Thoughts about Commercial Databases: 2013
January 29, 2013
After the dress rehearsal for my weaponized information webinar, a couple of librarians and I were talking about the commercial database business. I narrowed the focus to the commercial outfits selling primary and secondary information to libraries and other professionals; namely, to the legal and health care sectors.
In a nutshell, the digital future does not look too bright for companies such as:
- Ebsco Electronic Publishing (everything but the kitchen sink coverage)
- Elsevier (scientific and technical with Fast Search in its background)
- ProQuest (everything but the kitchen sink coverage plus Dialog)
- Thomson Reuters (multiple disciplines, including financial real time info)
- Wolters Kluwer (mostly legal and medical and a truckload of individual brands)
I just reread “Why Acquisitions Fail: The Five Main Factors by Pearson Education. This outfit has a long and storied past. The irony of Pearson Education explaining the problems of making an acquisition work is interesting but not germane to the main points in the write up. the fact that this item was available to me without charge via the Internet is amusing to me as well. Here’s what the Pearson analyst suggests about the causes of failure:
Survey after survey has proclaimed that most acquisitions fail. Denzil Rankine’s Executive Briefing on Why Acquisitions Fail (FT Prentice Hall) examines why. There are five key factors, which we will examine below:
- Flawed business logic
- Flawed understanding of the new business
- Flawed deal management
- Flawed integration management
- Flawed corporate development
No argument from me. The business model for these firms has been built on selling “must have” information to markets who need the information to do their job. The reason for the stress on this group of companies is that the traditional customers are strapped for cash or have lower cost alternatives.
If one of these outfits buys a company, the likelihood that the acquisition will be a home run revenue success is low. These five companies are bottom-line oriented, so the acquisitions will have to perform. The idea of massive investment to realize the promise of the purchase is not in the game plan.
So big traditional commercial database companies have to find a way to work around the Pearson Education hurdles. Let me consider some of the options available to the Ebscos, Elseviers, ProQuests, Thomsons, and Wolters Kluwers of the world. (Yes, there are oligopolies in a number of other countries, not just the US and Western Europe.)
The Hail, Mary Deal
This is the option which makes investment bankers’ and deal brokers’ hearts go pitty patter. We know how that approach works.
Buy One Another
The idea is that no other outfit wants to buy commercial database companies. Ergo: These outfits buy one another in some combination. Good for the investment bankers but long term, the customers may not be able to cope with ever increasing prices. Librarians, lawyers, and accountants are not exactly in a GEICO made of money mode.
The Microsoft Dell Variant
The idea is that a third party like Google buys one or more commercial database companies and monetizes the content with ads. (I would lobby for this if I were attached to a giant money machine like the Google.)
I think that Thomson Reuters’ effort to get out of the health fraud business makes clear that the price offered kills the deals. Nevertheless, some of the commercial database publishers may be forced to chop off fingers and toes to keep the core alive. Highly probable path opine I.
Raise Prices and Innovate from Within
This option keeps the Board of Directors engaged. The reality is that such innovation goes nowhere. Ah, I am looking forward to annoyed vice presidents asserting, “I am innovative. We do innovate.” Okay, okay.
Big changes are coming for commercial database producers, access to curated content, and the quality of the commercial information. Lawyers are looking to cut costs. No good for Lexis and West. Librarians are under severe financial pressure. Accountants? Accountants don’t want to spend their own money.
Looks like the future is moving in directions different from what these traditional, commercial database producers are going. I suppose after a couple of decades of evolution, the arrival of the End of Times is tough to accept.
Disagree? Agree? Surprise me. Keep in mind that I don’t have a stake in these companies and find myself baffled by the management challenges each has created for itself.
Stephen E Arnold, January 29, 2013
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