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Author & Publisher Strategies Book and Reading News

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.

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The Reading World

Financial Times: Google’s railroading cartel

The Financial Times‘ Lex column (registration at site required, but free) makes the rhetorical point:

Imagine that in the 19th century the company furthest advanced laying US railroads was given the right to build all future rail lines. The public might have gained from the new services, but ultimately been left at the whim of a powerful monopoly. Now take the deal between Google and the publishing industry to create a digital market for out-of-print books – some 40 per cent of all those ever published. However laudable such a goal that may be, it raises anticompetitive issues too.

The article lays out clearly and simply why the Google Books deal with libraries is flawed. Rather than creating and exception to existing copyright and intellectual property restrictions, the outcome of the legal confrontation should be a general and open system for any company that wishes to scan books under terms acceptable to authors or other rights holders.

The deal is based on a scenario that is too good to be true. Google is only here to help, the company says, yet is it sweeping up rights that could be abused. Readers face a potential future where, because it is impractical to compete with Google, other e-book providers simply don’t try, giving Google free reign to raise prices on access to books, whether one at a time or through an all-you-can-read subscription service. It could choke off libraries’ access to these books, because Google circumvents their relationship with the reader or raises institutional prices too high.

For free culture activists, it should be clear that the settlement in effect grants Google a degree of control over access to library collections it has scanned that is functionally similar to holding a renewed and extended copyright on the works.

It is also questionable whether the potential for advertising in library-accessed books is a good idea, since it commercializes what had been a public good and, potentially, creates a commercial filter based on advertisers preferences for certain ideas and information. If faced with reading an uncontroversial history of, say, the Iraq War, which is free at the library through Google Books and one that, because it has no ad revenue support carries a fee, the least-privileged in society would probably opt for the free choice. That’s a kind of commercial Big Brotherism we need to engineer out of e-libraries.

The takeaway: Google is being granted a cartel position in the intellectual marketplace, which the FT believes is bad for competition. “Google’s ingenuity does not give it the right to surround itself with an impregnable digital moat,” the column concludes.