Swedish trade mulls Storytel-Norstedts deal

Storytel’s purchase of Sweden's second largest publishing house, Norstedts, announced yesterday (22nd June), was no surprise to the trade.

The rumour had been going around for weeks. First reactions, when the deal was confirmed, were characterised by a positive but cautious approach. It is not obvious to the trade what Storytel wants to do with Norstedts. It has acquired a publishing house that lacks a clear strategy, one that has spent the last five years or so totally focused on cutting costs. And Storytel has no experience of publishing at Norstedts' level.

Storytel is promising to leave the current management of Norstedts at the helm just to calm the market, but people believe that will only last as long as it takes Storytel to make a proper analysis of its purchase.

Pelle Andersson, publisher at Ordfront Publishing, commented: "Storytel must have realised that Norstedts hasn't been in good shape in recent years. Everybody knows that."

It is obvious to trade observers what's at the core of the deal. Norstedts has not kept up with the development of the digital market so Storytel is buying into a potential goldmine. The publisher's backlist holds nearly 1,000 fiction titles ready to be transformed into digitally streamed audiobooks. This in itself is enough to cover the relatively low price, £12.5 million, that Storytel paid for Norstedts.

Hakan Rudel, c.e.o. of Bonnierförlagen, said: "A publisher that does not invest in the future while at the same time conducting their existing business is prone to end up like this. New players are buying old players. Small companies buy big companies. Had Norstedts themselves taken hold of the digitisation of their books they would never have been an interesting target for Storytel to begin with."

Most publishers are pleased that at least the buyer is interested in, and works with, literature. It has long been a fear in the trade that one of all the venture capital companies that have looked into Norstedts during the last three years would buy the publisher and then split it up, and in the process destroy the balance in the market. That they didn't in itself says something about the value they put on Norstedts.

But no one has a clue what Storytel plans to do with Norstedts. They know what happened when Storytel bought Massolit Publishing House last year. Storytel slimmed Massolit¹s list down to titles and genres that work well as audiobook titles. The rest was shut down, including a non-fiction list that not long ago was one of the most prominent in the Swedish book trade. Ordfront's Andersson asked: "Will they do the same to Norstedts? I don't think they can. It wouldn't be good business".

So what will Storytel - which has shown great skill and courage in the development of its own company in recent years - do with Norstedts?

Bonnierforlagen's Rudel commented: "From our perspective, it is too early to say how it will affect us. If Storytel lets Norstedts stay independent and continue business as before it has no special implications for us. If they incorporate it with Storytel, it will be a completely different thing. For the first time, we will have a competitor of a similar size. It could be fun. It is good to have a competitor who does things differently."

What he does not say is that Storytel's purchase of Norstedts is a strategically important step for Storytel, which now gets a list that can almost compete with Bonnierförlagen when it comes to digital audiobooks.

An important position when Bonnierförlagen's BookBeat starts to compete in earnest in an audio market where Storytel today has a de facto monopoly.