Turning the Pages : Publishing an Overlooked Gold Mine for Paramount

As the battle rages for Paramount Communications Inc., it’s easy to forget that the famed movie and television company is also the nation’s largest book publisher.

But you can bet that Paramount’s suitors, Viacom Inc. and QVC Network Inc., aren’t forgetting.

Not only does Paramount Publishing--known until January by the name of its most famous imprint, Simon & Schuster--account for 40% of the parent company’s revenue, it’s also in a strong position to capitalize on the technological revolution sweeping the once-sleepy book business.

“The publishing industry until a few years ago was toddling along using the same distribution and production methods that were there for hundreds of years,” says Richard E. Snyder, the tough, energetic and sometimes controversial chairman who has long run the unit. “But we’re finally ready to have our day in the sun.”

The new opportunities have little to do with “synergy.” Despite public pronouncements to the contrary, executives inside and outside the company say there are precious few advantages to having a publishing company and a movie studio under one roof.

Indeed, some expect that whoever wins the tug of war for Paramount will look to sell Simon & Schuster as a way of paring back what promises to be a large post-sale debt.

Though Paramount Chairman Martin Davis has heartily backed the publishing group’s expansion, there’s little love lost between him and Snyder--in part because of Davis’ interference in sensitive editorial decisions.

If synergy is an illusion, however, size may truly be strategic. Over the last two decades, Snyder has engineered an acquisition-led expansion unprecedented in book publishing, based in part on the belief that size will yield enormous leverage in a technology-driven multimedia world.

And he may not be finished yet.

For months, Paramount has been considered a leading candidate to purchase Macmillan Publishing, now on the auction block after the collapse of the Robert Maxwell empire. Snyder is eyeing other deals as well--uninhibited, he contends, by the uncertainty surrounding the parent company.

(However, book industry executives are skeptical that Snyder could proceed with a major acquisition in the shadow of the takeover battle.)

Size will enable Simon & Schuster to take full advantage of the massive investments it has made in computerization over the last five years. Those investments have cut the time it takes to produce a book in half and cut costs by one-quarter, according to Peter Yunich, the company’s chief information officer.

Even more important, size is crucial to Snyder’s long-term concept of the company as a massive database of copyrighted information.

New technologies, ranging from CD-ROM computer disks to store-based book-printing systems to interactive television, will enable Simon & Schuster to repackage and distribute that information in many ways--and thus, Snyder hopes, transform the low-margin book business into a serious cash machine.

“I don’t care if our content is sold by carrier pigeon or by electronics,” Snyder says. “We’re going to sell the content twice and three times and four times.”

Of course, some content is more amenable to electronic exploitation than others. That explains why Snyder has poured resources into educational publishing, which now accounts for nearly half of Paramount Publishing’s revenue.

In 1990, the company acquired Sunnyvale, Calif.-based Computer Curriculum Corp., with the aim of integrating the firm’s school computer systems across its educational publishing line.

Though he has a reputation for being difficult, Snyder is widely respected for his achievements in building Simon & Schuster into a powerhouse. But some lament what they see as a diminished commitment to general interest publishing.

And even Wall Street analysts who praise Snyder’s management aren’t entirely convinced that the digital revolution will yield its promised dividends anytime soon.

“They’ve moved very aggressively into technology, moved very aggressively to get costs down,” says Martin Romm, an analyst at First Boston. “But it’s not particularly clear that there are these enormous advantages.”

The recession has also taken its toll as the company has grown more dependent on economically sensitive educational and professional publishing.

And Computer Curriculum must battle a burgeoning array of educational software programs from companies such as Novato, Calif.-based Broderbund Software and Torrance-based Davidson Associates. Moreover, some educators believe that “integrated learning systems” such as CCC’s--which traditionally have stressed “drill and practice” exercises--are not the best way to exploit computers in the classroom.

But Snyder is undeterred, pointing out that all educational software companies desperately need content. Broderbund, for example, recently formed a joint venture with Random House to produce children’s stories on CD-ROM disks.

Snyder ultimately envisions a broad array of Simon & Schuster books, computer programs and CD-ROM disks that help teachers, assist students with their homework and keep youngsters entertained when they’re done.

It is in this area, in fact, that some synergies could conceivably emerge, especially if Viacom--owner of the Nickelodeon children’s network--ultimately wins the battle for Paramount. Snyder talks of challenging Whittle Communications’ Channel One with an educational television channel for schools, for example.

A Thriving Book Nook

Though movie making, TV and sports are the most high-profile segments of Paramount Communications, its 8,700-employee Paramount Publishing unit provides fully 40% of the company’s revenues.

Publishing Segments (by percent of revenue) Education: 47% Consumer: 24% Business and professional: 20% International: 10% *

Revenues (in billions) 1992: $1.61 billion Note: Totals more than 100% because of 1% loss in “other” segment.

Source: Company reports