Spending on Entertainment & Leisure Media will increase 4.9% to $293.49 billion in 2012, with strong gains in Subscription TV spending expected to offset weaker growth in Entertainment Media and declines in Consumer Books. Steady growth in Subscription TV spending and a resurgent Entertainment Media will produce a 4.9% CAGR in the forecast period despite protracted declines in Consumer Book spending.

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Education Panel at Frankfurt Tools of Change

Sheila Bounford who is chairing our panel discussion at Tools Of Change next week posted this about our panel session:

Greater than the Sum of Our Parts:

We’ve been talking between us for some time about how best to run this 50-minute session. The Frankfurt Tools of Change audience is infamously diverse, knowledgeable and yet hungry for insight, which – in combination with the sheer rapidity of technological, educational and commercial change – presents a challenging mix for speakers and panelists. Just as the changing style of pedagogy means that college and university tutors are engaging with students differently – we also need to break away from the conventional PowerPoint x3 and Q&A format.  At risk of sounding dangerously Rumsfeldian – our expert panel know what they know. What they don’t know is what you know, don’t know and want to know. So here’s your chance to tell us.

The format we’re adopting is for each panelist to make some brief opening remarks about how they currently see change in action in the textbook arena. Then we’re throwing it open to you to ask questions, make comments, and get involved. We’ll be taking questions from the audience in advance and during the session through Twitter hashtags #tocffm #digtxt, (and I’m at SheilaB01) or by email to SheilaB@otpi.co.uk. I’ll be producing a post-conference write-up to share online with all participants. We’re aiming for an outcome that’s greater than the sum of its parts – but that’ll only happen if you pitch in.

 More here

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Open Letter from ALA on Digital Book Lending

Last week ALA President Maureen Sullivan published an open letter to the library and publisher community regarding the refusal of Simon & Schuster, Macmillan, and Penguin to provide access to their e-books in U.S. libraries.   It could have been better planned with Macmillan and Grand Central taking tentative steps to address this market in a more comprehensive way.

The open letter states:

It’s a rare thing in a free market when a customer is refused the ability to buy a company’s product and is told its money is “no good here.” Surprisingly, after centuries of enthusiastically supporting publishers’ products, libraries find themselves in just that position with purchasing e-books from three of the largest publishers in the world. Simon & Schuster, Macmillan, and Penguin have been denying access to their e-books for our nation’s 112,000 libraries and roughly 169 million public library users.

Let’s be clear on what this means: If our libraries’ digital bookshelves mirrored the New York Times fiction best-seller list, we would be missing half of our collection any given week due to these publishers’ policies. The popular “Bared to You” and “The Glass Castle” are not available in libraries because libraries cannot purchase them at any price. Today’s teens also will not find the digital copy of Judy Blume’s seminal “Forever,” nor today’s blockbuster “Hunger Games” series.

Not all publishers are following the path of these three publishers. In fact, hundreds of publishers of e-books have embraced the opportunity to create new sales and reach readers through our nation’s libraries. One recent innovation allows library patrons to immediately purchase an e-book if the library doesn’t have a copy or if there is a wait list they would like to avoid. This offers a win-win relationship for both publishers and library users since recent research from the Pew Internet Project tells us that library users are more than twice as likely to have bought their most recent book as to have borrowed it from a library.

Libraries around the country are developing mobile applications and online discovery systems that make it easier to explore books and authors on the go. Seventy-six percent of public libraries now offer e-books — double the number from only five years ago — and 39 percent of libraries have purchased and circulate e-readers. Public libraries alone spend more than $1.3 billion annually on their collections of print, audio, video, and electronic materials. They are investing not only in access to content and devices, but also in teaching the skills needed to navigate and utilize digital content successfully.

Librarians understand that publishing is not just another industry. It has special and important significance to society. Libraries complement and, in fact, actively support this industry by supporting literacy and seeking to spread an infectious and lifelong love of reading and learning. Library lending encourages patrons to experiment by sampling new authors, topics and genres. This experimentation stimulates the market for books, with the library serving as a de facto discovery, promotion and awareness service for authors and publishers.

Publishers, libraries and other entities have worked together for centuries to sustain a healthy reading ecosystem — celebrating our society’s access to the complete marketplace of ideas. Given the obvious value of libraries to publishers, it simply does not add up that any publisher would continue to lock out libraries. It doesn’t add up for me, it doesn’t add up for ALA’s 60,000 members, and it definitely doesn’t add up for the millions of people who use our libraries every month.

America’s libraries have always served as the “people’s university” by providing access to reading materials and educational opportunity for the millions who want to read and learn but cannot afford to buy the books they need. Librarians have a particular concern for vulnerable populations that may not have any other access to books and electronic content, including individuals and families who are homebound or low-income. To deny these library users access to e-books that are available to others — and which libraries are eager to purchase on their behalf — is discriminatory.

We have met and talked sincerely with many of these publishers. We have sought common ground by exploring new business models and library lending practices. But these conversations only matter if they are followed by action: Simon & Schuster must sell to libraries. Macmillan must implement its proposed pilot. Penguin must accelerate and expand its pilots beyond two urban New York libraries.
We librarians cannot stand by and do nothing while some publishers deepen the digital divide. We cannot wait passively while some publishers deny access to our cultural record. We must speak out on behalf of today’s — and tomorrow’s — readers.The library community demands meaningful change and creative solutions that serve libraries and our readers who rightfully expect the same access to e-books as they have to printed books.

So, which side will you be on? Will you join us in a future of liberating literature for all? Libraries stand with readers, thinkers, writers, dreamers and inventors. Books and knowledge — in all their forms — are essential. Access to them must not be denied.

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