Category: Publishing & media (Page 39 of 52)

The title of this blog entry is the title of HP’s press release on the same topic. On May 30th in New York Hewlett-Packard announced “Print 2.0” at the company’s annual Imaging and Printing Conference.
According to the press material: “Vyomesh Joshi, executive vice president of the company’s Imaging and Printing Group, described how HP will seek to capture a significant share of the 53 trillion digital pages estimated to be printed in 2010 alone – an opportunity valued at more than $296 billion.
“Joshi identified three key areas of focus of the Print 2.0 strategy:
● Make it easier to print from websites, such as blogs and travel sites, and bring new printing capabilities to online properties;
● Extend the company’s digital content creation and publishing platforms – for example, Snapfish and Logoworks – across customer segments spanning from consumers to enterprises; and
● Deliver a digital printing platform that increases print speeds and lowers the cost of printing for high-volume commercial markets.”
There might be something a little different in HP’s strategy here. I’m still not sure. There was a ton of video recorded at the event, and it’s easily accessible on HP’s site. I didn’t start with the videos of the executive presentations, but instead with the presentation by John Battelle. Battelle has had a unique (and eventful) relationship to both print and electronic media, making him a uniquely fascinating speaker on where publishing is headed. The third video, of his Q&A session, is particularly revealing of his unique perspective on the evolving relationship of print to electronic media.
After watching Battelle, I’m willing to spend more time here, even listening to the executive presentations. HP may be onto something.

Earlier this year, I wrote that the announcement that Thomson Learning was for sale was an indictment of the current fundamentals of most learning market segments. From the perspective of Thomson senior management, the decision was to divest seems clear cut. Consider this comparative financial data:

Thomson Learning All Other Thomson Units

• Organic Growth 4.0% 6.0%
• Adj Ebitda 24.5% 29.2%
• Operating Margin 12.9% 18.9%
• Electronic Revenues 36.0% 80.0%
• Recurring Revenues 24.0% 82.0%

(Source Thomson 4th Q Investor Presentation)

The percentages of electronic and recurring revenues are particularly at odds with CEO Harrington’s goal of integrating Thomson’s content with their customer’s work flows. After examining this data combined with declining unit volumes, growing price resistance, and increased government regulation, one wonders what motivated the private equity firms to pay the lofty multiples described in Thad McIlroy’s excellent post earlier this week.

Perhaps, they see the opportunity to create more new products that will blend content and technology to add value to the student’s learning experience. Vivid simulations and multimedia can help bring clarity to the explication of complex topics. Linking the appropriate content to solving problems improves student understanding while saving them lots of time and frustration. Making texts searchable and providing fresh links to appropriate Internet sites brings life and exploration opportunities to static textbook content.

Transitioning from a reliance on the sale of books and specific ancillary items to an intellectual property licensing model that is based upon usage metrics and attributes value to all aspects of course package (including the many package elements currently provided to faculty at no cost) would enable profound changes to the income statement. Revision cycles could be lengthened, sampling and selling costs reduced, and the percentage of recurring revenue increased substantially.

For several years, the potential of such changes have been obvious to industry executives and observers. Why then would the new owners be better able to institute these changes and transitions? The answer is simple, the short term costs of technology investments coupled with the transition to a recurring model would produce some “difficult quarters” for a publicly traded company. The opportunity to retool and restructure while private could create a company that would have excellent recurring revenues and better margins when reintroduced to public markets in a few years.

Should Thomson (and possibly Houghton-Mifflin) adopt this strategy, the impact on the rest of the industry could be profound. However, if these changes were to take place, authors, students, universities, and the publishing companies would eventually all be winners! Here’s hoping that this deal lends impetus to this industry transition.

Pearson made an interesting acquisition yesterday. Their acquisition of eCollege continues their corporate foray into Student Information Systems and Course Management. Last year, Pearson acquired PowerSchool and Chancery Software yielding a very strong position in Student Information Systems for the K-12 market. Clearly, they like these learning infrastructure markets for several good reasons.
1. At present, they seem to be solid businesses with only a few competitors that are poised to grow at rates exceeding their traditional textbook businesses.
2. The acquired customer base brings them many new customers and brings them closer to the students (and parents) who use their instructional products. The information about these students and the ability to reach them with additional product offerings is not to be underestimated in this digital world.
3. As the range of course materials such as content modules, learning software, simulations, educational websites, etc. continues to grow, the value of the course infrastructure technology will increase as well as provide a strategic advantage for integration with their broad range of course materials.
Last week at the Digital Book conference in New York, several speakers agreed that college textbook publishers will look more and more like software publishers over the next ten years. The reasons for this transition will center on using technology to: 1. deliver appropriate content to the student when it is needed to solve homework problems and prepare for tests; 2. integrate traditional material with innovative simulations and learning modules available from communities like MERLOT; 3. add life to static published content by enabling further exploration via web links and domain specific search engines and content repositories.
Pearson is wise to acquire successful software and technology companies to give them the pockets of technical expertise that would take many years to develop within the company. While there may be some culture clashes, this strategy should serve Pearson well and position them to maintain or expand their leadership position in educational publishing.

Well, Thomson Learning has finally been sold (subject to rote “due diligence”) to private equity firms. Everyone figured it would be private equity firms that would make the purchase, partly because these firms are buying just about everything these days except your old underwear, and also because the higher education textbook market is so concentrated that even George Bush’s “I’ve never seen a merger I didn’t like” administration would have had trouble fobbing this one off. Too many children would have been left behind.

The big surprise was the price. A whopping $7.75 billion, over 3 times the annual sales of the division, and apparently roughly 15 times cash flow (see . The same article points out that “by comparison, the average cash flow multiple paid in leveraged buyouts of $500 million or more last year was around eight times cash flow, with media deals typically in the low-double digits, according to buyout industry statistics.” The price is also some 50% more than company officials originally stated they thought they could fob the division off for.

Would we say there’s a little too much cash out there looking for comfy homes? Or would we wonder why this Thomson division, much maligned by management when the sale was first announced, is suddenly as valuable as DaimlerChrysler? (http://www.nytimes.com/2007/05/15/automobiles/15chrysler-web.html)

I guess we’re stuck with Thomson’s overriding stated view that higher education just wasn’t getting with the program fast enough in an online, electronic sort of way, and so the division had to be jettisoned. (Although Thomson CEO Richard J. Harrington admitted after the sale announcement that the company had no complaints about the educational unit’s financial performance. Textbooks are, by and large, a high-margin product ).

On the other hand, memory serves to remind us that Thomson was previously determined in a fierce way to get the heck out of the news business, and now it’s about to merge with Reuters.

What I’m most cognizant of is that Thomson shares had been languishing in the mid-$30s for years before the announcement of the bold move to get rid of textbooks. Now those shares are in the $40s. A lot of senior Thomson executives have made a whole lot of cash from these recent maneuvers (not to mention the Thomson family). No senior Thomson executive was left behind (as for the the operating staff; it is not polite to ask).
(To glimpse the stock chart: