Archive for Business News
Kobo is beginning to feel the pinch of prospective lower profit margins in Canada. The Canadian Government is forcing them to renegotiate contracts with all of their major publishing partners. Kobo sees this as being “Devastating for the company” and will relegate them to “an ineffective competitor.”
Two weeks ago, the Commissioner of Competition in Canada mandated to Kobo that it had 40 days to re-negotiate contracts with Simon & Schuster, Macmillan, HarperCollins, and Hachette. Immediately the publishers starting mailing letters to Kobo, demanding their existing contracts be augmented or cancelled completely. Complex contract negotiations take time, and Kobo may find themselves being unable to sell thousands of titles to customers in Canada. In contrast each publisher in the United States DOJ settlement took 16 months each.
The US Justice Department has been running a very high profile case with Apple and the top 5 major publishers. All of the publishers settled out of court with specific agreements. Most of the exact proclivities of the publishers settlements were varied and not consistent, none were publicly available. Kobo is contending that the DOJ lacks jurisdiction in Canada and any settlement in the US, is not binding, because no one knows exactly what they were.
Kobo first started implementing agency pricing with publishers in 2011. The essence of agency was to have eBooks sold at a common value. Normally, the publisher sets the price and Kobo gets 30% of each book sale. If the publisher price matches the book against another site, Kobo would still get the same commission, but at a reduced rate. Each publishing contract is negotiated separately, some adhering to the wholesale model and others agencies, or a combination of both.
A new term most people have not heard of before is called “Agency-Lite.” These agreements arose after the settlement agreements and final judgements that transpired in the US. The essence of Agency-Lite is that allows the publishers to set the price, but allows Kobo to diverge from the sale price. One of the conditions entail the discount cannot exceed the total margin that the retailer earns from annual book sales, this is called the “discount pool.”
When Kobo first formed their company, they abided by the wholesale model, which was tremendously unprofitable. They had lost millions in their first few years trying to compete against Amazon, Sony, Apple and Barnes and Noble. Kobo contends that the Wholesale model is not indicative to an online environment of price matching algorithms.
The Canadian government is now forcing Kobo to iron out new contracts with Hachette, Macmillan, Harper Collins and others. If they can’t do it in 40 days the existing ones will be void and Kobo will be forced to remove thousands of books from their bookstore. Without a full catalog of eBooks from all of the Canadian publishers “Kobo would be an ineffective competitor. Customers choose eBooks and e-Readers based on the breadth of their catalogs”. If Kobo lost any of these “they would cease to be a credible player in the market place.” Conversely, if Kobo accepts the amendments and shifts it operations to Agency-Lite, it will suffer unrecoverable losses.
If you live in the USA, you will likely know that you would find it difficult to find a Kobo e-Reader available. This is primarily due to when the USA adopted Agency-Lite, Kobo saw its net revenues decline and stopped investing in that market. It closed down its office in Chicago and decided to focus aggressively on international expansion. In a legal filing Kobo said that the reason Barnes and Noble and Sony’s business collapsed in the US was directly attributed to the abolishment of agency pricing. Now, we might see Kobo abandon the Canadian market, just like they did in the USA.
The only play Kobo has in a legal battle against the Canadian Government is to play the jurisdiction card. The publisher settlements and the abandoning of Agency pricing was purely based in the United States. The Justice Department and the settlements have no legal jurisdiction in Canada. If Kobo fails to make a case and have to absorb profit loses by switching to a hybrid of wholesale and agency-lite it looks likely Kobo will kill their Canadian ebook business. They certainly won’t be able to compete against Amazon and Apple. I mean they could, but it wouldn’t be worth it anymore.
Barnes and Noble wanted to tackle the e-reader and eBook market in a big way. The company has lost over one billion dollars on their digital enterprise and are seeking new ways to stop the blood flow. The company has fired most of their executive team and sacked 190 jobs in the last year. New SEC filing has the Nation’s largest bookstore cutting Nook funding by 74%
Barnes & Noble’s fiscal quarter ended at the end of January, and the filing shows a $61 million loss on $157 million in revenue. It also notes their capital expenditures where a paltry $7.4 million on the Nook. That represents a massive decline in spending over last year, with a 55% drop in the past nine months. This is about the same time that the rumors starting about the accelerated decline of the entire Nook division.
The management shakeup and employee reorganization has been taxing on B&N. So much so, that they have failed to adhere to the terms of the Microsoft investment of 300 million. Barnes and Noble has not meant the content thresholds Microsoft established by opening up Nook stores in over 30 different countries. Because of this, Nook has not been able to attain the total funding until they meet their goals. Rumor has it, they might be able to do it by the end of April 2014.
Flipboard is currently one of the most popular online news reading apps and the company has been gaining massive traction over the past few years. In order to facilitate further growth the company has bought out one of their competitors, Zite.
Zite was formerly owned by CNN, who had paid $25 million for it back in 2011. CNN Money proclaimed that the buyout figure from Flipboard was to be in the neighbourhood of $60 million.
Flipboard founder Mike McCue said that the partnership with CNN will include all of CNN Digital’s content. We will also see the launch of heavily customized magazines created by a number of CNN personalities — including Fareed Zakaria, Jake Tapper and John King of CNN News. Those magazines are poised to go live later today.
Flipboard is also inking a new premium advertising partnership, “the kind of advertising you see in print magazines,” CNN’s head of digital KC Estenson said. CNN and Flipboard will be jointly selling ads for the CNN content. “We’ve been developing a healthy relationship.”
In the wake of Facebook launching their news reading app “Paper“, Flipboard has been ramping up its effort with publishing partners and advertisers. Flipboard has secured a new deal with Condé Nast to give titles such as Bon Appétit, Details, Glamour, Golf Digest, Vanity Fair and Vogue. Flipboard also has a great relationship with The New York Times, The Telegraph, Forbes, Esquire, Fast Company, Oprah, and Lonely Planet.
CNN is a victim of big media trying to run a news app. They simply could not innovate internally to make Zite a compelling enough service to give its serious rivals a run for their money. Flipboard puts the executioners axe to another competitor and is able to now harvest their original content to integrate it into their own service.
The eTextbook industry is undergoing a consolidation period, as many companies are being absorbed. Intel purchased educational software company KNO late last year and today Ingram acquired all assets of CourseSmart.
CourseSmart was founded in 2007 by Macmillan, Cengage Learning, John Wiley & Sons, McGraw-Hill Education and Pearson with a simple goal of providing instructors a better textbook evaluation service. The company has since expanded to become a leader in providing digital learning content to the higher education community. CourseSmart has millions of users around the world and offers access to over 90 percent of core higher education titles as e-textbooks along with the largest catalog of e-resources and digital course materials.
The VitalSource Bookshelf platform is the most used e-textbook delivery platform in higher education with more than 4 million users across 6,000 campuses around the world. The company has deals with most of the major textbook publishers and the acquisition of CourseSmart will give them access to thousands of additional eTextbooks with a global footprint.
“We are pleased to make another investment in higher education and technology with the acquisition of CourseSmart,” said John Ingram, Chairman and CEO, Ingram Content Group. “By integrating the strengths of CourseSmart with Vital Source, we are creating an extensive global sales channel for publishers and bringing the best in digital learning technology and accessibility to the higher education community. We are strengthening our services in the higher education market and reinforcing our commitment to helping publishers, institutions, educators and students navigate the evolving landscape of digital learning and succeed by providing them with content in any format.”
Amazon Prime has a number of compelling features that makes people glad to spend $79.99 per year. There is free shipping, a free eBook every single month and access to Amazon Instant Video. The Seattle based company announced during a recent earnings call that they were talking about increasing the Prime membership by $40.00. They cited rising shipping costs as being a prime motivator, but the price increase may also pave the way for a new Amazon Streaming Music Service.
Amazon is reportedly in talks with major music labels with the aim of releasing a music service of the future, hoping for low rates much as Apple did when negotiating for iTunes Radio. Amazon is hoping to go head to head with Beats, Spotify, Pandora, and Apple.
According to Re/Code “Amazon has been beefing up its roster of executives with digital music experience in the last few years. In October 2012, it hired Michael Paull, a Sony music executive, to head up its digital music operations. At the same time, it brought in Drew Denbo, who had handled business development at streaming services Rhapsody and MOG, to do the same job at the e-commerce site. And last year it hired Adam Parness, who handled licensing for Rhapsody.”
The industry standard for a streaming music service is currently six cents per 100 songs streamed. Apple ended up agreeing to pay 13 cents for each song played, along with 15% of net advertising revenue. Likely, Amazon is looking for the same deal, or cheaper.
Amazon launched ACX in 2011 to connect up publishers, authors and producers for unsold audiobook rights. Indie authors have begun to use the program more than the publishing companies and Amazon has tweaked their program a number of times to be more appealing. Today, the company announced they were adjusting the royalties it pays on audiobooks.
When the ACX program first launched, companies like HarperCollins and Random House primarily used it to compliment their eBook strategies with audiobooks. Lots of famous actors loaned out their voice to read novels and producers were earning extra income. A year later self-published authors started to take over the platform and Audible adjusted their strategy to have a wider appeal.
Until now, the royalties paid on audiobooks have been really solid. If you wanted to market it exclusively through Audible you would get paid around 50–90%, if you wanted to sell it outside of Audible you would earn 25–70%. Amazon has now lowered the exclusive rate to 40% and the non-exclusive version to 25%.
Further, a bounty of $50 will be awarded to the royalty earner every time your book is the first purchase of a new AudibleListener. Under the previous program, a $25 bounty was awarded every time your book was one of the first three purchases by a new AudibleListener. In Royalty Share deals, the Rights Holder and Producer will now split the $50 bounty equally.
If you have produced an audiobook in the past, the royalty structure will not change. Authors and Producers will still earn the old amount for audiobooks published before March 11, 2014. The commission adjustment is only applicable for new titles being published, although the bounty rate will change across the board.
Amazon, Audible and ACX have continued to make their platform less appealing to authors as time as gone on. It was not too long ago that the company paid authors an additional $1.00 everytime their book was purchased or downloaded. They did this to draw attention to their platform as a viable way to distribute audiobooks to the masses. This new adjustment to royalties is the latest decrease to revenue earning potential. But really, where else are you going to sell it?
Over the last few weeks Sony has announced the closure of their digital bookstore in the US and Canada. This apparently was a foreshadowing of what is to come, as the Japanese company has announced 20 of their 31 retail stores in the US will be closing down immediately. Close to 1,000 people will be losing their jobs and the only stores to remain will be in California, New York, Florida, and Texas.
Sony has been floundering for a number of years with their dedicated Sony Style and Sony retail stores. The companies 4K television technology and Sony Playstation 4 are doing very well. Basically, the company is restructuring their retail presence by selling their tablets and smartphones in electronic and cell phone stores. Instead of being burdened by a costly overhead, they are going to just have big box and boutique stores sell their devices for them. This obviously is the ideal strategy going forward, as the bulk of their customers are starting to buy more things online.
Barnes and Noble is a company in transition, when it comes to their floundering Nook Media division. In the last two months they have announced the departures of Jim Hilt – Vice President of eBooks, digital products director Jamie Iannone and VP of digital products Bill Saperstein. A myriad of other people have left, including the head of accessories and most of the hardware developers. The big reason these executives have left is primarily due to the fact that Nook Media has lost over a billion dollars since 2010.
Barnes and Noble is quite transparent when it comes to their financial earnings and hold nothing back from investor calls and their reporting. Normally, their end of the year reports come out every April and there is some bleak news. In 2011 the company lost 209 million, in 2012 they lost 261 million and in 2013 they increased the losses to 475 million. If we look at the quarter ending on July 27, 2013 they reported loses of 55 million and October 26, 2013 NOOK lost 45 million. If you add all of these figures together it comes to over 1 billion dollars.
It is painfully obvious that Barnes and Noble was making too many units and not selling enough. This resulted in dramatic price drops just to move the inventory. The executives are firmly to blame with none of their e-readers sold nearly as much as the Nook Color, their first tablet and their first/second generation e-ink display with a color LCD on the bottom.
Amazon, Apple and Kobo all got involved in the e-reader and tablet space roughly around the same time Barnes and Noble first started making devices. All of these companies are extreamly profitable and rarely have a quarter in which they are in the red. Why? They poach executives away from rivals, and have great leadership. This is evident in the products they release and the marketing they put into it. Can you ever say you saw a sexy Barnes and Noble television commercial?
I have no idea how a company can lose over a billion dollars and still be in business. It makes 0 sense with the largest bookstore in the USA to serve as a retail showcase can be in this much trouble. Obviously, there are plenty of ideas on how to turn things around, instead Barnes and Noble appoints the VP of Marketing Doug Carlson to lead the eBook crew. Here is an idea, hire from the outside, to bring fresh new ideas. A herd of spitting camels, is still a herd of spitting camels, no matter who the alpha of the group is.
Barnes and Noble has received a viable offer to buy their entire bookstore business from G Asset Management. They have proposed a complete buyout at a deal valued at $672 million. If they are unable to go through on this deal, their secondary offer is to buy a 51% stake in Nook Media.
There are plenty of barriers in place to prevent the sale of the last major bookstore in the USA. Len Riggio, chairman of B&N wanted to take the company private and was willing to pay big money to do it. The threat of shareholder lawsuits put the kibosh on his plans.
G Asset Management has had their sights on Barnes and Noble for quite awhile. They originally wanted to buy the College Bookstore division in 2012, and has been vocal at splitting Nook away from Barnes and Noble.
Barnes and Noble is a bookstore on the decline. The stores are profitable but Nook Media has been bleeding month for over a year. This prompted the exodus of all senior executives in charge of Nook. The head of eBooks, the head of hardware and head of accessories have all left the company and a new CEO has taken the helm. Interesting enough, the current CEO comes from a financial background, which makes the likelihood of a sale more realistic now, than under the previous regime.
What are the current barriers to sell the company? It is thought that Len Riggio controls 45% of the company and he would have to OK the deal in order for it go though. The Asset Management company also does not actually have the money to buy Barnes and Noble, instead they would have to raise it themselves.
Michael Serbinis has been CEO of Kobo for the last four years and has assembled one of the best executive teams in the eBook and e-reader industry. Under his watch the company expanded their library to have over 4 million eBooks in 190 different countries. Kobo has developed apps for almost every major operating system in the world and has even launched for Blackberry. When Kobo was sold to Japanese e-Commerce giant Rakuten, the writing was on the wall that there would eventually be a management shakeup. Today, Michael Serbinis has stepped down as the CEO of Kobo and has been supplanted by Takahito “Taka” Aiki.
Taka brings to the role a wealth of experience in building and growing successful projects and companies, and has built his career on achieving ambitious goals and forging strong teams. Most recently, as CEO of Japanese telecom company Fusion Communications, he introduced innovative new services that delivered sustainable growth and profitability. Under Taka’s leadership, Fusion became a reliable profit centre for parent company, Rakuten, Inc. He is also an accomplished former Manager at Bain & Company and was responsible for the online business of Japan’s top bookstore and video rental company Tsutaya, where he helped grow its online membership by 250% in only two years. Taka and his family will reside in Canada and will lead Kobo from its head office located in Toronto, Ontario.
“I am thrilled to accept the role of CEO at Kobo,” said incoming CEO Takahito Aiki. “I am excited to be joining Kobo, one of Canada’s most prominent brands and a true innovator in eReading. The Kobo team is extremely talented and, working together, I look forward to driving Kobo’s leadership in eReading.”
Michael is not leaving Kobo, but he will remain the Vice Chairman and will not have a seat the board. He might not be the alpha dog anymore, but will continue to be one of the highest ranking executives with Kobo.
Recorded Books LLC have changed hands with Wasserstein & Co. being the new owners of the premier company that has been providing unabridged audiobooks and other digital content or related services to schools, libraries and the open market. Recorded Books has to its credit more than 13,500 exclusive audiobooks and has extensive operations in the US, UK and Australia. Recorded Books also has more than 100,000 ebooks to offer libraries via its proprietary OneClick Digital platform, along with a dozen other electronic resources which includes Zinio, a provider of digital magazines for various ereading platforms. Recorded Books also maintains a distribution agreement with IndieFlix, a streaming movie service.
Speaking of the development, Rich Freese, President and CEO of Recorded Books said, “We are excited to work with Wasserstein & Co., whose expertise in the stewardship of content-owning media businesses will enable us to expand our leadership position in the audiobook, eBook, and digital content markets. This strategic partnership provides us with the resources to further broaden our content offerings and services for customers, and accelerate our growth into additional global markets.”
“Recorded Books is a premier audiobook publisher, drawing from the days when it pioneered the industry over thirty years ago,” commented Anup Bagaria, Co-Managing Partner of Wasserstein & Co. “With a proven management team, a portfolio of high quality exclusive content, and proprietary technology, Recorded Books is well-positioned to capitalize on the shift from physical audiobook formats to digital content. We look forward to working closely with the Recorded Books team as it continues to build on its long-standing customer relationships and track record of strong growth.”
Rick Noble, CEO of Haights Cross Communications too sounded optimistic of the new arrangement, saying: “With their world-class digital platform and new eBook offering rapidly gaining momentum, the timing is perfect for Recorded Books to be joining a quality, growth-oriented private equity firm like Wasserstein & Co. We wish them all every success.”
Humble Bundle has had a number of highly successful eBook campaigns and has recently experimented with audiobooks. The company wants a continued focus on literary content and has just hired Kelley L. Allen as its Director of eBooks.
Kelley was formerly the Director of New Media at Random House and Director of eBook Acquisition at Sony. She was also Manager of ePublishing at Hachette, Manager of Publisher Relations and Marketing at ereader.com and Director, eBookstore and Publishing Relations at Diesel eBooks. She recently left Kobo, as their Vendor Manager to join Humble Bundle in San Francisco. This girl is basically a mercenary, attracted to oportonity and money, with little to no loyalty to the companies she works for.
“We’re super excited to have Kelley on the Humble team,” said Steven Kovensky, VP of Partnerships & Strategy at Humble Bundle. “She brings a deep knowledge of the eBook world, and with her guidance we look forward to delivering many compelling bundles to our fans.”
Amazon is poised to release a new P2P cloud based payment system that seeks to compete against Square and Paypal. The Kindle Checkout System will be powered by technology acquired by GoPago, which Amazon bought out last year.
The essence of the Kindle Checkout system is to allow vendors to take orders or scan credit cards to make purchases. Retail locations is still where 90% of all commerce is conducted and Amazon will supply everyone with Kindle Fire tablets with a build in credit card and debit scanner.
The Wall Street Journal mentions that “Amazon also might seek to create a so-called mobile wallet with stored credit-card information to help speed payments. The company last year rolled out a one-click digital button for processing online and mobile payments on other retailers’ websites using Amazon customers’ credit cards.”
The Amazon development of a new payment system comes at a time where Apple is actively creating their own solution. They basically want to bill peoples iTunes account directly via a customers ID number. Since Apple is the leading phone by a wide margin in North America, hooking up retailers with the ability to just bill people. How will Apple handle this?
iBeacon technology has been garnering a ton of news lately, that first hit the scene with iOS 7. It uses Bluetooth Low Energy to create proximity based networks that can detect the physical presence of a phone in a store or at the register. It also included fingerprint ID in the iPhone 5s, which could be used to authenticate a customer – not just his or her device – is present to authorize a sale.