YEAR IN REVIEW 2001: MEDIA-AND-PUBLISHING

Book Publishing In 2000 the worldwide buzz in book publishing was "e-publishing"-the publication of books in various electronic formats, usually together with paper-and-ink books but sometimes exclusively in "cyberpublished" versions. American suspense novelist Stephen King, for example, serialized his short novel The Plant-ironically about a vine that threatens to take over a publishing house-on his World Wide Web site. King asked each fan to send in one dollar after downloading the newest chapter; if enough readers did not do so, King said, he would discontinue the postings. King maintained that the novel had attracted a half million readers and grossed about $600,000 before he suspended postings late in the year. Several top American publishers-including Time Warner, Random House, Simon & Schuster, Modern Library, and McGraw-Hill-announced their intention to embark upon e-publishing. The International eBook Awards, with a top prize of $100,000 and five $10,000 awards, were given out for the first time in Frankfurt (Ger.) during the annual book fair held there in October. Hardware and software manufacturers contended to develop universal standards for reading devices onto which e-books could be downloaded from a Web site or read from a portable storage medium. The Microsoft Reader software was popular for hand-held devices, while Acrobat from Adobe Systems Inc. was the choice for reading on desktop or laptop computers. Thomson Multimedia introduced a new line of dedicated hand-held readers in September starting at $300. Publishers in the U.K. were busy digitizing the content of their backlists for the new e-book readers as well. The question of whether established publishers would be obliged by agents to negotiate separately for e-rights on new books was under negotiation-publishers feared that their titles in print would face direct competition from the same titles in e-format. The European Commission proposed that a value-added tax be levied on e-books, whereas printed books currently carried either zero or reduced VAT rates in European Union member states. Web sites were being developed to market publishing rights on-line. Houghton Mifflin Co., which brought out the fourth edition of its American Heritage Dictionary of the English Language, was equally interested in licensing the new dictionary to Web sites and other electronic users. Creating an efficient on-line distribution network was increasingly a requisite for survival; Wolters Kluwer saw its stock tumble by more than 25% in March because of its lack of a viable Internet strategy. Reed Elsevier's purchase in June of eLogic, an applications service provider, signaled that new approaches were needed. Bertelsmann AG agreed to pay $250 million to AOL to be its "preferred provider of media content and e-commerce" for a four-year period. AOL, in turn, took out an option to buy Bertelsmann's 50% stake in AOL Europe and AOL Australia after 2002. Bertelsmann also rolled up Internet interests such as BOL.com and its 40% stake in BarnesandNoble.com into a new e-commerce group. Publishers' eyes were riveted on the legal attack to shut down Napster, the company that provided the opportunity to download recorded music from the Internet without observing copyrights. (See Computers and Information Systems.) In Tasini v. The New York Times, a group representing the interests of freelance writers brought suit against the New York Times Co. and other large publishers, alleging copyright violation because of the publications' resale to electronic databases of materials that had been provided by the authors for onetime print use. The restructuring and merger activity at Bertelsmann, including the splitting up of Bertelsmann Buch, led to major changes in the list of top 10 publishers by domestic sales in Germany. New entrants included BertelsmannSpringer (first), Verlagsgruppe Bertelsmann (third), Sddeutscher Verlag Hthig (fifth), and Weltbild (eighth). The legitimacy of retail price-fixing in Germany was reconfirmed in February. A separate fixed-price law modeled on the French loi Lang came into effect in Austria for an initial five-year period. Because 80% of Austrian books were imported from Germany and German publishers feared the potential for cheap reimports, the latter were also covered by the new law if the reimport was intended solely to undercut fixed prices in Germany. LION.cc, an on-line site belonging to Libro, initially challenged the latter aspect of the new law by offering 20% discounts but four weeks later withdrew the offer after German publishers cut off supplies. The European Commission then began investigating whether German publishers had colluded in boycotting Libro and whether Libro's restoration of fixed prices was an illegal restriction of competition. At the end of April, the Danish Competition Council ruled that book prices would be liberalized, with fixed prices permitted for first editions but not for new editions or reprints. It also ruled that beginning on Jan. 1, 2001, the monopoly of booksellers over the sale of books would be abolished for titles priced over 155 kroner ($18). In February British Butterworths Tolley agreed to buy Eclipse Group Ltd. Nelvana Ltd., an animation house based in Toronto, announced plans in April to buy Klutz Inc., a California children's book publisher, for $74 million. In March Pearson bought troubled Dorling Kindersley (DK), which had heavily overstocked Star Wars-related publications, for roughly $460 million. Pearson then axed DK's CD-ROM publishing division and set up its own digital-media division. Scholastic Inc. acquired Grolier, Inc., a major publisher and direct-mail marketer of children's reference books and encyclopaedias, for about $400 million in June. That same month British publisher David & Charles accepted an offer from American F&W Publications, and Bloomsbury paid $25 million for A&C Black. HarperCollins bought Fourth Estate in July, while in August there were rumours of links between Bertelsmann and Reader's Digest. In March it was announced that the two largest American book clubs, the Literary Guild (controlled by Bertelsmann) and the Book-of-the-Month Club (of Time Inc.), would be combining efforts. Also during the year, Pearson agreed to pay $129 million for the U.S.-based FamilyEducation Network. J.K. Rowling's fourth best-seller in the Harry Potter series of books about a youthful magician swept markets around the world. Harry Potter and the Goblet of Fire sold half of its one million initial printing on its first day in German bookstores. In March American novelist Nancy K. Stouffer filed suit against Rowling and American publisher Scholastic Inc., as well as movie and toy companies that stood to profit from the phenomenon, charging that plots, characters, and language in the Potter books had been taken from her 1984 work The Legend of Rah and Muggles. Judging that the books presented witchcraft in too positive a light, a school district in Zeeland, Mich., sought to ban them in elementary and middle schools. The 2000 Pulitzer Prize for Fiction was awarded to Interpreter of Maladies by Jhumpa Lahiri, while the general nonfiction prize went to John W. Dower's Embracing Defeat: Japan in the Wake of World War II, the 1999 National Book Award winner. The NBA fiction prize went to In America by Susan Sontag, and the nonfiction award went to Nathaniel Philbrick's In the Heart of the Sea: The Tragedy of the Whaleship Essex. The National Book Foundation Medal for Distinguished Contribution to American Letters was awarded to science-fiction writer Ray Bradbury. In children's literature, the Newbery Medal went to Bud, Not Buddy by Christopher Paul Curtis (see Biographies), and the Caldecott Medal for illustration went to Joseph Had a Little Overcoat by Simms Taback. Waiting by Ha Jin (see Biographies), the 1999 NBA fiction winner, was awarded the PEN/Faulkner Award. According to Publishers Weekly, the top hardcover fiction best-sellers in 1999 were The Testament by John Grisham (2,475,000 copies sold) and Hannibal by Thomas Harris (1,550,000); the nonfiction leaders were Tuesdays with Morrie (1997) by Mitch Albom (2,500,000) and The Greatest Generation (1998) by Tom Brokaw (1,968,597). Peter Curwen; Editor magazines American magazine advertising revenues surpassed $10 billion during the first nine months of 2000, up 16.4% over 1999. The president of the Magazine Publishers of America, Nina Link, commented that the extraordinary results also extended to dot-com advertising, which "has shown phenomenal growth this year so far with a 320 percent increase year to date." Modest circulation gains in 1999 were fueled largely by growth among smaller, niche magazines; some of the magazines with the highest circulation experienced declines. Spending on magazine advertising reportedly increased 6% worldwide in 1999 to $40 billion. Magazines reportedly took in 12.9% of the worldwide expenditure for advertising in 1999, compared with 13.9% in 1988. Media ad spending on magazines ranged from a high of 52% in India to less than 2% in Uruguay and Venezuela. American magazines averaged 12% of total media ad spending. The American magazine with the fastest-growing readership in 1999 was Maxim, a "beer-and-babe" title targeted to men; it doubled its 1999 circulation to 2.1 million over 1998 and had increased its readership fourfold (from an initial base of 450,000) since its 1997 launch. Growth in the competitive men's category, however, was mixed. Though GQ, Men's Journal, and Men's Fitness averaged more than 10% circulation gains in 1999, Playboy, Penthouse, and Men's Health all lost ground. New magazine launches in 1999 totaled 864, down from 1,065 in 1998; it was only the second time since 1986 that a decrease had been recorded. The largest category among the new launches was media personalities, with 108 titles, followed by sports with 95. Time Inc. ended publication of its 64-year-old Life magazine in May 2000, explaining that the monthly's advertising base was no longer strong enough to maintain it. The company planned to keep the brand alive, however, by expanding its presence on the World Wide Web and publishing commemorative issues of Life to mark important milestones. Among many other magazines that ceased publication were Mirabella, a fashion magazine, and two sports-related ones: Sport and Women's Sports & Fitness. Two magazines celebrated milestone anniversaries. Harper's mounted yearlong festivities in honour of its 150th anniversary, and The New Yorker marked its 75th anniversary in print. Making their debut were two American magazines geared toward women: O: The Oprah Magazine, which offered self-help articles as well as recipes and musings of television star Oprah Winfrey, and Real Simple, a heavily illustrated magazine dedicated to "streamlining, refining and distilling" women's lives. Publishers Clearing House paid more than $18 million to various U.S. states to settle claims that it had used misleading sweepstakes promotions. The settlement placed several restrictions on company promotions, including preventing it from putting "you-are-a-winner" statements on its mailings unless equal prominence was given to qualifying conditions. Americans reportedly spent more time reading in 2000 compared with 1999. The time that consumers spent watching television, listening to radio, and using the Internet all decreased, but their time spent reading increased by an average of 29% across all print media, and magazines led the way with a 39% increase. Inside.com, which covered the media and entertainment industries, joined several other on-line magazines in launching a print publication. "One of the things we've discovered about the Web is that it's an incredibly fast way to build up an audience," said Michael Hirschorn, Inside.com editor and former editor of Spin. Another World Wide Web-to-print launch in 2000 was Space.com Illustrated, from Space.com, run by former CNN anchor Lou Dobbs. World Magazine Trends reported that in the U.S., "Internet publishing and the new media are not viewed as threats to print but rather as complements, which offer great potential for magazine brand extensions and transactions." The Chinese government's decision to ban English-language names and logos on magazines created worries among foreign publishers. Fairchild Publications terminated its licensing agreement to publish its fashion magazine W in China owing to the restrictions. Most American publishers disguised their covers with logo-free wraparounds. China also tightened its law on Internet firms and issued new regulations in October. A 2000 survey of 4,585 Japanese households revealed that 24.4% of those in the market for a personal computer used magazines as their chief information source when they went to purchase a PC. The percentage relying on television was 7.6%, followed by newspapers with 5.9%. In an effort to control the press, the Russian Press Ministry declared that all magazines and newspapers in the country had to be licensed. Per R. Mortensen, president of the London-based International Federation of the Periodical Press, joined 10 other delegates of the Russian Press Freedom Support group, which represented six leading international free-press organizations, to express the international media community's deep concern over what it considered a serious deterioration of press freedom in Russia. David E. Sumner newspapers Freedom of the press was a major issue throughout the world in 2000. Panama's newspapers began the year by celebrating the end of two laws that limited press freedom. The nation's new president, Mireya Moscoso, signed an order ending a requirement that journalists be licensed and ending the imposition of a $2,500 fine for reporting that discredited the government. Iranian newspapers were not so fortunate. During a two-month period, Iranian courts ordered the closing of 19 newspapers for publishing stories that violated Islamic principles. Three journalists were imprisoned on such charges as insulting Islam. A newly elected parliament, dominated by reformers, failed to end a campaign against the press when Iran's leader Ayatollah Sayyed Ali Khamenei killed a bill that would have allowed limited press freedom. By August the last major reform newspaper, Bahar, had been forced to close. In China 27 newspapers were punished for having published stories that officials said contained political errors and fabrications. No details were released about the punishments or how many of the newspapers were shut down. In Malaysia the government cut the publishing schedule of the opposition newspaper, run by the fundamentalist Pan-Malaysian Islamic Party, from twice a week to twice a month. The Swazi Observer, one of the leading newspapers in Swaziland, was closed by the government after the newspaper reported about conflicts between King Mswati III's cabinet ministers. In Angola Pres. Jos Eduardo dos Santos's government proposed that journalists who published news that attacked his government be jailed for two to eight years. This followed a government campaign against the media, including the arrest and intimidation of foreign journalists. In Zambia the government charged 11 journalists with espionage after the independent daily The Post reported that Zambia was not prepared to deal with an attack from Angola. The changing nature of the newspaper business led to closings, sales, mergers, and investment in the Internet. L'Unit, once a major left-wing newspaper in Italy, closed. The newspaper was $33 million in debt and had a declining circulation of about 50,000. As content-rich newspapers moved to develop on-line communities of readers, publishers invested in the Internet, regarding it as a publishing tool with low overhead and no printing costs. In the U.K., for example, industry leader Trinity Mirror PLC invested 150 million (1 = about $1.45) in Internet operations. Newsquest PLC, controlled by the Gannett Co. of the U.S., launched Fish4, a World Wide Web site that featured listings for home and automobile sales along with job openings. Clients included such newspaper groups as Trinity Mirror and Regional Independent Media. London's Financial Times expanded its Web product, FT.com, and posted 1999 revenues of 6 million. The television and publishing group United News & Media announced a 370 million investment in the Internet. In the U.K., newspaper groups fought to control the regional newspaper business as they sought to lower costs and create larger advertising bases. Trinity Mirror paid 285 million for Southnews, a London-based publisher that owned the Croydon Advertiser and the Harrow Leader. For 444 million Gannett bought Newscom, which published the Southampton Southern Daily Echo, among other titles. Trinity Mirror sold the Belfast Telegraph for 300 million to Independent News & Media, a Dublin-based chain that controlled most of the daily newspapers in Ireland. Major changes took place in Canada, where convergence-the combination of print, Internet, and television journalism-ruled. CanWest Global Communications purchased the Canadian newspapers owned by Hollinger, the international media group controlled by Conrad Black, owner of the Daily Telegraph and the Chicago Sun-Times, for Can$3.2 billion (about U.S. $2.3 billion) in cash and shares. With an eye toward building an Internet empire, the Thomson Corp. of Canada announced in February that it would sell 54 of its 55 daily newspapers and all of its more than 75 nondaily newspapers in the U.S. and Canada. By midsummer Thomson had sold all but one of its American daily newspapers: Gannett bought 21 of them with a combined circulation of 466,000 for $1,125,000,000; Community Newspaper Holdings, Inc., of Alabama paid $455,000,000 for 17 dailies with a combined circulation of 260,000, which gave it a total of 112 newspapers with a combined circulation of 1,100,000; and Media General bought five dailies and six weekly newspapers for $237,000,000. Gannett also acquired Central Newspapers, Inc., for $2,600,000,000. The deal included the Arizona Republic and the Indianapolis (Ind.) Star, the flagship newspapers of the Pulliam family, owners of Central. Another dynasty to fall was the Chandler family, which had controlled the Los Angeles Times since 1882. In March the Tribune Co., publisher of the Chicago Tribune, announced a record-setting $6,460,000,000 deal for the purchase of the Times Mirror Co., which included the Los Angeles newspaper. Total assets of the new company exceeded $11.7 billion. Executives of the Tribune Co. said that the merger would allow them to converge the content of the newspapers with television, cable, and Internet operations. The new company had a nationwide newspaper circulation of 3.6 million (third highest in the nation); its television stations broadcast to more than 38.4 million homes; and its Internet news outlet received more than 3.4 million visitors each month. Gannett, the largest chain by readership, owned 99 newspapers, including the nation's largest, USA Today, with a combined circulation of about 7.8 million. The 31 newspapers of the second largest chain, Knight Ridder, had a combined daily circulation of four million. In San Francisco a federal judge ruled in July that the Hearst Corp.'s $660 million purchase of the San Francisco Chronicle did not violate antitrust laws. He also allowed the sale of Hearst's San Francisco Examiner to the Fang family, publishers of a dozen free newspapers in the San Francisco Bay Area. The Chronicle's circulation of 464,943 was more than four times that of the Examiner. To rid itself of the Examiner, Hearst agreed to pay as much as $66 million of Fang's expenses for three years. In May the Denver Post, owned by MediaNews Group, and the Denver Rocky Mountain News, both in Colorado and owned by E.W. Scripps Co., entered a joint operating agreement that merged advertising sales, production, and distribution, while the editorial departments remained independent. The News had lost $123 million since 1990 in its circulation war with the Post. If approved, each paper would publish a separate edition Monday through Friday, the Post would publish a Sunday joint edition, and the News would publish a Saturday newspaper. The Denver arrangement would be the first American joint operating agreement in 11 years. The two newspapers together employed more than 3,600 people. Each of the Denver newspapers won a Pulitzer Prize for coverage of the tragedy at Columbine High School in Littleton, Colo., in 1999 that left 12 students, one teacher, and two student gunmen dead. The Post was honoured in the breaking news category, and the News won for breaking news photography. Other Pulitzer Prize winners included Mark Schoofs of the Village Voice, an alternative weekly published in New York City. He spent six months in Africa researching the AIDS epidemic by visiting remote villages and documenting the devastation there. He later was hospitalized with a drug-resistant form of malaria. The Internet continued to have a great effect on newspapers. In a study by Middleberg & Associates, a public relations and marketing agency, about two-thirds of American print reporters revealed that they were on-line continuously, looking for information. About two-thirds said they used the Internet to read publications on-line, and almost 90% said that they used the Internet to research stories. Two major newspapers complained about a talent drain to on-line publications. The Philadelphia Inquirer said that it lost six reporters to Web sites such as CNN's, while the San Jose (Calif.) Mercury News complained that it had lost 11 people to Internet companies. For many newspapers the Internet was a revenue loser, with Knight Ridder, Tribune, the New York Times, and McClatchy Newspapers reporting losses ranging from $8 million to $20 million a year on their Internet products. On July 4 the Hartford (Conn.) Courant apologized in a front-page story for having made a profit during the 1700s and 1800s on advertisements for the sale and recapture of runaway slaves. The newspaper, the longest continuously published daily newspaper in the U.S., was founded in 1764. Such ads were common in newspapers of the time, when slavery was legal in many states. In February cartoonist Charles M. Schulz, creator of Peanuts, a syndicated strip that ran in 75 countries, died of colon cancer a few hours before his last Sunday cartoon ran. The last cartoon carried a signed farewell: "Charlie Brown, Snoopy, Linus, Lucy . . . how can I ever forget them. . . ." Jeff MacNelly, a syndicated editorial cartoonist who won three Pulitzer Prizes, also died during the year. The New York Times said he "was regarded as one of the nation's foremost political cartoonists, a profession that calls for the combined talents of artist, social critic, political analyst and humorist." (See Obituaries.) In a survey of press freedom in the U.S., the First Amendment Center reported that 51% of respondents believed the press had too much freedom and 20% said that the government should be allowed to approve what newspapers publish. When asked to name one of the five freedoms guaranteed by the First Amendment of the U.S. Constitution-freedoms of press, speech, religion, and to assemble and to petition the government-37% could not do so. Glen Bleske Media and Publishing television Rather than battle it out with the Internet, the television industry in 2000 opted for mergers. Also during the year, the technology needed to deliver the benefits of interactive TV to consumers had not yet been fully developed. Organization. Two large-scale mergers kept European and U.S. regulatory agencies busy. The European Commission allowed Time Warner Inc. to proceed with its $165 billion merger with America Online, Inc. (AOL). The U.S. Federal Trade Commission (FTC) was, however, slower to approve the merger, which would result in a company that would be one of the largest cable TV networks in the U.S. as well as the biggest provider of on-line services (unlike in Europe). AOL pledged to sever ties with Bertelsmann AG, the German media conglomerate that owned 50% of AOL Europe. In December the FTC approved the deal after first receiving assurances that the new alliance would not be used to limit competition. Earlier, the $34 billion acquisition of Canada's Seagram Co. Ltd. by French conglomerate Vivendi was approved following concessions by both companies to dilute their combined business in entertainment and telecommunications. Vivendi controlled Canal+ pay-TV, a telephone company, and the Havas publishing business. Seagram owned Universal music and film studios. As a result of the merger, Vivendi Universal owned an archive of 9,000 movies and 27,000 TV shows. Rupert Murdoch's News Corp. acquired the 21% share of Gemstar-TV Guide International, Inc., that was held by cable company Liberty Media Corp. News Corp. already owned 22% of Gemstar, publisher of TV guides and inventor of VCR Plus+, which allowed users to record programs by using a simple code. Murdoch also was strengthening his position to buy DIRECTV Inc., the largest satellite-TV group in the U.S. German media magnate Leo Kirch expanded his pay-TV's capital base by selling 3.2% to Saudi Prince al-Waleed ibn Talal ibn Abdul-Aziz and 2.76% to Capital Research & Management Co., a Los Angeles-based fund manager. The prince and Capital already were investors in KirchMedia, KirchGruppe's free TV. KirchPayTV operated in Germany and Austria and owned 40% of Swiss pay-TV station Teleclub AG. Philippine cable TV operator Sky Vision Corp. entered into a $100 million joint venture with Yes Television of the U.K., providing video-on-demand service and nationwide interactive TV. Commercial service included access to hundreds of movies, music videos, children's programs, travel services, sports features, and television comedies and dramas. With most of the American networks already part of giant corporations, the year's only network ownership change came when the Viacom Inc. entertainment conglomerate increased its stake in UPN, the fifth most popular network, from half to full ownership. In addition to control of two of the seven broadcast television networks, the move gave Viacom ownership of dozens of television stations throughout the U.S. Viacom also completed its purchase of the CBS television network during 2000. In November it added the cable channel Black Entertainment Television to its roster, buying the parent BET Holdings II, Inc., for $3 billion. The purchase in effect gave Viacom, already in charge of MTV and VH1, control of popular music on American cable television. While some observers decried the loss of one more independent voice in television, others were optimistic that BET's program offerings under Viacom would improve. Further signs of the trend toward consolidation came when NBC announced that it would rebroadcast its Nightly News with Tom Brokaw on stations of the upstart PAX TV network, in which NBC owned a 32% stake. The move, designed to draw maximum audience to the newscast, angered NBC's affiliates, which did not want their own network sending viewers elsewhere. Although the protest caused the network to cancel the plan, the episode signaled further erosion in the relationship between networks and their local affiliates. Networks became increasingly concerned about rising programming costs and the threat represented by cable. The rate of cable penetration leveled off between May 1999 and May 2000 at about 68% of American homes, but cable continued to increase its audience share, while that of network TV continued to decline. Such moves as NBC had planned with PAX would allow the network to get more bang for its programming buck. Similarly, ABC angered its affiliates by announcing plans to start a cable channel using the network's soap operas. In its battle for people's attention with home computers and the Internet, television overall got a boost when a November report from Nielsen Media Research showed that TV usage had remained stable over a one-year period in homes that also had computers and World Wide Web access. Earlier in the year Nielsen had reported that, despite the increased competition, television viewing levels were at an all-time high. Nielsen said in January that the average U.S. household kept its TV set on for eight hours 11 minutes per day.