Audio Abundance?

Untangling the Very Tangled World of Audio Rights

However much the print world is suffering as it stares down proliferating e-formats and their rights, the audiobook world’s been there, and done that. With cassette, CD, and now streaming media all up for grabs in a variety of permutations, many of them farmed out to different publishers with completely uncoordinated agendas, the audio biz is well into a protracted battle against the hydra-headed monster.

“In an ideal world all audio rights would be bundled, but they’re not,” says Jan Nathan, executive director of the Audio Publishers Association. “The more sophisticated the author, the more complicated the contract. You’ve got abridged and unabridged, then single voice and multiple voice, and interactive. There are so many different types of rights that can be sold.” Indeed, while audio may seem established compared to electronic editions, many of the topsy-turvy rights issues remain common to both formats. Agents report that every book is treated differently when they offer rights, so publishers can never count on getting audio included with print rights. Audio rights may be reserved and auctioned off to the highest bidder later — mostly for abridged editions, as full-scale unabridged runs are still rare. However, most agents now understand that marketing dollars are not generally available for audio, so they strive to tie in with the p-book release for maximum promotional exposure.

But it’s still complicated. Just ask Maja Thomas, executive director of Time Warner AudioBooks, who says she’s doing Nicholas Sparks’s The Rescue in abridged and unabridged on both cassette and CD. “That’s four different formats and four different packages,” says Thomas. “It’s one title but it’s really four different pieces of work.” All of which begs the question: Can there possibly be a market to justify so many audio formats? Apparently so, publishers say. On Thomas’s list, literary works such as Tony Earley’s Jim the Boy or Jody Shields’s The Fig Eater only go out unabridged, because “the language and the plot are inseparable.” And Thomas says that as the market becomes more sophisticated, longer, four-cassette abridgements are on the rise. Since about 20% of all cars have CD players, there’s a push to service that market as well. “The interesting thing is that we don’t see the CD sales cutting into our cassette sales,” Thomas observes. “We were losing sales because people with CD players weren’t buying the cassette version.”

Carrie Kania, associate publisher of Harper Audio, concurs: “On the bigger books we try to do all formats, and in the last four months we’ve pushed the envelope and done a few unabridged releases on CD.” Kania’s first such title was Cormac McCarthy’s All the Pretty Horses, a 10-CD set selling for $50. On the Internet front, incidentally, Harper is putting out Armistead Maupin’s The Night Listener as an Internet audio serial on Salon.com, two weeks before the book, cassette, and CD hit stores. Kania’s also been dipping into the Caedmon list, which Harper bought in the 80s and features venerable audio moments such as T.S. Eliot intoning his own poetry.

With audio sales on the rise, publishers have realized that handling audio themselves can be a boon. “The competition for audio rights is much tougher all across the board,” says Eileen Hutton, vp associate publisher at Brilliance Audio. Now it’s all part of being a full-service publisher, adds Judy McGuinn, former head of Warner Audio. “If you can handle audio you become a publisher that an author feels is a one-stop shop.” Unfortunately, McGuinn says, a lot of publishers have still failed to appreciate the potential of audio to reach a new audience. “Book publishers have never looked at audio and said, Wow, I should be putting major ad dollars into creating a marketplace for people who don’t read books in the classic sense,” she says. “If audio books not only appeal to readers but to nonreaders, and if the only place book companies ever advertise books is in book review sections, then how do we reach nonreaders?”

Don Katz, chairman at Audible, has a similar take on the issue. “It might be the most underpenetrated segment of publishing. There are 84 million people who drive to work alone every morning, and what they do by default is listen to the radio.” Katz says the bias against audiobooks is deeply ingrained. “A lot of people didn’t want the audiobook industry to exist. They thought it would cannibalize book sales. But research always indicates that there’s a rub-off effect that just creates more reading.”

In any case, there’s no shortage of synergy at Random children’s audio imprint Listening Library, which has been ground zero for the Harry Potter ripple effect on the whole kids’ audio market. Publisher Tim Ditlow says that around 70% of the children’s audio releases fit on two cassettes (and all Random kids’ audio is unabridged), which sell for about $18. But as usual, Potter IV broke all records, going over 20 hours in a 12-cassette set for $39.95 or a 17-CD set for a whopping $69.95. He’s sold over 300,000 audio releases of Potter IV, bringing the series up to 1.3 million copies. “It puts us into an interesting category in terms of audiobooks,” Ditlow says, “because it has become the fastest selling audiobook series, surpassing any of the adult bestselling authors.” Now, parents are coming back for more. To stoke the fires, Ditlow’s embarking upon a 19-hour, full-cast production in London for the third book in Philip Pullman’s The Amber Spyglass series, set for a simultaneous release in October. “The complexities of a full-cast production are daunting,” he says. “It’s like producing a Broadway show. People here are scratching their heads and telling me that the BBC doesn’t even do this.”

International Bestsellers

Trading Places
Guillou Turns Publisher, Potter Imposter in Spain, and Bridget Jones Down Under

The prolific writer-turned-publisher Jan Guillou has commandeered the top three slots in Sweden this month, all of them part of his journey through the Middle Ages. At the top of the heap is the third in his trilogy based on the Crusades, The Kingdom at the End of the Road, which also happens to be the first Guillou novel to be published by his new co-venture Piratforlaget (Pirate Publishing). In a somewhat twisted tale of his own, Guillou left Norstedts, his publisher of 30 years, with editor Ann-Marie Skarp to join co-bestselling author Liza Marklund and her partner Sigge Sigfridsson to fire up Piratforlaget. Sigfridsson and Marklund jumped on board after earlier joining forces in a unique one woman/one man team to publish Marklund’s wildly successful novels, The Bomber and Studio Sex, under the name Ordupplaget. Now with Guillou and Skarp, the foursome plan to leverage their bestseller status and editorial know-how in potentially novel ways. Currently their list includes only three authors (Marklund, Guillou, and Norwegian crime-writer Anne Holt), but more are expected next year. As for Guillou, he’s just counting his blessings. Rights to his current series have been sold to Germany (Piper), Italy (Longanesi), Spain (Planeta), Holland (Uniboek), France (Laffont), Norway (Cappelen), Denmark (Modtryk). The series is under submission in the UK and US. Contact Linda Michaels for rights.

Murder is on the menu elsewhere in Sweden. At number four, Murder on Mauritius is veteran writer Jan Mårtenson’s twenty-eighth mystery in as many years. They feature the “anti-hero” Johan Kristian Homan who lives, with his Siamese cat sidekick Cleo de Merode, in Stockholm’s Old Town where he is an antique dealer and collector. He finds himself stumbling into mysteries and in this most recent he finds himself investigating the secretive rich and famous on the island of Mauritius, where a mysterious murder has occurred. Rights are still available; see Wahlström & Widstrand. Then along comes Willy Josefsson’s latest thriller, The Mark of the Killer, wherein former chief inspector Martin Olsson gets a surprise when he attends a funeral at which two bodies tumble out of an overturned coffin. The “wrong” body belongs to a prominent financier, and the clumsy pallbearers lead him into a bizarre melange of church politics and business rivalry. By day, author Josefsson is a journalist for a documentary program on Swedish Public Radio, and has enjoyed success with his four previous novels. Rights have been sold to Germany (Rowohlt) and Denmark (Lindhart & Ringhof). See Anneli Høier at Leonhardt & Høier for rights.

A serious case of Harry-Potter-itus is spreading in unusual directions, to which the bestselling Spanish novel Aranmanoth attests. Set during the Middle Ages, the novel features the adolescent “Aranmanoth” who feels somewhat out of place because he is half fairy and half human. Unlike other teens, he obeys “strange signals issuing from the leaves in the trees and the birds in the sky.” The young man eventually realizes that his dreams and fantasies are as valid and important as what most non-fairies (read: Muggles) call “reality.” Ana Marie Matute is a septuagenarian author who has written 34 novels and wildly popular children’s books in Spain, earning her membership in the Spanish Royal Academy. She was last published in the US in 1961 by Harcourt. The Agencia Literaria Carmen Balcells handles foreign rights.

A popular historian, José García Hamilton, has whipped up patriotic feeling in Argentina this month. His biography, Don José, recounts the life of José De San Martin, who liberated Argentina from Spain, and has dominated their list since publication. Hamilton practices law, and has also written several biographies of famous Argentine figures. He already has a following in the US, incidentally, having made the lecture circuit at the University of Wisconsin, Johns Hopkins, and elsewhere. Rights are currently waiting to be liberated from Sudamerica.

Pamela Jooste has once again made her way to the top of the South African bestseller list. Like Water in Wild Places explores the legends of ancient South Africa through the story of a contemporary family living during apartheid. Jooste’s first novel, Dance With a Poor Man’s Daughter, won numerous prizes, including the highly regarded Commonwealth Writer’s Award. Sources at Doubleday report that the book, published in July, has sold close to 5000 copies. In the hardback/trade paperback market in South Africa, these are impressive figures (especially for a local author). US rights, held by Doubleday UK, are still available. See Judith Murdoch for all translation rights. And speaking of the UK, Chris Hopkins has pole-vaulted up the list there with his second novel, High Hopes, involving the journey of the young author in the early years of his teaching career. Hopkins’ first book, Our Kid, was also a hit, although rights have only been sold to Arbeiderspers in Holland. We’re told the novels are on submission to a number of US publishers. See Sara Thomson at Headline for rights.

Things are certainly heating up in Australia with Maggie Alderson’s Pants on Fire, a saucy debut novel featuring a magazine editor desperately trying to forget an unfaithful fiancé. The heroine’s magazine, Glow, is memorably described as your typical girlie “facials and orgasms” rag, and parts of this tale remind us of the popular confessionals of Bridget Jones. London-born, Alderson has had a long career in magazines, and was editor of Elle in London and Mode in Sydney. She is now a contributor to Australian Vogue and other publications. US and Canadian rights are still awaiting takers, and Penguin UK controls rights. See Peg McColl.

As a parting note, we notice that Canada’s Globe and Mail rather unceremoniously kicked Harry Potter off the fiction bestseller list, placing him in the vaguely delineated “Special Interest” column. This follows close on the heels of the New York Times’s controversial creation of a children’s bestseller list, and according to our friends at Publishers Weekly Daily, Michael Jacobs, svp for trade at Scholastic, has been asking the Times to put the new Potter paperback (Chamber of Secrets) on the mass market/general interest paperback list. Jacobs’ rationale? Potter is one of the bigger releases in recent memory, and more than 40% of those who buy and read Harry are adults.

New York Is Book Country — But So Are Seattle, Santa Fe and Amarillo

ORIGINALLY PUBLISHED AT INSIDE.COM (9/18/00)

This week marks the beginning of the 22nd year of New York is Book Country, one of the oldest and largest American book fairs. Typically, New Yorkers think the publishing business begins and ends in this city, and with 350 writers, more than 200 exhibits — including a new technology pavilion — and an expected 250,000 attendees parading through the five-day event, NYIBC is pretty impressive. And this year’s theme, ”A book, e-book, any book!,” is particularly timely.

Still, it’s hardly the only fair to visit these days.

From Amarillo, Tex., to Wooster, Ohio, from Seattle to St. Petersburg, Fla., the season’s regional book festivals are increasingly showing prime-time potential — and racking up hundreds of thousands of dollars worth of sales every year.

Beyond NYIBC and other blowouts like the Los Angeles Times Festival of Books (which brought 90,000 readers to the UCLA campus in April) and Chicago’s Printers Row Book Fair (which packed in 75,000 attendees last June) — or even the up-and-coming Santa Fe Festival of the Book, slated for Oct. 12-14 — fairs seem to be putting authors front and center in regional hubs from coast to coast.

As the Miami Book Fair’s Mitchell Kaplan explains it, the popularity of book fests is a classic case of the ”out-of-New-York syndrome.” With scant book review coverage in the local media and even scanter author tour support for minor-league cities, he says, the public is ravenous for the chance to meet writers and their work.

Just ask Galyn Martin, director of the 12-year-old Southern Festival of Books, which kicks off in Nashville on Oct. 13. Last year, some 250 authors and 30,000 attendees descended upon the fest — and left with $50,000 worth of books from the fair’s tables alone, not including sales from participating booksellers. This year, the festival is one of four fall fests being featured on C-SPAN (the others are New York, Austin, and Miami), which can boost business to, well, multinational levels. ”When we got mentioned on C-SPAN two years ago, we got a letter from Mongolia,” Martin says. ”I didn’t know they had cable in Mongolia.” The festival still relies heavily on publishers to send authors and buy booths; HarperCollins will be sending a dozen authors this year, while Ingram, whose employees had previously volunteered at the fest’s book sales table, are now getting paid for their efforts, courtesy of Ingram president Jim Chandler.

Then again, maybe it’s just something in the air. ”Everybody gets excited about reading and writing in the fall,” says Era Schrepfer, exhibition coordinator for the Northwest Bookfest, ”probably because it gets really cold and dark in Seattle.” Indeed, some 30,000 fest-hoppers from the Northwest will pack into Seattle, where the 200-author-strong Bookfest (Oct. 21-22) has been cultivated by the Pacific Northwest Booksellers Association and the Washington Commission on the Humanities. The event funnels the $5 suggested donations to small literacy organizations in the region — and pulled in nearly $50,000 for the cause last year.

Every book fair, it seems, serves a slightly different constituency. ”The purposes of book fairs are almost as diverse as the areas they’re located in,” says Kevin Howell, bookselling editor for Publishers Weekly. ”Some are self-explanatory, like the three Latino Book and Family Festivals (in Los Angeles, Chicago and San Bernardino, Calif.), or the Tennessee Williams/New Orleans Literary Festival that not only promotes the late playwright but also New Orleans literature.” He adds, ”Most festivals exist to promote regional writing, regional authors and local bookstores.”

That’s emphatically the case at the Great Basin Book Festival, which aims to put Reno, Nev., smack on the nation’s literary map. ”Contrary to what some people may believe, Reno and Northern Nevada is an area where there are a lot of readers and writers, and we wanted to make a statement about that,” says Judy Winsler, director of the Nevada Humanities Committee. Writers are heading for Reno by the SUV-load, Winsler says, and this year’s fourth Great Basin book bash, held on Sept. 28-30, is part of a master plan to gather together readers, writers and university faculty in the region. As for national support, the bookselling chains’ corporate offices ignore them, says Winsler, but ”the local Barnes and Noble is going all out. The manager writes us a personal check, and with any luck she’ll get reimbursed six months down the line by the corporate headquarters.”

Which raises the question: Are fests worthwhile for booksellers? While it’s ”hard to say” what the festival does for Reno-area book sales, Winsler says local bookstores see the ”book festival as significant and important,” and booksellers in other cities say that the ripple effect from book fairs is ”huge and lasting.” In New York, Jo-Anne Ferris of Posman Books says the bookseller broke a record for sales at NYIBC last year, and has now partnered with Reader’s Digest, Prentice Hall and Random House. Meanwhile, the Texas Book Festival (in Austin on Nov. 10-12) sold more than $100,000 in books last year, and the Buckeye Book Fair, coming up on Nov. 4 in Wooster, Ohio, sold an impressive 12,000 books last year and grossed over $133,000.

Sales are so good at the LA Times Festival of Books, in fact, that Steve Wasserman, book editor of the Los Angeles Times Book Review, says booksellers refer to that event as ”Christmas in May.” Its success has even puzzled the area’s literati: ”Who would’ve thunk that people around here would actually get off their stairmasters and get out of their lap pools and go read a book?” Incidentally, Wasserman adds, the LA fair is nothing like NYIBC, which he somewhat disdainfully describes as ”people milling about eating falafel.”

Even when fests show only modest success, they’re still trying. In Amarillo, where the three-year-old High Plains Book Festival will be held on Sept. 28-29, book events for children are slated, with keynote speaker (and National Book Award-winning Amarillo resident) Kimberly Willis Holt leading the pack. More than 1,000 kids from all over the Texas panhandle showed up last year. Unfortunately, a third public day had to be cancelled this year due to scheduling conflicts — perhaps an unavoidable consequence of book festival popularity. As fest chair Karen McIntosh says, ”Authors are getting so busy now that if you don’t get to them a year in advance, you don’t get them.” The public day will return next year, and publisher support is welcome, to say the least. ”We haven’t built up a big enough base to get the Stephen Kings in yet,” McIntosh says, ”but if someone wants to be really nice and send him our way, we’d be thrilled.”

Discounts on the Danube

Battle Over Price Maintenance
Roils The European Book Trade

In case there was any doubt about it, German culture minister Michael Naumann will not go gently into his country’s cultural good night. Portraying himself to the media as a lonely lookout on the prow of the Titanic, scanning for the iceberg that will plunge German literature to the depths of commercialism, Naumann has in effect declared war on the free market. And that means cut-price bestsellers are still verboten in Germany, where publishers have staunchly defended the century-old practice of maintaining fixed retail prices for books. Their stance was affirmed last month when the deeply discounted future came knocking in the form of 14 European Commission minions, who raided several German publishers — among them Bertelsmann — seeking evidence that they colluded to cut off distribution to savvy Austrian Internet bookseller Libro, which on July 1 began selling more than 100 German-language bestsellers into Germany at a 20% discount.

July 1 was the fateful date that Germany and Austria agreed to abandon their commitment to one another’s retail book prices after bowing to EU competition commissioner Mario Monti, who has crusaded against cross-border price fixing on the grounds that it presents an illegal restraint of trade. This skirmish on the Danube over what is known as resale price maintenance has highlighted the vulnerability of European book markets to vanishing trade barriers. But the battle over fixed prices transcends economics to pierce the very heart of what it means to sustain a literary culture amid a one-world zeitgeist.

“For smaller language zones like Germany, book price maintenance is very necessary,” says Eugen Emmerling, a spokesman for the Börsenverein, the German publishers and booksellers alliance. “We must ensure a future for a variety of independent bookshops and publishing houses. In Germany we value freedom of speech.” Those are fighting words in a country where more books are sold per capita than in any nation save for Britain. Emmerling and others argue that fixed prices ensure “literary productivity” and “diversity,” because deep discounting by chains and Internet booksellers threatens the existence of small, literary booksellers and publishing houses. They warn that the abolition of price-fixing would put two-thirds of Germany’s 6,000 bookshops out of business. It would also cut back on the 900,000 books in print in Germany, where the new title output reached an all-time high last year of 80,779. “We have more new titles in Germany than in other countries,” explains Emmerling, “and we think that the system of the fixed book price can help retain this variety and stop conglomeration in the book trade.”

Yet critics note that the German book biz has been under siege from imports for some time now. The Weekly Standard examined a leading bestseller list and found that only a quarter of the top hundred titles in Germany last year were written by German-speaking writers. Within the top ten, in fact, there was only one German speaker. By contrast, more than 40 of the top hundred titles were British or American works. In other bad news, the German book market just turned in its second flat year in a row, with sales up a slim 1.5% to $8.3 billion. Given such numbers, it’s not hard to see why Germany’s culturati are on the defensive.

“The whole issue is loaded with emotions,” says agent Michael Meller, who adds that matters aren’t helped any by the fact that in Germany the publishers association and the booksellers association are one and the same. Clearly, Germany’s publishing establishment holds a passionate faith in the Buchpreisbindung, which has been in effect since the 1880s and exempts books, magazines, newspapers, calendars, maps, and globes from the free market. Thus Harry Potter fans had to shell out DM44 (about $20.40) for Goblet of Fire on Amazon.de, while UK readers had it for a breezy $13.50. By comparison, US readers could find it on Amazon for $15.57. Meller says that while price maintenance protects the small booksellers in theory, in practice those booksellers are being driven out of business by chains such as Hugendubel, Phoenix, Douglas, and Germany’s biggest bookseller by volume, Kaufhof. Then there’s a joint venture between Hugendubel and Weltbild called “Weltbild Plus,” a sort of book club that specializes in “Modern Antiquariat” knock-offs of successful titles. Meller also notes the irony that the recent McKinsey report to the Holtzbrinck Group expressly advised the publisher to stop cross-subsidizing titles — that is, subsidizing slow-selling literary titles with the proceeds from bestsellers — in order to re-establish profitability.

The ‘Cultural Exception’

Of course, Germany is not the only nation resisting a free market for books. The French have fiercely guarded the “cultural exception” that protects the nation’s culture from foreign incursion. French book prices are strictly maintained under the 1981 “Loi Lang,” named for former French culture minister Jack Lang, which permits a maximum discount of 5%. And last year, French culture minister Catherine Trautmann even vowed that her government would pursue a pan-European fixed-price regime when it assumes the six-month term of EU presidency this year. As in Germany, however, the state of literary affairs in France seems somewhat compromised. The Académie Française recently declared that a lack of interest in French literary life “is on the verge of completely eliminating knowledge and appreciation of literature.” And if they’re worried now, just wait till Amazon debuts in France this month.

As for the rest of Europe, several other nations have moved to block book discounts. Portugal passed a fixed-pricing law a few years ago, and Greece implemented a price regime last year. But most observers agree that the long-term tide seems to be turning against trade barriers. Finland and Sweden dumped fixed pricing in the 1970s, while in 1996 Italy junked an agreement between some publishers and booksellers not to supply books to retailers that discounted deeply. And Spain recently authorized the discounting of textbooks (they were considered too expensive), while Denmark has severely cut back its pricing scheme.

Meanwhile, all eyes are trained on the UK as a free-market case study. In 1995, British publishers abandoned their hundred-year-old price-fixing scheme, known as the “net book agreement.” But thus far, the predicted demise of small booksellers has not come to pass. “We were anticipating a very detrimental effect on the independents,” says Ian Taylor, director of international and trade services for the Publishers Association. “But it hasn’t been as damaging as we expected.” Independents who decline to discount titles such as Harry Potter are still “doing very well,” and a growth of wholesalers in the UK has had a cushioning effect, as discounts from publishers are passed on to accounts. Indeed, only about 900 titles were discounted out of the 150,000 published in Britain last year, according to Frank Fishwick, economic adviser to the Publishers Association, who adds that book prices have risen much more than general inflation. The country has also seen stronger sales of hardcovers, as consumers seem prepared to buy a discounted hardcover rather than wait for the paperback (which is the same phenomenon that killed the mass market biz in the US). Other evidence shows that the number of new titles has been growing at about 5% per year. And how do publishers feel about the end of price maintenance? “Most publishers in this country don’t have an opinion,” Taylor says. “They’ve simply moved on.”

Booksellers apparently feel much the same. “It’s over, dead, and buried as far as we’re concerned,” says Sydney Davies, trade and industry manager for the Booksellers Association. “The whole trade has changed since it was outlawed. Booksellers now see their competition more from the Internet and from American chain booksellers opening in the UK.” He says the number of bookshops has decreased only marginally since the end of price maintenance, while chains have opened more branches and nontraditional outlets are selling more books.

To some observers of the European price wars, the rhetoric on both sides of the issue has a familiar ring. “It’s an argument that’s been present in the book trade for a very long time,” says Laura Miller, an assistant professor at the University of Western Ontario who studies the book trade. “The idea is that books are not simply another commodity.” Miller points out that in the US, publishers formed the American Publishers Association in 1900 (along with the ABA, which is of course still with us) to battle price-cutting department stores. Then in 1913, she says, Macy’s won a lawsuit against publishers, and the APA was subsequently disbanded. The booming postwar years made price maintenance irrelevant, and the federal government put an end to such practices in 1975. By that time, however, discounting was considered a dandy way to sell books, and publishers couldn’t even recall what the ruckus over price maintenance was all about.

It’s still unclear whether the Europeans will take a similar turn. For the moment, German publishers have persuaded Libro to stop discounts on German titles. That agreement, however, was being reviewed by the EU for evidence of collusion to restrict cross-border trade. Meanwhile, trade warriors are keeping an eye on Belgian online bookseller Proxis, which sells to the Netherlands, France, and soon to Germany. As Meller sums up, “Now it’s all up to the courts and will take another decade to be resolved. In the meantime booksellers will disappear, publishers will be rudderless, and the Internet is the bogeyman!” Maybe bookselling in Europe isn’t so different from America after all.

Cader’s Media Meal

What began as a humble “public service” snack is swiftly plumping up to a full-meal deal for Michael Cader, the book packager and compulsive web-surfer behind Publishers Lunch, a free daily email news digest for the book biz. Launched last April and based at www.publisherslunch.com, the service has already been promoted as the publishing industry’s “essential daily read,” has spurred inquiries from interested partners, and appears likely to spawn that fateful document known as a business plan. “It’s endlessly expanding,” Cader explains, “which is why at some point it needs to turn into a business.”

Though subscriptions are not currently being “monetized” (the number of subscribers is in the “low four figures”), the daily email known as “Takeout Lunch” has become a hit with its quick takes on top book news and links to media stories, which are culled from some 30 web sites that Cader surfs every morning and then puts into digest form on the train to work. The whole idea, he says, is to serve up a sophisticated and frequent alternative to the existing book media, and do it in a way that could exploit the web as a community-building tool. Or, as he explains on the site, his ambition is to become “the electronic equivalent of the old-fashioned publisher’s lunch; a place where all of us can swap completely unsubstantiated but dead-on stories, news, deal information, and insights.”

Actually, before Lunch became a public service it was sort of a self-administered tutorial. “I ended up doing Lunch in my head for a while before I did it live, as part of an ongoing effort to transform myself into more of a web-based person,” says the 38-year-old Cader. Then, after regularly enjoying Jim Romenesko’s MediaNews site (www.poynter.org/medianews), which compiles a daily digest of links about the news media, he decided to plunge in with a similar book-based venture. The business plan may not yet be fleshed out, but his communitarian goals have at least paid off with plenty of uncensored emails: “People don’t hesitate to hit reply and let it fly.”

But partners have come calling, among them Subrights.com, whose users will receive a daily stream of deal news and international updates, repackaged as Publishers Lunch International, with a special message from Subrights at the top. Lunch will also be served on the Subrights site, while Subrights will include Lunch in a promotional mailing going out to 9,000 publishers worldwide. Cader expects to replicate such arrangements with other partners, on the long-term model that Lunch will be underwritten by its sponsors.

All of which has clearly cut into time devoted to that other business, Cader Books, which he launched in 1988 after five years at Workman. The packager focuses on “high-profile, high-concept commercial nonfiction,” with a specialty in parody. There’s In the Kitchen With Bill (50 recipes for chowing down with chief Clinton) and Bad As I Wanna Dress: The Unauthorized Dennis Rodman Paper Doll Book (produced for Crown). “As a rule we’re not a pretty-books publisher,” Cader says by way of explanation. The company also did Hyperion’s Who Wants To Be a Millionaire book in a pinch last fall so the publisher could rush it to accounts by Christmas, and such novelties as “Recipeasel” books for Chronicle, which extract cookbook content as laminated recipe cards collected on handy stovetop easel stands. Then there’s a series of “Procrastinator’s Guides” that will be the basis for half-hour shows on PBS (it’s a kind of Dummies series for TV), and a project is brewing with the Smithsonian’s Anacostia Museum, due out in 2002 from Harper. With about 200 trade books on the backlist, Cader is now mulling over ways to combine his multimedia interests with the packaging business as electronic packaging projects, and is doing more e-publishing consulting. But keeping the two ventures separate, he says, has a certain logic: “In an ironic way a lot of packaging is waiting for things to happen. Lunch provides a regular diversion to fill up the gaps.”

Book View, September 2000

PEOPLE


Rosanna Hansen
has been named SVP, Publisher and Editor-in-Chief of Weekly Reader Corp. She left Reader’s Digest Children’s last month. . . Liz Maguire is leaving Free Press for Basic, where she will be Associate Publisher, Editorial Director. . . Since Abrams bought STC and Smithmark, there have been several casualties, including SVP Director of Sales & Marketing Steve Tager (still reachable through STC), and Rights Director Christian Red, with others to come. . . Nicholas Callaway’s (re)transition back to publishing from packaging includes moving to S&S for distribution, hiring Michael Murphy (ex-Publisher of Morrow) as Director of Sales and Marketing and Audrey Barr (formerly of Larousse Kingfisher Chambers) as Trade Sales and Marketing Manager, and retaining the services of Rosemarie Morse for publicity. Associate Publisher Paula Litzky is leaving to pursue other interests. . . Roberto de Vicq de Cumptich, most recently AD of HarperInformation, has been promoted to VP, Senior Art Director for Adult Trade, reporting to Laurie Rippon. Joseph Montebello, 32-year veteran at Harper where he was most recently VP, Creative Director, has left the company. He will announce his plans shortly, but meanwhile is reachable at 212 242-3073.

Geoff Shandler has been named executive editor at Little, Brown (filling Bill Phillips’s slot). The New York Observer calls him “one of the hottest young names in New York book publishing.”. . . Geoffrey Burn has been named MD for Stanford U. Press. He previously ran a division of Thomson. Jill Cohen, Vice President of QVC Publishing, has announced that Karen Murgolo has joined the company as its Acquisitions and Rights Director. In this newly created position, Murgolo is responsible for acquiring new books and authors for a variety of nonfiction lifestyle titles, including cooking, decorating, beauty and fashion. She was Senior Editor at BookSpan’s The Literary Guild and GuildAmerica Books. . . Pam Art was named President and CEO of Storey Communications. . . As reported elsewhere, Lisa Queen steps down and Avon executive Jennifer Hershey is rumored to be in line for the job (but you know what those Harper rumors are like) . . . As noted elsewhere, Maria Guarnaschelli is going to Norton as VP, Senior Editor. She was previously at Scribner. . . Kathryn Court, who started there in 1977, has been named President of Penguin and Publisher of Plume. Clare Ferraro remains President of Plume.

VIRTUAL PEOPLE


Jessica Carter
has been appointed New Media and Online Marketing Director, Knopf Publishing Group, reporting to Tony Chirico, who was himself recently promoted to EVP and COO. She was previously Promotion and New Media Manager, Vintage and Anchor. Jason Zuzga will be working with Carter as Knopf’s “New Media Coordinator.”

DEALS


HarperCollins’ Susan Friedland bought Marcella Hazan’s ‘valedictory,’ tentatively titled Master Classes and, Friedland say, “Marcella wants to tell the world everything she knows.” Susan Lescher is the agent on this “big figure” world rights deal. . . .

MEDIA


We’re so inundated with must-read stuff, that grok, The Industry Standard’s new magazine, was sitting on our desks for a full week before it got noticed. Or picked up. When we finally got around to it, there was a page headlined “Five Myths about E-Books” by Steve Zeitchik, with the winning opening lines: “Graduation ceremonies come close. Political campaigns, perhaps. But in their ability to generate gaseous conjecture at a complete remove from reality, it’s hard to beat e-books.” A booster himself, he goes on to bash the standard (death of literature, etc.) myths about them. The freshness of this launch issue loses a little credibility with the pic of Ellen DeGeneres and Anne Heche together, smiling for the camera.

By the way, some people, including Celia McGee, were confused by our wording last month when we said she was leaving her Daily News book beat for general assignment. She’s not leaving the paper; she remains as a features writer.

EVENTS


Word is that Bertelsmann CEO Thomas Middelhoff has sent around a memo to all of his NY employees informing them that he has rented out Radio City Music Hall on September 15, from 10–12 for all of his employees to gather together and hear him speak on the state of the company.

The repackaging and repromoting of Penguin’s The Pelican Shakespeare included corporate sponsorship of this year’s Shakespeare in Central Park, which led them to organize a celebration for friends and press: catered dinner at the open-air Delacorte theatre followed by a performance of Julius Caesar. (As anyone who has ever queued for the free tickets will tell you, being handed a ticket as you arrive is a rare treat.) Joining in the festivities were amongst others St. Marks Bookshop’s Bob Contant, BOMC’s Victoria Skurnick, B&N’s Karen Patterson, BordersChristine Cody and the Drama Bookshop’s Rozanne Seelan, widow of legendary owner Arthur Seelan, who died recently. The rest of the promotion involves a sweepstakes for $200 of Shakespeare publications from across Penguin Putnam imprints.

CYBER


Posted all around Barnes & Noble stores, right by the cash register, are brochures featuring happy looking people, and the line “Discover the Successful Author in You.” Yes, it’s iUniverse.com, coming to a store near you! Inside the brochure, we learn that “iUniverse is a new kind of publisher. . . . We have changed the publishing world by harnessing technology and the power of the Internet to give everyone the opportunity to get published. Moving beyond traditional publishing, iUniverse works with industry leaders to be faster and more efficient.” One industry leader, Steve Riggio (remember B&N’s 49% stake in the company) knows that this move won’t be welcomed by those very traditionalists. As he said in a recent Industry Standard interview, “Traditional publishers and editors have basically taken a very negative approach to this, believing a company like iUniverse is largely bringing works to the marketplace that are not worthy of being published by a traditional publishing house. And that’s really myopic, shortsighted and dumb.”

Ever been on Switchouse.com? It’s a service that allows users to buy, sell and swap products, including books, music, movies, and electronics. Though it claims to have only 1.8 million products available (as opposed to Ebay’s multiple millions), many bestselling books are being offered for swap. Tuesdays with Morrie, currently back at the top of the NYT hardcover bestseller list, is available, as are books by Grisham, Crichton, and Rowling. What did we get? Nothing. Alas, we read the terms of agreement, which make Ebay’s attempts to rein in its users look like the beginning of a police state.

FROM THE ANNALS


On the theory that the adage about the more things change, the more they stay the same is the ultimate truism, we present the following:

This is a conversation recorded by Robert Sterling Yard. He was a well-known figure in American publishing in the era between the turn of the 20th century and the end of WWI, and headed the imprint of Moffat, Yard, & Co. From his book The Publisher, written in 1913:

“The trouble with this business,” said a celebrated publisher, “is that you’re always between the devil and the deep sea. There’s harbor nowhere.”

“Explain yourself,” I cried. “Who is the devil and who the deep sea?”

“The public and the author, of course,” he replied.

“Ah!” said I; “but where does the literary agent come in?”

“You’re right,” he returned with a grin. “I’ll have to revise my simile and add a third monster, for the literary agent is surely the devil.”

And now for something completely different:

Woody Allen on reading: “I took a speed-reading course and read War and Peace in twenty minutes. It involves Russia.”

How Business Books Can Be Dirty Business

ORIGINALLY PUBLISHED AT INSIDE.COM (8/8/00)

As publishers clucked over General Electric CEO Jack Welch‘s vertigo-inducing $7.1 million advance — right on the heels of former Treasury Secretary Robert Rubin‘s $3.3 million one– it was only too obvious that business books have become, well, big business.

In fact, business book sales in the professional category rocketed to $852 million in 1998 from $490 million in 1992, growing more than twice as fast as the overall market for trade books, according to the most recent figures available from the American Association of Publishers.

But beyond those white-hot numbers is what some publishing executives call a vast ”gray area” in the way business books are sold and ranked. More than any other category, perhaps, the business book market is rife with unusual — some would say unethical — methods used by authors and their corporate sponsors to pump up sales and propel titles onto influential bestseller lists.

Five years ago, Business Week rattled the industry with an expose about the alleged ”dirty tricks” that helped a couple of ethically challenged authors get their book, The Discipline of Market Leaders (Perseus Books) on the New York Times and Business Week bestseller lists. The article revealed that management consultants Michael Treacy and Fred Wiersema spent at least $250,000 to have a ring of buyers purchase 10,000 or more copies of their book from key retailers around the country. In addition, they funneled bulk purchases of another 30,000 to 40,000 copies through a web of bookstores. That way, sales would be counted in the retail tallies without arousing any single retailer’s suspicions that the overall purpose was to pad the numbers of reporting stores, and thereby — as Business Week writer Willy Stern put it — ”breach the integrity” of the bestseller list.

Treacy and Wiersema’s goal? Not to sell gazillions of books, though some business bestsellers do. (Discipline continues to be a bestseller.) More important for these consultants was to appear to have written a ”national bestseller.” Along with such a designation would come speaking engagements — at $30,000 a pop — and lucrative consulting assignments, which would increase the fortunes of CSC Index, the firm they worked for and with which they shared the copyright. CSC, after all, knew the power of brand-name authors. Two years earlier,  Reengineering the Corporation, a book written by CSC consultants Michael Hammer and James Champy, sold 2 million copies — and business at the consultancy boomed.

But it’s unclear whether Treacy and Wiersema’s 1995 public dressing down did anything to clean up the business book marketing process.

David Goehring, who was then sales director at Addison Wesley (which is now part of Perseus, where he is currently publisher) thinks that much of the problem back then was not the way books were sold, but rather, how their sales were reported: ”It’s important to recognize where an order comes from, and to note that.” He says that The New York Times now puts a dagger next to business books that have bulk sales to indicate that ”some bookstores report receiving bulk orders.” Robert Hughes, who compiles the Wall Street Journal‘s business book list, states via e-mail, ”Our suppliers of data let us know when books are bought in bulk, so we can take that into account when calculating our weekly lists.”

But some publishers admit there are still some practices that are best not divulged: ”It’s like running a spa, and you’re providing a discreet service,” says one business book publisher, referring to the delicate task of coordinating the needs of a small number of elite clients — CEOs, consultants and others with corporate brawn behind them — all of whom want to reap the rewards of bestsellerdom. To that end, the arrangements among author, company and publisher vary widely, executives say. A company might commit to outright sponsorship (paying a fee to get the book published), or agree to a contractual obligation to buy a minimum number of books, or even commit to buy unsold books.

And there’s where things begin to go gray. Whether those books are bought in bulk at a negotiated price, or through a bookstore (sometimes brought in to sell books at the end of an author’s speaking engagement), depends on how determined author and employer are to get the book on the lists. Corporate purchases alone can’t make a book a bestseller, but they’re proof of a company’s commitment to its author, which demands the ongoing attention of both the publisher and (if bulk sales go through bookstores) retailers. According to a rival publisher, there’s good evidence that corporate purchases accounted for only 5 percent of the total sale of one business book that may have benefited from questionable tactics, though the book went on to sell hundreds of thousands of copies and topped the bestseller lists for months.

Factor in that there is not exactly a shortage of such lists. Like the Wall Street Journal, Business Week now publishes a weekly ranking of business titles (in 1995 it was a monthly). And Amazon and bn.com have endlessly refreshed lists that start with the top 50 titles, but splinter into myriad subcategories. Online retailers, in fact, have become by far the largest retailers of business books. One publisher said that Amazon and bn.com — which together usually account for 10 to 12 percent of retail sales — can outsell Barnes & Noble stores, and on specialized books, will outsell traditional retailers by a factor of 2 to 1. The Cluetrain Manifesto, a recent Perseus Books title, sold around 20 percent of its 100,000 copies through online retailers, though Goehring is quick to point out that this book began its life as a Web site, and therefore had an online following.

B&N insiders, meanwhile, report that business books are among the company’s top five categories, even though corporate and bulk discounted sales (which are not reported to bestseller lists) are now handled by its own B2B Business Solutions division. Sales through the division have become ”quite substantial,” says a B&N source. The business market has managed to create its own ”virtuous circle of promotion and sales,” says Adrian Zackheim, editor in chief of HarperInformation. Zackheim adds that the Internet and the news media contribute to the buildup of self-promotion, which is presumably not lost on the corporate world, where good publicity is a priceless commodity.

There are those in publishing who dispute the notion that large corporations are unfairly fueling the bestseller fires, though there’s no disputing that most other categories of books don’t benefit from the kind of largesse that, for example, Hewlett Packard exhibited when it gave each employee a copy of the story of the company by its revered co-founder, David Packard. Still, says one publishing veteran, ”It’s just not true that every company in the U.S. will buy copies.” And two people involved with the Jack Welch deal confirm that there were no contractual promises from GE to buy books from the publisher.

Given the hype, however, one assumes that a sizable number of GE’s 350,000 employees will want to read their exiting leader’s bits of corporate wisdom. It must comfort Time Warner Trade Publishing to know that if each of those employees receives a copy, there will be only 1.2 million more to sell to earn out Welch’s gargantuan advance.

Brinkmanship at Borders

Is Borders’ “go-slow” approach to the online marketplace really a stroke of brilliance after all, as the Wall Street Journal recently postulated? The argument goes like this: despite the company’s listless approach to the Internet, which drove investors so bonkers that Borders rolled out the auction block earlier this year in search of a buyout partner, the nation’s #2 book retailer is actually sitting pretty by crafting a clicks-and-mortar bid to lure consumers into stores and cement customer loyalty.

“It’s more than just the clicks and bricks,” Borders president Tami Heim told the press at a recent briefing on the company’s multimedia plans. “We are creating a convergence experience for the customer.” As she unveiled a slew of tech-driven devices geared to blur the boundaries between terra firma and cyberspace, Heim hammered home Borders’ new corporate catchphrase: “the ultimate customer service experience.”

In other words, say “convergence” three times and click your heels. First, there’s Borders Vision, the new streaming video component of borders.com that offers video clips in six different genres and will also broadcast in-store author events, all developed with media firm Centerseat. Second, kiosks slated for roll-out to stores later this year will allow customers to search for a title and pinpoint the book’s location in the store (plus offer access to reviews, title recommendations, and email newsletters). The kiosks also enable customers to order a book from the Borders database for delivery in-store or elsewhere. And third, “E-Listening” stations, currently in test phase, will allow customers to scan a CD or audiobook barcode and listen to all tracks of the CD or a selection from a spoken-word audio track. Customers can preview 90-second trailers of films in the video departments, and a wireless incarnation is also in development that would let consumers wander about the stores freely, checking out audio selections at their leisure via a hand-held scanning and listening device. Len Cosimano, Borders vice president for multimedia, even waxed optimistic about a “complete wireless environment,” with customers downloading audiobooks in-store and popping e-books onto their Palm Pilots.

As are other cross-channel retailers, Borders is striving to integrate its “enormous” cache of customer purchasing information into one database. Theoretically, customers could log onto the company’s website and check on an order they made at a brick-and-mortar store, or vice versa. More crucial for sales, Borders hopes to leverage its customer data to create what Heim called a “one-to-one digital dialogue” with customers by pitching book and music picks via email and the borders.com site.

Of course, Borders could use the customers. The top three e-commerce websites for the second quarter of this year were Amazon (with 18.7% of consumers surveyed buying from the site), eBay (15.8%), and bn.com (6%), according to a joint study by U.S. Bancorp Piper Jaffray and Harris Interactive. But Borders.com didn’t make the cut of the top 11 sites. Moreover, Borders isn’t the only one with a few digital tricks up its sleeve. Bn.com has rolled out BNTV (produced by media production company Rain), where streaming “bookVideos” showcase various titles and where a daily author interview series is slated to appear this fall. The UK’s BOL TV, meanwhile, broadcasts interviews with writers every weekday at bol.com.

As to how Borders’ new vision will play on Wall Street, investors have yet to don their 3-D glasses. Acquisition talks fizzled last month when Borders brass rejected a reported $16-a-share offer from Apollo Management, Bain Capital, and Blackstone Group, which amounted to about $1.28 billion but was considerably lower than the $20 to $25 per share said to be expected for the company. And it remains to be seen how much a “convergence experience” will improve Borders’ standing in the marketplace. Still, the company can congratulate itself on having grasped the primary lesson of the New Economy. As Cosimano explained, “This is content, folks. That’s what this is all about.”

Book View, August 2000

PEOPLE


Kristina Peterson leaves Random Children’s to take over as President of S&S’s Children’s division. . . . Meanwhile Vivian Antonangeli has left Reader’s Digest Children’s, following the arrival of Harold Clarke — previously President of RHas VP Publisher New Market Development for Global Books and Home Entertainment. Antonangeli, who had been GM and President of the division, is reachable at 917 744-2955. Rosanna Hansen, who had been Publisher, has also left the company. . . . Paul Golob will be joining Public Affairs as executive editor in September, after less than three months as an editor on the New York Times Op-Ed page. Prior to that he was at Free Press and Basic. And speaking of FP, congrats to Bill Shinker, newly named VP and Publisher. . . . Warner’s Anita Diggs has joined Ballantine’s One World imprint as Senior Editor, reporting to Maureen O’Neal, and replacing Cheryl Woodruff, who has resigned
. . . . After 20 years, Mark Magowan, VP of Abbeville, is leaving to join Abrams after Labor Day as Associate Publisher, fueling rumors that his former employer is on the block. Meanwhile, his new employer is the likely purchaser of the assets of STC, Golden Turtle, and selected Smithmark titles.

The past month has brought a lot of change to media coverage of books: David Kirkpatrick has begun his tenure at the NYT, Elizabeth Manus has moved out of the New York Observer offices and is now on general assignment, and Celia McGee has moved to general assignment at the Daily News. Paul Colford from Newsday has replaced her on the book beat and will also write on the electronic and virtual media.

Quick takes: Tom Spain and Jackie Farber are out at Dell/Delacorte. The former had been Maeve Binchy’s editor, but when Carole Baron went to Dutton, the author followed her there. . . . Marcy Posner and Dan Strone have both left the NY office of the William Morris Agency. . . . Natalie Chapman has left Discovery Books, where she was Publishing Director. Dorothee Grisebach, Editor in Chief of Droemer Knaur, has been let go as part of the latest Holtzbrinck re-organization. . . . Publishing News reports that HarperCollins UK Sales and Marketing Director David North has been named MD of its trade division, Pan Macmillan. He replaces Ian Chapman, who left at the end of last year to head up S&S. Meanwhile, James Kellow, Marketing Director at Fourth Estate, is leaving to take up the new position of UK Sales and Marketing Director at S&S UK.

Erin McHugh, former Executive Vice President, Executive Creative Director, and partner at Spier New York, has joined the Empire State Pride Agenda, New York’s statewide gay and lesbian political advocacy organization, as Director of Member & Institutional Support. She served on the Pride Agenda’s Board of Directors for most of the past decade. Niko Pfund, Director and Editor-in-Chief, has left for OUP to become Academic Publisher. Pfund started his publishing career at OUP, as an editorial assistant. And Chris Rogers has been appointed College Editorial Director. He was previously Director, New Business Development for Wiley.

Nina Hoffman has been named EVP of the National Geographic Society and President of the Books and School publishing group. She was formerly SVP Publishing. . . . Michael Stephenson, currently VP, Editor in Chief of Doubleday Direct’s Specialty Clubs, has been given the same titles for New Book Development at BookSpan, overseeing book development for all clubs.

Motorbooks Publishing, a piece of the recently spun off SF Chronicle publishing group, has made the following appointments: Mike Hejny, formerly VP, Merchandising at Barnes & Noble, has been named VP of Sales and Marketing; Ben Jones is VP, Direct Marketing, formerly of Heritage House, Carl Fazio is VP and CFO, formerly McGraw-Hill Medical Division, and Brad Savola is VP and CTO, formerly of Fair Isaac database marketing.

DEALS


It’s been a big book summer, with the latest million-plus deal just announced: Sun Microsystems co-founder and chief scientist Bill Joy’s book has been sold by Kathy Robbins to Penguin’s Rick Kot for $1.6 million +. . . . It is based on Joy’s April 2000 Wired magazine article, “Why the Future Doesn’t Need Us.” Robbins was already doing well in this period we used to label as the summer doldrums: she recently sold David Denby’s book to Little, Brown for $500k +.

MEDIA


What’s with this increasing interest on the part of all media — print, tv, radio and, of course, electronic — in books? It’s a barrage, with endless stories on individual authors (Rowling, Fox (Michael J.), Rubin (Robert), Welch (Jack)); new e-initiatives (iPublish, iWrite, I’m Stephen King); bestseller lists, unread bestsellers, pre-pubb’ed bestsellers (HP #5) — and on and on and on. Even the staid Economist has announced that, beginning in September, they will expand the number of pages devoted to books and will run those weekly, rather than the current ten times a year. And, the new weekly section — now called “Moreover” — will be renamed “Books and Arts.”

In an interview in Gannett’s The Review Press IMG’s Mark Reiter speculates that German and Japanese rights to Jack Welch’s book will each go for “north of $1 million,” and denies that his commission for the $7.1 million deal was a cool million. He also confides that within the decade he “hopes to find himself writing books full-time,” but wants to represent one particular client before he leaves agenting. The name? Warren Buffett.

DULY NOTED


Come Fall, publishers will have to choose between three publishing conferences, all scheduled within a week of each other. Reed’s ePub Expo will be held Oct. 31–Nov. 1 at the Millennium, while Internet World’s e-Book World takes place at the Marriott Marquis on Monday and Tuesday, Nov. 6–7. The former will focus on the management, distribution and production of digital content. (See PT page 8 for details.) Seybold is holding what purports to be a publishing show in San Francisco at the end of August. It is, however, weighted heavily in the direction of technology, though there are sessions on Digital Rights and Digital Asset Management, ebooks, etc. Click on www.seyboldseminars.com.

Word comes to us that the 25th annual University of Denver Publishing Institute opened on July 10th on the University of Denver campus with 91 students — all college graduates. The program was co-founded by Elizabeth Geiser and includes as instructors Elisabeth Scharlatt of Algonquin Books, Jane Isay of Harcourt Trade, Arnold Dolin, formerly of Penguin, and others. At a gala dinner at the Fourth Story Restaurant (atop the Tattered Cover), six graduates of the program spoke of their careers, among them Tari Warwick (vp, Perseus Books Group), Meg Ruley (Jane Rotrosen Agency), Jeanne Martinet (author of The Artful Dodge), and Reid Hester (editor with Mayfield Publishing).

PARTIES


Overlook
’s party for cutting edge novelist Brad Gooch was held by and at Diane von Furstenberg’s loft-cum-showroom (a family emergency called Ms. von F back to Belgium) and included Barry Diller, Jonathan Burnham, Jay McInerney, Mary McFadden, fashion photographer Carter Smith, Bret Easton Ellis (a co-host), and other trendy novelists such as Ben Neihart, Christopher Bram, and Fred Tuten.

IN MEMORIAM


We sadly note the passing of Workman‘s Sally Kovalchick on July 15th.

Bertelsmann’s Ventures

Random House Parent Wages Global E-Commerce Turf War

There is a special place on Thomas Middelhoff’s atlas of corporate geography that he likes to call “Bertelsmann Valley.” You might think of it as Silicon Valley stretched to a global scale and populated with scenic villages of dot-com shops, a few stray Holstein cows, and a couple billion dollars in strategically seeded venture capital. Or as Middelhoff, whom everyone knows as the chief executive of the world’s third-largest media conglomerate, describes it in company literature, Bertelsmann Valley is a “global innovation factory” turning German venture capital and corporate synergies into bang-up business plans to power the next wave of e-commerce.

Whichever metaphor you prefer, Random House, Inc. is looming ever larger as a prime piece of real estate in Bertelsmann’s e-commerce portfolio. With stakes in custom e-publisher Xlibris and digital audio retailer Audible via Random House Ventures, Random’s e-investment subsidiary, it’s clear that Random’s stockpile of digitized content will prove instrumental as Bertelsmann gears up for a global digital turf war against AOL Time Warner and CBS Viacom. And with more than $10 billion in Bertelsmann coffers primed for acquisitions and other investments — cash mostly derived from the sale of Bertelsmann’s stakes in AOL Europe and AOL Australia to America Online — the strategic alliances between the company’s publishing and e-commerce holdings are being closely watched by competitors on all fronts.

“In the decentralized organization of the Bertelsmann group,” Middelhoff told a recent conference in Berlin, “the new magic words are: stronger cooperation and intensive networking between the autonomous product lines and companies.” Shortly after that statement was made, the Bertelsmann e-Commerce Group (BeCG) was rolled out, forging a unified front of Internet, mobile, and broadband properties including bn.com (in which Bertelsmann has a 40% stake) and bol.com, which operates in 14 countries (including Japan, which the company notes is the second-largest book market in the world, devouring 1.5 billion books a year) and is soon to open in China, Korea, and Italy. Headed by Andreas Schmidt, who was recruited from AOL Europe, the BeCG mandate is to drive content — from books to magazines to compact discs — to wired consumers. “In the near future, we believe all content will be digitized,” Schmidt tells PT via e-mail, “and our aim is to put the products Bertelsmann produces — music, books, movies, and television — into digital form and distribute them across the Internet.” That may be the party line, but there’s more “intensive networking” to come. Middelhoff told the Financial Times Deutschland that he expects to bundle all Bertelsmann e-commerce under a single brand in the next three months. The long-term goal, Middelhoff said, was the digital distribution of books and music to a worldwide “content community” via a single brand network that could include bn.com and the Bertelsmann joint venture GetMusic. And all that commerce can be conducted with help from Bertelsmann’s digital rights management unit, Digital World Services.

For the moment, though, books are on the Bertelsmann Valley back forty. Major hits in the US have targeted the music and magazine segments, as in the acquisition of CDNow for $117 million. Bertelsmann’s magazine and newspaper unit Gruner + Jahr, meanwhile, dumped its UK holdings last month to focus on targets in the US, including the acquisition of Inc. magazine for $200 million. G + J USA CEO Daniel Brewster is also said to be in hot pursuit of the Times Mirror magazine group, a prize that would put content from such titles as Field & Stream and Popular Science at Bertelsmann’s e-commerce disposal.

On the portal front, much ado was made in May over Bertelsmann’s participation in the Terra Lycos deal, in which Spain’s Terra Networks gobbled up the portal Lycos for $12.5 billion, with Bertelsmann planning to pitch in $1 billion in advertising over the next five years. But the deal’s rationale involves a broader strategy to combine Terra’s data lines with Lycos’s portals, and funnel Bertelsmann’s content over both of them to the 50 million people in 37 countries who visit the Terra and Lycos sites each day. In fact, thanks to strategic alliances with AOL, Terra Lycos, and other portals, Bertelsmann has direct access to 200 million customers, in addition to the 50 million people already in the Bertelsmann database, including its book clubs. And on that note, all Bertelsmann clubs have been folded under one “direct-to-customer” umbrella to consolidate cross-divisional networking. BookSpan, a joint venture with Time Warner’s Book-of-the-Month Club and Bertelsmann’s Doubleday Direct, has only heightened convergence in clubland, while company insiders suspect an imminent bid for Reader’s Digest. Then again, what media property hasn’t had a rumored Bertelsmann bid?

A spokesperson declined to discuss Bertelsmann’s publishing holdings. But the most recent figures show that those holdings derive close to 70% of their revenues in North America, while 34% of Bertelsmann’s total revenues in the last fiscal year were generated in the US. Accordingly, few were surprised when Bertelsmann made Random House ground zero for the company’s worldwide book business, with Peter Olson at the helm. And that just means more fun for Richard Sarnoff, president of Random House Ventures. Look for more deals à la Audible, which created the Random House Audible imprint to produce spoken word content for digital distribution, with titles sold on the web by Audible.com (which has an exclusive deal with Amazon).

As the titans duke it out for e-market share, don’t forget Bertelsmann Ventures, a venture capital fund with offices in Santa Barbara, New York, and Hamburg, which recently closed a $250 million round of venture-ready capital. And Bertelsmann controls a venture capital fund for e-commerce companies via its e-Commerce Group. As Middelhoff told the European press, it’s “only the beginning.” That much, at least, is certain.