In the midst of the Olympiad, it is hard to remember that we should be celebrating two centuries since the birth of Charles Dickens in 1812. My private undertaking was to read Michael Slater’s literary biography of the great man (Yale, 2009), and I am now at the midpoint of its massive 650 pages of densely packed information. It is a fascinating but heavy tome, so when I fell asleep with it on my lap last evening, it is hardly surprizing that, in reverie, I encountered the great man himself and was able to pose one or two questions that have been troubling me. I found him alert, right up to date (though his use of slang owes more these days, he tells me, to TV soap operas than the streets of London’s East End) and full of his typical energy in tackling modern problems.

“Future of publishing, you say? Well, future of literature, and self -education is one thing, but if the future of publishing means the future prosperity of publishers, then I cannot link the two. My publishers were either printers or booksellers, and when they were not trying to make off with my livelihood they were trying to cheat each other. I never had a good one after Chapman and Hall, and even the best got greedy.”

“That’s why this technology stuff is so fascinating. Restores the balance. Now once again authors and readers are powerful and intermediaries are fighting for their lives – capital good stuff. If only I had been able to employ your tools. The eBook is brilliant for me – here was the method I needed to serialize my stuff properly. If I was doing it today, I would publish on Amazon or AppStore in 20 monthly parts for 99p per part, then collect the whole lot at the end into a single volume for £17.50. Then I would read each part myself on your splendid You Tube thingy, then do the album from that. Then the illustrated text – my dear Phiz could just about have managed animations – so in the final, de luxe, Christmas edition we could have text, animation and voice all integrated. And, of course, I would have been a natural as a film producer, so the ultimate collection, as well as my brilliant readings – almost killed me, dear boy, those did – would have film versions as well. All those price points, all those entry levels, all those royalty cheques! But, recall this: serialization is the secret to the build – and to building an audience which will discuss your work and constantly sell it to each other. We got over 70,000 on the Old Curiosity Shop serialization – my breakthrough to an audience that I could address time and again, and hold stable with my magazines, like Household Words (yes, we shall live in their mouths like Household Words – does no one perform Henry V these days?)”.

“So what is going wrong? Simply, dear boy, you have no genious! Everything is either controlled by publishers, who always want to hold onto the past and ride it into the future, or by distributors. They are the death of innovation – as soon as they have innovated they want to stop the business model merry-g0-round and milk the wooden animals on it. I want to see authors blazing this new trail. Cory Doctorow? Never heard of him. Was he one of those damn Yankees who were so rude to me in ’41? Go out and build audience in these digital networks, and then watch the world come to your door. Look at me! Don’t wait for publishers to move into the nineteenth century – that’s a joke, a jeu d’esprit, but you know what I mean. Before I came along there was no real serialization. Literature was a three decker novel. I changed all that. People demanding to read in railway trains changed all that. Now you have smartphones and people in subways. Its a challenge to genious and you are failing it. Fifty Shades? Yes, I was reading it aloud to poor Wilkie Collins only the other night. Boring, we thought. Unrelated to what goes on in your society.”

“What goes on in your society? My dear child, you try my patience since you have less natural intelligence than Jo the crossing sweeper. Only this morning I read in the dear old Manchester Guardian (and they said my Liberal Daily News would not last!) that a boy near London had spent a year living in a tent without an income because he “fell through the net” between different local government offices. 44% of my modern Londoners do not have English as a first language. Your care homes are a scandal of violence and bullying of  subnormal young people and intimidation and neglect of the powerless elderly. And this is what a responsible, well-paid, allegedly trained “professional, caring” society does to them or allows others to do to them. Dotheboys Hall? You have so much more to write about than I did! And my government did the Great Exhibition and yours is doing the Olympics. Bread and circuses, dear boy”.

“Whats that? I’m a bit deaf on this side. Oh, you think people do not flock to Literature because they will get their intellectual property ripped off? (Interesting expression – mind if I make a note?). Look, this whole Copyright thing is a farce. Please, please start again somewhere else. Perhaps with an International Licensing Convention. Copyright is the shibboleth of those who own rights and not property. It was created in Queen Anne’s time to stop booksellers and printers from ripping each other off. In my time, the heinously criminal American publishers lobbied their government to maintain the fact that they had never signed the international copyright conventions. As a result I had a huge audience in the USA by 1841, but never had a penny in royalties from it. My solution? Do my public readings there – then they had to pay to get through the door to see me. But when I spoke in the USA about this I was always told, by those toads of journalists, that I “besmirched the face of literature by mentioning a pecuniary interest!” And I had similar problems with plays – as my serializations came to an end of story, plays would start appearing in the West End and Broadway using my characters – and second guessing the endings! So I used to alter the endings… until I got wise and did a play collaboration with one company. But now, dear boy, you need to wake up….”


And, just then, I did…

Yes, I remember Dun and Bradstreet. In the old UK headquarters in High Wycombe, the “white elephant” building that was intended to become the global data centre (in the days when you concentrated data instead of distributing it) had a waxwork  figure in the foyer depicting a frock-coated Mr Dun (or was it Mr Bradstreet , or Lewis Tappan , the real founder?) collecting together the vital credit rating clues of the 1840s, as well as a discreet reminder that Abraham Lincoln had acted as as a data collector in Illinois in the 1850s. But the company I knew was a large and prosperous portfolio player, the very demonstrator for the theory that markets never go all bad at once, and that change in one can be nurtured from sustained growth in others. Under the portfolio, if I recall correctly, there nestled Nielsen in market research , IMS Health in medical market research, Donnelley in directories and market-leading marketing services, Cognizant in technology, Moodys in global rating services and Hoovers in company profiling. Never, you might say, was there a better example of a company with a portfolio of related interests who could interconnect these data collections to create fresh value in wider marketplaces – and take it all global as D&B itself was already going global. What a huge opportunity that now seems to create value through connecting hitherto unconnected  data values and effect the type of transformation that Thomson Reuters are now attempting.

But the voices that D&B listened to were not the voices that said things like this. They were the siren voices of the market, who said that short term values could be increased by selling off all these allied companies, organizing the buyback of shares on a major scale and creating a greater value in the parent than would have been possible if it had remained in the group. So all of these companies went, and mostly to private equity buyers. But this was still not enough in terms of value creation, so the majority of the overseas subsidiaries were franchised to local operators , with valuable operations like China, Russia, Australia, and Germany having their data leased out to previously competing market players, who would then pay fees and royalties and contribute to the global data holding (now around 200 million companies and 53 m  details of directors) in return for local re-use.

Markets and managements change, and over time D&B have bought back Hoovers ( revamped and without its research services ), and bought out their local franchise holders in places like China (where they now face a  local data privacy infringement case) and Australia. No one adds the loss of value from these buybacks to the long term calculation, but presumably at some point the company became aware that by paring itself to the operational bone in search of value, it was actually losing opportunity. Now we gather (Wall Street Journal, 31 July 2012) that the company has been seeking a buyer for the past year, and has now appointed financial advisors to “explore opportunities” that may or may not lead to a sale.

D&B know all about creating value. In 1963 they created the DUNS number , forcing consistency and their own metadata on a market they meant to dominate globally. In just the same way IMS Health created its proprietory BRICS system for measuring medical activity in a community. Here were the forefathers of dominant metadata systems, whose value creation (think of the recent Thomson Reuters argument with the European Union over its RICS metadata nomenclature) is the bedrock of value add in data driven systems. Given its birthright, D&B might have been the dominant player today in value-added workflow services and systems offering solutions in areas like procurement and customer profiling. Question: has it been competitively outflanked by Experian (compare performances in Brazil, for example, where D&B have been since 1933) and lost touch with a value growth plan beyond buying back the franchises it once leased out?

It seems to me sometimes as if value in the sense that markets use the word is in fact a bell curve. It is clear how the asset sales drove D&B’s valuation up one side of this and how it has peaked through an inability to add fresh value in the narrow front on which it now operates, without the advantages of platform integration and Big Data-style development. It is possible that in places where these factors have come together (insurance risk in the US would be an example, where Lexis Risk use these elements to dominate in a related but consumer-orientated marketplace) it may be very difficult, without very extensive strategic partnerships and joint venturing, for D&B to prevent itself from losing ground.

So does this mean sale at a discount to a private equity player, or are there trade buyers who would offer a premium. Before Sanford Bernstein suggest again that Reed Elsevier should sell Lexis Law and buy this, let me just say that, in my view, the only real potential fit is with Thomson Reuters, and they probably have enough on their plates without trying to absorb a $1.7 bn revenue player, or Bloomberg. Competitors would all face anti-trust issues, but enterprize software and systems players might be interested – and D&B already has good links with Oracle.

A friend reading the last two pieces on this blog – a sort of odd trilogy on valuations – kindly asked how the UBM announcement that it “might” sell its “data services” fitted into all of this. Surely, as with D&B, we do not sell data at the moment: instead we try the alchemy of value add. So I have looked at this too, and am now even more confused than when I started. For example, by “data services” UBM appear to mean the databases from which they once sourced their print directory products. Apparently they have found that advertising online earns such diminished CPMs that it is very difficult to sustain the services. Similarly with Tech Insights, which they acquired and seems to suffer from the same problem. Is this surprizing? Not at all, since unless that data can be recombined with other internal or third party content there is no real hope of getting a subscription value from it. Advertising online is always going to be dodgy territory and at best a subsidiary income source.

And what does all this demonstrate ? Is the portfolio model broken for good and cannot ever be mended ? Or maybe D&B were right fifteen years ago , as Thomson Reuters are now : you can build portfolio if the players you buy are data-related and if you have platform and distributed search going for you . When D&B lost faith in their original model they did not have the technologies to do the job . So they followed the equity market view of value , and the chronic short term thinking that results from that has brought them to this . Now comes a more interesting question : what is credit rating and how do you reconstruct the service future of this marketplace ?

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