On Bloomsbury and buggy whips
Excited and terrified
Coincidentally, on the day I start thinking about adding Bloomsbury, which is predominantly a book publisher, to the Thrifty 30 portfolio two news items catch my attention. The first is, an experiment by Google to create a Tardis-like online bookcase, tied in, naturally, to its eBook store. The second is a blog from the Frankfurt Book fair quoting Philip Downer, erstwhile head of defunct Borders UK warning publishers they must “repurpose” or face the same fate booksellers have.
Bloomsbury agrees, quoting Darwin in its annual report earlier this year:
It is not the strongest of the species, nor the most intelligent that survives. It is the one that is the most adaptable to change.
In March, Bloomsbury switched from operating in geographical divisions to six global divisions, four tackling discrete markets, Academic and Professional, Information, Adult books, and Children’s and Educational books and the other two providing production and marketing support. Founder and chief executive Nigel Newton says the new structure is already enabling the group to profit from the globalisation of the book market.
Other than that, the annual report doesn’t say much about what the company is doing as technological change renders, by its own admission, the traditional publishing business model redundant. The chairman hands over to the chief executive to talk about Bloomsbury’s adaptation to meet the needs of e-readers, but he doesn’t, much. Bloomsbury has established Bloomsbury Reader to republish out of print but in copyright books.
It’s exciting that Bloomsbury is embracing change, but it’s also telling this profitable, cash-rich company, with a list of home-grown successes topped by Harry Potter and venerable publishing acquisitions (some of which are listed on its corporate history page), is talking about survival.
I’m fearful because I’m a Kindleista, so’s my wife, and my Mum. My eldest son says he’d read more if I bought him a Kindle, a likely story, and even my Dad, who doesn’t read books much, is thinking of buying one. I’m as convinced as Bloomsbury the industry faces fundamental change.
Having successfully dodged investments in booksellers, computer game retailers, and newspapers, companies that looked great value but have failed in their responses to earlier waves of the digital onslaught, I’m now tempted by a company that could be in the next wave.
Some initial thoughts:
Recession aside, Bloomsbury’s professional, academic and information divisions ought to be in a reasonably strong position. Most of the publications are probably already digitised and universities, for example, have been buying access to databases for years. That part of the market embraced electronic publishing earlier, and has evolved relatively gradually.
The big shift now is the move by consumers to eBooks. Since consumer titles are a bigger part of Bloomsbury’s business (68% by revenue last year) it’s vulnerable. Sales are growing fast, but still amount to little more than 2% of sales from its book divisions.
The digital switch is worrying because we don’t yet know how it will impact our consumption of books. In some ways we’re forced to buy more, on Amazon’s platform at least, because digital rights management makes it difficult or impossible to share. But the ability to download the beginning of books before you buy them means I read more of the books I buy.
More worrying is the emergence of technology companies as publishers. Authors can design, publish and market their books on the Amazon platform, circumventing the need for a publisher. Google is digitising out of copyright texts that compete with the lists Bloomsbury is still acquiring. Classic novels, available free from both Google and Amazon and many other sites, compete with modern blockbusters.
Mum hasn’t bought an eBook yet, she’s too busy reading George Eliot.
I’ve worked in publishing for seventeen years, yet I’ve rarely owned shares in publishing companies, manual publisher Haynes being the exception that proves the rule.
Family owned Haynes has a strong position in a niche businesses, and those two factors give me some comfort. Its acquisition of Vivid, an electronic publisher of motor manuals also gives it a toe-hold in the future.
Perhaps the “buy what you know mantra” should be revised to “buy what you know as long as the industry is not facing potentially ruinous competition from technology companies.”
So why am I still tempted by Bloomsbury?
The interims to be published in just over a weeks time will give a more up to date picture but, in February, Bloomsbury’s high quality tangible assets (mostly cash and receivables) net of all liabilities were worth £73m and It’s market value is also £73m.
In other words, the market says all those intellectual property rights it is still collecting, titles dating back hundreds of years, they’re worth nothing (JK Rowling retains the digital rights to Harry Potter so they’re not worth anything to Bloomsbury). The knowledgeable well connected staff. They’re worth nothing. Wisden, A&C Black, etc.. Worth nothing.
I find that so hard to believe.
The trouble is, I might be kidding myself.
I don’t want to believe it.
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Thanks Richard, interesting post.
I personally don’t like the eBook idea. Give me a physical book. What really put me off is an article on Slashdot (a website for IT nerds), where, in the biggest irony ever, it was found that the eBook on 1984 was altered post purchase. It is so so easy for the book provider to muck you about that I am very skeptical about it. And what if the server goes offline?
I wonder how they’re going to get on in the academic and professional segment. It probably has a good moat – which is good for incumbents, but bad for outsiders. It’s not exactly clear what they had in mind by “academic and professional”.
I’m uncertain as to the role of the publisher. I think that’s the beauty of books: it’s such an arduous and time-laden process to produce, that there’s a certain guarantee of quality. OK, I guess that doesn’t explain Carol Vordermen’s Grapefruit Diet, or whatever it is, but no system is perfect, huh. Just how readers are going to navigate the minefield of garbage is an open question.
Hi Blippy, I’ve heard that story about 1984 before, but think its extremely unusual and only possible for booksellers like Amazon, which control the physical warehousing of books you ‘buy’. The trade-off I make is the convenience of having them permanently stored in the cloud.
Regarding the academic/professional market the latest annual report talked about the acquisition of a publisher of classics (i.e. Greek, Roman etc.), the digitisation and commercialisation of the Winston Churchill archive and various tax and legal tomes. Information seems to be dominated by a series of ventures funded by Qatar like: http://www.qfinance.com/home !
I agree with you. Bloomsbury particularly has a reputation for quality. But the companies Bloomsbury is up against, like Amazon and Google, are already adept at helping people navigate through mountains of garbage, whether its all the stuff we don’t want to buy, or it’s the entire Internet, which, lets face it, and putting your blog to one side, is full of information of dubious quality the vast majority of people aren’t interested in!
In fact here’s a scary thought. There are some great long-form essays on the net, like this one say: http://www.johnkay.com/2011/10/04/the-map-is-not-the-territory-an-essay-on-the-state-of-economics
I’ve got a button on my browser which will send that to my Kindle. When it arrives, it’s almost indistinguishable from a book, or a pamphlet anyway. In the future we may not be talking about books at all, just writings you can read however you want to. What’s the role of the publisher in that scenario?
Glad to hear that my blog is not the “Carol Vorderman Grapefruit Diet” of investing. Apparently she did write “Eat Yourself Clever”, and not the Grapefruit Diet, but the “Detox Diet”. Sweet Mother Mary.
By a strange coincidence … combining “diet” and “publishing” … for those that have eat a few pies too many, a good resource to check out is the Hacker’s Diet
http://www.fourmilab.ch/hackdiet/
It’s free, and written by John Walker, creator of the highly successful AutoCAD package. I wrote him an email once, and he responded. Nice bloke! He also wrote a free version of Forth, “at-last”, for people to download and compile.
Yep, I own Bloomsbury (very small 1% or so stake) for the IP.
The first book I bought on Kindle was ‘Memoirs of Stock Market Operator’ ! About 90 years old, and I paid £13 for it for the annotations, even though I’m sure I could have dug it up out of copyright somewhere.
Everyone I know with a Kindle buys more books.
I wouldn’t worry either about the theoretical lack of need for a publisher. This has been the case in music and online/social games for years now (facebook games etc) yet the publishers are still in the game in some form.
Piracy is the real issue, and harder to judge. At least it’s a known threat now. It’s hard to imagine the book buying public sneaking around on Warez sites, but some semi-legit looking book piracy store based somewhere like China could be a threat.
Fore legit free books, check out Project Gutenberg:
http://www.gutenberg.org/wiki/Main_Page
“Project Gutenberg offers over 36,000 free ebooks to download to your PC, Kindle, Android, iOS or other portable device. ”
The books are reasonably old, of course, but there’s some great stuff on it like Alice In Wonderland. There’s also “Memoirs of Extraordinary Popular Delusions and the Madness of Crowds” by Mackay”
Well worth checking out.
Just downloaded Popular Delusions
Thanks for the tip!
I must admit I don’t buy (or pirate) much music so music publishing is a bit of a blind spot for me. When you say music publishers are still around in some form, though, I do wonder if that is a form that has been beneficial to shareholders.
EMI lost its private equity backers a fortune and I remember Sanctuary, a listed music group, which was busy buying up back catalogues last decade and promising to exploit them through merchandising etc, being a particularly hairy investment.
There are probably parallels worth investigating. Instinctively, I think pirating will be less of an issue for books, and self publishing more of an issue. I think pirating music was more common even before its digitisation, and self publishing of books was more common.
[...] Ist Bloomsbury ein Value Investment oder eine Value Trap ? [...]
I think you always have to look at technology. You might (*might*) have been able to pirate a book by photocopying every page, but you’d end up with a big ugly and expensive stack of paper to read. In contrast, the average teenager couldn’t tell the difference after pirating an album onto his/her C90 cassette.
Now any pirated ebook will offer exactly the same experience as buying it. That makes piracy infinitely more dangerous in my view.