Irene and Bookstores

By Judith Rosen
Aug 29, 2011

 

For the most part Hurricane Irene left bookstores untouched. Gwyneth Paltrow signed My Father’s Daughter at BookHampton in East Hampton, N.Y., amidst storm preparations. Many bookstores throughout the mid-Atlantic and New England closed on Sunday, including Porter Square Books in Cambridge, Mass., and R.J. Julia in Madison, Ct. Clinton Book Shop in Clinton, N.J., which is no stranger to flooding, sand bagged the store; Books & Books Westhampton Beach in Westhampton, N.Y., like many business close to the water boarded its windows.

 

Other booksellers decided to use the storm as an excuse to party. The Spiral Bookcase, a used bookstore in Philadelphia, offered food and drink and live music. When it seemed as if the storm had passed, Greenlight Bookstore in Brooklyn opened yesterday afternoon, and was soon packed.

While most booksellers escaped with no or very little water, Bartleby’s Books in Wilmington, Vt., was completely destroyed by flooding. In an email to Shelf Awareness, owner Lisa Sullivan wrote, “We plan to rebuild as soon as possible.” This is the second time within the past four months that Sullivan has lost a store. In April, her Brattleboro, Vt. bookstore, The Book Cellar, was closed due to a fire. No word yet on when either store will reopen.

*From PW Daily

Profits Surge at Random House

by Jim Milliot
Aug 31, 2011

The digital transition is proving to be a profitable one for Random House. Bertelsmann, parent company of the country’s largest trade book publisher, reported this morning that RH's operating EBIT (earnings before interest and taxes) jumped 72.5%, to 69 million euros ($99 million), in the first half of 2011 driven by a strong bestseller performance, large gains in e-book sales and improved operating efficiencies. Revenue in the period fell slightly, to 787 million euros ($1.14 billion) from 791 million euros, hurt by the weak dollar. Excluding the impact of currency exchange, sales were up.

 

In his letter to employees, Random House chairman Markus Dohle noted that demand for “Random House content around the world continues to be enormous.” Nowhere was the demand greater than in the U.S. which led Random’s growth. Dohle pointed to “our bestseller successes, operational efficiency, and more than 200 percent growth in e-book sales” as the factors contributing to the performance. Digital sales across all RH companies for the first half of 2011 have already exceeded their total for all of 2010, Dohle noted. In the U.S., digital sales accounted for over 20% of revenue with RH making more than 27,000 titles available in e-book formats. 

 

In his letter, Dohle underlined a number of initiatives: “we have launched several new print and direct-to-digital imprints, introduced new formats and business models, and acquired the leading digital media studio Smashing Ideas. We are continuing to strengthen our supply chain to help make our retail partners’ business more efficient and more profitable with Random House titles. And we are working together in a global effort toward our immediate and long-term top priority: connecting and communicating directly with readers through marketing innovation. Our cross-company collaboration and cost consciousness are yielding many internal benefits, ultimately helping us broaden our investments in author acquisition and development, which will always be the heart of our business.”

 

The economic uncertainty will not make it easy to maintain the momentum in the second half of the year, but RH has a strong publishing lineup, Dohle said, and is off to a good start with the summer blockbuster A Dance with Dragons by George R.R. Martin. The success of the new book has led RH to reprint 4 million copies of Martin’s four early works in the A Song of Ice and Fire series, a figure, Dohle noted, “which reminds us that the print side of our business is an indispensable contributor to our greater publishing success.”

 

*From PW Daily

BN Says Nook Is A $900 Million Business, Set to Double

Barnes & Noble reported first quarter results that were mostly below analysts' expectations, but showed strong growth in the Nook business and for the first time broke out the entire digital reading segment. The Nook segment--including content, devices and accessories--totalled $277 million for the quarter, with BN saying digital content sales quadrupled over the year. They say the Nook business comprised $880 million last year (and $123 million in 2010), and "is expected to double this year to $1.8 billion." That news, and projections of smaller losses and much better EBITDA thanks to the Liberty Media investment sent Barnes & Noble shares soaring in early trading, up over $2 a share just after the opening bell and still up by well over 10 percent later in the morning.
Total sales for the quarter were $1.418 billion, up 1.5 percent on an overall basis, though all the gains came through BN.com as both retail and college sales slid. While print book sales continued to fall, the company told investors "we saw that rate of decline slow" and "project a further pick-up in our physical book sales" as Borders finishes its liquidation. Regular store comps declined 1.6 percent (better than the 2.1 percent falloff analysts expected), while college store comps fell 1.8 percent (worse than the 0.6 percent analysts estimated). The consolidated net loss was $56.6 million, or 99 cents a share, a $6 million improvement versus a year ago, but still more than analysts had expected. The company says EBITDA improved 23 percent in the quarter, at $30.7 million.
In this morning's conference call with analysts, ceo William Lynch noted that BN.com margins are improving considerably, helped in part by agency pricing. "We see agency expanding. We think agency is going to take hold as the dominant form of pricing for ebooks going forward. It makes a lot of sense for a lot of reasons. Clearly agency expands our gross margins."
PubIt remains "the fastest growing part of the sales and catalog," with those units "typically priced under $2.99." Some of that growth is from IP holders who can monetize electronic content as "ebooks" that has been harder to charge for via the web itself. Lynch said traditionally-priced frontlist books are performing steadily, too, though, adding "we see that pricing holding there." He still estimates their ebook market share at 26 to 27 percent, and says they are doing slightly better with electronic periodicals. As for the recent change in iOS apps, Lynch says "we didn't see a marked change in purchasing through the app itself." In answering another question, Lynch declared "this belief that people are going to read books on smartphones just hasn't materialized."
In addition to breaking out the Nook business, BN has resumed providing forward earnings guidance, which can be seen as a sign of stabilization as well. They are projecting full-year sales of $7.4 billion, and losses of 10 to 50 cents a share. (With the Liberty Media investment, however, they see full-year EBITDA of between $210 and $250 million.) The sales gain from the disappearance of Borders is put at a modest $150 to $200 million (only roughly 10 percent of Borders' sales).
Lynch foresees a big holiday as part of that forecast: "With Borders going out, we're convinced this holiday will be the biggest traffic we've had in the stores for five years." He says their educational toys and games initiative also continues to perform well, with 66 percent comparable-sales growth in the past quarter. Store president Mitchell Klipper added that they are "talking to the landlords now about acquiring some leases" for locations that have been occupied by Borders, without indicating a number of new stores under discussion.
One more interesting sign: the conference call with analysts was far busier (and too much longer) than usual, with many more participants asking questions than in the past. Clearly the Nook results and Liberty investment have attracted new attention for the company from the financial sector, and participants enjoyed being able to query management about the particulars of the ereading business. (You can expect that analysts will now conjure new guesses about the size of the Kindle business based on Barnes & Noble's disclosures today.)
Finally, in the official release Lynch comments, "Our strategy of growing market share in the exploding digital content business while maximizing cash flow and EBITDA from our retail operations is paying off. We plan to continue investing in the significant growth areas of our business, and in fiscal 2012, we expect to see leverage as our digital sales growth is projected to exceed the growth of investment spend. Additionally, the return on investment is expected to increase in future years, as readers purchase increasing amounts of digital content on the platform we have built."
Release

With Writedowns, Borders Loses $328 Million In July

Borders filed their monthly operating report for July with the bankruptcy court, reporting sales of $94.7 million and other revenue of $57.5 million for the month. Regular SGA expenses were $38.2 million, but they took two large writedowns--one against "all long-lived assets," for $135.2 million, plus the fully-loaded "cost" of the merchandise sold was $284.7 million (or $132.5 million more than sales for the month). All told, they recorded an operating loss of $305.9 million on their books for the month, and a total net loss of $328.2 million.

*From today's issue of Publisher's Lunch

New Book Stats Describe the Flat Trade In New Ways--Including $838 Million in 2010 eBooks

After a couple years of no industry-wide statistics and many years before that of poor, illusory numbers, the publishing industry is back on the road to measuring itself with the new BookStats, prepared jointly by the AAP and BISG, released in highlight form to trade media on Tuesday.
All of the new numbers as you will read about them are modeled estimates rather than actual data--but they draw on data supplied by just under 2,000 publishers, and the methodology for extrapolating the estimates was far more careful and rational than the process used by the BISG alone for its annual Book Trends numbers, and has introduced fewer errors of gross exaggeration-by-multiplication. (More on this later....) Book Trends was abandoned after publishing data for 2008, and the BISG did not compile any statistics for 2009. The AAP has published annual estimates though they were considered less complete. So the new data effort covers 2010 but also compiles industry numbers for 2009 and 2008 using the same new method.
In the headline numbers, BookStats estimates trade publishers' 2010 sales at $12.59 billion. That's a slight decline from $12.71 billion in 2009, when sales were 7.4 percent higher than the year before, which registered $11.83 billion in 2008.
(Here's our first point of divergence with some other accounts: we calculate trade sales as adult fiction, adult nonfiction and juvenile sales. BookStats has put the "religion" breakout inside trade in their general press release. There is some overlap, but with $1.35 billion in wholesale sales, we're more comfortable leaving "religion" outside of the trade basket.
(Here's our second point of divergence: the official BookStats press release celebrates all of the increases in publishing, some of which can only be derived by looking at changes over a two-year period, instead of the traditional year-over-year view. And 2008 was when the economy plunged in the final quarter, so it may make for a skewed baseline, particularly on a two-year comparison. We are breaking out percentage changes on year-by-year comps, and our focus is on changes in the past year.)
*From Publisher's Lunch

Amazon vs. Apple: The Battle Escalates

Gabe Habash -- August 10th, 2011

In the latest chapter of Amazon vs. Apple–which is increasingly starting to resemble a popularity contest between the two prettiest girls in school–two separate stories broke today: both are good for Amazon and both are very bad for Apple.
The first story is Amazon’s announcement of its Kindle Cloud Reader, an HTML5 reader that bypasses Apple’s iOS guidelines prohibiting the use of links–and their 30% cut on all sales. The Cloud Reader allows users to purchase and access Kindle titles through their browsers rather than through apps, and gives Amazon the ability to set up a Kindle storefront through an iPad’s browser without having to pay Apple a cent for purchases.
The second story, which is a loss for Apple (and thus a gain for Amazon), is the class action lawsuit filed today in California claiming that Apple colluded with Hachette, Penguin, Simon & Schuster, HarperCollins and Macmillan to fix prices on e-books. The suit alleges that this all happened back in early 2010, as Apple was readying the iPad for the digital books marketplace, and neither the publishers nor Apple were willing to accept the low margins Amazon’s $9.99 e-book pricing was forcing on them.
“Fortunately for the publishers, they had a co-conspirator as terrified as they were over Amazon’s popularity and pricing structure, and that was Apple,” Steve Berman, an attorney representing consumers in the case, said in an e-mailed statement.
In one day, Apple has been thrown into the spotlight as a frightened player in the digital books market while a major hole has been punched in  their iOS’s restrictive guidelines through circumnavigation. The impending iPhone 5 and iPad 3 announcement can’t get here soon enough.
But, at least for this week, we can safely chalk up a victory for Amazon.
*From PW Daily

Amazon Launches The Kindle Cloud Reader

By Calvin Reid
Aug 10, 2011

As expected in the wake of Apple’s new restrictions on buying content outside the Apple in-app purchasing system,  Amazon.com has launched the Kindle Cloud Reader, an HTML5 reader that will allow consumers to buy and read Amazon titles through the web browsers found on almost any PC or mobile device. 

Starting today Amazon is releasing The Kindle Cloud Reader software, initially only for the Safari browser for the iPad, Mac desktop and the Chrome browser. In the coming months, an Amazon release says, the Kindle Cloud Reader will be released for Internet Explorer, Firefox, the Blackberry Playbook browser and other web browers.

 

Apple’s app development guidelines now prohibit the use of links that bypass its in-app purchasing system—and Apple’s 30% commission—and e-tailers like Amazon, B&N, Kobo, Blio and others must find a new way to sell e-books outside of their native Apple device Apps, which are now essentially strictly e-book readers. HTML5 technology allows web browsers to provide an online and offline experience that is comparable to a native app and e-tailers and publishers, as well as others looking to sell and attract readers outside of the Apple system, will likely turn to the technology. Most importantly, now e-book retailers like Amazon can offer and market their titles for sale and readers can read their Amazon e-books—online and offline—much as they had previously through the native Apple apps. By setting up a iPad Kindle Store available through the Kindle Cloud Readers/Safari browser with 900,000 titiles for sale, Amazon is bypassing Apple's cut of the sale. The Kindle Cloud Reader gives the reader access to all of their previously purchased Kindle e-books, provides automatic software updates, synchs all titles to the last page read and allows consumers to see all annotations and notes—and e-books can be read offline as well. 

 

Dorothy Nicholls, director, Amazon Kindle, said, "We are excited to take this leap forward in our ‘Buy Once, Read Everywhere’ mission and help customers access their library instantly from anywhere. The flexibility of HTML5 allows us to build one application that automatically adapts to the platform you’re using--from Chrome to iOS. We’ve added an integrated, touch optimized store directly into Cloud Reader, allowing customers one click access to a vast selection of books.”

*From PW Daily 

 

One Party + Two Authors = Twice the fun!

this was taken at an author party at my home last week. That's Sam Hilliard, author of The Last Track, on the left and Mariam Kobras, author of the upcoming The Distant Shore, on the right.  What fun! Sam was his usual entertaining self, and Mariam had everyone listening raptly as she read from her new book.
Good times!

Vonnegut Sold Saabs: 11 Author Day Jobs

Gabe Habash -- August 5th, 2011
We all have that same romanticized image of The Writer: sitting alone, hunched over his/her desk, pen in hand, thinking deeply about Writing before putting the pen to the page and Writing. But, unfortunately, doing this for long stretches of time doesn’t pay the bills, and that’s why things like Sylvia Plath working as a receptionist in the psychiatric unit at Massachusetts General Hospital happen. Writers are normal people, too. Just how normal? Here’s a few of our favorite writer day job finds:
1. John Steinbeck was a caretaker and tour guide at a fish hatchery in Lake Tahoe, where he worked on his fist novel and also met his future first wife, Carol Henning. She was a tourist on one of his tours.
2. Douglas Adams first thought of the idea for A Hitchhiker’s Guide to the Galaxy while moonlighting as a hotel security guard in London.
3. Jeanette Winterson, in addition to driving an ice cream truck, was a make-up artist at a funeral parlor.
4. Dashiell Hammett was hired by the Pinkerton Detective Agency as an “operative” at age 21. His job description included staking out houses and trailing suspects. He was thankful for the work; his previous job had been a nail machine operator.
5. Robert Frost changed light bulb filaments in a factory in Massachusetts shortly before he sold his first poem, “My Butterfly: An Elegy” in 1894 for $15.
6. Kurt Vonnegut was the manager of a Saab dealership in Cape Cod, after he’d already published his first novel, Player Piano. The dealership was supposedly Saab’s first in America.
7. Jack London was an “oyster pirate.” At night, he would raid the oyster beds of big-time oyster farmers and sell them in the Oakland markets.
8. Jean Rhys, a 23-year-old and in need of money, posed nude for a British artist.
9. James Ellroy led a life of petty crime and shoplifting as a wayward youth, most likely as a response to his confusion following his mother’s unsolved murder.
10. Harper Lee struggled when she first moved to New York at age 23, working as a ticket agent for Eastern Airlines before befriending Broadway composer Michael Martin Brown. In 1956, Brown gave Lee a Christmas present: a year’s wages so she could devote herself full-time to her craft. During this time, she began work on what would eventually become To Kill a Mockingbird.
11. Ken Kesey, in order to earn some extra cash, was a guinea pig for the psych department at Stanford in a CIA-sponsored drug experiment. As a result of the drugs, Kesey had hallucinations of an Indian sweeping the floors, which compelled him to write One Flew Over the Cuckoo’s Nest.

*from an article in today's PW Daily

In the midst of the debt-ceiling debacle, Congress surprised publishers and retailers by taking unexpected action and actually getting something right. The House of Representatives passed an amendment to the Consumer Product Safety Improvement Act (CPSIA) by 421-2 that excludes regular printed children's books and learning materials from the lead-content testing requirements that are due to take effect shortly. The Senate quickly approved the same measure by voice vote before adjourning, sending the bill on to President Obama for signing into law.
The amendment has been three years in the making, and its quick passage was a happy surprise to supporters. The amendment also makes clear the CPSIA applies only to new products, further relieving pressure on sellers of used goods, libraries and others. Most coverage so far focuses on all-terrain vehicles for kids, which were also exempted along with bicycles and used kids products.
The AAP's Allan Adler said in a statement the passage "resolves a problem that has vexed the Consumer Product Safety Commission since CPSIA was enacted in 2008: the inadvertent inclusion of ordinary books and similar materials in its all-inclusive definition of 'children's products' requiring testing for exposure to lead."
AAP release