Longhorn publisher goes digital to lift earnings

These are uncertain times for Kenyan publishers.

With hand-held devices becoming more affordable and data costs going down, fewer and fewer people in the country are consuming the printed word each year.

In addition, school textbooks — which account for 94 per cent of the value of the country’s Sh10 billion publishing industry — are headed for a major overhaul, the result of an anticipated curriculum change and the execution of a national digital literacy programme.

The Government two months ago received proposals from 26 prospective content producers for its Sh17 billion digital literacy programme.

A short list of these prospective bidders is expected at the end of this month, from which the winner will then be picked to supply digital learning tools and content by January 2016.

Make history

Longhorn Publishers, one of the country’s leading publishing houses, illustrates the upheavals that have accosted the publishing industry the past decade.

In 2012, Longhorn made history by becoming the first publishing firm in Africa to be listed at a securities exchange. The firm listed 58.5 million shares at an introductory price of Sh14 each.

Last month, the firm published its full-year results for the year ended June 2015, posting a 39 per cent drop in sales revenue from Sh1.396 billion the previous year to Sh848 million.

Profit after tax also went down by 24 per cent to Sh71 million.

Longhorn stated that the depressed sales were a result of the poor performance in the company’s Uganda and Tanzania subsidiaries, as well as reduced book sales across the whole region.

The publisher’s shares have dropped from a 12-month high of Sh30.75 to Sh4.70 as at Friday.

Last week, the company launched four reference books expected to bring in more than Sh1 billion in revenue over the next three years, making it one of the largest distributors of the reference materials in the region.

The reference materials include a dictionary, kamusi, Bible and educational charts.

“We looked at the needs in the market and realised that reference books are used as reference materials for all subjects, thus providing the perfect approach for us to increase our market share,” said Simon Ngigi, Longhorn’s group managing director.

Company profile

He added that the firm, which has Centum Investment as one of its major shareholders, is in the middle of executing a growth strategy that will see it adapt to the changes in the market as well as make inroads in other markets.

“The decision to list has been very good for the company. In the first place, it has really improved the company profile and people nowadays have a better understanding of Longhorn and of the publishing industry,” Mr Ngigi told Business Beat.

He added that listing has also provided the firm with the capital to expand into the region.

“We have set up in Uganda, Rwanda and Tanzania, and have distributor agreements in Zambia and Malawi. Soon, we shall be going into South Sudan, Zimbabwe and Ethiopia.”

With planned Sh150 million and Sh80 million investments in its Tanzania and Uganda subsidiaries, respectively, Longhorn is looking to cement its foothold in regional markets ahead of a prospective cross listing.

However, the publisher states that there have been challenges in accessing quality content and the right agreements at affordable rates.

“In the last five years, there has been an increase of between 10 to 15 per cent in the cost of content,” said Ngigi.

“This is because content has become very expensive. If you are looking, for example, for images to use, content producers are charging more because it is also costing them more to produce than it did before.”

Ngigi, however, said the demands in the market far outweigh these incremental costs, with publishers needing to adopt cost-effective strategies to maintain margins.

“Our board has ensured the crafting of deals has consistently been beneficial to Longhorn and its stakeholders.”

Piracy menace

Ngigi added that the company’s distribution model also helps it maintain its branch network and strengthen its hold in the market.

“We believe the best way to ensure our products reach the last mile is to work with distributors and book sellers. In some countries, the government buys the books directly from publishers and sells them to schools, cutting out the distributors. But we have found book distributors important in reaching every corner of our market.”

Longhorn has more than 1,000 booksellers in Kenya, and a combined 2,000 in the other countries it has a presence in, which enables the publisher have its products in almost all bookshops within a week of publication.

Ngigi added that the publisher has adapted to modern realities, and is digitising its content in readiness for the anticipated shift in how students will learn.

“Digital publishing has cut our production and distribution costs by half, and the first step was to covert what we already have in hard copy into digital formats, which we have done to some titles,” he said.

However the large costs of data encryption technology are eroding the gains to be made from digital publishing, and piracy remains a menace for both the digital and paper formats.

Kenya’s publishing industry loses 35 per cent of earnings to piracy each year, and despite several initiatives by stakeholders and the Government, little headway has been made in eradicating the economic crime.

Ngigi and his counterparts in the industry are now waiting to see how the Government will execute the digital literacy programme.

“The Government needs to make sure that as many gadgets as possible are available in the schools because the availability of the hardware will facilitate the consumption of digital content, complementing what is available in paper formats,” he said.

The digital literacy programme followed the re-evaluation of the free laptops policy, which was a central pillar of the Jubilee administration’s pre-election promises.

The original plan to have school children supplied with laptops was challenged for not incorporating other devices critical to digitising the learning process, such as tablets and projectors.

Further, content producers responsible for digitising the school curriculum successfully lobbied the Government to have them incorporated in the project.

The digital learning programme is heavy on research and development of educational content, which has seen more than a dozen private and public universities form consortia with publishing, software and hardware firms to supply this content.