July 22, 2014

Penguin Parent Buys iUniverse Owner

Written with research assistance from Gary Price of INFOdocket.

Pearson, parent company of Big Six publishing company Penguin, acquired self-publishing company Author Solutions Inc. (ASI) from private equity firm Bertram Capital for $116 million in cash. The five year old company is better known by its brand names iUniverse and Xlibris, under which it has published about 190,000 print and electronic books so far by about 150,000 authors. The company has grown at approximately 12 percent for the past three years; in 2011, it made about $100 million in revenues.

Pearson said in a statement, “Author Solutions will be integrated into Penguin’s back office and technology infrastructure but will continue to be run as a separate business;” however it also said the acquisition “brings significant opportunity for the two companies to collaborate. Penguin will gain access to ASI’s expertise in online marketing, consumer analytics, professional services and user-generated content.”

When asked what form that collaboration might take, Penguin spokesperson Erica Glass told LJ, “One immediate thing we are evaluating is how to find the best titles among those ASI publishes for consideration by the trade publishing divisions of Penguin. With regard to Penguin’s genre fiction workshop community Book Country, “From a back-office perspective, it makes business sense to leverage the ASI infrastructure and expertise to further develop Book Country‘s publishing tools,” Glass said.

Penguin’s CEO John Makinson told PaidContent that Penguin’s partnership with ASI “will fall somewhere between self-publishing as presently defined, and Penguin publishing as presently defined.” He mentioned “curated self-publishing” and imprints drawing on self-published content, and that an increasing number of bestselling books either are self-published or started out that way (though so far most such breakouts, such as the infamous Fifty Shades of Grey and Amanda Hocking’s fantasy series, have been published through free or cheap services rather than ASI or a similar model).

Neither company will be paring down staff as a result of the acquisition, according to Digital Book World. “We are looking at up-sizing, not downsizing. There are no plans to alter the strategy, to lay off anyone,” Makinson said. Author Solutions CEO Kevin Weiss will report to Makinson and sit on the Penguin Group board.

There’s no question that in purchasing ASI, Peartson is aligning itself with a coming trend. Self-publishing is the wave, or at least a wave, of the future: Bowker found it drove nearly all the growth in print book output this year.

And while apples-to-apples comparisons are hard to find, from a balance sheet perspective Pearson seems to have paid the right price. “ASI’s acquisition is meaningful because it represents the first major acquisition by a traditional publisher of a company in the self-publishing space,” Miral Sattar, founder and CEO of BiblioCrunch.com, told LJ. “The $116M purchase price translates into a revenue multiple of approximately 1.2 times 2011 ASI revenues, which is a relatively low premium when compared to other recent acquisitions in the tech sector.”

Whether ASI is the right self-publisher is perhaps less clear. Mark Coker of Smashwords was blunt in his assessment. “In order for Penguin to make this work in a big way, they’ll have to perpetuate business practices that have brought ASI so much criticism. I have higher regard for Pearson/Penguin than to expect them to do that, which means it’ll be tough to monetize this without compromising their ethics or reputation,” he told LJ. Those business practices include, in Coker’s view, “selling services packages of nebulous value to authors, […] outsourcing most of the company to the Philippines, and heavy handed sales practices that exploit the hopes and dreams of unwitting authors.”

And that’s not just harsh words from a competitor, because Coker’s not alone. IndieReader.com, a self-publishing blog, called the acquisition “news which has shocked writers, especially given Author Solutions’ long history of providing questionable services at staggering prices.” Blogger Emily Suess chronicles the complaints of several disillusioned ASI authors, as well as ASI’s responses. And employees rating the company from within at Glassdoor.com give it, on average, only 1.9 out of 5 stars. (For comparison, Penguin rates 3.4 stars). Victoria Strauss of the Science Fiction Writers of America’s Writer Beware blog outlines some of the challenges facing Pearson in rehabilitating ASI’s reputation, including improving customer service, payment problems, and misleading advertising practices. But Strauss cites the ultimately hopeful example of Booksurge, which suffered a similar reputation when it was acquired by Amazon, and has since shed it under its new moniker CreateSpace.

Meredith Schwartz About Meredith Schwartz

Meredith Schwartz (mschwartz@mediasourceinc.com) is Senior Editor, News and Features of Library Journal.

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Comments

  1. Unknown22@comcast.net says:

    iuniverse took me for a ride. They received thousands from me in advertising, did a horrific job editing my book, and when I complained, I had to present it to their board. It took them over six months to provide an answer, after I contacted them numerous times of the outcome. Eventually they said a new editor would review my book, but it still has numerous errors. When I complained concerning the errors, I was told this happens in many books. In addtion, they did not tell me when my book would be published. I found it by accident on Amazon.com a month after publishing. They did not tell me the cost of my book. It is over $20.00. When I complained, they said I had over 400 pages. There was no prior discussion concerning book costs. They sent out announcements about my book, so they said, to thousands of book dealers before my website was assembled. When I spoke to the rep who did this, she said I didn’t tell her. I presented the e-mail where she confirmed she’d wait for my website. They said they would resend the announcement. I have no idea if they did. I spent over $7,000.00 for this book and I have not made a terrific return, ever. I am terribly disappointed with iUniverse. However, I respect Penguin Publishing. I hope they treat indie writers with more respect and honesty.