This article was written by Richard Wachman, for guardian.co.uk on Saturday 4th September 2010 23.06 UTC

Tim Waterstone, the founder of the books chain that bears his name, is considering a £100m-plus bid to take the chain private if the parent company, HMV, fails to turn the business around by the new year.

Well-placed City sources say Waterstone is closely monitoring developments at the bookshops, where sales and profits have plunged under HMV’s ownership.

HMV’s chief executive, Simon Fox, is to update the City this week on trading at the group’s operations as rebel shareholders push for a sale following the bungled opening of a new centralised distribution hub in Burton upon Trent.

Waterstone is ready to fire off a bid if Fox decides to sell, and has lined up funding from backers that include a London-based hedge fund.

HMV shareholders are pushing for a sale, although they are prepared to wait until after the all-important Christmas trading period before presenting their case to management.

Waterstone, who last week published his first novel in 10 years – In for a Penny, In for a Pound – founded Waterstone’s in 1982, opening the first store in London’s Old Brompton Road.

He sold the firm to WH Smith in the early 1990s, which in turn offloaded the company to HMV in 1998 for £300m. But in recent years, the business has floundered. Waterstone attempted to buy the firm back in 2006 for £280m, but withdrew his offer following a row over the terms of a deal.

Sources say Waterstone is still keen to regain control and that “it is unthinkable he wouldn’t be in the running” if HMV decided to sell. Analysts say the value of Waterstone’s is not reflected in the HMV stock price, which closed at 59p on Friday, valuing the entertainment group at about £255m.

“According to some calculations, Waterstone’s doesn’t feature at all in the parent company’s market value,” said one broker.

As reported in the Observer’s sister paper, the Guardian, last week, shareholders will demand a sale of Waterstone’s if a turnaround plan unveiled in March fails to reap returns.

Investors were rattled at Christmas when HMV disclosed that like-for-like sales at Waterstone’s had slumped by nearly 9% during a period viewed as peak trading time.

After the collapse of Borders in the UK, Waterstone’s is now Britain’s last major specialist books chain, with a national presence of 300 shops. But the firm has been hit by fierce competition from internet retailers such as Amazon and Play, and supermarkets.

New devices like the Kindle e-reader have raised concern about the long-term viability of high-street bookshops. But Tim Waterstone is understood to believe that rumours of the death of the bookshop have been greatly exaggerated.

Former colleagues of Waterstone say he has been troubled by poor morale at the chain, but is supportive of its new managing director, Dominic Myers, who took over when Gerry Johnson departed earlier this year.

An HMV spokesman said: “We have a clear strategy for the turnaround of Waterstone’s, focused on reinforcing our credentials as a range bookseller and helping stores reflect the local interest of their customers. Although we are only a few months in with this strategy, we are making very good progress and our initiatives have been very well received by the wider book industry.” Insiders said there was no intention to sell at present.

Despite problems at Waterstone’s, HMV revealed last month that group profits had risen by more than 12% after a strong showing from its core music and entertainment business. Fox said then that HMV was “on track” to transform the company into a broad-based entertainment brand after a move into live music and ticketing. The idea is to be less dependent on CD and DVD sales.

guardian.co.uk © Guardian News & Media Limited 2010

This article was written by Josh Halliday, for guardian.co.uk on Thursday 5th August 2010 14.11 UTC

Amazon today launched its UK Kindle Store, with more than 400,000 ebooks now available to download. The price and scope of the digitised books marks a significant point in Amazon’s move towards domination in the ebooks market.

Up against increasing competition in the market, Amazon last week unveiled two more advanced versions of its Kindle e-reader.

The company is looking to pick up consumers who cannot afford Apple’s iPad. In the US, Amazon has slashed the price of its Kindle device to compete with the iPad, which uses the iBook store to sell ebooks.

More than 80 of the 100 Nielsen UK bestsellers are available to download from the new UK store, retailing at relatively low prices. One of the new bookstore’s featured authors, the late Swedish journalist Stieg Larsson, last week became the first author to sell more than 1m ebooks through Amazon.

Larsson’s novel The Girl Who Kicked the Hornet’s Nest is currently second in the Kindle store’s bestsellers list and available for £2.70 to UK buyers.

“The Kindle Store offers the largest selection of the most popular books people want to read at low prices,” said Russ Grandinetti, vice president of Kindle content at Amazon.

In the US, digital books account for 6% of consumer sales. Many publishers now realise the need to follow the direction of the market.

Amazon’s new Kindle devices are lighter, faster and smaller than the previous generation. The Wi-Fi model costs £109 in the UK, while the model supporting both Wi-Fi and 3G will retail at £149 – both around £25 more than the US retail price.

Previously, UK Kindle owners had to get their device shipped from the US, with subsequent book purchases retailed in dollars.

Greg Greeley, vice president of European retail at Amazon, said: “The opening of the UK Kindle Store allows customers to buy content in pounds sterling and offers a great shopping experience including UK customer reviews, recommendations, bestseller lists and customer service.”

Though Amazon rarely releases definitive figures on Kindle sales, the company says the original device has sold “millions” – it has been the bestselling item on Amazon.com for two years running.

Last month, the company revealed that it sold 143 Kindle ebooks for every 100 hardbacks sold in the previous three months in the US, although no figures were released about the relative proportion of paperbacks sold in this time.

Amazon and Apple face investigations into their ebook retailing. The office of Richard Blumenthal, Connecticut attorney general, says that the companies could be “potentially depriving consumers of competitive prices” and that the burgeoning nature of the market “warranting [a] prompt review of the potential anti-consumer impacts.”

guardian.co.uk © Guardian News & Media Limited 2010

This article was written by David Teather, for guardian.co.uk on Thursday 29th July 2010 20.59 UTC

Penguin this week celebrates its 75th year and is marking the anniversary by repackaging a series of seminal books from the 1960s to the 1980s. Although the company might afford itself a brief look backwards, it feels as though there is little room for nostalgia in book publishing now, as the industry turns its face firmly – and apprehensively – to the future.

Amazon last week announced sales of ebooks on its US site had outnumbered hardbacks for the first time, stunning casual observers, even if it had not been entirely unexpected in the trade.

The launch of the iPad has added a sense of urgency. Where music went first, books are set to follow, although Penguin and other publishers would hope without the same devastating effects. Amazon this week launched a cheaper, more lightweight version of its Kindle ebook reader and a digital store on its UK site, while others, including Google, are muscling in. Digital book sales are still less than 1% of Penguin, but the direction of the market is clear. In the US, digital books already account for 6% of consumer sales.

Penguin chief executive John Makinson says he is a convert. The day after we meet he is on his way to India, as part of David Cameron’s delegation, and had loaded titles on to his iPad, including a manuscript by John le Carré and some Portuguese classics (in English) ahead of Penguin launching a range in Brazil. He is also reading Lord Mandelson’s diary. It simply makes sense, he says, instead of carting an armful of books in your carry-on luggage.

Innovation

“It does redefine what we do as publishers and I feel, compared with most of my counterparts, more optimistic about what this means for us,” he says. “Of course there are issues around copyright protection and there are worries around pricing and around piracy, royalty rates and so on, but there is also this huge opportunity to do more as publishers.”

Publishing, he says, must embrace innovation: “I am keen on the idea that every book that we put on to an iPad has an author interview, a video interview, at the beginning. I have no idea whether this is a good idea or not. There has to be a culture of experimentation, which doesn’t come naturally to book publishers. We publish a lot of historians, for example. They love the idea of using documentary footage to illustrate whatever it is they’re writing about.”

The very definition of a book is up for grabs he says, although the company has just published a version of Ken Follett’s The Pillars of the Earth for the iPad in the US that might provide clues – and horrify traditionalists. It includes scenes from a TV adaptation embedded in the text, as well as extras including the show’s music soundtrack and Follett’s video diary during the making of the series.

For now, Makinson says, digital books are expanding the market; hardback sales in the US are up this year, despite the march of ebooks. Piracy is not yet a significant issue and lessons have been learned from the music business.

“You have to give the consumer what the consumer wants – you can’t tell the consumer to go away. So we didn’t participate in this experiment where a number of publishers deferred publication of the ebook until a certain number of months after the hardcover publication. I thought that was a very bad idea. If the consumer wants to buy a book in an electronic format now, you should let the consumer have it.”

He has added confidence, because with tablets such as the iPad, consumers are used to paying a subscription to the wireless operator and for “apps”, creating a more benign environment than the wild west of the PC, where users are used to getting everything for free.

Penguin’s profits more than doubled to £44m in the first half of the year. The company gained market share, but one reason for the dramatic improvement was the outsourcing of some design and production to India last year; the company now has around 100 designers in Delhi making books for Dorling Kindersley, belying the idea that Britain can at least live off its creative industries. Makinson defends the decision and says DK is now back in profit, which means it can reinvest in Britain: “We can’t pretend we can do everything here. In order to be internationally competitive, some work needs to be done in other places.”

About 8% of the publisher’s sales are from its classics, including Jane Austen and Charles Dickens, and revenues are still growing, despite much of the copyright being in the public domain. It is launching the range in Mandarin, Korean and Portuguese. But it is not all highbrow. What would Penguin’s founder, Sir Allen Lane, whose aim was to publish quality paperbacks for the masses, have made of Penguin putting out books “by” Peter Andre or Ant & Dec?

“Allen Lane’s view was that we should publish good writing of all kinds for all audiences at affordable prices,” Makinson says. “I’m not saying he would necessarily have approved every single publishing decision we take, but would he have approved of Penguin being a very democratic publishing company, publishing for lots of different tastes? I think he would definitely have approved.”

Makinson has long been mentioned as a successor to Dame Marjorie Scardino, who runs Pearson, Penguin’s parent company. Her departure has been a perennial question, though she has defied the investment community’s chattering classes by staying in her post for well over a decade. She has also confounded expectations by keeping Penguin and the Financial Times in a group dominated by educational publishing. Makinson says it now makes more sense than ever for Penguin to remain part of the group, as the digital era draws each division closer.

He says there will still be the need for publishers in the digital world: “I used to have this discussion with [Hitchhiker's Guide to the Galaxy author] Douglas Adams. He created this thing called the digital village, an online publishing platform. Douglas’s argument was, ‘all of my friends will come along and publish on digital village and you the publishers will be disintermediated, you will be irrelevant’. Well, it hasn’t happened. I am not aware of any successful direct to consumer publishing model that exists.

“The reason it doesn’t work is that the publishers do actually perform quite a useful service: they edit the book, then they publicise it.” In the physical world, they make sure it is stocked in bookshops, he adds.

Clubbable

Makinson, 55, perhaps feels more adaptable than some of his counterparts because he arrived at Penguin as an outsider. A clubbable character, he has taken an unusual career path, from a journalist on the Financial Times, to working for the Saatchis, setting up his own investment consultancy, running the Financial Times and then becoming Pearson finance director, despite having no training as an accountant.

But his passion for books is evident. Five years ago, he and his brother bought a bookshop in the small Norfolk town of Holt. For an out-of-the-way independent, the Holt Bookshop attracts a starry line-up of authors for events, including Stephen Fry, due to talk about his new autobiography, which, perhaps not surprisingly, is published by Penguin.

“We are all terribly sentimental about books,” Makinson insists. “It is terribly important to me that we sell lots of wonderful books in my little independent in Norfolk, and when I talk about digital I do sometimes worry that it looks as though I am neglecting all this,” he points to the books on the shelves behind him, “which I am not.”

CV

Born: 1954, Derby.

Education: Graduated from Cambridge with honours in English and History.

Career: 1976-1979, journalist, Reuters; 1979-1986, journalist, Financial Times; 1986-1989, vice-chairman, Saatchi & Saatchi; 1989-1994, co-founder of capital markets advisory firm Makinson Cowell; 1994-1996, managing director, Financial Times; 1996-2002, finance director, Pearson; 2002-present, chairman and chief executive Penguin Books.

Other interests: chairman of the Institute for Public Policy Research, a director of the National Theatre and of the International Rescue Committee, a humanitarian organisation.

Family: Married with two daughters.

guardian.co.uk © Guardian News & Media Limited 2010

Walsh Colour Print the Kerry-based printer has started an educational imprint. The company has started trading under the imprint Educate.ie.

Educate.ie launched with six text books and will debut an exam papers series in August.

The series features ‘detailed analysis of the examination papers and helpful hints’ and will be written by ‘teachers with concrete experience in preparing students for exams’.

Educate.ie will compete with established educational publishers Gill & Macmillan (who earlier this year acquired Carroll Education’s Primary list), Folens and CJ Fallon.

The 2009 Publishing Ireland Survey indicated that respondents in the educational book sector had revenues of €54.12 million in 2008.

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