Wednesday, March 24, 1999

3/24/99: ReedElsevier, Bertelsmann, Barnes Noble,

Publishing News: March 24th, 1999
Mercer Study on Single Copy Sales
Reed Elsevier Profit Forecast Disappoints
Martin Maleska, Rejoins Veronis, Suhler
Bertelsmann Havas Deal is Off.
AAP: 1998 Book Sales Exceed $23Bill
US Book Store Sales: $13Bill
Amazon on Drugs
Golden Reprieve
Barnes & Noble Sales: $3Bill

Mercer Study on Single Copy Sales
Mercer Consulting recently announced preliminary findings from a study commissioned by the Magazine Publishers Association (www.magazine.org) . The study was a review of the single copy magazine channel and the potential role of scan-based trading in the retail market. The objective of the study was to determine the best way for the industry to take positive, concerted action to improve the efficiency and effectiveness of the single copy channel for all trading partners, and address the future role of scan-based trading. During the first phase, Mercer worked with retailers, wholesalers, national distributors, publishers and other industry players to identify opportunities for performance improvement in the retail sales of magazines. Mercer identified potential rewards equivalent to as much as $420 million per year or ten percent of retail sales based on their input, as well as lessons from other industries, and economic modeling of the supply chain. In support of the above, the MPA has adopted a set of cooperative standards and practices named COSMAR which will require changes and new approaches on the part of all trading partners: publishers, distributors and retailers. Mercer and the MPA will look to prototype their recommendations over the next few months.

Reed Elsevier Profit Forecast Disappoints
They don’t have a CEO, their merger with Wolters Kluwer failed and now profits announced for 1998 were 6% below last year and projected earnings for 1999 will be flat. Pre-tax profits fell to $1.26 billion in 1998 and these results were in line with the six percent drop the company forecast in December. Sterling's strength and Reed's heavy investment in adapting its core hard-copy publications for the Internet age were given as reasons for the poor results. Sales were $5.5Billion for 1998. This lack of strong growth, combined with a lack of news on Reed's search for a new chief executive, delivered a double blow to its shares, which fell sharply in London and Amsterdam, despite strong overall gains by both stock markets. The company did say that discussions with a candidate were in an advanced state however it is now two weeks after this announcement and they still have not made an announcement. Out going CEO, Nigel Stapleton declined to comment on how soon Reed will announce the results of its search, which was unveiled seven months ago. Other items of note; Reed spent an additional 15 million pounds on major initiatives in electronic publishing last year, taking the total to 80 million. The company posted ``pure'' Internet revenues of 10 million pounds, a 50 percent increase year on year.

Martin Maleska, Rejoins Veronis, Suhler
Veronis, Suhler & Associates announced that Martin E. Maleska, a senior publishing executive and investment banker who most recently served as President of Simon & Schuster's International and Business & Professional Group, has rejoined the firm as Advisor Managing Director. Mr. Maleska will be involved in all aspects of the firm's merchant banking activities which include investment banking and its private equity funds. The return to Veronis, Suhler is a homecoming for Mr. Maleska, who was a managing director at the firm from 1991-1995, concentrating on magazine, newspaper and book publishing transactions.

Bertelsmann Havas Deal is Off.
The proposed merger between Bertelsmann and Havas’s professional publishing operations is off. Apparently, neither side would concede to the other in terms of who’s operation was bigger. The companies continue to maintain close relations in French book clubs and online book retailing.

AAP: 1998 Book Sales Exceed $23Bill
The American Association of Publishers recently released their preliminary sales numbers for 1998. According the AAP numbers, retail book sales reached $23Bill. Give the last five years of declines or mediocre sales gains this was a remarkable sales increase of 6% over 1997. The biggest sales gains occurred in Adult paperback (+10%), Juvenile paperback (14%), and ElHi Texts (10%). In contrast to prior years, there were no categories which showed declining year on year sales.

US Book Store Sales: $13Bill
Bookstores sales reported in Publishers Weekly rose 2.6% to over $13Bill. Store sales measured against retail sales generally were only half the experienced gain for the sector.

Amazon on Drugs
Amazon.com purchased a 40% interest in the online drugstore, drugstore.com. Amazon made the investment a number of months ago and it recently came to light due to drugstore’s launch. Jeff Bezos, Amazon CEO declined to comment on other internet related investments Amazon may have made. Amazon appears to be actively proving the ‘mall’ internet business model.

Golden Reprieve
Golden Books, the beleaguered Children’s Book publisher where Richard Synder went to re-create Simon & Schuster, reached an accord with it’s Bankers on restructuring plan. Essentially, the deal recapitalizes the company with a loan from CIT group. Current management, which has been in turmoil over the past 12 months, will remain in place. Rumors at the end of last year had Disney purchasing Golden Books however nothing came of this. Golden holds long term licenses on a number of Disney characters.

Barnes & Noble Sales: $3Bill
Barnes & Noble sales hit $3Bill in fiscal 1999. Sales increased 8% over last year and sales from superstores accounted for 84% of total sales. Internet sales at barnesandnoble.com increased to $70.2MM. B&N reports that they will add up to 50 new superstores during 1999 however the company’s fiscal 2000 earnings forecast was low which helped reduce the stock price by $5 last week. Let’s not forget that Amazon is on a yearly run rate of $1Bill – what’s with the bricks and mortar?

Tuesday, March 02, 1999

3/2/99: Amazon.com, Ingram, Pearson, NYTimes,

Publishing News: March 2, 1999
Amazon.com Sales
Ingram
Hearst
Pearson
New York Times Co. to Buy Interest in TheStreet.com
EBook Standards Meeting
Book Point of Sale Information
Cambridge University Titles On Demand
Reader's Digest Outlines Growth Strategy
Adobe Systems Introduces Next Generation of Page-Layout Software
Langenscheidt Acquires Hammond Brand
Mirror Group

Amazon.com Sales
Amazon.com’s sales grew to $610MM from $147MM and are now at an annual run rate over a Billion dollars according to company executives. The net loss for the period was $124MM vs $31MM last year. Since last year, not only has Amazon.com continued to explosively sell books but the company has added CD’s and videos to the mix. Additionally, the company also expanded into Germany and the UK during the same period. Sales in ‘expansion’ areas accounted for 25% of total fourth quarter sales. Company President Jeff Bezos confirmed his company’s plans to aggressively invest in the business even more than they had in the past which will no doubt translate into continued operating losses for the company.
Source: Publishers Weekly, 2/1/99

Ingram
YoungSuk Chi has been promoted to COO of the Ingram Book Group and will report to Mike Lovett the President and CEO of the Ingram Book Group
Source: Publishers’ Weekly 1/25/99

Hearst
Hearst Book Group which includes Avon, Hearst, Morrow and at least 21 other imprints saw sales surpass $200MM according to Publishers’ Weekly. During the year Hearst had six titles on the best seller lists and also saw increases in back list sales.
Source: Publishers’ Weekly 1/25/99

Pearson
Pearson Education announced an agreement with Versaware Technologies to convert textbooks into electronic form. Apparently, Versaware has developed a system that reduces the time and expense of convertion into a variety of formats. Versaware is also denying that it is about to be purchased by Barnes and Noble although they admit to a number of discussions on strategic partnerships.
Publisher’s Weekly 2/15/99

New York Times Co. to Buy Interest in TheStreet.com New York Times Co. said it will pay $15 million in cash and services for a minority equity stake in TheStreet.com, an online provider of financial and investment news and commentary.
Simultaneously, Michael Golden, vice chairman of New York Times Co., was nominated to serve on TheStreet.com's board. New York Times Co. also said it was discussing opportunities for strategic alliances with TheStreet.com.
Source: The Wall Street Journal 02/23/99

EBook Standards Meeting
The Open Book Standards committee met to review a draft for proposed standard file formats based on SGML and XML for electronic book devices. The meeting was hosted jointly by eBook manufacturers Softbook Press and Nuvo Media. The current specifications are open to review (as an evaluator) for comment and review. It is expected that the specifications will be published to the public sometime in the next three months.
Source: Publisher’s Weekly 2/15/99

Book Point of Sale Information
Publishing Solutions Inc., a White Plains N.Y. company announced it is has agreed with Barnes & Noble and Penguin Putnam to pilot a book POS system. This system is designed to track and forecast book sales at the retail level. As the results become known the company plans to expand the system to a wider group of retailers.
Source: Publishers’ Weekly 2/15/99

Cambridge University Titles On Demand
Lightling Press the Ingram affiliated on demand printer announced that they have joined with Cambridge University Press (CUP) to offer a number of CUP titles on demand. Initially Lightning will offer 113 titles, however if all goes well up to 500 additional titles may be added to the selection. CUP has chosen recently discontinued titles which are still receiving orders and company sources commented that their current order fulfillment system keeps track of orders for out of print titles. Lightning Press now has over 1800 titles in it’s digital library which can be printed in lots as low as one unit.
Source: Publisher’s Weekly 2/15/99

Reader's Digest Outlines Growth Strategy Thomas O. Ryder, chairman and CEO of The Reader's Digest Association, Inc. today outlined a five-point growth strategy for the company in a speech to financial analysts and company employees. The key elements of the growth strategy include: - Dramatically expanding the company's presence in five targeted areas of intense consumer interest -- home, health, family, finance and faith -- that offer high growth potential and suit the company's brand. - Selling products and services beyond publishing that fit with the Reader's Digest brand in the five targeted areas, initially focusing on health and financial services. - Continuing geographic expansion, by entering new countries and expanding offerings in countries where the company already has a presence. - Developing new channels -- including direct response TV and non-sweepstakes mail -- to market existing and new products and services. - Making the Internet an integral part of all the company's business by investing in high quality website development, enhancing current sites and creating new ones.
In the call Ryder also spoke of efforts – to date largely successful – to reduce monetize assets and that these had produced over $300MM. This money together with an additional investment pool of $100MM would be used to fund the above investment activities. There will be a concentration on the internet as a mechanism to extend their strength in direct response. There was no mention of the proposed deal/joint venture with Time Life. The companies may still be discussing some consolidation but it remains to be seen if anything comes of it.
Source: Businesswire 2/25/99

Adobe Systems Introduces Next Generation of Page-Layout SoftwareAdobe Systems introduced the vaunted ‘Quark Killer’ application this week in Boston. The desk top publishing package named InDesign was previewed six months ago under the name K2 and is based on a new open object oriented architecture that is highly extensible. With the introduction of InDesign, Adobe is aggressively taking on Quark’s core market in desk top publishing software; however with over 70% market share in key publishing and advertising markets Adobe will face an up hill battle convincing production managers and designers to make the switch. There are a number of advantages however to making the switch – number one is you don’t have to deal with Quark’s renowned cavalier attitude to customer service as well as their errant product migration strategy. Additionally, Adobe’s other products are mainstays in publishing and advertising offices and InDesign has been developed to work seamlessly with Photoshop, Illustrator and Acrobat. Quark does not interface with these products which has caused process silos and inefficiencies. A flexible, fully digital workflow is, according to Terry Rosen, director of information technology at Ogilvy & Mather New York, essential for companies looking to succeed in a global market, where concepts and materials have to be shared effortlessly across thousands of miles. "Adobe InDesign delivers a truly integrated creative tool kit. The software offers a familiar interface and the same approach to page layout and design as Photoshop and Illustrator, which means our art directors and studio artists can hit the ground running with it. With InDesign, we can also output ads directly to PDF for review, approval, and transmission. It's this type of unified workflow that lets us move ideas to production faster, and better support our clients worldwide," said Rosen.
Quarks’ reaction to the news was muted – although they have yet to announce a strategy for the current generation of products.
Source: Businesswire 3/2/99

Langenscheidt Acquires Hammond Brand Hammon Inc, a US based map and cartography publisher has been purchased by German based Langenscheidt Publishers, Inc. The 98-year old Hammond, celebrated for its old world tradition of cartography, has enjoyed a reputation in recent years for its advances in mapmaking technology. In 1992, it published the world's first completely digitized world atlas: The Hammond Atlas of the World. This atlas garnered awards for graphics, accuracy and innovation, as did its most recent edition, published in 1998, which pioneered computer-generated tints depicting land elevations and ocean depths. Terms were not disclosed.
Source: Businesswire 3/2/99

Mirror Group
The Mirror Group rejected the most recent offer from regional UK publisher Trinity. The last bid valued the company at approximately $1.5Bill. The combination of stock and cash was insufficient in the view of the board and additional bids are expected. Mirror group has faced turmoil over the past several months regarding it’s future. David Montgomery the Mirror CEO was removed by the board recently in a board room shake up and the company is now being run by a temporary CEO. Since the living large days of Bob Maxwell (was he pushed?) the company has fought to recover it’s once UK market dominance while at the same time managing the debt imposed by Maxwell’s unique style of financial accounting. Maxwell if you recall stripped the pension funds of this operation to ‘plug the leaks’ (pun very much intended) in his rapidly sinking business empire. Many of those pensioners were required to return to work.
Source: NYT 3/2/99