By Porter Anderson | @Porter_Anderson
Editor-in-Chief
Amid concern among many in the industry at news of Rakuten’s US$68 million write-down of Toront0-based Kobo, CEO Michael Tamblyn has stressed a positive outlook for 2016, in comments made to Publishing Perspectives.
Tamblyn tells us:
Michael Tamblyn
“Kobo is poised for a strong year this year, both in terms of growth and continuing profitability improvement.
“In fact, in January we saw the strongest content sales in our history while our device business is more profitable than ever.
“I couldn’t be more confident in Kobo’s place in the future of ebooks.”
In an overview report, TechCrunch’s Jon Russell describes the Kobo write-down as part of a package of actions announced by Rakuten: “Japan-headquartered e-commerce firm Rakuten has written down $340 million from a range of businesses, including its Kobo e-reader division and France-based e-commerce site PriceMinister, and announced plans to close a number of global operations as part of a new strategic focus.”
As it was reported by The Bookseller, Rakuten recorded “a 7.8 billion yen (£47 million, US$68 million) impairment charge for its Kobo division, according to its financial results for the three months to end December 2015.”
In assessing reports of that charge, Publishers Lunch’s Michael Cader has some clarification:
“Some accounts have compared the Kobo writedown in dollars—$68 million—to the purchase price of $315 million from early 2012. But Japan-based Rakuten operates and reports in yen (and the dollar has risen steadily against the yen over the past few years, even with a recent slide), so dollar translations obscure the true proportions and are not the right way to look at it.
“Rakuten paid roughly 24 billion yen to buy Kobo, so the current writedown—along with two smaller writedowns in the first and third quarters of 2015 of about 2.65 billion yen in total—means that they have taken charges of about 44 percent of the purchase price from three years ago.”
In his remarks to us, Tamblyn’s explanation for the new write-down closely echoes the initial published commentary from Tokyo on the situation:
“Slower than expected growth in English language ebook markets has resulted in an adjustment in Kobo’s long-term value. Rakuten’s commitment to and confidence in the ebook market is evident in the purchase of OverDrive and continuing investments in Kobo’s global growth.”
Tamblyn took over from Taka Aiki as CEO at Kobo on January 1, with Aiki moving to the chairmanship and overseeing Rakuten’s book business elements, including Kobo, OverDrive, and Aquafadas, per Jim Milliot’s report in November at Publishers Weekly. Milliot reported that Tamblyn’s role as CEO has him “involved in overseeing all of Rakuten’s global ebook business as vice executive manager.”
At the time the Aiki-Tamblyn handoff was being announced last autumn, Aiki’s commentary was markedly upbeat. As Milliot reported it, Aiki said that in his tenure as CEO, “the discipline, innovative thinking, financial planning and customer focus are exactly where they need to be for success” with “dramatically improved” financial performance.
As Cader points out, this week’s commentary on OverDrive from Rakuten talks of “rapidly improving” financial performance, and—like Tamblyn—the tone is upbeat for this year’s anticipated “return to the black” for the company’s ebook businesses overall, “including Rakuten Kobo and OverDrive Holdings.”
This, Cader writes, “means that it’s currently still losing money.”
“When Rakuten acquired OverDrive in March 2015,” Cader writes, “they said at the time that the unit had EBITDA of $25 million and expected that their combined ebook businesses would ‘be close to breakeven in 2015.'”
In other news, as reported Tuesday, Kobo’s self-publishing platform, Kobo Writing Life, has a new partnership with Reedsy in London, as Reedsy introduces its Book Editor tool.