Print On Demand (Toc 2010) Final

Making the case for digital printing
Tools of Change in Publishing
Ashley Gordon and Brian O’Leary
February 22, 2010

Digital printing: a summary
Three overlapping segments
Can make financial sense when you look at all of the costs involved with creating and managing inventory
Potentially significant opportunity to use digital printing to maintain or grow the availability of niche content
The benefits available from digital printing depend on the size, page count and annual demand for any given title
Models (tailored to address the nature of specific imprints and titles) can help identify the best uses

Digital printing
Print on demand
Short-run printing
Ultra-short-run printing
One-off printing
Self-publishing
Author services
Wholesaler/distributor
Distribution/fulfillment
Metadata
Chunking/bundling/repurposing
Alphabet City: PDF, XML, DAD/DAM, ONIX
Content
The vocabulary of digital printing …

It’s useful to first confirm the overlapping models

A range of digital printing suppliers
Lightning Source (Ingram)
CreateSpace (Amazon)
Textstream (B&T)
Bookmobile
Colorcentric
Edwards Brothers
ePac
Quebecor-World
R.R. Donnelley
Friesens
Sheridan
Transcontinental
The firms shown are representative; list is not exhaustive

Among digital printing vendors, there is overlap…
Lightning Source
Transcontinental
Various
Quebecor-World
(Eusey Press)
Vendor examples are representative only (not a complete or preferred list; vendors can and do cross segments)

All part of an evolving value chain …
Lightning Source (Ingram)
CreateSpace (Amazon)
Textstream (B&T)
Bookmobile
Colorcentric
Edwards Brothers
ePac
Quebecor-World
R.R. Donnelley
Friesens
Sheridan
Transcontinental
Amazon
LibreDigital
NetGalley
SharedBook
Value Chain International
ReadHowYouWant
Ingram
Baker & Taylor

Digital printing set-up requirements
All look for PDFs; most will (try to) process properly structured documents in XML or native-application formats (InDesign, Quark, sometimes Word)
All offer direct or third-party conversion (scanning) of material not available digitally
Digital conversions cost less and take less time than scanning
Conversion costs occur once; if you work with a digital asset distributor, they may provide it as part of their service (i.e., don’t pay twice!)
Separate, lower set-up costs for cover and text/body copy are typical

Typical limitations of digital printing services
Paper choices
Trim sizes
Maximum page counts
Foil stamping or embossing
Rough cut edges
Sewn bindings
Case-bound color
Spot colors
Some vendors offer some of these services; no vendor offers all of them. Before committing to digital printing, evaluate requirements against current and expected market capabilities.

How do you typically work with these vendors?
Most maintain relationships with traditional royalty publishers
Most offer conversion services
Some offer warehousing and/or fulfillment services
Options can include: “no” inventory (print only when ordered); limited inventory (order 1, print “n”); and minimum inventory (fill-in)

Author-services firms come in many shapes
Author House (Indiana)*
iUniverse (Nebraska)*
Trafford (British Columbia)*
xLibris (Pennsylvania)*
Lulu (North Carolina)
CreateSpace (Amazon.com)
Bookends (New Jersey)
Blurb (California)
Picaboo (California)
Picturia Press (California)
*While these firms are now part of Author Solutions, they operate independently and offer different types of services
The firms shown are representative; list is not exhaustive

How do author services firms typically work?
Compete for authors as customers; may make some money selling books
Authors invest in editing and digital printing services (basic services generally under US$1,000)
Clear agreements on what each service provides (and does not provide)
Services can obtain ISBNs and arrange for listings
Typically, the services do not promote (unless you buy that)
Usually do not handle fulfillment

On-site services (POD “kiosks”) are more limited
Instabook (Bookends)
On Demand Books (Espresso Book Machine)
Limited but growing market penetration at this point
Promising uses: local demand for OOP titles; customized content (special editions, course packs, etc.); high-traffic sites with limited inventory (e.g. airports)

So how is digital printing used by publishers?
Backlist (but not just long tail)
Just-in-Time Inventory
New Imprints
Distributed Print
Overseas Expansion
Bridging/Crashing
New Formats
Large Print
Personalized Content
Custom Content

Just-in-time inventory saves on the rent
Free Books: Bloomsbury Publishing Launches “Radical” New Academic Imprint
Library Journal, 9/23/2008
The Perseus Books Group Announces New Digital Printing Partnership with Edwards Brothers
Edwards Brothers press release, 1/28/2008
Northshire Bookstore Prepares to Launch Print-on-Demand Publishing Service
Bookselling This Week, 2/20/2008
Lightning Source UK and publisher Thomas Nelson Inc. announce best-seller title program
Lightning Source press release, 2/26/2007

Crashing & bridging: printing “miracles”
Chelsea Green Makes Obama Book Available Early Exclusively on Amazon
Publishers Weekly, 8/15/2008
Gov. Sarah Palin biography brought to market by Epicenter Press and Ingram content companies
University of Nebraska Press selects Lightning Source to bring Nobel Laureate titles to market

Digital printing can lower the unit cost of books sold

Digital manufacturing costs are typically higher
Unit costs per POD book printed are higher than seen with conventional technologies (studied books between 80 and 320 pages)
Unit costs per POD book sold can be lower, depending on sell-through for a title
POD can be set up to produce a single copy of one or more consistently formatted titles
When POD is dismissed by publishers, it is typically based on manufacturing costs alone.

POD can help reduce or eliminate returns/unsold copies
POD technology allows publishers to choose their inventory objectives
Supports zero inventory (order, then print) as well as structured maintenance of low volumes of ordered titles
Titles printed POD can be sold as non-returnable
Titles printed POD can also be fulfilled directly, through contracted services
Our research shows that the share of unsold copies is often much higher on small press runs (smaller base, greater uncertainty).

POD can also reduce inventory spoilage/shrinkage
Shrinkage (loss or theft) and spoilage (from handling) can consume as much as 10% of a print run
Little or no inventory also means significantly reduced spoilage/shrinkage
Coupled with fewer returns or unsold copies, lower spoilage also improves POD’s cost per book sold
While spoilage and shrinkage vary significantly across titles, the longer a book is held, the greater the loss becomes…

Reducing inventory cuts carrying costs
Warehouse costs can range from $0.12 to $1.80 per copy, per year
Costs of capital (paying for printing well ahead of when the books are sold)
For slow-moving titles (demand below 50 per year), carrying costs can exceed manufacturing expense
Because warehouse and financial expenses are usually not part of a departmental or title budget, the costs are often not factored into POD analyses.

However, this analysis compares just “books in print”
There is another, important consideration unique to POD…

POD also helps keep niche content in print
Higher manufacturing costs for POD
Lower expenses for returns/unsold, spoilage and carrying costs
“Order, then print” model supports more timely inventory decisions
OOP/OSI is no longer a forced (economic) decision
Editorial value can be protected without incurring significant upfront costs
Lowers risk (“Why not stay in print?”)
Prices based on POD expense and full understanding of costs
Predictable expenses
Search and filter helps drive demand

OUP: an example of backlist life
OUP made 15,564 digital titles available through Google Book Search
Nearly 144 million book pages viewed
Over 700 thousand readers clicked a “buy the book” link
An average of 47 “buy the book” clicks per title
Expensive books (average price: $40)
Click-to-Buy Conversion Rates

Where POD may help meet long-tail demand
Potentially cost-effective use of POD for online orders (titles still in print but slower-moving)
Use POD to keep titles in print, growing revenues
Demand (sales)
Title count ranked by demand
Maximum offline-retail title count
OOP or OSI invoked

Digital printing also supports new formats and uses
Large Print Up Close: Diverse content—edgier, younger—plus POD possibilities give new life to a venerable offshoot
“Releasing our large-print titles directly into paperback allows us to be more competitive in pricing… It'll also slide easily into a print-on-demand format at the end of the retail life cycle.”—Anthony Goff, Hachette
Penguin Launches Penguin 2.0, iPhone App
SharedBook Introduces Smart Button™ Technology Through Partnerships with Encyclopaedia Britannica, Legacy.com, and SOHO Publishing
Press Release, 2/9/2009

So what are the typical economics for POD?
Costs and services vary by POD vendor, so we created a uniform model to track various options
This model consists of: a series of vendor tabs (expandable); a summary of all vendor results; and a cost-benefit tab for a book of a given page count and trim size
Pricing changes over time, but this model provides a good look at the demand scenarios in which POD makes sense
After a short break, we’ll show how these demand scenarios work
Switch from presentation to the workbook model …

We’ll add one significant analytical footnote …
The model assumes that every book printed and not spoiled is sold
There’s no reduction in the model for copies not sold
A smaller conventional press run can look like a good financial option if demand is predictable
Where demand is uncertain (or certain to be less than your minimum conventional print quantity), POD can become a better option

So what to make of all of this data?

Discoverability and access in a POD world
Lower-demand titles are less likely to make it to bookshelves
Successful digital printing strategies use online to promote titles
Google Book Search, Amazon SITB, BN Search are all valid options
Consider digital printing vendors that can seamlessly fulfill
Try to balance the market power of Amazon and CreateSpace
Use social media to leverage content discoverability, syndication
Direct sales probably not as successful in the near term
Channel conflict
Challenges managing fulfillment
There are exceptions (Ellora’s Cave, Samhain Publishing)
Individual authors without a platform may be best served by author services

Getting started in digital printing
Determine your objectives: what do you want POD to accomplish?
Title set up: fees, process, file types, book specs
Workflow: design with POD in mind, anticipate when to turn it on
Identify vendors and partners: capacity, production specs, relationships
Know your numbers:
true unit cost
inventory needs
turn-times (title set up, printing, shipping)

Digital printing: a summary
Three overlapping segments
Can make financial sense when you look at all of the costs involved with creating and managing inventory
Potentially significant opportunity to use POD to maintain or grow the availability of niche content
The benefits available from POD depend on the size, page count and annual demand for any given title
Models (tailored to address the nature of specific imprints and titles) can help identify the best uses

Suggested digital printing resources
Book Industry Study Group (a primer now available)
Leading vendors
Your current vendor (depending on the relationship)
Leading-edge experimenters
brian.oleary@magellanmediapartners.com
ashley@mockingbirdpublishing.com

Print On Demand (Toc 2010) Final

by Brian O'Leary on Mar 23, 2010

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