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Latest news and features from theguardian.com, the world's leading liberal voice

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    It makes sense: the two titans of business information, Thomson Reuters and Bloomberg, competing for a great news brand

    Let me follow a rumor in real time …

    My lunch companion, a senior executive at Thomson Reuters – where, it seems, just about every journalist of a certain age and experience is going to work, or wants to go to work – drops a passing remark about how, at Thomson Reuters, they might use the Financial Times. Then, this is contrasted with how the FT might be used at Bloomberg, Thomson Reuters' great rival, and the other place where all out-of-work, or worried-that-they-soon-will-be-out-of-work, journalists want to be.

    Then, it trips out, according to my friend – said quite unselfconsciously, rather as though it should be obvious to all; for a moment, I actually think I've somehow missed the story – that the FT, having flirted with and then turned down an acquisition offer from Bloomberg, is now talking to Thomson Reuters.

    I should qualify my source: he or she is not from the deal-making side (where they keep their mouths shut or, at least, more carefully confide), but someone likely to be consulted by the deal-making side. My source, by the way, has been usefully loose-lipped before, when in the woe-is-me-what's-going-to-happen-to-us mood of so many media people.

    Thomson Reuters and Bloomberg, at least on their media sides, generate, in my experience, a disproportionate amount of woe-is-me-talk. This is because they are among the last places where people of a certain generation can still find adult offices and reliable pay checks, creating an island or survivor mentality. There is a sense, too, of small-timeness, of everybody understanding the random luck of being hired by a rich man. (David Thomson and Michael Bloomberg, both worth about $20bn, regularly vie with each other in the net worth sweepstakes.) For many, this is what it seems to have come to: the uncertain ambitions of Thomson Reuters and Bloomberg are perhaps the only hope for traditional journalism.

    For good measure, my lunch companion also says that at Thomson Reuters, they believe that the Wall Street Journal's parent, News Corporation, will sell the Journal in two years, give or take – an actuarial (New Corp Chairman Rupert Murdoch, who protects the money-losing WSJ, will shortly be 81), as much as a business analysis.

    True, my companion clearly wishes for an FT or WSJ acquisition by Thomson Reuters to be true; so wishfulness may be coloring his sense of corporate ambition and the likelihood of a transaction. After all, the Thomson company, which owned papers in Canada in London, is one of the few newspaper companies – perhaps, the only one – to have mostly exited the business, reinventing itself, at great profit, as a modern, specialized, high-value, information company.

    Even when Thomson bought Reuters in 2007, it bought it not for its legacy news operation, but for its much greater business information assets. Bloomberg, for its part, generates the overwhelming share of its revenues from its terminals and financial data products. Journalists work for Thomson Reuters and Bloomberg only at some sufferance – they aren't really needed.

    And yet both companies seem to have dreams of boosted brand greatness. Both have invested heavily in their news operations – even to uncertain, or dubious effect (there have been recent reports that Bloomberg is unhappy with the lackluster results of its television expansion and may shrink the business).

    At Bloomberg, its founder and controlling shareholder, the mayor of New York, is coming to the end of his political career and, by all reports, looking for new worlds to conquer. Several years ago, when the New York Times was at its financial nadir, he was urged by many to grab it – and seemed tempted. And if not the Times, the mayor himself is said to have asked, what about the FT – the favorite paper of globe trotting businessmen? (Rupert Murdoch openly speculated to the people around him, including me, about whether it would be more worrisome for him and the Wall Street Journal if Bloomberg did own the Times or the FT; better, he concluded, for Bloomberg to own the Times.)

    At Thomson Reuters, there are, evidently, grander impulses, too. The Thomson family, which sold the Times of London and the Sunday Times to Rupert Murdoch in 1981, has let it be known that it might consider buying them back if News Corp is compelled by the British phone-hacking scandal to sell them. (Murdoch recently tweeted: "Ignore Thomson Reuters. Thomsons chickened out of GB decades ago, except for oil money. Now control Reuters and no idea what bias they push.")

    Of course, there is the FT to consider – and the hopes and ambitions of its parent, Pearson. The best source I know with a view into the high corporate levels of Pearson, whom I call immediately after lunch, demurs: "The FT will be sold. But she won't sell it." She being Marjorie Scardino, the present, seemingly-always-embattled CEO, and former newspaper editor, who has repeatedly defended ownership of the FT, even as Pearson has turned ever more into an education company.

    Back to my original source, now settled in at the office: "How solid is this?" After the sinking sensation of realizing that foot may have been put in mouth, the source shuts the office door and says: "Solid. Solid. Really. Still at an informal level of conversation …" – a slight retreat – "but in clear discussions." In other words, even if true, it could be a business lifetime until an agreement. Still. The logic of a deal can almost be as good as a deal.

    There are four companies that dominate the brand name financial information business: Pearson with the FT, News Corp with the WSJ, and Bloomberg and Thomson Reuters with their myriad assets. The latter two make their money and vast margins in this business. The former make their money in other businesses and maintain a foothold in financial information and news for mostly extra-business reasons. It is certainly true that neither Bloomberg nor Thomson Reuters need a newspaper – and yet it is true, too, that it could change the game were one of them to get a major financial news organ (so much so that each would probably do what is necessary to try to prevent the other from getting one – vastly enhancing the value of both the FT and WSJ). Indeed, while neither Pearson nor News Corp are ever going to turn the FT or WSJ into significant earners, Bloomberg and Thomson Reuters, with their back-end financial information resources, might be able to build a powerful and profitable financial news front end.

    What's more, even before the recession, the terminal business was slowing for Bloomberg. So there may even be logic in seeing the media business, at least for last-man-standing players, as a growth business. If there is not a deal here, surely there is a dance.

    And there is, too, a pleasing and – especially for rich men – perhaps irresistible counter-version of events. The news business, historically the province of organizations with big brands and big reach and big budgets, has been bitch-slapped by the digital upstarts. But here are two players distinguished by their establishment credentials, sound business footing, and vast resources – which, if they choose to act, could change things up, and, as well, allow many news journalists of my generation to breathe again.

    I believe it: the game's afoot. Of course, never underestimate the glacial pace of the inevitable.

    • Follow Michael on Twitter @MichaelWolffNYC


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    Ebook revenue growth helps push Pearson to pre-tax profit of £1bn for 2011

    Pearson has reported a 72% surge in pre-tax profits to £1.15bn for 2011, with ebook sales at Penguin more than doubling and profits at FT Group, home to the Financial Times, up by about a quarter.

    Pearson, which beat its own recently increased forecast of 85p earnings per share with an analyst pleasing 86.5p, said that on an adjusted basis total operating profits grew by 10% to £942m.

    Total revenues across the group, which includes book publisher Penguin and educational holdings, grew 4% to £5.9bn. Within this total digital revenues grew 18% to £2bn to account for a third of all sales.

    FT Group, home of the Financial Times, grew revenues 6%, or 7% on an underlying basis, to £427m. Adjusted operating profit was up 27%, or 17% on an underlying basis, to £76m.

    FT digital subscriptions were up 29% to 267,000, about 44% of total paid circulation.

    As of the end of 2011 the number of digital subscribers in the US exceeded the number of print subscribers for the first time.

    Pearson said that digital and services now accounts for 47% of total FT Group revenues.

    Pearson admitted that advertising was "generally weak and volatile with poor visibility".

    Advertising has shrunk from 59% of FT Group revenues in 2007 to 42% in 2011.

    On a conference call with journalists Marjorie Scardino, the chief executive of Pearson, was asked about her view on the future of regulation in the newspaper market.

    She said that it was clear that something has to be done and believed that some form of combination of legal and self regulation would be best to govern the newspaper industry.

    "Self regulation is going to have to be independent and populated by people who truly understand journalism," she said, adding that she believed that the Leveson inquiry into media ethics and standards was a pretty thorough process.

    Penguin reported a revenue decline of 1%, although on an underlying basis growth was 1%, to £1.05bn. Adjusted operating profits grew 5%, or 8% on an underlying basis, to £111m.

    Penguin also reported a massive increase in digital book sales, up 106% year-on-year, with ebooks accounting for 12% of total revenues and 20% in the US market.

    In 2010, ebooks accounted for 6% of total Penguin revenues.

    Ebooks accounted for 12% of Penguin revenues worldwide in 2011 – up from 6% in 2010 – which are expected to increase significantly again this year. Big Penguin sellers were cookbooks by celebrity chef Jamie Oliver and Kathryn Stockett's The Help.

    Pearson raised its dividend by 9% to 42p.

    "The external environment provides a testing backdrop for these results, and all our industries face some degree of turbulence," Scardino said.

    "But our strategy and long-term planning for change have helped us to another good year to add to our record of persistent out-performance."

    Pearson's North American Education division saw revenues decline by 2% to £2.58bn, a 1% decline on an underlying basis. Adjusted operating profits grew 5% to £493m, 8% on an underlying basis.

    The International Education operation grew revenues by 15%, or 4% on an underlying basis, to £1.4bn. Adjusted operating profit rose 15% to £196m, a 2% rise on an underlying basis.

    Pearson's pre-tax profit bonanza was partly boosted by the £412m profit on the £428m sale of its 50% stake in FTSE International to the London Stock Exchange last year.

    The company said it had headroom of about £1bn to make acquisitions.

    • To contact the MediaGuardian news desk email editor@mediaguardian.co.uk or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000. If you are writing a comment for publication, please mark clearly "for publication".

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    Journalists on the Financial Times have voted by three to one to take strike action over their 2012 pay claim.

    The management had offered a rise of 2%, while retaining a third of the money set aside for this year's increase, to use as merit pay or for staff retention at the managing editor's discretion.

    The strike call by members of the National Union of Journalists came as the FT announced a 27% profit increase at the group.

    It also followed the revelation that the group's chief executive, John Ridding, was paid £928,000 in 2010.

    According to the NUJ, figures obtained from Companies House showed that his remuneration increased by 95% in the four years to 2010.

    During the same period, staff were asked to accept redundancies and a one-year pay freeze.

    Steve Bird, NUJ father of the chapel at the FT group, welcomed the ballot result as a big boost to the chapel's campaign for fair pay.

    He said: "Voting to strike is a very big step to take, especially for committed journalists. The size of the majority is a sign of the anger at management's intransigence and the unfairness of the pay deal."

    Michelle Stanistreet, the NUJ's general secretary, said: "The FT is making a good profit and in its end-of-year report, the group is claiming that it has achieved the highest circulation in the paper's history.

    "So why is it offering its journalists, who must take credit for this success, an insult of a pay deal?"

    According to figures released by Pearson, the FT's parent company, the operating profit at the FT group grew by 27% to £76m in 2011 and turnover was up 6% at £427m.

    The growth was driven by an increase in the FT's digital subscriptions of 29% to 267,000 and registered users up 33% to more than 4m.

    Source: NUJ


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    Updated 1pm: I reported yesterday that the National Union of Journalists' members at the Financial Times have voted to strike.

    In its press release, the NUJ stated that the FT had offered a rise of 2%. But the FT management say the proposed salary increase is 3.5% in which editorial staff will receive between 2-2.5% with a further 1% for merit, plus a bonus.

    The FT issued a statement saying it views the vote for industrial action and the risk of disruption as "unwarranted and unreasonable."

    It points out that the FT "has continued to invest in its editorial operations because we strongly believe that quality journalism is at the heart of our global success."

    It says the pay offer "compares favourably with the rest of the industry" and adds: "We have avoided any compulsory redundancies at a time when news organisations around the world are facing exceptional challenges."

    FT management also points out that it has "strong contingency plans in place to ensure business as usual at the FT and there will be no adverse effect on the quality of our coverage."

    The FT is ultimately owned by Pearson, which yesterday reported a 72% rise in profits. During a conference call with the company's chief executive, Marjorie Scardino, she was asked about the dispute.

    She replied: "A 3.5% pay rise and no compulsory redundancies - I don't really know what else we can do. We have been pretty good about it.

    "I do understand the angst [but] if you are going to work on a newspaper this is a pretty good one. There is nothing more we can do besides what we've offered".

    1pm update: The NUJ chapel disputes the management's presentation of the offer as 3.5%. A spokesman said that "the vast majority of staff have been offered 2%" and only "a handful" will get 2.5%.

    The other 1%, says the chapel, is not part of the pay settlement because it is being placed in a separate pot to be paid out for merit or "staff retention" at the managing editor's discretion.

    The spokesman said: "Management's attempt to portray this as a 3.5% pay offer is misleading."

    The chapel's father, Steve Bird, has pointed to the disputed figures in an open letter to Marjorie Scardino. It concludes:

    "We appreciate your concern at the strike threat. In reply to your question about what else to do, it would be best to start by persuading our managers to give us the offer you have outlined in the press.

    "FT journalists are extremely unhappy that we have been forced to take this stand in the face of management's refusal to enter real negotiations, your intervention could be timely and help avoid a confrontation that would be extremely damaging to the FT brand and to relations in the newsroom."


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    The industrial situation at the Financial Times is now looking quite serious.

    Journalists who have voted to strike over a pay offer - the details of which are disputed - have called on Marjorie Scardino to intervene.

    As chief executive of Pearson, the FT's ultimate owner, the National Union of Journalists' members believe she has the final say.

    However, I'm uncertain whether she would be prepared to step in and, by implication, overrule the FT Group's management.

    I know she has a high regard for the FT, for its journalists, for journalism and for newspapers, but it's still a big ask for her to get so intimately involved in such a dispute.

    One problem she faces is having said the offer is "3.5% with no compulsory redundancies". It may be a short-form way of describing the offer but it doesn't quite square with the way the FT managers have put it.

    According to an official statement "the proposed salary increase is 3.5% - with 2-2.5% for all editorial staff and 1% for merit, plus a bonus."

    The NUJ's own version, as outlined in an open letter to Scardino on 28 February, says that it amounts to a 2% pay rise for "the vast majority" while "a handful of others and some non-journalists" will receive 2.5%.

    The other 1%, says the union, "is being kept back for use to 'retain staff' and to reward certain individuals in a non-transparent way at the sole discretion of the managing editor."

    On that basis, NUJ members voted by three to one to take strike action at a packed chapel meeting on 29 February. They have also called on management to meet at Acas.

    FT editor Lionel Barber has addressed staff and urged them not to strike. He has also said that action, though disruptive, will not prevent publication.

    Sources: NUJ/FT Group


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    Financial Times owner pays nearly £3.75m in bonuses to directors, according to the company's annual report

    The chief executive of Financial Times owner Pearson, Marjorie Scardino, was paid almost £2.5m in 2011, according to the company's annual report.

    Scardino, who presided over a another strong year for Pearson with pre-tax profits up 72% to £1.15bn in 2011, received a total remuneration package of £2.46m in 2011, including a £1.35m bonus. This is a 7.78% decrease on 2010.

    Scardino, who kept out of a recent dispute between FT journalists and the paper's management over their annual pay offer, received basic pay of £993,000 last year.

    The National Union of Journalists had threatened to strike over the issue, before accepting a revised pay offer on Wednesday.

    Scardino was paid an annual performance bonus of £1.35m as Pearson paid out just less than £3.75m in bonuses to directors in 2011.

    The chief executive of the Financial Times Group, Rona Fairhead, received a total pay packet of £999,000 in 2011, down from £1.37m in 2010. Fairhead was paid a base salary of £529,000 and a bonus of £440,000.

    John Makinson, the chief executive of Pearson-owned book publisher Penguin, was paid a total remuneration package of £1.42m, down from £1.58m in 2010. His base salary was £549,000 with a bonus of £641,000.

    Pearson's directors were paid £8.27m in salaries, bonuses and benefits in 2011, down from £9.23m in 2010. In 2010 almost £5m was paid out in bonuses.

    Pearson's remuneration committee said that there would be no increase in director salaries for 2012.

    "Annual incentives paid to executives for 2011 performance were generally lower than for 2010, reflecting more challenging targets and a tougher business environment," said David Arculus, chairman of Pearson's remuneration committee. "The remuneration committee is also sensitive to the current social and economic environment surrounding executive compensation."

    The committee also decided that there will be a reduction in the number of shares awarded to the Pearson management committee as part of their long-term incentives.

    "It is not the committee's intention to grant stock options in 2012 or for the foreseeable future," it said.

    Sly Bailey, the chief executive of Trinity Mirror, has come in for heavy criticism over her pay packet, which in 2010 was £1.66m.

    Sir Ian Gibson, the outgoing chairman of the publisher of the Daily Mirror, defended Bailey's performance but admitted that the company remuneration committee was looking at bonus awards.

    • To contact the MediaGuardian news desk email editor@mediaguardian.co.uk or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000. If you are writing a comment for publication, please mark clearly "for publication".

    • To get the latest media news to your desktop or mobile, follow MediaGuardian on Twitter and Facebook.


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    Chief executive of Pearson, the publishing group behind the Financial Times newspaper and Penguin books, received cash and share awards worth £9.6m last year, making her Britain's highest paid woman director of a FTSE 100 company

    Dame Marjorie Scardino, the chief executive of Pearson, the publishing group behind the Financial Times newspaper and Penguin books, received cash and share awards worth £9.6m last year, making her Britain's highest paid woman director of a FTSE 100 company.

    The bumper package comes despite fraught relations with staff at some of Pearson's operations, including the FT, where journalists this week called off planned strike action. In the group's annual report, published on Friday, directors claimed Scardino and other directors had shown pay restraint designed to reflect "the action that continues to be taken across the company to control costs". She is said to have suggested to the remuneration committee it would be inappropriate for her to receive an increase in basic salary.

    Nevertheless, Scardino did take home almost £2.45m in basic salary, benefits and annual bonus. That figure includes a longstanding contribution to "housing costs" though US-born Scardino is now a British citizen who has been based here for many years. The company said this allowance has been in her contract since 1997 and has nothing to do with citizenship or relocation.

    In addition, she received £644,500 of cash in lieu of pension contributions and received shares worth £6.5m from long-term awards.

    Scardino is one of just five woman leaders of FTSE 100 companies. Others include fellow Americans Angela Ahrendts at Burberry and Cynthia Carroll, chief executive of mining group Anglo American. The two British blue chip bosses are Katherine Garrett-Cox at Alliance Trust and Alison Cooper at Imperial Tobacco.

    Scardino is also one of the longest serving FSTE 100 bosses, having been Pearson chief executive for 15 years.

    Last month she announced the group had made adjusted operating profits for 2011 of £942m, up 12% on 2010. "The external environment provides a testing backdrop for these results, and all our industries face some degree of turbulence," she said. "But our strategy and long-term planning for change have helped us to another good year to add to our record of persistent out-performance. We believe those qualities, combined with the commitment and innovation of our people, will continue to serve our customers and our shareholders well."

    Shares in Pearson, which employs 41,000 staff, largely in its education publishing arm, have easily outperformed the FTSE 100 in recent years, rising more than 50% over five years compared to a 10% fall in the blue chip index.

    Outside of her work at Pearson, Scardino has also been permitted to take up non-executive posts at Nokia and and MacArthur Foundation, for which she received a further £140,000 last year.

    A significant change in Scardino's pay arrangement was introduced in 2010, when she became eligible to receive an annual cash bonus of 180% of her base salary, compared to 150% previously.


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    Producer of The X Factor and The Apprentice appoints Cecile Frot-Coutaz to run global TV operations

    Tony Cohen, the chief executive of FremantleMedia, the producer of shows including The X Factor and The Apprentice, is stepping down after 17 years with the company.

    Cohen, who has held the chief executive role since 2001, is to be replaced by FremantleMedia veteran Cecile Frot-Coutaz who has been running the company's North American operation since 2005.

    Prior to that Frot-Coutaz, who has worked for parent company RTL since 1994, held commercial responsibilities for FremantleMedia in the US as well as the title of executive producer on American Idol.

    Coutaz will relocate to London to run the global operations for FremantleMedia, RTL's production, rights and distribution business which makes shows including Britain's Got Talent, Celebrity Juice and Take Me Out, from 1 July.

    Cohen is leaving the company after 17 years, having joined as managing director of Pearson Television in 1995.

    In 2000 Pearson TV, which was then run by Greg Dyke and providing ITV with shows such as The Bill, acquired I'm Alan Partridge and Da Ali G Show producer TalkBack.

    Shortly afterwards Pearson TV merged with Bertelsmann's TV assets to create RTL Group. The combined business's production operation was renamed FremantleMedia.

    "[Tony] transformed FremantleMedia from a collection of individual entities into a global content power house," said Guillame de Posch and Anke Schaferkordt, RTL's co-chief executives.

    "Under his leadership, the company has become the pre-eminent producer of the hit prime-time global entertainment formats in dozens of countries, a top distributor and brand licensor, and a rapidly growing force in online and mobile gaming, branded entertainment and kids."

    They added: "After being with the group for 17 years, Cécile has the vision and leadership that are needed to further grow FremantleMedia. She brings expertise and drive from the largest TV market in the world and combines her creative skills as a producer with a sharp business perspective."

    De Posch, who was promoted to joint chief executive of RTL Group in February following the departure of Gerhard Zeiler to CNN-owner Turner Broadcasting, refused to rule out buying Big Brother maker Endemol to help grow FremantleMedia.

    RTL has previously dismissed reports that it tabled an offer for Endemol in November, although it is thought that the company has had a keen eye on what the Dutch production company's shareholders decide to do when the final details of a protracted debt-for-equity restructure is complete.

    When asked if he was interested in Endemol, de Posch declined to comment directly, but said: "RTL Group fully supports FremantleMedia and its ambitions to grow."

    FremantleMedia is a hugely important business for RTL Group, it accounts for 25% of total revenues and 13% of profits, although the business had a less than sterling year in the UK in 2011.

    The production business grew total revenues by 12.3% to €1.4bn last year, as profits increased 2% to €143m, mainly thanks to the huge success of the North American business. However in the UK revenues fell by 11% year-on-year from €232m to €206m.

    Last month RTL's privately-owned parent company Bertelsmann, which is tightly controlled by the Mohn family, opened the door to selling a strategic stake or listing its shares on the stockmarket.

    The move, which was engineered by changing the German group's legal structure, would give the company access to billions of euros in potential acquisition funds without the Mohn family losing control.

    • To contact the MediaGuardian news desk email editor@mediaguardian.co.uk or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000. If you are writing a comment for publication, please mark clearly "for publication".

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    Pearson, a business that sells education products and services, seems to be gaining an ever-growing influence on school life. But whose interests is the company promoting – students' or its shareholders'?

    How great an influence over education policymaking can and should a private organisation have? That is the question being asked by some, as a debate growing increasingly acrimonious in the US seems poised to cross the Atlantic.

    Pearson, the giant London-based multinational, is the world's largest education firm as well as running Penguin books and the Financial Times. Attention is now focusing on its seemingly ever-growing influence on English school life.

    Pearson's level of involvement in state education in the US, particularly through testing, has become high-profile in recent weeks. Last month, hundreds of parents reportedly protested outside the firm's New York offices, unhappy at the company's $35m (£22m) contract to provide controversial high-stakes tests for the city's schools. A statement from the group ParentVoicesNY said the protest was about "the excessive power and influence the billion-dollar, for-profit company, Pearson, has over [New York City's] education department".

    Pearson also reportedly has a five-year contract worth nearly $500m (£318m) to provide tests for schools in Texas, and sets tests across other states including Florida, Kentucky, Arizona, Virginia and Maryland.

    In an article on Pearson in the New York Times columnist Gail Collins described testing as a "huge corporate profit-centre", and seemed to call for a "pushback against education privatisation".

    In the UK, its home country, the company's influence is less debated, but seems extensive here, too. Pearson's involvement at the heart of what goes on in English secondary schools, in particular, through its ownership of the Edexcel exam board (purchased in 2003), is widely known. Edexcel is the largest UK exam body by the volume of its sales, with a turnover of £317m in the 14 months to February 2011. It remains the only one of England's big three school boards to be run for profit.

    Pearson's core education publishing business includes, in this country, the brands of Heinemann, Longman, BBC Active and the Edexcel publishing label. All sell textbooks and other supporting resources to schools, parents and pupils. Since 2009, Pearson, through Edexcel, has also had a contract to administer the marking of Sats tests for England's 11-year-olds, grading 3.8 million of them in 2011.

    But it is Pearson's foray into new areas of policymaking and school improvement that is provoking questions about its influence, and about the interaction between the state and the corporate world.

    In the policy field, the company is currently – with the Royal Society of Arts – running and funding an inquiry into the success or failure of the coalition's signature education policy: the academies scheme.

    Pearson has also carried out a probe this year into whether the English exam system is promoting "high standards", which raised concerns about test-driven learning, and which is to be followed up by a five-year "review of education ambition". The company's goal in this, it says, is to "reassert Britain's position as the global leader in education".

    This month, the CBI published its annual survey of what businesses think of education standards in the UK, as evidenced by the skills of recent school leavers. For the first time this year, this was published jointly with Pearson, with quotations from the firm in the accompanying press release, suggesting a high degree of influence for Pearson in this debate.

    Pearson also runs its own "Pearson Think Tank", headed by Professor Becky Francis of King's College, London, who is also serving on the Pearson/RSA academies review. In 2007, it funded the setting up of Oxford University's centre for educational assessment.

    And in the last nine months, the firm has moved into the area of school improvement. The "Pearson school model", which has been trialled in six secondary schools since September, includes a computer-based curriculum – "the Always Learning Gateway", named after Pearson's corporate strapline – in 11 subject areas. The service is currently free to participating schools, but Pearson will be charging a fee when it is sold nationally.

    The Pearson school model has been led by Anders Hultin, a Swedish educationist who invited controversy in 2009 when, in a previous post at the private education chain Gems, he told Education Guardian that ministers should allow state-funded schools to be run for profit. Hultin, though, is now leaving Pearson to return to Sweden.

    Diane Ravitch, bestselling writer on US education reform, who has blogged about Pearson's influence in the US, says of the company's English activities: "Pearson is overstepping the bounds of the role of a profit-making business.

    "The corporation is acting as a quasi-government agency in several instances, but it is not a quasi-government agency: it is a business that sells products and services. What part of the field of education does Pearson not manage?

    "At what point do conflicts of interest arise? Is it acting in the best interests of students, of the nation, or of its own business? These are questions that must be raised and answered."

    Stephen Ball, professor of the sociology of education at London University's Institute of Education and an expert on education business, sees Pearson's school-improvement model, alongside its policy work, as particularly interesting. He says: "I think it's related to an overall strategy: they want to offer products and services in all areas of school practice: assessment, pedagogy, curriculum and management, and they want to create the possibility for that through policy work.

    "They want to have indirect influence in policy to create opportunities for business expansion. It's a very well thought-out business strategy. I think we should be thinking about it, because a lot of it is going unnoticed."

    Alasdair Smith, national secretary of the Anti Academies Alliance, which is critical of corporate influence in education, says: "This stuff frightens the life out of me. My concern is that business dictates the nature of education, and especially the aims of education, when it should be one voice among others."

    Ball says private influence does not stop at Pearson. He mentions McKinsey, the management consultant that has published two widely cited international reports on successful education systems, as evidence of companies' incursion into policymaking. Sir Michael Barber, Tony Blair's former education standards guru, was an author of both McKinsey reports. He now works for Pearson.

    Last month, it was reported that ministers want to "outsource" some policymaking to companies, consultants and thinktanks in a bid to scale down the civil service.

    Robert Coe, a school exams expert and director of Durham University's centre for evaluation and monitoring, who contributed to Pearson's standards investigation that criticised exam-driven schooling and raised questions about GCSEs, says he was impressed by its approach, and that the company was right to investigate. He says: "I read this inquiry as saying 'let's take a look at this and see what we can do to improve things'. A lot of the things they said [about problems with the current system] they were right to say."

    Earlier this month, Pearson also announced plans to invest £10m on running private schools in the developing world.

    Pearson says its involvement in so many areas of education is part of a strategy, instigated 10 years ago, to move from being mainly a publishing and media company to one much more involved in schools.

    Alice Hunt, director of communications for Pearson's non-US operations, says: "That created in us an awareness of education debates around the world and the need to contribute to them. We see our contribution to these debates as a really important part of the overall discussion, which embraces governments, other policymakers, civil society groups and so on."

    Hunt says Pearson does not run schools for profit at present and that it is "not something we are in any way pursuing at the moment".


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    A new battlefront has opened in the long war between the Financial Times and The Times of India over the use of the FT's trademarked name.

    The launch by the Times (TOI) of a new supplement called the Financial Times has prompted the FT's chief executive, John Ridding, to hit back with a full-page advert in another newspaper.

    The ad in today's Hindustan Times, under the FT's familiar masthead, is headlined: "A message to readers in India from the CEO of the Financial Times". It then carries a quote from Ridding:

    "The Financial Times would like to make it clear that the internationally renowned 'Financial Times' newspaper is not in any way associated with the Indian title of the same name, published by Times Publishing House (TPH), part of Bennett, Coleman & Co."

    TOI has been using the FT's name for almost 18 years but, after a legal fight, has been required to carry a disclaimer stating that it was "not in arrangement with Financial Times, London". That disclaimer is missing from the new supplement.

    It was thought that the war had been largely settled in a court ruling in May this year. Though a second court hearing is due in October, this fresh twist has taken the FT and its owner, Pearson, somewhat by surprise.

    Khozem Merchant, president of Pearson India, said it was important to avoid confusion for readers. "What sets us apart is not only the quality of our journalism but the fact that we are distinguished because of our print, online and award-winning apps," he said.

    The FT has a content-sharing agreement with the Indian Express, which has led to TOI suing the Express in order to stop it from using "FT" or "Financial Times" in its paper. The matter is pending in the Bangalore high court.

    Sources: Sans Serif/Hindustan Times/live.mint/Indian Kanoon


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    Society of Authors warns that writers would have to give up rights and potential profits to win significant distribution deals

    A leading authors' body has warned that Penguin's $116m (£73m) acquisition of self-publishing giant ASI could threaten and undermine the rights of budding writers.

    Penguin, the publisher of titles including Kathryn Stockett's The Help and Jamie Oliver's cookbooks, said that the deal to buy US-based Author Solutions Inc would allow the book giant to capture a major share of the burgeoning self-publishing market.

    The splash caused by self-publishing superstars such as Amanda Hocking and EL James, the author of worldwide success Fifty Shades of Grey, has encouraged traditional publishers such as Pearson-owned Penguin to break into the market.

    "Self-publishing has moved into the mainstream of our industry over the past three years," said John Makinson, the chief executive of Penguin, who described the deal as vital to the future of the company. "This acquisition will allow Penguin to participate in perhaps the fastest-growing area of the publishing economy".

    However Kate Pool, the deputy secretary general of the Society of Authors, warned that Penguin's deal was giving a lustre of credibility to a company which, she argued, did not provide a great deal for budding writers looking to self publish.

    "What worries me is that authors will get misled by these deals thinking that a tie-up with Penguin means they are getting either a full publishing or self publishing service, when in fact they are getting neither of those," she said. "It is very misleading for authors".

    She said that while AS enabled authors to develop an ebook or print-on-demand book, they have to give up significant rights, and potential profits, to gain a meaningful distribution deal.

    "There are other services that are true self-publishing where authors can go cheaply and keep their rights," Pool said. "What worries me is the fact that Penguin's name associated with it gives it a lustre of credibility it does not deserve."

    A spokesman for Penguin said: "ASI offers a broad range of professional publishing services. While the author will always retain the rights to their material, there would be a royalty arrangement on the occasions when
    ASI distribute their books to the wider market."

    Kevin Weiss, chief executive of ASI, refuted Pool's criticism, arguing that the deal meant more opportunity for authors and more choice for readers.

    Makinson said that Penguin intended to be careful to keep the brands separate, at least for a period of time, so that authors did not get the wrong impression about what was on offer from ASI.

    ASI, which makes revenues of about $100m and is growing at about 12% annually, was formed in 2007. So far 150,000 authors have used its services to publish, market and distribute books.

    Penguin reported revenues of £1.05bn last year, on operating profits of £111m, as ebook sales more than doubled accounting for 12% of total revenues.

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    Penguin parent Pearson blames success of Fifty Shades of Grey for 48% fall in operating profit

    Profits at the book publisher Penguin slumped by almost 50% in the first six months, thanks in part to the runaway global success of EL James's Fifty Shades of Grey, which is published by a rival, Vintage Books.

    The runaway success of Fifty Shades and The Hunger Games helped cut sales at Penguin by 4% to £441m and its adjusted operating profit down 48% to £22m.

    "They have distorted the overall books market – Fifty Shades of Grey has sold more than 30m copies," said Marjorie Scardino, chief executive of Pearson, the parent group of Penguin.

    "The US is the only place we are down," she said. "Those big bestsellers really did take a lot of air out of the market."

    Penguin US published 132 bestsellers in the first half of 2012, compared with 157 in the same period last year, while the UK operation matched its strong performance in the first six months of 2011 with 49 bestsellers. Popular UK titles came from authors including Gok Wan, Rachel Khoo, Antony Beevor and Jojo Moyes.

    Ebook sales soared by a third and now account for nearly one in five of Penguin's total revenue. In 2009 ebooks were just 2% of Penguin's total revenues, growing to 12% last year.

    Scardino said that although the rate of ebooks growth was slowing, she did not have a view on when the increase in Penguin's digital book revenues would begin to flatten out.

    The publisher expects a better performance in the second half, with new titles from well-known authors including Ken Follett, Jamie Oliver and Jeremy Clarkson. Pippa Middleton, sister of the Duchess of Cambridge, will also have a book out.

    Pearson's FT Group, which publishes the Financial Times newspaper, boosted sales by 6% to £216m and adjusted profits rose 5% to £22m.

    Pearson said that digital subscriptions rose by 31% year-on-year in the first half, to more than 300,000, as registered users of its online product rose 29% to 4.8m.

    There are 2.7 million FT web app users and mobile devices now account for 25% of traffic on FT.com.

    Across print and online, the FT said its total paid circulation stood at 599,000, up 2% year on year. Advertising revenues declined, although the rate of the fall was not disclosed.

    At the Economist Group, where Pearson owns a 50% stake, print and digital circulation grew 5% to 1.62m as at 31 March.

    Overall profits at Pearson, which also owns extensive educational and professional training businesses, dropped 28% to £59m.

    Scardino said that Pearson would pass the milestone this year of more than half of revenues coming from digital and services as against traditional publishing.

    "We still publish a lot of books, the FT on paper etc, but it is a milestone for the business," she said. "We are not really withdrawing the FT from print, it is just our customers are choosing digital. There is still a lot of print around."

    She added that despite the first half performance, the company remained on track to report record sales and profits for the full year.


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    Five years ago I recall listening to the Financial Times's chief executive, John Ridding, as he outlined his paper's digital strategy. It was under way by then, of course, but the FT was moving faster and more enthusiastically than many papers - including its major global rival, the Wall Street Journal.

    In practical terms, the FT's transition from print to screen was highlighted by its integration of print and online operations. And the year before the FT had launched its live financial markets blog, Alphaville, which has since prospered by attracting a regular audience and winning awards.

    These initiatives can now be seen in the context of what Ridding calls "the journey of transformation" during which continued experimentation has carried the FT to an important milestone. It was able to report last week that the FT's digital subscribers have exceeded its print buyers.

    Here are the relevant statistics of Ridding's "growth story": the FT's combined paid-for print and digital circulation during the three months up to June this year was 598,698, up 2% year on year (and, incidentally, the largest daily audience in the FT's 124-year history).

    Breaking that down, the average global print circulation was 297,227 compared to the digital circulation of 301,471. It meant that the number of digital subscribers increased by 31% in that April-June quarter compared to the same period in 2011.

    Just a couple more facts: the FT's average daily global audience has grown to a smidgeon under 2.1m while print has stayed flat. There has been a 30% improvement to the online desktop audience and treble digit rises for both tablet and smartphone audiences (from low bases of course).

    These figures bear out Ridding's expectation that ink-on-pink-paper would continue its sales decline while the future was digital. He may not have been alone in foreseeing that, but he certainly adopted an internal strategy aimed at smoothing the digital path.

    By erecting a paywall, while gradually increasing the cover price for the print platform, he also ensured a flow of revenue that has resulted in the FT making a profit every year since 2005.

    No wonder Ridding is able to tell me that the digital strategy is working. The FT has survived what was undoubtedly an existential crisis to be confident of its future, well, as confident as any paper can be nowadays. "If we had not made those changes," he says, "we wouldn't have got through."

    Not everything worked, of course. Its attempt last year to follow Alphaville with an online emerging markets service, called FT Tilt, didn't last much more than six months. But that's the nature of digital game. It is important to experiment.

    By contrast, the FT's various apps have been very successful indeed. Its web app alone has had 2.7m users since its launch. The importance of building apps - and not being reliant on Apple or needing to give it a giant cut - led the FT to acquire a development firm, Assanka, in January this year. Three months later it was rebranded as FT Labs.

    "We're no longer trying to do everything ourselves," says Ridding who recognises that digital journalism can benefit from non-journalistic involvement by developers and data analysts.

    Listening to customers and knowing who they are

    In a world where top-down journalism is no longer relevant, listening to customers' demands is paramount. One big advantage in the digital world is that it is easier to hear what they are saying and therefore know what they want. Ridding points out that in the old newsprint days "we didn't know anything about our readers.

    "Now we know their professions, their locations, what they're reading, what they like. This information enables us to do a much more effective job. And the more subscribers we get, the information we get and the greater the engagement."

    One major initiative involves the building of future audiences through encouraging business school students to use the website. MBA Newslines enables the students (and their tutors) to comment on FT articles and see comments from other schools.

    And ForToday, an FT partnership with the Wall Street Institute, uses FT articles in language classes. It has just launched an educational game app designed to help people learn English.

    And there is also tagging to the FT's ultimate parent, Pearson, which is one of the world's biggest educational publishers.

    Then there are specialist services and publications, such as China Confidential and Brazil Confidential. The exploitation of the FT brand to generate extra revenues appears to have endless possibilities.

    There cannot be any doubt that, given its specialist content, that it made sense for the FT to introduce its paywall. It serves an affluent and educated audience that is happy to pay for the privilege of access.

    It is not in Ridding's nature to boast. But I've rarely heard him register such obvious delight at the way things are going. So is the FT on the verge of abandoning print altogether?

    Not at all, he says, arguing that newsprint is undergoing "a new lease of life" because there are people who, despite accessing content digitally, through desktop computers, mobile phones and tablets, who still enjoy reading papers too.

    That may not be forever, of course. But, for now, it makes sense to keep publishing on every available platform.

    Source: Telephone interview with John Ridding Hat tip: Media Week


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    Pearson aims to recruit 'the brightest and most entrepreneurial students'

    The company which owns the Financial Times is to set up its own college offering business degrees. Pearson said it aimed to recruit "the brightest and most entrepreneurial students" for the courses, which have been developed with a number of businesses.

    Degrees at Pearson College, which will launch in September 2013, will be validated by Royal Holloway and Bedford New College, which are part of the University of London, the publishing and education firm said.

    The new college comes amid a government move to allow more private companies to enter higher education. Pearson said its business and enterprise degree will "focus on preparing students for the world of business".

    The degree will include a guaranteed internship programme and company-based mentors for students. A small number of students are due to be recruited to begin courses, which will cost £6,500 a year in tuition fees, this autumn, with the main launch next year.

    • This article was amended on 14 August 2012. The original said that Pearson College courses will cost £5,500 a year rather than £6,500. This has been corrected.


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    With a successful shift towards digital products and services under way, the Pearson chief has secured a £9.6m pay package

    Job: chief executive, Pearson
    Age: 65
    Industry: publishing, education, digital media
    2011 ranking: 18

    Dame Marjorie Scardino marked her 15th year running Financial Times and Penguin owner Pearson in 2012. She also predicted that the company would pass another milestone this year, with more than half its revenues coming from digital products and services for the first time, up from a third in 2011.

    Scardino, an American-born British citizen, received cash and share awards worth £9.6m in 2011, making her Britain's highest-paid female director of a FTSE 100 company. Pearson boosted pre-tax profits 72% to £1.1bn last year, thanks largely to the sale of its 50% stake in the FTSE International as it moved away from financial data to focus on news and analysis.

    Education remains by some distance the biggest part of Pearson's business, accounting for two thirds of its total £5.9bn revenue in 2011. However, in the US, which accounts for the biggest share of Pearson's education business, the company is vulnerable to public school funding cuts.

    The FT is doing its bit in the shift away from sales of physical products, with digital subscribers overtaking print circulation – 301,471 versus 297,227 – in the three months to the end of June, after 31% year-on-year growth. The FT also had nearly 2.1 million daily unique visitors to its website globally and 2.7 million web app users, while mobile devices account for 25% of FT.com's traffic.

    The Economist, in which Pearson holds a 50% stake, is on a roll, hitting record circulation of 1.62m in March – of which 123,000 are digital subscribers.

    Penguin's US book business took a hit in the first half of 2012 from the runaway success in print of two titles published by rivals, Fifty Shades of Grey and The Hunger Games.

    However, Penguin is expected to do better in the second half of the year, with new titles from Jamie Oliver, Ken Follett, Jeremy Clarkson and Pippa Middleton.

    Ebook sales have soared by a third in the past year and now account for nearly 20% of Penguin's total revenue. In 2009, ebooks accounted for just 2% of Penguin's total revenues, growing to 12% in 2011.


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    John Fallon, head of international education division, to replace long-serving CEO of Financial Times and Penguin owner

    Dame Marjorie Scardino, one of the UK's highest-profile female corporate leaders, is to step down as chief executive of Financial Times and Penguin owner Pearson at the end of 2012, and will be replaced by the head of its international education division, John Fallon.

    Fallon will succeed Scardino as chief executive on 1 January 2013, and joins the Pearson board with immediate effect. He has been chief executive of Pearson's international education division since 2008 and is responsible for education businesses outside the US.

    Scardino, an American-born British citizen, has been Pearson chief executive since 1997. During her tenure, sales have tripled to nearly £6bn and profits grown more than three times to a record high of £942m in 2011, as the company focused on learning products and moved towards digital.

    Shortly after her arrival, Scardino tidied up Pearson's conglomerate structure, for example selling off its historic stakes in investment bank Lazard, and focused the business on education and publishing. She tenaciously defended Pearson's ownership of the Financial Times, memorably declaring she would sell the business newspaper "over my dead body"; her departure will trigger speculation that a sale of the financial newspaper could happen.

    She received cash and share awards worth £9.6m in 2011, making her Britain's highest-paid female director of a FTSE 100 company.

    Pearson boosted pre-tax profits 72% to £1.1bn last year, thanks largely to the sale of its 50% stake in FTSE International. This year, it expects to generate more than half its revenues from digital and services businesses for the first time in its history, up from a third in 2011.

    Education accounted for two thirds of Pearson's total £5.9bn revenue in 2011; the international education division generated sales of £1.4bn and operating profits of £196m last year.

    Scardino said: "For more than 160 years, Pearson has stood for integrity, quality and business strength. It has been a privilege to be part of such a great company for a small part of its history.

    "Though we've changed the company beyond recognition from its form in 1997, we are still in the foothills of the climb to make all kinds of learning more accessible and more effective for more people.

    "I know that John, the board, the senior team and our 40,000 people have the bravery, imagination and decency to lead the company to new ways of achieving these goals, while holding on to the traditions and values that make Pearson unique."

    Fallon said: "Marjorie's legacy is a company with a strong performance record, a deep commitment to its wider social purpose and a unique culture. I am proud to be part of the company; it is a tremendous honour and responsibility to be asked to lead it.

    "Pearson has a clear position of leadership in global learning and publishing, with strong foundations for growth in technology, services and developing economies. Our challenge is to seize those opportunities in an era of tremendous industry change."

    Before joining Pearson, Fallon was director of corporate affairs and a member of the executive committee at Powergen.

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    John Fallon, who will replace Marjorie Scardino at the end of the year, backs paper – but fails to rule out sell-off

    Incoming Pearson chief executive John Fallon has described the Financial Times as a "valuable part of the company", but failed categorically to rule out a sale of the newspaper division.

    Fallon, the head of Pearson's educational division, was announced as the successor to Dame Marjorie Scardino on Wednesday morning.

    Scardino was a staunch advocate of Pearson's ownership of the Financial Times, memorably declaring the company would sell the business newspaper "over my dead body". Her departure as chief executive of Pearson after 16 years in January will trigger long-running speculation about a potential sale of the profitable newspaper arm.

    On a conference call with journalists, Fallon said he recognised the FT Group as a "valuable part of the company" and its business strategy aligned with parent company, Pearson.

    He said: "I think the FT is a highly valued and very valuable part of Pearson. I think the Pearson strategy is very much the FT strategy. If you look at digital transformation of the FT over the last few years, that is leading the transformation of the digital publishing industry. My attitude to the FT is that it is a valued and valuable part of the company."

    Pressed on whether his appointment makes it more likely that Pearson will seek to dispose of the FT Group, Fallon added: "I very much recognise and value the FT as a valuable part of the company."

    Fallon officially replaces Scardino as chief executive on 1 January 2013. He has been chief executive of Pearson's international education division since 2008 and is responsible for education businesses outside the US.

    On Scardino's watch, the FT and Penguin owner has tripled sales to nearly £6bn and grown profits three fold, to £942m in 2011. FT Group grew revenues 6% in 2011, or 7% on an underlying basis, to £427m. Adjusted operating profit was up 27%, or 17% on an underlying basis, to £76m.

    The Pearson chairman, Glen Moreno, said the company had initiated a "rigorous" succession planning process for the chief executive post since 2010. This accelerated earlier in 2012 when Scardino told the board of her intention to step down at the end of the year.

    Moreno described Fallon as a strong experienced manager and gave Scardino fulsome praise.

    He said: "There are many numbers to represent Marjorie's achievement but there is a bigger point – Marjorie has built a company with a strong sense of purpose, the sort of enduring company in the famous business book we published, Built to Last."

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    I cannot say I know Marjorie Scardino well. And I have little knowledge of her role as Pearson's chief executive. But in my informal talks with her she has made one thing abundantly clear: she has an abiding passion for newspapers.

    I am not sure whether that personal preference played a part in the fate of the Financial Times. I like to think it did because, throughout her 15 years at Pearson's helm, there have been continual rumours about the paper being sold off.

    It was never going to be an option while she was in charge because she simply loved the paper, its journalism and its ethos. She ensured that it had a safe haven inside Pearson.

    Of course, the FT and the group of which it is part, needed to justify itself by turning a profit, which it certainly has done in recent years. (And the paper alone makes money, incidentally.)

    Now that she is to leave questions about its future will undoubtedly be raised once again. For the moment, let's leave that speculation to one side and pay tribute to Scardino's faith in, and support for, the Financial Times.

    It springs from her own journalistic background. Marjorie Morris, as she then was, dropped out of law school at George Washington University to become a journalist with the Associated Press in Charleston, West Virginia.

    After rising to desk editor she met a rookie reporter called Albert Scardino and romance blossomed. They married in San Francisco where Marjorie returned to university and duly gained her law degree.

    After a couple of years, the couple moved to Savannah, Georgia, where she became a partner in a law firm. And it was there in 1978 that they founded their own newspaper: the Georgia Gazette.

    The paper, characterised as a "feisty alternative weekly", won editorial plaudits (including a Pulitzer) for its campaigning journalism. But it failed financially and closed in 1985, thus providing a valuable, if painful, lesson for Marjorie about the publishing business.

    Albert joined the New York Times – covering media, I think – while Marjorie managed, against the odds, to land the job of managing editor of the north American division of The Economist magazine.

    She oversaw the doubling of its US circulation and was rewarded for her success in 1992 by becoming chief executive of the Economist Group, which brought her to London.

    Within five years she was given the infinitely more complex task of running Pearson's global empire. I ought also to mention that Albert was an executive editor here at The Guardian for a while and maintains a close interest in media affairs (see his recent piece on the Leveson inquiry).

    It's fair to say that despite the wide-ranging concerns at Pearson that have taken her away from newspapers, Marjorie still has a beating journalistic heart. The FT was always safe in her hands. Will the new Pearson chief, John Fallon, feel the same way?


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    Pearson's new CEO, John Fallon, says company is committed to FT, but City analyst predicts possible 'trophy hunt' by buyers

    Pearson could offload the Financial Times for as much as £1bn in a "trophy hunt" by potential buyers, after the head of the company's education division was announced as the new chief executive, replacing Dame Marjorie Scardino.

    The company announced on Wednesday that John Fallon will take over from Scardino, who is stepping down after 16 years running Pearson, from 1 January 2013.

    Fallon lost no time in reaffirming Pearson's continued commitment to the FT in a conference call with journalists on Wednesday morning, saying it is a "highly valued and very valuable part of Pearson".

    However, City analysts predicted that Pearson's FT Group, which includes the Financial Times and a 50% stake in the Economist Group, publisher of the Economist, could achieve as much as £1bn if Fallon pursues an aggressive sale.

    Earlier this year, Citigroup speculated that intense interest from buyers could mean FT Group might sell for as much as £1bn, although based on the division's actual financial performance, the bank thought it was worth closer to £600m.

    Fallon is described by analysts at Liberum as having no "emotional commitment" to FT Group and suggested a figure of £770m on Wednesday morning if Pearson were to sell the division.

    Deutsche Bank argued that his arrival might accelerate Pearson's digital transformation, including realising the "value tied up in non-core assets such as FT".

    "What makes this really interesting is if it ended up being a trophy asset hunt," said one City analyst. "The question is who wouldn't want to own the FT. Russian oligarchs, a wealthy Middle Eastern owner would get more status than owning a football team, or a trade buyer like an Axel Springer or Bloomberg."

    Investec reckoned FT Group would be "very highly valued given its status", with a price tag of about £750m, adding that another division, book publisher Penguin, might get £650m if Fallon chose to divest it.

    "We think Pearson would have sold if good offers had been received in recent years," said Mark Braley, an analyst at Deutsche Bank. "A change in chief executive will be seen as suggesting an exit is more likely."

    City analysts have also focused on the potential destabilising effect among senior management of the promotion of Fallon.

    UBS argued that many investors will be surprised at his appointment – with Rona Fairhead, chief executive of FT Group and a former chief financial officer, and Will Ethridge, the head of the North American Education operation – tipped as possible successors to Scardino. John Makinson, the head of Penguin, had also been considered a potential successor to Scardino.

    "A period of uncertainty is coming," said Claudio Aspesi, an analyst at Bernstein, citing management retention as one possible issue.

    Steve Liechti, analyst at Investec, said: "The near-term negative is management hiatus given a number of talented divisional level executives who may have wanted the top spot."

    Fallon has been chief executive of Pearson's international education business since 2002 – starting with Europe, Middle East and Africa, before adding all markets outside North America – and a consistent presence at analyst meeting and investor events in recent years.

    Under his tenure, the international education business has seen revenues near quadruple from £322m to £1.4bn and profits soar from £12m to almost £200m.

    "The choice of Fallon reflects the fact that [international education] will be the fastest-growing unit for the company going forward," said Alasdair Reid, an analyst at UBS.

    FT Group reported sales of £216m and profits of £22m in the six months to the end of June.

    Sales at Penguin fell 4% to £441m in the first six months of 2012, with adjusted operating profit down 48% to £22m, with Pearson in part blaming the runaway success of EL James's Fifty Shades of Grey and The Hunger Games, published by rivals.

    Pearson's share price fell 6.79p, about 0.5%, to 1,230p in early trading on Wednesday following the announcement of Scardino's departure.

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    Majorie Scardino's departure as chief executive leaves the way open for new boss John Fallon to restructure

    Ever since Dame Marjorie Scardino famously said that the Financial Times would be sold "over my dead body" a decade ago, the position of the Pink 'Un in Pearson's portfolio has been sacrosanct.

    Scardino's departure as chief executive has inevitably put the spotlight on Pearson's commitment to the FT. However, some analysts believe that if her successor John Fallon wants to restructure the company, it could be Penguin that is disposed of.

    Penguin, the home to authors including Jamie Oliver and Jeremy Clarkson, has been identified as the weakest link of the major media assets in the portfolio. The book publisher, operating in the most mature media market, made profits of £111m last year, giving Penguin a valuation of between £650m and £800m.

    "If they want to sell something non-core then selling Penguin is the obvious choice," says Alex DeGroote, an analyst at Panmure. "It makes a bigger profit [than FT Group] and there is a much poorer strategic fit. FT Group profits will respond to the business cycle, it is doubtful Penguin will. It is hard to see a great growth story in a 10-year view."

    DeGroote believes Penguin would make a perfect addition to the publishing company that Rupert Murdoch intends to set up to house assets including the Wall Street Journal, the Sun and the Times papers, and his book publisher HarperCollins. HarperCollins is about 80% of the size of Penguin globally. "The proposed publishing company could do with a bit more critical mass," says DeGroote. "It is a bit far-fetched to see Murdoch buy the FT – they have the Wall Street Journal – but not at all far-fetched to see them buying the imprints under Penguin."

    The counter view is that Penguin could remain valuable by exploiting greater synergies with Pearson's education assets.

    In spite of the extensive coverage it receives in the media, FT Group, which includes a 50% stake in the Economist Group, is a small part of Pearson, accounting for just 7% of its £5.9bn revenue. The Financial Times alone is thought to account for just 4%, although Pearson is coy about figures when it comes to the newspaper. Adjusted profits at FT Group are expected to be about £50m this year, a small fraction of Pearson's £1bn.

    Eager analysts have put a price tag of between £500m and £800m on FT Group – Pearson's stake in the Economist Group representing more than half of most of the estimates – with Bloomberg cited as a particularly good fit to snap it up.

    Fallon, who has a low profile (although he was a press officer for the company in the 1990s), has been instrumental in building Pearson's education business internationally. At his first public outing in the job last week, he was obliged to dampen speculation about the possible disposal of the media assets – instead he portrayed them as part of Pearson's digital transformation.

    "The strategic themes that have driven the growth of the business I've been directly responsible for over the last decade have driven North America, Penguin and the FT as well, they are Pearson-wide," he said. "[The FT and Penguin] are valued and valuable businesses in their own right, and very much with the strategic grain of what we are trying to do across Pearson."

    FT digital subscriptions grew by almost a third last year, to more than 250,000, adding up to well over 40% of total paid circulation. And at Penguin the digital transition is moving at a pace, with ebooks jumping year on year from 6% to 12% of the publisher's £1.05bn in revenues in 2011.

    But it is the education division that is Pearson's future, accounting for 75% of total group revenue and about 80% of operating profits. With £1bn to spend on acquisitions and headwinds facing the US education operation, which represents almost 50% of Pearson's total profits, it is perhaps clear why Fallon was chosen ahead of more apparently fancied internal candidates.

    Handling Rona Fairhead, the chief executive of FT Group, Will Ethridge, the head of the North American Education operation and John Makinson, Penguin's group chairman and chief executive, will be high on his to-do list. Financially too there is work to do to please investors. "Pearson underperformed the FTSE by 7% and is easily the weakest performing medium-to-large sized media company over the last year," says DeGroote. "It was outperformed by ITV, BSkyB, Reed, WPP and DMGT."

    So the FT may be safe for now, but given the constant need to maintain stock price performance, there is always a City analyst ready to argue that Pearson will may one day sell its prized newspaper.

    "A clear message was sent with Fallon's appointment, the company is positioned in education and FT Group is a less strategic asset than it was 10 years ago when Scardino made her comment," says Will Smith, an analyst at Jefferies. "I would be surprised if they haven't previously had any discussions on a sale. They need to invest to continue to grow and selling assets like the FT would certainly generate cash."


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