What happened to the digital revolution in publishing? Just a couple of years ago, some people were predicting that paper books would go the way of the manual typewriter and the rotary phone. Instead, they predicted, people would download and store their reading material on portable devices called e-books. But the e-book has been a nonstarter so far -- even though growing numbers of homes and schools are hooked up to the Internet, people still do most of their reading the old-fashioned way.
Agnès Touraine, who heads Vivendi Universal's $4.2 billion-a-year publishing unit, agrees that the reality hasn't lived up to the hype. But she contends that the publishing business is undergoing dramatic changes that the consumer often doesn't see.
Touraine is in a position to know: With its acquisition last year of U.S. textbook publisher Houghton Mifflin, Vivendi is now the world's second-largest educational publisher, with major operations in Europe and Latin America as well as the U.S. It's the global No. 2 publisher of computer games and is a leading producer of educational software, including the popular Jump Start and Adiboo series for young children. And increasingly, its books and games are linked to entertainment produced by Vivendi's other holdings, which include Universal Studios, Universal Music Group, and cable- and pay-television holdings in the U.S. and Europe.
The exec recently discussed with BusinessWeek Paris Correspondent Carol Matlack the impact of technology on the industry and the strong growth of game publishing. Edited excerpts of their conversation follow:
Q: Did the publishing business get left behind in the digital revolution?
A: Not at all. We're in a period of incredible change. Even if the products don't look different, the process has changed dramatically. It's true that nobody has yet found the device that can replace paper [books]. And of course there was a lot of hype about the Internet. But in publishing, there's a real revolution in what we call prepress, as more and more content is digitalized. This means you can put content onto many devices -- not just books but also CD-ROMs, DVDs, handhelds, and so on.
Also, you can customize content -- and ironically the more the world is becoming globalized, the more our content is becoming local. For example, in Spain, we're now doing customized school textbooks for 17 different regions. That means 17 different math books, 17 different reading books, and so on. It's the same in the U.S. Each state has a different reading program. Even within states, they ask for customization by school district.
Q: Education publishing has traditionally been a slow-growth business. Is that changing?
A: Yes, it's already growing 8% to 10% annually in the U.S., where there's a greater emphasis on standards and testing [which fuels demand for new teaching materials]. There will be changes in Europe, too. With European integration I think we will begin to see a more European way, rather than the strictly national approach. That would mean more books about European history, European geography, and so on.
The other big change in education is technology. Most schools now are equipped with computers, but we're only beginning to understand what this can mean. It's absolutely foolish to think the computer will replace the teacher, but technology can help us to develop customized programs for different groups of kids. Even if they're following the same curriculum, there's no reason to think that all kids need to learn the same thing at the same time, at the same pace.
Q: What's behind the spectacular growth in games publishing? At Vivendi, revenues from your games division are up 18%, and the unit's operating earnings are up 20% in the first quarter.
A: Games are an incredible market -- already bigger than the movie business. Currently, we have the best-performing game company in the world, and we expect the growth to continue.
Actually, we were lucky because until recently we were almost entirely on the PC market (that is, selling CD-ROMs rather than games for consoles such as the PlayStation). For the past couple of years, the console business was horrible for publishers because customers were waiting for new consoles to come onto the market. Now, sales are picking up because we have the new consoles [such as PlayStation 2 and Xbox] -- and this is just the time that we're moving into this market. Already, 40% of our sales are on consoles.
We're also benefiting because, thanks to the merger with Universal [Universal Studios and Universal Music Group were acquired by Vivendi in 2000], we now have access to movie characters and music for our games.
Q: In fact, isn't the publishing business being driven more and more by this kind of cross-marketing?
A: Yes, absolutely. We have released games based on movies such as Jurassic Park 3, as well as books and interactive software for kids. For Curious George [the popular children's book series published by Houghton Mifflin], Universal Studios is developing a full line of consumer products, such as toys and other things for kids. Also we may do a Curious George TV series. We're even developing educational software called Learn English with the Stars, with stars from Universal films.
Edited by Tzyh Ng