Almost immediately after he got his feet under his desk two years ago, Nigel Portwood issued a call to arms to the troops at Oxford University Press that certainly ran against the grain of industry thinking during publishing’s Age of Austerity. “I said: ‘I think we should be spending a bit more money, and I want as many ideas as you can give me about where we should invest,’” he recalls.
What the new OUP c.e.o. found was that his staff are not short of ideas. “In the first year we had a good range of ideas, in the second year it has been a torrent. So many excellent suggestions came back I had to ration what we invested in—not because of finances, but because I had to think about whether we had the physical resources and time to achieve all this.”
Portwood happily admits that he started from an advantageous point at OUP in 2009. “It was not an organisation that was in any sort of crisis. It was very sure of itself and in a good position.”
The previous c.e.o. Henry Reece had done much in his 11 years to transform the successful but arguably sleepy and self-satisfied academic publisher into a professional modern powerhouse, and went into his retirement on a high: OUP’s 2009 results, the last full year under Reece, achieved then record turnover (£587.8m) and profit (£84m). When Reece initially took over at OUP in 1999, full year revenue was at £200m.
Even coming from that fiscal strength, there was something of a new broom feel to Portwood’s appointment. Previous OUP c.e.o.s more often than not came from the groves of academe. Dr Reece earned a DPhil in Modern History from Oxford in 1981. Reece’s predecessor but one, Sir Roger Elliott, was an eminent scientist and Oxford’s Wykeham Professor of Physics before taking the OUP top job (Elliott was, rather advantageously, the leader of the search committee to select the c.e.o., and passed over a young Richard Charkin to nominate himself).
Though Portwood is not short of degrees himself—he has an MBA from INSEAD in France—his path has been different. He worked as a media consultant directly out of university and his publishing background includes the cut and thrust of being director of strategy at Pearson, where he worked with Marjorie Scardino to acquire and sell businesses; head of Pearson’s sprawling Europe, Middle East and Africa division; and a seven- year stint at Penguin and Pearson in the US where his various roles included driving Penguin’s digital business development and having group-wide responsibility for developing Pearson’s digital strategy. He is also young—a boyish looking 45—and a (gasp!) Cambridge engineering graduate. In fact, he is the first person to run OUP in its 425-year history without an Oxford degree.
A CV with a combination of digital strategy and experience in emerging markets is undoubtedly what piqued OUP’s interest. Portwood shrugs: “I don’t know why I was lucky enough to be chosen to do the job, but I imagine it’s that I have focused my career on themes that are running through this industry at the moment: globalisation, digitisation and increasing competitive intensity.”
Portwood’s two main strategic planks in the past two years have been digital and growing OUP throughout the world. Perhaps the most important move on the digital side was adding a new management structure, including hiring former Oxford Journals IT director Pam Sutherland to the new role of chief information officer, with responsibility for all of OUP’s digital and IT infrastructure. Portwood says: “I have focused a huge amount of my time getting the organisation more digitally capable, both in terms of systems and infrastructure. And just in terms of being more ambitious about the publishing side and experimenting a bit more, which I think is something we didn’t necessarily do previously”.
Globalisation has been tackled by another restructure, with the creation last year of the Global Academic Business, a new worldwide division which combined OUP US, OUP UK and Oxford Journals, a reorganisation that Portwood describes as “the biggest structural change at OUP in some decades”.
He adds: “In some ways that change was evolutionary because we had been working towards closer links across those academic divisions. Yet nobody had taken the leap to say this is a global market, this is a market where formats no longer matter. The idea of books versus journals versus reference materials . . . that’s all gone now. I suppose that’s the biggest change that we made: acknowledging that the publishing has to be format independent, that we have to invest more in online and we have to think about moving resources across the business.”
So far, so good. In OUP’s 2010/11 results, the first full year under Portwood’s stewardship, the OUP has reported a record turnover of £648.6m (up from £611.9m in 09/10) and after-tax profits of £113.9m (a rise from £90.8m).
For a brand so rooted in British culture, it is worth pointing out that an increasing amount of sales are coming from outside the UK—nearly 90%. With that increased globalisation come challenges from the vagaries of local economies and political climates. OUP España is the OUP’s third biggest market (after the US and UK), but had a difficult year with Spain’s ongoing economic turmoil and a cancellation of school textbook renewal programmes in two of the country’s regions.
The Arab Spring affected OUP’s burgeoning Middle East business—not least with staff safety concerns, as it has several offices throughout the region. “It is a big emerging market for us and the next few years will be difficult there. Long term we’re pretty excited about what’s going on in the Middle East. Don’t forget one of the things we’re here for is dissemination of information. The Arab Spring, apart from being democratic and a wonderful thing for the human race, means that we are going to be able to disseminate more of our materials in that market.”
More of the business is coming from the emerging markets—37% last year, up from 30% five years ago. Most of that is from “the usual suspects” of China, India, the Middle East and Latin America, particularly Brazil. Portwood says: “A key in education is that we are a local publisher in a lot of those markets. As much as we are able, we are actually in situ, producing local materials for local people, ministries and schools.”
Working out how much of OUP’s revenue stems from digital is problematic even for the OUP’s c.e.o. “We have these debates about how much of a percentage digital accounts for, and it is very difficult to judge. I don’t think we sell any product without a digital component. When you have a hybrid print and e-textbook, for example, what are you selling, the physical or the e-book?”
The physical textbook, he believes, is anything but dead—particularly in OUP’s US market—mostly because the most popular device, the Kindle, is still monochrome. He says: “Students in the US are going back to school now and they are still buying the print books. We are still not seeing the device penetration in the higher education market that will allow that digital revolution to happen. I know it’s coming, but it’s a question of whether it’s this device or the next one."
Portwood is unfazed by whatever “that” device will be. “As long as we’re still producing fantastic content and as long as it’s in a format that enables it to be moved around, reformatted, messed with and cross- referenced, I’m not particularly worried. Digital is an opportunity not a threat, because now you can do more things with the content.”
One of OUP’s sacred content cows is, of course, the Oxford English Dictionary. Its importance is driven home to Portwood every day when he arrives in his office and sees a first edition sitting on his bookshelves. He found himself at the centre of a mini media storm last year when he casually mentioned that the OED’s next edition (due in about 10 years’ time) might—might—not have a print edition. This would have hardly raised an eyebrow with anyone who knows the economics of the dictionary and reference market, but the mainstream press leapt on it.
“It’s an interesting debate—I don’t often get on the front page of the New York Times,” Portwood says dryly. “It does show you how important a cultural resource the OED is for the whole world. But also this issue of print moving into digital is on everyone’s mind. The publishing industry has never been as exciting.”
He does have faith in the long-term viability of the OUP dictionary programme, even when it is competing with a surfeit of free information. Free content, he emphasises, that is often licensed from dictionary providers such as OUP.
“I think we have a real long-term opportunity,” he says. “Others are building that free market based on advertising with content from publishers like ourselves. We are one of the few publishers still investing in keeping that content up to date. At some point, once these models prove out, we’re going to be holding the cards. Because we will be able to withdraw our content from free providers, and move into the next phase of the business.
“At the moment, our dictionary business is as vibrant and exciting as it’s ever been. Now instead of just worrying about print or straightforward e-books we have all these licensing channels. We can embed dictionaries in other people’s hardware—every iPad, Kindle and Apple computer comes with an Oxford dictionary. This material has to be good—you can’t get away with a half-baked definition. I’m not at all concerned with my dictionary business. I know that it will be very different in 10 years’ time, but I’m looking forward to it.”
Portwood is not just the c.e.o., but “secretary to the delegates”, a traditional title that is four centuries old. He reports to the vice-chancellor and the delegates, a group of the university’s academics who, as they have since the 1600s, approve the publishing programme.
Being part of the university was, for Portwood, his biggest change since moving over from Penguin. “Our primary purpose is to support the university’s mission of excellence, research, scholarship and education. All publishers think they do something important for humankind and they are right to think that. Yet here the extent to which that is understood and felt is far greater. It is incredibly powerful; it really does drive what we do.”
The university profits from this—OUP often transfers some of its revenue over to the university (in 2010/11 it was a whopping £234.7m in cash). This arrangement—and OUP having tax-free status as part of the university—has attracted some controversy in recent years, particularly when the Charity Commission started reviewing its guidelines in 2008. Portwood says: “We are part of the university, and as long as the university upholds its central mission it will retain its charitable status.”
OUP’s links with the university also makes its position in another potentially vexing issue, namely journals pricing, a bit different than its competitors’. On the one hand it has a mission to disseminate information as widely as possible, yet on the other it has to make publishing a viable business. It has experimented with various subscription, open access (essentially free journals) and hybrid open access (a combination of free and paid) models.
Portwood argues that the journals market now shows how publishers are innovating, and it is one of the reasons why he is so optimistic about digital publishing. “Users can now access more content more easily, for a lower price per article than they ever had before. They have the added functionality of cross-referencing and searchability that was never available. The industry has invested to enable this to happen; and the industry has grown as a result.”
Portwood’s plan, obviously, is to continue to grow OUP’s business organically. Yet with a background in buying and selling companies, will acquisitions be on the table? “Looking forward, it will be part of our story,” he says. “And it is one of the questions I asked when I took the job: ‘Why haven’t we done any acquisitions?’ The university told me that it wasn’t really part of the culture.
“Will we be able to make a transformative acquisition? We would be able to financially, but I’m not sure it is something we would want to do. I think we will be much like our successful competitors, like Pearson, who buy businesses that make sense, that add value, that they can absorb easily and don’t create or introduce significant risk.”
The bottom line, Portwood says, is that OUP will strive to be more ambitious under his stewardship. “That’s my style, I have a strategic background. That wasn’t necessarily the way this organisation approached its plan previously. Yet my predecessor had a different remit, he had to get this organisation more professional and he did a fantastic job. That was entirely appropriate for the time.
“Yet our industry has changed so much in the past five years—if you are not thinking ambitiously now, you’ll have a problem in a few years’ time.”