Who Would You Buy; Readers Digest, B&N, Nook, Whatsapp?

This last week has seen three company potentially changing hands and although they are all very different in the price offered they are also very different in what they offer their new owners. So which would you buy and how much are they really worth?

Barnes & Noble

G Asset Management LLC has offered to acquire 51% of Barnes & Noble at $22 a share, valuing the bookseller at $1.32 billion. They also proposed to acquire 51% of the Nook e-book division at $5 a share.

The big question is whether the business is worth the valuation and also exactly what they will do with it in order to get their return.

Nook is clearly on the ropes, losing executives in a continual game of musical chairs and only this month declared it will shed engineers on Nook as they continue to haemorrhage business and try to dump their hardware development. Competition from Apple's iPad and Amazon's Kindle continue to dominate the market and with Kobo picking up the international new business and aligning with Kobo what does Nook really have to offer? Barnes and Noble made two fatal ebook errors in not expanding its International reach until it was too late and not creating an attractive and easy to use self-publishing and digital content business.

The retail business remains but is like a giant ship that has built on yesterday’s economic model and is increasingly challenged to tack and change course in what are choppy and dangerous waters.

The news of G Asset Management offer has increased the demand and trading in Barnes & Noble shares which closed still short of the $22 offer price, which would indicate that the market may be sceptical that the deal will go through. Analysts are expecting Barnes and Noble to announce a per-share profit of $0.61 on $2.03 billion in revenue, an 8.8% drop from a year ago. So even splitting the book and Nook businesses may not look that attractive and maybe Microsoft may wish to counter the Nook offer.

Readers Digest

Next comes a relative little publicised sale of Readers Digest for just £1 by Better Capital to a venture capitalist. Readers Digest was once a force to be reckoned with and dominated its marketplace. Better Capital bought the business out of administration for £14m in 2010 adding a further £9m of investment, but despite the title’s administration freeing a £125m black hole in Readers Digest’s pension fund they failed to stave off its collapse into a company voluntary arrangement last January. Now Mike Luckwell who made millions from the TV company behind Bob the Builder has snapped up Reader's Digest UK for £1.

Mr Luckwell wants to take on Saga and focus on the over-50s market and exploiting financial services opportunities who he states are increasingly active and under-served by other media groups.

“Over-50s have a very different life than they did 20 years ago,” Mr Luckwell said. “People over 65 are jumping out of aeroplanes now, it’s a younger type of audience with a ridiculously high proportion of the wealth and only 10pc of advertising.”

He plans to restart the Reader’s Digest product sales business and invest in its online services, even potentially charging for access to its website and couple this with an expansion into financial services. So is the brand recoverable and importantly is the mailing list that is key to its reestablishment sufficiently active to support it? The mail list may be huge but like all lists it ages quickly and becomes harder to mine effectively when the vast majority is postal and you wish to convert them to a digital business. However, managing the list and renting it could be attractive and the brand alone is a steal for £1.

The purchase raises the question why no publisher who had any intentions to offer a direct to consumer offer did not stump up the cash to buy Readers Digest for a £1?

Whatsapp

Facebook announced last Thursday that it would pay $4bn (£2.4bn) in cash and $15bn (£9bn) in Facebook shares as part of the deal to buy the Whatsapp real-time messaging service. The app's founders and employees will get $3bn (£1.8bn) of the shares as four year restricted stock. Facebook previously bought Instagram for $1bn and has a strategy of extending its community offer buy acquistion.

Since the likes of Skype first showed that connecting people for free over the internet could build and deliver huge communities others have taken up the mantle. So does being able to offer even further growth as well as extending the offer make Watsapp a perfect Facebook fit?

It is not that the service is ad free, or has stringent privacy rules, or that it has relatively small in overheads in only having some 50 staff, as all these could change with the wind. What is important is that it has the community, the quality of the service and is easy and free to use. When you plug this into Facebook you have a rich community with multiple ways to effectively communicate and this starts to protect Facebook from others who merely copy and refine their current offer. The younger Facebook generation who may be becoming disillusioned with the site that is now being used by their parents and even grandparents, may be retained by the lure of comprehensive connection by any means under one roof and advertisers just value more connections and a larger community.

We may question the price paid but it is relatively chump change for Facebook to stump up and offers them a quick growth and increased valuation options. There are few who have the cash or the benefits case to compete with such a purchase but it is worth noting that Skype has gone somewhat corporate and dry since it was itself acquired by Microsoft and this has fuelled the likes of Whatsapp. However Facebook doesn’t yet have the same corporate treacle of Microsoft so can probably ingest Whatsapp a lot better.

So which is the best buy and which buyer offers the best investment strategy? All three are very different but all 

2012 Digital Perspectives: The Consumer

We have written a series of short articles titled, ‘2012 Digital Perspectives’ which we shall publish this week. These will look at what we believe are the short term issues, challenges, potential game changers and outcomes across the digital publishing value chain.

Yesterday we looked at digital publishing from the author perspective and today we look at the Consumer. It’s the same house but we shall see a different perspective.

Today’s media noise about ebooks and digital is now driving a greater consumer awareness about the opportunities and importantly what they want from digital content. What issues matter may vary by the different consumer demographics and they will change with time.

Who do the public recognise as the drivers of their ebook needs – Amazon, HarperCollins, Randon House, Penguin, Apple, Kobo, Barnes and Noble, Waterstones, Google?

We now live in a global world where consumers are connected 24x7 and can compare prices at a click of a mouse. They no longer are influenced by newspapers, magazines, TV, radio but now have a virtual world of information available in a click on the move. Importantly, the largest power block is not the youth, but the silver surfers, who now have the greater disposable income and time, are increasingly technically savvy and are the heavier book readers.

What Amazon has taught us is that no single device is going to satisfy demand and that ebooks have to be available across all platforms. They learnt this trick early on in the physical book world with ABE, marketplace and other ventures and now have transferred the logic to digital.They also recognise that the first page consumers turn to in a book in not the copyright page to see it it’s a new book.

Amazon understand consumer demand and behaviour better than most and it is this that aligns them with consumers. We should remember that it was consumers made Apple, Amazon, Google, Facebook and it was consumers that walked away from MySpace, Napser, Sony.

What are the key issues consumers look for in digital books? Do we understand these, or do we presume to understand them? Price is probably a major if not the major driver, but does this apply to all content and demographics? Availability is probably a major driver, but is it of the latest, or the right content and how do they find it in the digital haystack, let alone validate it is the right one for them?

Digital rights management has to work for not just publishers and authors, but also consumers. Napster demonstrated the folly of tight control and MP3 music is the norm and DRM free. Even Apple have had to yield to consumer demand for DRM free music. We must always consider the consumer usability needs, as well as our own and if we make it too hard to enjoy, share, borrow and read then, they will find an alternative.

The industry must find a way forward on the library ‘free to lend’ versus ‘buy to own’ issue. Consumers will increasingly question the commercials and ownership benefits and the more some refuse to do business with libraries on digital, or demand unreasonable terms, the greater the divide becomes with the group that matters – the consumer. Libraries charging for loans should not be off the agenda and we must also recognise that loans, rentals and on demand commercials should not be restricted to libraries and their members. As consumers become more aware that they have ‘lost’ the right of the first sale doctrine on ebooks then an ‘on demand’ 'Spotify' model could be the obvious answer.

The folly of agency pricing was not in a return to retail price maintenance by a back door to just stifle Amazon and support Apple, but the fact that it was not in, or would not be perceived to be in the consumer interest.

The salient lesson that the music producers failed to grasp was that the ‘customer is always right’ and it is all about perception and making that a ‘win win’ not a ‘win loose’ situation.

You Are Never Too Old

Who said that the technology and digital revolution was only for the young? When Ivy Bean heard that a 97 year ago French woman was the oldest member of Facebook she decided to join. She soon attracted 5,000 friends and has 17,775 people waiting to be her friend. Unless you know someone older, Ivy from Bradford is now the oldest Facebook member at 103 years old and has now joined Twitter and already has 9500 followers!

Her daughter Sandra Logan, 61, said: "It has given her a new lease of life and she has met some marvellous people all over the world. She speaks to a woman in Norway who has named a cow after her."

Her latest twitters read :
‘hello im going to spend my morning reading papers ‘, ‘i have now reached 5,000 followers so im saying goodnight for today be back tomorrow thank you everybody ‘, ‘had a loverly afternoon with my friends here at hillside just had tea just having a chat with the staff.’

The PC may have past many of the older generation by and been seen by them as a mere expensive toy, the mobile may be viewed by many as a complex phone and only used as a phone, email may dominate our lives but unless you have others to email its not essential. Now thanks to new high-speed broadband connection in public libraries, thousands of pensioners are now able to only to join Ivy and learn new ways to communicate. This older group may now have found the way to start to be engaged in the digital world and influence its direction.

They may not have the disposable income but they have the time, a wealth of knowledge and experience and are historically heavy readers. Many may want to capture their own history and experiences, not necessarily for money but as a legacy, others to just find new friends. It is relatively easy to see many social communities develop that were not possible a few years ago.

Is it possible that we may start to see a shift, not only the source of content for the self publishing market, but also to break away from the current vanity publishing business models that may be seen to exploit vanity, more than encourage writing. We don’t need long works and these new tools demand shorter more focused content. Maybe it’s the older generation that will lead us to rethink the book in a digital form.

Well done Ivy and long may you enjoy twittering

A Facebook with Wrinkles

In the Brave New World report we intimated that the ‘silver surfers’ should not be forgotten as they had; higher disposable income, more leisure time, propensity to reading and were signing up to broadband services and the internet in droves. Some may say that targeteting the youth market was like herding cats. The New York Times today take the viewpoint further and reports that Silicon Valley’s technology investors and entrepreneurs, are starting a host of new social networking sites aimed at baby boomers and ‘graying’ computer users. They are creating Facebook with wrinkles!


The sites such as Eons, Rezoom, Multiply, Maya’s Mom, Boomj, TeeBeeDee and Boomertown are starting to attract attention and big investment dollars.
In the US there are around three times as many silver surfers (78 million boomers) than the number of teenagers. According to a market research firm Nielsen/NetRatings, the number of Internet users over 55 is roughly the same as those who are aged 18 to 34. Older user will also want a different experience and not always feel comfortable with the younger and hip MySpace, Facebook, Bebo or Friendster offers. Their social conversation and the topic too the older user wants to discuss will also be different to the teenager. Its also doubtful whether they will get a fulfilling experience engaging with the teenagers on their subjects.

These developments should be very important to publishers and are sustainable ones which support their current reader base. The question is whether the young marketing turks can and will relate to the needs of an older audience or continue to chase ‘me too’ offers?

Saga Silver Surfers

It was interesting to read in the Bookseller this week that publishers are missing out on the Saga Silver Surfers.

As Publisher potentially lurch from one demographic to another it appears that just like with Classics, what goes around comes around and the grey market is the next best thing. Anyone who has read the statistics on internet adoption, broadband connectivity, or visited a bookstore or library will be able to tell you this.

Reaching this audience is getting easier and harder. They may be getting switched on but they are also discerning and probably will not be on Facebook, MySpace and definitely not Bebo. They are also becoming discerning in giving away their email address and responding to direct marketing slush mail. The Brave New World report last year said that the silver surfers were an obvious Book buying audience.

So yes the content needs to be appropriate by why are we covering something that is so obvious as news?

Hi Ho Silver Lining

The silver surfers have arrived. In our report “Brave New World” we recognised the potential of this group, pensioners with time, potentially income but importantly a high affinity to books and reading. Others will talk at length about youth and their switched on lifestyle but ignore the silver surfers.

Insurance group AXA has conducted research that has found some interesting insight as to how pensioners spend their time. Browsing the Internet has overtaken both gardening and DIY and is now the UK pensioner’s favourite pastime. This encompasses email, researching information, booking holidays and shopping. They are embracing technology often encouraged by younger members of their family but are discovering the pleasure of home shopping and a less stressful life. 41% of retired Britons named the Internet as their favourite pastime, followed by 39% for gardening and DIY, 36% hobbies and 28% travel and walking. Four in ten retired people said that they were regular internet shoppers. Email captures 84 % of online closely followed by searching for information.

The level of time spent in Internet surfing places the UK among the top five in the eleven surveyed. The US is top with nine hours followed by Australia and Canada with seven hours per weekend.

The silver surfer is the obvious publishing target; they love books, reading and have time. Migrating the silver surfer onto audio downloads and digital content may be a lot easier than many have thought.

Market research is not about assuming you know the answers and then validating it. It is also about finding out what you don’t know and understanding it. The proposed industry digital reseach programme in “Brave New World” recognised the need to establish consumer attitudes and track these. This research shows there is potentially a significant digital market with existing book lovers. The question is how retailers and publishers need to engage with them, understand them and respect and provide what they want, how they want it and at a price that they will pay and perceive value.