Seagull & Deseret Book at War

I just got off the phone with a Salt Lake Tribune reporter asking questions about Deseret Book’s decision to pull its titles from Seagull Book & Tape. I expect an article tomorrow. But it sounds like neither company is coming clean with exactly what the dispute is all about.

The issue first appeared publically on Michael Cleverly’s blog which reported Deseret Book announcing the policy to its staff in late June. Robison Wells at then reported that Covenant Books, Seagull’s sister company, has told some of its authors about the situation, apparently to assure them that Covenant continues to sell its books to Deseret Book.

Most of the speculation on these sites assume that Deseret Book is taking this action to force traffic to its own stores, where it can charge higher prices and get that traffic to make other purchases. The claim is that Deseret Book objects to Seagull’s high discounts.

I don’t buy this argument. Not only is such a move a violation of the anti-trust law, I don’t think anyone who knows the industry well would think it will work. Are customers really looking specifically for the 120 to 140 Deseret Book titles involved so often when they are in Seagull stores that they would leave the store and go to Deseret Book’s store as a result?

A large portion of store sales (50% or more, if memory serves) are impulse sales. The customer sees something on the store shelves and purchases it. If it isn’t on the store shelf, it might as well not exist, and the customer either buys something else or nothing at all.

So, the result of Deseret Book’s move will probably be that Seagull Books’ sales will drop (by a large portion of its sales of Deseret Book titles), and Deseret Books’ own sales (to Seagull) will also fall. Who will get hurt worst? Probably Deseret Book, in my opinion. Deseret Book should get 50% to 60% of the cover price when it sells a book to Seagull, whereas Seagull nets the cover price, minus whatever discount it is giving customers, minus what it pays to Deseret Book! On a book sold at 20% off, Covenant has lost 20% or a little more, while Deseret Book has lost 50% or more!!!

Of course, not all those sales will be lost. Some Seagull customers will go to Deseret Book looking for that same book. Others will simply purchase other books on the shelf at Seagull. Regardless, this move will probably cost Deseret Book more than it costs Seagull.

So why do it? Deseret Book gives a clue in a letter from Vice President Keith Hunter, posted on Six LDS Writers and a Frog. He says, “Deseret Book and Seagull have a long-standing difference in views regarding how Deseret Book products should be merchandised, promoted, and treated.”

I wish I knew exactly what this means. It sounds like it is talking about how Deseret Book’s titles are placed in Seagull’s stores, although discounting might be part of it (I’d speculate that if discounting is part of the issue, then it has more to do with discounting making books look cheap somehow, than the discounts being unfair compared to Deseret Book — after all, Deseret Book is still selling to Walmart, etc.).

Is Seagull putting Deseret Book’s titles on the bottom shelf or something? Are they refusing to sell preferred space in the stores? (Most store chains sell end-caps and other shelf placement to producers. That display on the front table you saw going into Barnes and Noble could have cost the publisher $40,000 or more!).

Unfortunately, we don’t know what the exact issue is — at least not yet. Hopefully this Salt Lake Tribune publisher can get someone to spill the beans, or someone on one of the blogs covering this issue knows someone who can tell us exactly what’s going on.

Until then, its hard to say what will happen or even who is at “fault.” It could be either side — it could be Seagull is being unreasonable about merchandising Deseret Book titles — and it could be Deseret Book is being unreasonable in its expectations. Complicating the matter is both chain’s well-known tendencies to favor the publications of their sister companies.

I know I have been critical of Deseret Book in the past (and its likely I will continue to be), and my first reaction is to suspect that they are the problem. But I also know that Seagull hasn’t given independent LDS publishers the same kind of placement that it gives Covenant’s titles.

What is clear is that the LDS marketplace looses as a result. Some portion of those sales, in which consumers purchase Deseret Book titles at Seagull stores, will never happen. And the lost profits on those sales make Seagull less able to invest in other inventory and Deseret Book less able to launch, promote and distribute other titles.

Like almost every war, no one really wins.

35 thoughts on “Seagull & Deseret Book at War”

  1. Here’s my question, though:

    If DB’s issue is Seagull’s discounts, then why will DB continue to sell to WalMart, Sam’s Club, and Costco (who are the discount kings)?

    If DB’s issue is placement and shelf space, then why will DB continue to sell to B&N and Borders (who put all LDS books in a back corner) or Costco and Sam’s Club (who put all books, regardless of genre, in unorganized stacks on a big table)?

  2. Rob, you are correct. I gave you the credit because you wrote one of the posts on Six LDS Authors and a Frog on this subject. Please excuse my error.

  3. Regarding discounts, as I tried to say above, I don’t believe discounts is really the issue. But, Rob, you are right on a purely financial basis, it doesn’t make sense to sell to Walmart, etc., and not to Seagull. This is one of my reasons for suggesting that it is not about discounts.

    As far as placement is concerned, I think you are comparing apples and oranges. B&N, Borders, Costco, Sams Club, Walmart and the rest are very different from Seagull, Deseret Book’s own stores or any other general LDS retailer. Its simply not possible to expect the same placement in a store that doesn’t focus on a particular type of good with stores that focus only on books and LDS products.

    Regardless, since we don’t know exactly what the placement or merchandizing issue is, its hard to even know that B&N, Borders, Costco and the rest are NOT giving DB the placement asked.

    Everyone who is fairminded wants a level playing field. That means that similar retailers should get similar treatment by publishers, and that similar publishers should get similar treatment by retailers.

    Unfortunately, we don’t have enough information to know if that has happened or not.

  4. Not selling books to a retailer over issues like “placement” and “promotion” sounds like cutting off your nose to spite your face to me.

    The only possible excuse I can think of would be if Seagull were pouring dirty water over the books or selling pornography or something like that.

  5. Kent, you have some good points. I should mention that in my opinion both DB and Seagull promote their own stuff. DB may not like the placement of their stuff in Seagull, but as an author, I know my placement in DB is horrible. They both play this game. I personnaly think DB does it worse, but that’s only an opinion.

    As I mentioned over on my blog, the local DB sold out of my book in about 4 weeks (despite just sitting on the back shelf), but they never reordered my book. They weren’t interested in selling a book that appeared to be selling farily well. But if you walked the shelves, and saw which books were face out, they were all DB, or DB imprints. Those were the books being pushed.

    What the LDS market really needs is for there to be a division between publisher and bookstore. Otherwise the books that are pushed are what the publishers thing you should be reading, rather than what you want to read.

    It’s a crazy business… ūüôā

  6. Thanks for this, Kent.

    I had noticed that Seagull pretty heavily pushes Covenant. In fact, I remember figuring out that the two must be related simply because of the placement and advertisement of Covenant books at Seagull. All other books are back in the shelves.

    However, I still don’t understand how this would benefit Deseret Book. Even if their books are being treated as second-class, it still seems that their losses are less than what they would be by cutting their Seagull sales altogether.

    It kind of makes me wonder if this is really just a threat of sorts. “If you don’t give our books proper placement, we’re going to pull them all out. It will hurt us, but it will hurt you more.”¬Ě That would be really crazy if that’s what’s going on here.

  7. This whole issue is discouraging to me. It seems as if we’re expected to be good Latter-day Saints and good Christians in all facets of our lives, except business. The golden rule certainly doesn’t seem to apply to capitalism.
    This separation of Church and Commerce is very prevelant among Mormon business folks, from what I’ve seen. Vicious.

  8. Mark, you are right. It is cutting off your nose to spite your face.

    A reader, Russell Page, sent me an Ogden Standard-Examiner article (not available online, as far as I can see) published today. That article cites an unnamed Seagull Book employee as saying that Deseret Book titles account for 50% of Seagull’s book stock and 30% of its audio stock.

    If that is true, then this action could mean Seagull will take a hit of 20% to 40% of its business.

    But while I’m sure it isn’t as big a hit for Deseret Book, I can see it being as much as 10% of its business.

    In either case, this is a huge hit, the kind of thing that could put some companies out of business.

  9. Matthew wrote:

    What the LDS market really needs is for there to be a division between publisher and bookstore. Otherwise the books that are pushed are what the publishers thing you should be reading, rather than what you want to read.

    Matthew, welcome to A Motley Vision! I couldn’t agree with you more. Would you like to write the General Authorities on Deseret Books’ board? or should I? We’ll have to get them to sell either the publishing operations or the chain of stores!

    Oh, and if you know Lou Kofford at Covenant/Seagull, we’ll have to persuade him to do the same.

    Seriously, I wish I thought there was a way to get there.

    Of course, it is also possible that this current war will force one or both of the companies to restructure.

    We’ll see what happens.

  10. Well then, Seagull ought to start selling books published by Signature press. Signature books are reasonable price and insightful. DB books are too expensive, and even at Amazon they are way overpriced. My two cents.

  11. This is really ridiculous and unfortunate. I agree with Mahonri that a bookstore run by the Church should perhaps try to be a little more Christ-like, and less “bottom line, cut-throat, if you don’t promote our “premier” books the way we want, we’ll take them away.”

    If you were the president of Deseret Book, wouldn’t you think that allowing books about Christ and his prophets to have as wide an audience as possible would be the primary goal? Well, apparently not.

    Apparently, Seagull was providing too much competition, so the strategy is to drive them out of business.

  12. The quotation from Jeff Simpson suggests that DB has concluded that Seagull takes advantage of DB’s marketing efforts; i.e., DB advertises on TV, but people buy the books at Seagull. If DB was acting as a publisher instead of as a retailer, it would be happy for sales wherever they take place.
    DB considers itself a “premier brand,” but it’s difficult to position a retailer as a “premier brand” when it sells generic items (books that can be purchased at many locations). Since most sales are impulse buys, I doubt a full retail price strategy at a “premier” bookstore will succeed.
    It looks to me like DB wants to follow the LDS distribution center approach, as an exclusive retailer–except the part about selling at cost.

  13. What part of Deseret’s book sales are local to the area served by both chains, and what part is worldwide? I know that I buy all of my Deseret Books and just about all my books period from This needs to be factored into the speculations about what is going on, it seems to me. I don’t even see how Seagull Books could stay in the business of selling Church books if it lost its ability to sell Deseret Books.

  14. Joe Vogel posted the link to the new Salt Lake Tribune article already.

    For the record, I didn’t think I said what the reporter quoted me as saying! (I know, big surprise). I’m quite sure that I never said that I thought this would affect my own ability to get books into these chains — but in retrospect, I suppose it could have an effect. If Seagull Book is smaller and weaker as a result, it might purchase less material from small publishers with less popular products.

    I also didn’t think that I had said that I thought there was an anti-trust claim against Deseret Book. I don’t. While I think that Deseret Book is more of a monopoly that the anti-trust lawyer cited apparently does, I don’t see any evidence that Deseret Book is treating Seagull Books differently than any other LDS bookstore. The evidence may exist, I just don’t see it yet.

    Oh well, overall the article is ok, but incomplete. We’ve covered the issue better in this and the other blogs I’ve mentioned above, IMO.

  15. Studio’s comment on Seagull purchasing more Signature Books is a good thought, by the way. Not that I think Seagull will do so, but the strategy could help them weather the problem.

    A part of the issue Seagull faces is how to minimize the sales loss. I suspect the best way to do this is to fill the empty places on its shelves with titles from other publishers. They already have their own titles in place, so presumably shifting their own books around won’t make much difference. But adding titles from smaller publishers gives consumers something to purchase and allows Seagull to still pick up some of the impulse buys that they will loose.

  16. Jonathan Neville writes:

    “If DB was acting as a publisher instead of as a retailer, it would be happy for sales wherever they take place.”

    Perhaps. But to argue Deseret Book’s side in this, they are going to a lot of effort to prepare marketing materials (posters and displays) and opportunities (author signings in stores, etc.) that Seagull is apparently not using. This effort costs money, and therefore that money is being wasted.

    But (as I now stop arguing Deseret Book’s case and switch back to criticism), I believe that Deseret Book had other remedies for this. IMO, they could have simply reduced the discount they gave Seagull on their books — increasing Seagull’s costs and increasing their revenue. The justification for this is that the additional revenue is needed to pay for the extra advertising Deseret Book has to do because Seagull isn’t doing instore promotion and merchandising.

    Did that idea occur to Deseret Book? I don’t know. It should have. But sometimes competitive situations or long-standing disputes like this one can cloud your thinking.

  17. John W. Redelfs asks:

    “What part of Deseret’s book sales are local to the area served by both chains, and what part is worldwide?”

    Good question. Its hard to divide up the sales here to figure out what proportion of Deseret Books’ sales are at risk. All 25 Seagull stores are in areas where there is a Deseret Book store, but Deseret Book has 17 stores (all outside of Utah) that aren’t directly competing with Seagull. My guess would be that Deseret Book’s website sells a lot more than Seagull’s does, and that each of the Deseret Book stores sells more than the Seagull store nearest to it. So, overall, my guess is that 40% to 50% of Deseret Books’ sales are in competition with Seagull.

    John also says:
    “I don’t even see how Seagull Books could stay in the business of selling Church books if it lost its ability to sell Deseret Books.”

    That’s exactly why this is so important, and what makes Deseret Book a near monopoly in my opinion (but apparently not legally, because legally you have to look at the national publishing industry, not just the LDS part).

  18. A friend once commented that she didn’t think of Deseret Book as a “real” bookstore, in that if you wanted to buy the latest Grisham there, you couldn’t. It’s a Mormon store. You go there to buy Mormon stuff, just like when you go to a Christian bookstore, you can find Christian stuff (including anti-Mormon stuff).

    If they were a “real” bookstore, then the national publishing industry would be a valid point of reference. But they aren’t competing with Barnes and Noble, unless they’ve changed their market position a lot lately. If I want to buy “Feng Shui in Five Minutes,” will Deseret Book order it for me?

  19. Kent said: “legally you have to look at the national publishing industry, not just the LDS part.”

    This is not necessarily so. The quotes in the article are cursory and (I suspect) fail to capture any nuance the attorney may have offered the reporter. Unfortunately, legal analysis rarely lends itself to terse quotes or sound-bites that are not misleading.

    To establish either a monopolization or attempted monopolization claim against Deseret Book, Seagull would have to establish (among other things) that DB has monopoly or market power–the power to control prices or exclude competition in the relevant market.

    Monopoly or market power is generally established by two types of proof: (1) direct evidence of an injurious exercise of market power, such as restricted output and charging “supracompetitive”¬Ě prices and/or (2) circumstantial evidence regarding the structure of the market, which generally involves (a) defining the relevant market, (b) showing the defendant owns a dominant share of the market, and (c) showing the existence of significant barriers to entry to the market/ showing that existing competitors lack the capacity to increase their output in the short run.

    Of course, “defining the relevant market”¬Ě is what we are talking about when we ask whether or not the relevant market is the national publishing industry. The legal definition of the relevant market: “the group of sellers or producers who have the actual or potential ability to deprive each other of significant levels of business.”¬Ě Also, the relevant market generally consists of two components: the product market (the products that consumers view as substitutes for each other), and the geographic market (the area of effective competition where consumers can turn for alternative sources of supply).

    As far as product market goes, I think there is a legitimate argument for defining the product market narrowly: DB is not merely a publisher or bookseller or even merely a Mormon publisher or bookseller. On the contrary, DB seems to be the exclusive source of a distinct flavor of semi-official devotional Mormon books. There is not an alternative source for Seagull to turn to for reasonable substitutes for the titles DB plans to withdraw from Seagull’s shelves. As far as geographic market goes, there are likely a few arguably legitimate market definitions: an argument may be made for several discrete localized markets where both DB and Seagull compete for walk-in traffic and impulse buys. However, with online booksellers and big-box retailers in the mix, an argument may also be made for a national market.

    Bottom line: Seagull may have an antitrust case against DB, but it would not be a slam dunk. Both sides would employ teams of economic consultants who would concoct competing models of the relevant market. Assuming Seagull can get over other hurdles (i.e., proving antitrust injury) the case would likely come down to which model the trier of fact (the judge or jury) finds most persuasive.

  20. Shawn, your legal analysis is instructive, and shows you know the subject much better than I. Thanks for adding this information.

    Despite this, however, I don’t believe a lawsuit is going to happen — and I’d say the odds are probably 90% or more against any lawsuit, for two reasons aside from whether the case could be successful or not:

    1. A lawsuit of this magnitude is probably outside Covenant/Seagull’s financial capacity.

    2. They would have to essentially sue the LDS Church.

    Now, if governmental authorities took on the issue, that’s another question altogether.

  21. St. Thomas says,

    1. DB did not make this move without a thorough legal review of the anti-trust issue.

    2. DB has already written and is holding the legal response to Seagull should Seagull threaten lawsuit. No formal law suit will happen.

    3. This will eventually kill Seagull, even if it takes 10 years.

    4. Before Seagull goes out of business and its resale value completely decimated, DB will offer to buy them out. The offer may even be modestly generous. The purchase agreement will include a non-compete clause and a confidentiality clause. The truth will never be known. (OR, the truth is DB has never liked having a competitor and hasn’t until now been willing to stoop this low. If it was wrong before”¬¶.what makes it so right, all of a sudden? Hmmmm.)

    5. DB will promptly close all competing Seagull stores, keeping the coveted Santa Monica and Oakland locations.

    5. With Seagull gone, DB will be free to charge any price it wants. The bad news for DB will be that without the competition, it will no longer have any excuses for mediocre performance. Sales will continue to decline and DB will go the way of the hospitals, department stores, and most colleges.

    6. With Seagull gone, Covenant will suffer and may suffer similarly.

    St. Thomas has no inside knowledge, just a lot of respect for DB’s aggressive business prowess…or is it desperation?

    I wonder when DB will excise the following from all of its publications:

    “I, the Lord, stretched out the heavens, and built the earth, my very handiwork; and all things therein are mine…
    For the earth is full, and there is enough and to spare; yea, I prepared all things, and have given unto the children of men to be agents unto themselves.” D&C 104:14, 17

    St. Thomas out.

  22. Wow, I think I’m naive. This issue has absolutely stunned me in how much of cut throat capitalism has infiltrated the minds of otherwise good members of the Church. I really wouldn\’t have expected something like this to happen. Mosiah Hancock in his autobiography describes a rather long and, at points, stunning prophecy from Joseph Smith. Mosiah seems to be a reliable source, but I could be wrong. But something he quotes Joseph as saying has haunted me since, “You will live to see men arise in power in the Church who will seek to put down your friends and the friends of our Lord and Savior, Jesus Christ. Many will be hoisted because of their money and the worldly learning which they seem to be in possession of; and many who are the true followers of our Lord and Savior will be cast down because of their poverty.” In quoting this, I do not imply that the leaders of the Church are astray (please, no one suspect me of apostasy!), especially since Deseret Book’s actions are not equivelent to the Church’s actions in my mind. The Church may own it, but DB still claims no gift of prophecy in its business decisions. But I do believe this “money is the bottom line” attitude in business, even LDS business, is a serious casualty in the Church. How can we expect to build a real Zion with such attitudes? This kind of talk is not my normal line of thinking, but this issue really troubles my spirit.

  23. Interesting, St. Thomas. Since you say you don’t have any inside information, I’ll assume that you don’t actually know, you are just making wise assumptions:

    1. This would be the competent move. I’m not as sure of Deseret Book’s competence as you apparently are.

    2. Written? I doubt it. But I’m sure there is a number of lawyers ready to take it on, and they may have dones some research on this.

    But, IMO, it will never get to a lawsuit.

    3. It is possible that it will kill Seagull Books. I don’t think it will kill its sister company, Covenant (the publisher), but that is also possible, if Kofford doesn’t have them legally separate enough.

    4-6. Very possible.

    As for Deseret Book’s “business prowess” or “desperation” I don’t think its “business prowess.” I estimate that this will cost Deseret Book something like $1.5 million in sales by its publishing arm. A good portion of those sales won’t be recouped by customers buying Deseret Book’s titles elsewhere.

    It just stupid to loose those sales, when there are other options, like reducing the discount Seagull gets, which could actually make up, at least in part, for Seagull’s supposedly poor merchandising and promotion.

  24. For those who like me want more on this issue, there have been several other articles. Here is a complete list, courtesy of Michael Cleverly’s blog:

    Deseret Book to
    stop suppplying rival
    (Salt Lake Tribune)
    Seagull Book No Longer
    Allowed to Sell Deseret Book Products
    (KSL TV)
    Seagull Book Can No Longer Sell Church’s Books (KUTV)

    LDS bookstore cuts competitor’s supply (Salt Lake Tribune)
    Deseret Book servers relationship with Seagull (Deseret Morning News)
    LDS Church firm no longer will allow private chain to sell its books (ABC 4/Associated Press)

  25. Kent, personally I don’t think it will cost DB anywhere near $1.5 million because they won’t have to match Seagull’s prices on Deseret Book products anymore in their own retail stores. They’ll recoup nearly that much (if not more) every month this Christmas season even if none of Seagull’s customers switched to shopping at Deseret Book.

    I do agree that in a strict legal sense it would be difficult to prove that Deseret Book had a monopoly, but that for all practical purposes they do, and I feel bad for Seagull.

  26. Michael:

    You are correct. The $1.5 million is my estimate of the annual amount Deseret Book gets in cash from Seagull for the sale of their titles.

    BUT, I disagree that they will get this all back. The reason is that as much as 50% of these sales are impulse purchases — made by consumers who weren’t necessarily looking for a Deseret Book title, but saw it on the shelf and bought it.

    With no Deseret Book titles on the shelf, these consumers won’t purchase Deseret Book titles at all! And those sales will be lost entirely to Deseret Book.

    Yes, some consumers are looking for a specific book, and those will go to Deseret Book stores now, and may make impulse purchases there. And you are correct, they will probably pay something more for their purchases.

    It remains to be seen, however, how much of a drop in sales this will cause.

    A few years ago Deseret Book tried to pull their titles from Walmart, apparently on the theory that people would switch to getting the books at Deseret Book — that lasted about six months, from what I understand.

    I too feel bad for Seagull — and I think that this move is simply wrong. As I said above, Deseret Book had at least one better alternative. Its too bad they chose the most extreme way of making their point.

  27. FWIW, Michael Cleverly has a great, clear-headed take on why Deseret Book took this action on his blog.

  28. I continue to hold to one of my rules of business: Buying from your competitors is always a losing proposition. The problem I see is with Seagull’s business model. I just don’t see how you can have a viable retail business that competes with a market-dominant company like DB unless you have DB’s complete buy-in to what you are doing. Even at that, you will always be vulnerable to exactly this type of action. Covenant may be able to survive, but I think this action will kill Seagull.

    Just my opinion. I could be wrong.

    (BTW, I agree that in the short-term this will hurt DB, but in the long-term they will get what they really seem to want: distribution control of their product. What is their arrangement with Wal-Mart? You have to ask yourself: Why would DB leave their product in Wal-Mart and not in Seagull?)

  29. Nephi, I’m afraid its not as simple as that. Customers that go into an LDS Bookstore expect to find Deseret Book titles there. Seagull’s ability to get customers is compromised without those titles. This is as true today as it was the day they started their stores in 1987.

    To be honest, I think Seagull, like every independent LDS bookseller, doesn’t have much of a choice. Its part of the power that Deseret Book has over this market. (See my post on the problem of Deseret Book).

    You are right that any time you purchase from a competitor, you are vulnerable. In this sense Deseret Book is also vulnerable, becaue their stores purchase from Covenant, Seagull’s sister company!

    Of course, the real solution is what I called for a few weeks ago (and what I have long thought the LDS market needed), an LDS market wholesaler.

    If the market had a wholesaler, then Seagull could purchase from the wholesaler instead of Deseret Book. But since the wholesaler would also sell to a lot of other customers, Deseret Book couldn’t refuse to sell to them to stop Seagull Book from getting its products.

    Perhaps this is a pipedream, but I think it would solve a lot of problems in the LDS book market.

  30. This is just a general impression, but in the short time I worked at Excel Entertainment, before the company was bought out by DB, his business sense was often not so canny.

  31. From a purely capitalistic point of view, DB is in complete control and will benefit financially from what they are doing in the long run. They have the Gold”¬¶ they make the rules.

    Ultimately, if they really do stop selling to Seagull, they will probably put Seagull out of business, purchase them or at least make them completely irrelevant in the market place.

    From this move, they will be able to increase the average retail price of their books in the market place, drive more foot traffic to their own stores and sell more books through other outlets as well, something they have been wanting to do for a long time. They can largely determine the future of covenant as well.

    Signature Books is not a viable factor in any of this, their market share is small, many of their books are controversial and niche.

    The mystery in all of this, from a capitalistic point of view is that DB ever allowed Seagull to enter and capture so much of the LDS book market in the first place. I think it has been an interesting evolution. In the early years, the LDS market was really not much of a money maker and the primary motivation of the church was not more prophet directed that profit directed. Their goal was to promote the church and church books any way they could”¬¶ and how they were perceived by the market place was very important to them back then.

    My how things have changed”¬¶

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