Pearson’s digital pay-off still awaited

Pearson, the British publishing group behind Penguin, The Financial Times and a growing educational assessment and testing business, reported first-half financial earnings yesterday. Share prices gained nine percent on the day, well ahead of the rest of the market. Some digging in the report and presentation raises some interesting questions.

First, the FT, which saw 18 percent growth year-over-year in online subscriptions, is losing more paper subscribers than it is gaining online subscribers (roughly 20,000 new online subscribers versus a loss of approximately 24,500 paper subscribers). However, the shift to digital is insulating the group from the steep losses due to advertising that has hit the newspaper industry generally. Total revenue for the FT declined only 13 percent year-over-year. That is good news in this newspaper market.

What’s missing from the report, though, is information about digital subscriptions to the FT on the Kindle. The newspaper currently ranks #2 in British newspapers and #6 in U.S. newspapers with an overall Kindle Store sales rank of 25,586. By contrast, And Then the Roof Caved In, an account of the financial crisis by CNBC’s David Faber has a Kindle sales rank of 820 (sales figures as of this writing). This tells us little in specific, but draws an intriguing picture. Pearsone-booksales

Likewise, Pearson’s e-book sales charts look great (see right) until the lack of a scale sinks in. Certainly, e-book sales have increased by at least an order of magnitude year-over-year. Any given month of 2009 would account for 70 to 100 times 2007 sales. The chart starts from a minute number of units sold in 2004 and ends with a towering but unspecified number of e-books sold in the first months of 2009.

Best guess, the company is still seeing total sales of e-books that account for less than 1.5 percent of total book sales. Penguin’s sales increased eight percent, though the first half of any year represents less than a quarter of the total sales in a year, as the second half, particularly the beginning of school and the holidays, generate the vast majority of sales. The gain bodes well for Pearson’s second-half.

The short story, though, because there is no highlighting of e-book successes, is that Penguin and Pearson have no break-out e-book and digital newspaper story to tell, yet.

Noted in the graphics of the presentation: While Pearson featured seven iPhone application views, two iPod views and the Sony Reader in its slide about its digital market presence, Kindle was absent. Think a bit about that. Seven iPhones. No Kindle. On one slide. It’s a message that Amazon execs will catch.

Global and U.S. advertising spending plunges in 2009

For anyone hoping to refinance publishing on the back of advertising, it may be the best of times to sell a new medium to advertisers, but it is the worst of times for advertising.

Nielsen reported this week that ad spending globally dropped 7.9 percent in the first quarter of 2009. U.S. ad budgets declined by a record 12.7 percent and growth in Chinese advertising, which has been consistently strong since the beginning of the economic meltdown, shrank to only 2.5 percent year-over-year.

All traditional media, from newspapers and magazines to TV and radio, showed marked declines. U.S. magazine revenue shrank by 22 percent; newspaper advertising revenue was down by 15.6 percent. Charts and more here.

Is “Total Youth Think” the solution to publishing’s problems?

Can the World Young Reader Conference, which will happen in Prague this September, provide actionable ideas for newspaper publishing? According to a recent, cloying Pepsi radio spot, youth does everything worthwhile. I personally prefer to see the wiles of age tempering the energy of youth to produce generational changes that represent the experience of everyone involved, but I’m cranky.

The answer promised in Prague is a “Total Youth Think” that “places young people at the center of a newspaper company’s strategy.” I am struck by the fact that the youth-oriented Facebook is becoming a medium predominantly used by parents and grandparents. The realistic course seems to be designing media for all ages, allowing them to connect. If you design just for youth, your market eventually ages out of your design target.

Presented for your consideration.

Surprisingly, I agree with Steve Ballmer

Steve Ballmer, CEO of Microsoft, was speaking to the Cannes Lions International Advertising Festival yesterday, when he said:

“There won’t be newspapers, magazines and TV programs. There won’t be personal, social communications offline and separate. In 10 years it will all be online. Static content won’t cut it in the future.”

That’s true, but what is missing from this analysis, albeit it is pruned to a sound bite of a thought, is that interaction will augment those “traditional” media rather than replace them. A book will be a discussion, but it will also be typical for a book to be sold in paper form, with new ways to enter the conversation promoted therein. E-books will be discussions and static texts, blending the authorial statement with the discourse about those ideas.

Media evolution isn’t a zero-sum game. Media flows together, with some channels rising to prominence while others take on new roles.

Noted News & Opinion, June 16, 2009

Global entertainment and media spending will reach $1.6 trillion in 2013, according to PricewaterhouseCoopers annual industry projections, AdWeek reports. The U.S. media industry will not match growth in the rest of the world, increasing only 1.2 percent annually, compared to the global rate of 2.7 percent, reaching $495 billion in 2013. Digital revenues are predicted to grow from 17 percent of the market today to 25 percent, for a total of $124 billion annually, four years from now. Bad news for magazines and newspapers, where revenues are expected to continue to head south.

Surprise, Jeff Bezos doesn’t like the Google-Author’s Guild settlement. But he won’t say why, according to CNET: “We have strong opinions about that issue which I’m not going to share,” Bezos is quoted as saying during the Wired Business Conference. “There are many forces of work looking at that and saying it doesn’t seem right that you should do something, kind of get a prize for violating a large series of copyrights.” The article also suggests that Bezos said Kindle sales now account for 35 percent of paper book sales, which I believe is a misinterpretation of what he said, as I discussed yesterday. What he appeared to say was that when a book is available in paper and on Kindle, 35 percent of the sales are in Kindle format.

Author Jeff Matthews suspects Google’s good for writers. He’s fond of Google Books as a research tool, as I am, then relates an interesting story about discovering why his grandfather won a medal in World War I through a book scanned by Google. It’s a touching story and is completely valid with regard to out-of-copyright books, but that kind of title isn’t what the Google-Author’s Guild covers. I have a different opinion, but I found Matthews’ story compelling.

S&S e-books venture is doomed. Author Anthony Policastro (Absence of Faith and Dark End of the Spectrum on Kindle), writing on his blog, argues that Simon & Schuster’s announced distribution deal with Scribd will fail because the pricing strategy is wrong. “Most people won’t even pay even $10 for an eBook,” Policastro writes. “The reason is that they do no perceive the value the same as the printed version.” I disagree, not because of the price point, but because the e-book as it is today is no improvement over reading a book and, in many ways, diminishes the reading experience. Someday, readers will pay more than the Jeff Bezos price ($9.99) for a book, because it will be a portal to new experiences through reading. But Policastro is right about S&S’s pricing strategy: If they want to succeed on Scribd they must compete on price, going below Amazon’s pricing.

Mitch’s Perspective: Today’s e-books have been positioned as less valuable than a mass market paperback. That needs to change, which means the features and services associated with the e-book have to change, for the better.

Amazon would be boycotted, if Science Fantasy publisher has a say. Antellus, a publishing company operated by its only author, Theresa M. Moore, has complained that Amazon is slow to respond to publishers experiencing problems with its DTP publishing platforms’ management of ASINs and and associated accounting systems. She also says Amazon should be faster in its deployment of a color Kindle. While the former may be a real problem, condemning Amazon for a “seller agreement, which allows Amazon to modify and/or sell books from its suppliers in whatever format it chooses at its own discretion,” which is key to providing book buyers archival access to titles without having to renegotiate rights each time it updates file formats, and failure to be the first to deliver a color reader diminishes the force of her arguments.