Pearson Buys Author Solutions
Posted by Victoria Strauss for Writer Beware
Last March, word went out that self-publishing giant Author Solutions Inc (owner of AuthorHouse, iUniverse, Xlibris, Trafford, WordClay, Palibrio, and several others, and contractor for the self-pub divisions of several major publishers) was looking for a buyer.
Now it has one: Pearson, the parent company of Penguin Group.
According to the official press release, Pearson is paying $116 million in cash for ASI (which, frankly, doesn’t seem like all that much, given ASI’s dominant position in the self-publishing services market).
Penguin’s chief executive John Makinson said: “Self-publishing has moved into the mainstream of our industry over the past three years. It has provided new outlets for professional writers, a huge increase in the range of books available to readers and an exciting source of content for publishers such as Penguin. No-one has captured this opportunity as successfully as Author Solutions, which has rapidly built a position of world leadership on a platform of outstanding customer support and tailor-made publishing services. This acquisition will allow Penguin to participate fully in perhaps the fastest-growing area of the publishing economy and gain skills in customer acquisition and data analytics that will be vital to our future.”
In 2011 Author Solutions generated revenues of approximately $100m, growing at an average annual rate of 12% over the past three years. Its business is split broadly evenly across three key areas: publishing, marketing and distribution services, with revenues generated primarily from services to authors.
The company has approximately 1,600 employees, located primarily in Bloomington, Indiana and Cebu City, the Philippines. Pearson will be expensing integration costs relating to Author Solutions in 2012 and expects the acquisition to enhance adjusted earnings per share and to generate a return on invested capital above Pearson’s weighted average cost of capital from 2013, its first full year. Author Solutions will be integrated into Penguin’s back office and technology infrastructure but will continue to be run as a separate business.
I tweeted this news this morning, and got several responses along the lines of “publishing is changing rapidly.” But I don’t think this is about shifting publishing paradigms so much as it is about Pearson seeing the profit potential in a lucrative consumer service that is a good lateral match to its core business. While I’m sure there will be those who feel that Pearson–and by association, Penguin–has sold out (again), publishing companies increasingly need to look for alternative ways to support their bottom lines.
There’s a brief breakdown of ASI’s output and profitability here. Among other interesting facts, ASI estimates “the ‘lifetime value’ of an author relationship to generate $5,000 for the company”; and although it sold only 15 more publishing packages in 2011 than it did in 2010, it’s predicting a rise in package sales of over 3,000 for 2012. ASI also claims ” a 90% satisfaction rate,” with 20% of sales coming from repeat customers.
There are many open questions here. Here are some of the most pressing, in my opinion.
– Under new ownership, will ASI manage to improve its customer service? Despite ASI’s claims about customer satisfaction, the comments threads of my posts about ASI’s acquisition of Xlibris, Trafford, etc. (see the links in the first paragraph of this post) are replete with complaints from unhappy authors, and I receive many more via email. Others can be found online (author and editor Emily Suess is one of those who has been keeping track).
Amazon faced a similar problem years ago when it acquired self-pub service Booksurge, which at that point had a terrible reputation for quality and service. Under Amazon’s management, Booksurge (which eventually became Createspace) was overhauled and improved, and was able to shed its negative image. Will Pearson be able to do the same with ASI?
– Will the payment glitches that currently seem to be plaguing the ASI “brands” be addressed? Over the years, I’ve gotten a steady stream of complaints from authors who’ve used one or another of the ASI brands, and believe they aren’t being paid what’s due them. Often enough, this turns out to be the result of unrealistic sales expectations or other misconceptions about sales.
Lately, though, the volume of payment complaints has increased significantly. I’ve also heard from agents whose clients are experiencing similar issues; ditto for authors in the Authors Guild’s Back In Print program. While I don’t think ASI is deliberately witholding and hoarding authors’ money (as some of the authors who contact me believe), it does look as if something is seriously wrong with ASI’s payment systems, and urgently needs to be fixed.
– Will ASI begin to advertise itself more transparently? So far, the company has put out two whitepapers that promulgate the misleading claim that it is an “independent publisher” (along with other inaccuracies about the publishing industry). Other less-than-transparent marketing efforts include maintaining sites like Findyourpublisher.com, which purport to be utilities to help writers choose a publishing company, but which all default to ASI brands.
– Will ASI continue to offer–and to aggressively promote–all those overpriced, dubiously useful marketing services and incentives? One of the most frequent annoyances reported to me by authors who use ASI brands is the constant email and phone solicitations to buy ASI’s hugely expensive marketing services. I’m guessing that, like liquor in a restaurant, these are a major profit center for the company, since many can be provided at low cost and sold at a high fee (according to PW, for instance, ASI’s “Hollywood services” generated over $3.5 million for the company during 2011). Still, it would be wonderful if Pearson would rein in this aspect of the business–if only just to downplay the hard-sell sales tactics that exploit the ignorance and inexperience of many new authors.
– Is this really a good investment for Pearson? Will ASI’s customer base and profits continue to grow? Or, with all the free options out there–not to mention the fact that the main action in self-publishing these days is in ebooks–is its high-priced, POD-centric business model already on the way out?
All in all, an interesting situation to watch over the coming months and years.
