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Posts Tagged ‘Bertelsmann’

First Half Sales Slow for Random House

The Bookseller’s Philip Jones reports that Random House registered a slight year-on-year decline in its first-half revenues and earnings, according to parent Bertelsmann. The group blamed the decline on the “cost of investing in future growth”, and came despite a strong performance in the UK bestseller charts.Sales reached 832m euros in the six months to end-June 2007, down from 859m euros a year earlier. Operating earnings before interest (EBIT) were 44m euros, against 48m euros in 2006.

Bertelsmann said: “In a global book market with a slow-growth trajectory. The decline is due to the cost of investing in future growth, especially for new publishing businesses in the UK, as well as the unfavorable US exchange rates.” It added: “Random House outperformed the market in Germany and the UK. Random House UK Group titles accounted for 30% of the Sunday Times bestseller lists. In the US, Random House placed more than 100 titles on the New York Times bestseller lists.”

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Bertelsmann to Restructure Direct Group Unit

Reuters reports that Bertelsmann (parent company of Random House) plans to carve up its Direct-Group unit. Bertelsmann bosses will discuss the new structure of the division, which includes the group’s book club businesses and generates annual sales of some 2.7 billion euros ($3.7 billion), at a meeting on Wednesday, followed by a meeting by the supervisory board on Friday. Bertelsmann plans to present a new strategy for the whole company in mid-December, when the group’s top managers will gather for a two-day meeting in Berlin. Direct-Group unit head Ewald Walgenbach said last week he will leave the conglomerate by the end of the year to join private equity firm BC Partners.

OFT Clears Advertising Guidelines for Bertelsmann Book Clubs

AFX reports that the UK’s Office of Fair Trading (OFT) said Bertelsmann-owned Book Club Associates (BCA), membership book clubs across the UK selling books online and by mail order, has given undertakings not to use misleading adverts when enticing customers to sign up for its book clubs, although it added that BCA refused to accept its previous ads had been misleading. The OFT said it considered a number of the claims made in BCA’s advertising have been misleading under advertisement regulations, and whilst BCA did not accept this, it has “agreed to work with the OFT to reach an outcome that will benefit consumers.”

The advertising must comply with the undertakings by July 24.

Bertelsmann Launches Dutch Chain

The Bookseller reports that Bertelsmann, Random House‘s parent company, is expanding its Direct Group with the launch of a new bookselling chain in the Netherlands. The first branch in the Cosmox chain, which combines traditional bookshops with book clubs and online activities, will launch in Alkmaar this autumn. At least two more stores will launch later in the year. The name Cosmox is taken from the online bookshop launched by Bertelsmann’s Dutch book club operation ECI in early 2006.

The combination of book club business, book trade and online activities is already well-established in France, where Direct Group has become the country’s second largest bookseller through its France Loisirs book club, its online bookseller www.chapitre.com, and its booksellers Librairies Privat and Alsatia.

Who Spiked the Water at 1745 Broadway?

It’s been a very strange week for the world’s largest publishing company. First we had Wednesday’s surprise announcement that Crown svp and publisher Steve Ross would be moving to Collins, with Tina Constable stepping in to take his place. Now comes last night’s announcement that Daniel Menaker was jumping ship from Random House‘s eponymous imprint, though it remains to be seen if the party line that the decision was “absolutely mutual” will hold up under scrutiny.

Maybe it’s because the current edition of Publishing Revolving Door takes me on a time warp all the way back to 2003 – ancient history for some, but important history nonetheless. Menaker, after 26 years at the New Yorker, first joined Random House in 1995 and continued uninterrupted there save for a sixteen-month stint at HarperCollins, which ended in 2003. The company he returned to was not the company he left behind. They had moved to sleek new offices in an office condominium between 55th and 56th streets; Ann Godoff was gone in one of the most publicized oustings in recent memory; Little Random had been absorbed in the same umbrella containing Ballantine and its holdings; and at the center of the new-look imprint was, and still is, president and publisher Gina Centrello. Taken together, these were clear signs of the company’s increasingly commercial shift that would play out in a major way over the next four-plus years. And yet Menaker was hired to give Little Random a distinct literary bent, which he did in the form of novelists Benjamin Kunkel, Arthur Phillips, Gary Shteyngart and Jon Clinch as well as former poet laureate Billy Collins, even if said acquisitions didn’t necessarily pay off in terms of sales.

No matter how much Menaker, Centrello and the Random House brass want to downplay the bottom line, it’s difficult to play by their rules in light of the company’s most recent shakeups – not to mention their gutting of the sales force, Bertelsmann‘s attempts to patch up the mothership after getting scared straight by former minority shareholder GBL’s threats to take their holdings public (Bookspan, anyone?) and a downturn in profits. All of which has to make one wonder about the overall health of Random House – and if more “unexpected” news is just lurking around the corner.

Bookspan Bloodbath

bookspanlogo.gifPW Daily reports that a mere six weeks after it acquired complete ownership of Bookspan, Bertelsmann has initiated a major overhaul of the book club business, a process that will eliminate 280 positions, or about 15% of its workforce of 1,900. As part of integrating Bookspan into BMG Columbia House, an unspecified number of smaller clubs will be closed, including American Compass, InsightOut Book Club and Behavioral Science Book Service, as will Madison Park Press, the publishing program launched about 18 months ago. Madison Park’s staff, including editor Christine Zika, will be let go but the fate of its publisher, Carole Baron, remained unclear as of this time. However, since Baron is also acting in an at-large capacity with Knopf (most recently acquiring the debut novel from Poppy Adams) it’s possible her duties there may increase in the wake of Bookspan’s new plans.

“A number of small, specialized clubs will either be combined with another book club or phased out by the end of 2007,” says company spokeswoman Paula Batson. “This realignment will enable the company to focus its assets and efforts on its core book club brands such as Book-of-the-Month, Doubleday, Black Expressions, Crossings and The Literary Guild as well as its music and DVD club businesses.” The clubs will be phased out over the rest of the year and members will be given the chance to transfer to a different club. Books from some clubs will also be made available through the general interest and other specialized clubs.

Slight Q1 Loss for Bertelsmann

Bertelsmann, the international media company and parent company of Random House, announced that the company continued its positive development in the first quarter of 2007. Adjusted for portfolio and foreign exchange effects, revenue rose by 1.7 percent year on year, to 4.4 billion euros. Reported revenue declined slightly though, since this was the first time that the BMG Music Publishing business was no longer included. The reported revenue also reflects foreign exchange effects arising from the euro’s strength in relation to the dollar. Bertelsmann’s Chief Financial Officer Thomas Rabe said: “Overall, we got off to a good start this year and we expect to achieve our financial targets for 2007. We are pleased to have reached out-of-court settlements about Napster with most plaintiffs and claimants.”

Bertelsmann Makes Book Clubs Work in Eastern Bloc

Business Week has a fascinating piece on the growth and expansion of Bertelsmann‘s book club arm into Eastern Europe and former Soviet Bloc countries like the Ukraine. In fact, Bertelsmann is enjoying dot-com-like expansion in fast-modernizing Ukraine for its book club, a category that’s a slow- or no-growth proposition in the U.S. and Western Europe. Family Leisure Book Club, whose distribution center is housed at a dilapidated former factory, moved 12 million books last year—everything from cookbooks to local potboilers to Stephen King thrillers-while sales grew 55%, to $50 million. Today, Bertelsmann is Ukraine’s biggest bookseller, with 12% of the market. And the operation enjoys profit margins that are triple the 4% global average for similar Bertelsmann units, which include the Book-of-the-Month Club and Literary Guild in the U.S.

Ukraine is the most spectacular example of Bertelsmann’s success with book clubs in the former Soviet bloc. And it’s proving that with the right mix of marketing and merchandise, there’s money to be made even with low-cost goods. The region has well-educated populations hungry for a good read but relatively few bookstores where they can indulge their passion. As a result, Bertelsmann has also become the biggest book publisher in the Czech Republic and has scored big successes in Poland, Russia, and elsewhere.

So what’s the big secret in Ukraine? Not only keeping prices low (in a country where the average income is $8,000 per year) but nearly half the Family Leisure Club’s 2 million members (in a nation of 47 million) are under 30. That’s because the Bertelsmann club recruits hot young Ukrainian authors and serves as their exclusive distributor, a smart strategy in a country with only about 300 bookstores. “They’re very effective, much more than other publishers,” says Ljubko Deresch, an intense 23-year-old who has published five novels—the latest with Bertelsmann—dealing with youthful disenchantment and pop culture. Says Shpilman: “Our goal is not to be a book club, but an integrated bookseller.”

Private Equity Keen on Thomson

Reuters reports that Bain Capital, Blackstone Group and Thomas H. Lee Partners, the former private equity owners of Houghton Mifflin Co., are bidding for Thomson Corp.‘s text book publishing unit, sources close to the process said Monday, in a deal that could be worth around $5-billion. A separate source told Reuters that Bertelsmann is considering teaming up with that bidding group, and yet another source indicated Apax Partners and Warburg Pincus are also involved in the auction with the two buyout firms bidding separately for the unit. All five private equity firms have placed preliminary bids and are meeting with Thomson executives, and it looks likely that some combination of firms will win out – just a matter of which grouping seems the most attractive…

When Being Dooced Is Only One Side of the Story

Sometimes, even us freewheeling bloggers like to exercise a little restraint. Because reporting on publishing people getting fired for what’s clearly a case of going overboard on a small matter is, frankly, not the best use of our time and resources. But since Gawker‘s now gone ahead and presented their (extremely flawed) version of Jason Pinter‘s abrupt exit from Crown, it seems like a good idea to present a more well-rounded, if still somewhat unattributed account of what precipitated this event.

First, the obligatory disclosure: I count Pinter as a friend, someone who bought another friend’s book and has also written a seriously kickass debut thriller that is (deservedly) receiving a good deal of pre-publication buzz. So much for objectivity, but don’t take my word for it, see what agent Kristin Nelson said (albeit without mentioning Pinter specifically by name) late last week: “it’s so sad when I get the news of a departure. Someone I liked. Enjoyed working with. Knew their tastes and what would work for them. Now I’ll have to scout out whoever fills their shoes. See who gets added to the dance card.”

But I’m getting ahead of myself. When reached for comment, Crown publicity director Tina Constable would only say that Pinter is no longer with the company and had no further comments, but Gawker is correct that Pinter’s termination resulted from the now-deleted blog post comparing and contrasting Chris Bohjalian‘s B&N-related success to Ishmael Beah‘s Starbucks-induced sales. Sources indicate that Crown publisher and senior vice president Steve Ross ordered Pinter to take the post down on February 23, which he did. A week later, without any warning or any indication that there would be further action taken, Pinter was informed he had violated Random House’s blog policy and had one day – last Friday, March 2 – to collect his things, inform his authors that he would no longer be working with Crown and absorb what had just happened.

Sources indicate that Pinter’s termination was not an easy decision, as a visibly upset Ross, as well as publisher Jenny Frost, were forced to do so at the behest of more senior Random House brass. Such sentiments are understandable considering the post in question never even made mention of Bookscan numbers – that was added in later, by me, after checking with additional sources. And from what I understand, access to Bookscan is hardly proprietary information – it’s not like actual Random House sales figures were being bandied about or, in the last publicized case of an employee fired for blogging, actual criticism of Random House employees was made public.

If anything, Pinter’s firing has less to do with him and more to do with his now-former company’s woes. Laying off the bulk of their sales force and then openly lying about it? Getting rid of an editor here, a small department there and scrambling to do something, anything to compensate for not just a bad year, but Bertelsmann‘s overall shortfall thanks to buying back the 25 percent stake that a minority shareholder wanted to take public? In short, this is a classic case of corporate publishing at its cowardly worst, taking a passive-aggressive action that may cover their ass in the short term, but adds yet more grist to the public relations disaster mill in the long term.

So yes, GalleyCat wishes Pinter well. He has a book to promote soon, another due out in February and a third to write under contract, with more in the future. There are job offers to consider and options to mull over. Indeed, rumors of his demise are greatly exaggerated. And if anything, drinks are on us, not the other way around…

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