Digital Change in Publishing:Lessons Learned in the US

Mike ShatzkinTo the IfBookThen Conference

Milan, Italy4 February 2011

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A brief history of ebooks in the US

• Why America was first: 300 million people, one language, one set of commercial laws

• It started complicated in the early 1990s: Voyager Expanded Book and CD-Roms

• Simple straight text in late 90s: Rocket Book, Softbook, then PDAs (Palm and MS) plus PDFs on PCs

• Sony Reader introduced in 2005• Into 2007, Palm “dominates” device reading in a

miniscule market

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But with the arrival of Kindle, everything changed

• Kindle introduced November 2007: almost instant success

• Why? Title selection; direct downloads; good reading experience; Amazon audience

• And pricing• But that caused problems for publishers

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Why publishers wanted to restrain Amazon’s growth in 2009

• Two segments of growth: online print sales and device-read ebook sales

• Amazon market share north of 70%, perhaps 80% on both

• Proven willingness to twist arms for margin• Online sales hegemony probably unassailable• Kindle alone was locking up heavy readers• Amazon’s very aggressive pricing was scary

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Agency was their answer; and maybe it worked

• Key to agency: price set by publisher, not retailer

• Five of six top US publishers do it; so most top titles are price-controlled

• Amazon device ebook share drops 30-40%• Other factors: Nook, iPad, Google

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Experience with ebooks so far:some lessons learned

• Price matters a lot, but high priced branded books can sell (even at $20!)

• Early device adopters tend to be heavy readers (practical and financial reasons)

• Effective interoperability was important, but provided within “closed” systems

• Ebook sales, at least at first, are frontlist-driven• Impact on brick-and-mortar: significant

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And now America exports an ebook infrastructure

• Three big companies might dominate the global ebook market, all American: Amazon, Apple, Google

• Wild cards (at the moment): Kobo, Sony• And longer shots: Copia, Blio, consumer

electronics players and mobile phone players• And a US player which should go global: B&N

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These players come with capabilities and audiences

• All sourcing titles in all languages• All have multi-device platforms• Each has, or is developing, a separate content-

focused app market; separate opportunities, separate platform challenges (Apple, Android in flavors, and Kindle – so far)

• Many have ambitions to control some content exclusively

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How can local ebook resellers compete?

• Carry titles in all languages• Deliver multi-device functionality• Keep up with features (lending, notes,

dictionaries)• Deliver impeccable customer service• Provide local propositions for libraries and

institutions• Deliver local in-store support and promotion

(the B&N example)

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And retailers need to play to native strengths

• Work with local authors, IP owners, and brands to capture and provide unique content

• Maximize knowledge of local content silos, pricing practices, and rights

• Market to your own language-based customers globally!

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What publishers should be thinking about

• Don’t waste resources defending print; you can’t• Rethink your capabilities to gain advantage in digital:

products and marketing• Don’t be fooled by a currently trivial ebook market,

pricing protection, or VAT issues: US tells you change comes faster than you think

• Be conscious of verticals; think about audiences you serve, not just IP you own

• “Start with XML”: workflows must deliver print and epub

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We’re all global publishers now

• Know Amazon, Apple, and Google like an American• Rethink exploiting your own IP: should you do an

English edition? Or a dual-language ebook?• Rethink rights acquisition; should you acquire by

territory instead of by language?• Recognize English-language books as a competitor

at home; use price, release dates as weapons when you can

• Accept this reality: bookstores will decline