Successfully moving into the age of digital books: an international case study Michael Bhaskar Pan Macmillan

Background Two years ago things started changing Ebooks had been on the scene for ten years. But nothing much had happened In 2007 UK publishing houses started putting together the beginnings of their digital teams Digital publishing- beyond websites

Two years ago things started changing

Ebooks had been on the scene for ten years. But nothing much had happened

In 2007 UK publishing houses started putting together the beginnings of their digital teams

Digital publishing- beyond websites

Jeff Gomez (ironically) published this book. Made the case that the market had finally changed. This was it.

A small company called Sony decided to launch an e-ink device and ebook store in the US, supplied exclusively through Borders….

The Web 2.0 boom was in full flow Investment piled in ($455.5 million into web 2.0 start ups in Q1-3 2006 alone) and the poster boys- Youtube, Facebook, Flickr etc, went from success to success Suddenly the web was the future. Again.

The Web 2.0 boom was in full flow

Investment piled in ($455.5 million into web 2.0 start ups in Q1-3 2006 alone) and the poster boys- Youtube, Facebook, Flickr etc, went from success to success

Suddenly the web was the future. Again.

Meanwhile…

We had watched while our sister industries in music, newspapers and film had been hit hard by digital: Piracy from peer to peer networks Unsuitable business models to a culture of low ad dollars and free delivery The increased demands on frictionless delivery New standards were set by web natives- Google for online, Apple for download and Amazon for retail Despite working closely with a range of partners only 1 in 20 music downloads is paid for. The IFPI claims downloads have cost the record $3.7 billion by 2008!

We had watched while our sister industries in music, newspapers and film had been hit hard by digital:

Piracy from peer to peer networks

Unsuitable business models to a culture of low ad dollars and free delivery

The increased demands on frictionless delivery

New standards were set by web natives- Google for online, Apple for download and Amazon for retail

Despite working closely with a range of partners only 1 in 20 music downloads is paid for. The IFPI claims downloads have cost the record $3.7 billion by 2008!

It dawned on us….we were next. Better get ready.

Macmillan’s Digital Response Pan Macmillan- UK’s fifth largest trade publisher Part of the Macmillan Group, which includes businesses like the Nature Publishing Group, Palgrave, Macmillan Education, Macmillan Publishing Services and Macmillan Distribution In the States we have a sister company Macmillan US which is one of the largest US trade publishers- and of course we have Pan Mac South Africa, as well as Australian and Asian companies Our imprints include: Pan, Picador, Macmillan, Boxtree, Tor, Sidgwick & Jackson, Macmillan Children’s Books and Young Picador We are owned by the Holtzbrinck Group, one of Germany’s largest media conglomerates.

Pan Macmillan- UK’s fifth largest trade publisher

Part of the Macmillan Group, which includes businesses like the Nature Publishing Group, Palgrave, Macmillan Education, Macmillan Publishing Services and Macmillan Distribution

In the States we have a sister company Macmillan US which is one of the largest US trade publishers- and of course we have Pan Mac South Africa, as well as Australian and Asian companies

Our imprints include: Pan, Picador, Macmillan, Boxtree, Tor, Sidgwick & Jackson, Macmillan Children’s Books and Young Picador

We are owned by the Holtzbrinck Group, one of Germany’s largest media conglomerates.

Our owners had already decided that they liked digital… In Germany Holtzbrinck had put itself at the forefront of the new web. Buy and build. It’s HGV IT crack team were making new systems for publishers.

Mac US More advanced market Converted thousands of titles to ebooks Totally revamped web presence Moved into web development territory Very proactive on the Google settlement- 17,000 books in the program

More advanced market

Converted thousands of titles to ebooks

Totally revamped web presence

Moved into web development territory

Very proactive on the Google settlement- 17,000 books in the program

What about us?

Pan Mac UK We started to experiment and think critically about how to engage with digital Small run of producing and publishing ebooks from our website- big learning experiment Started working with bookish social networks, Second Life, started blogging and proposing specific digital projects Began to think about the marketing potential. But no real market up to the end of 07…

We started to experiment and think critically about how to engage with digital

Small run of producing and publishing ebooks from our website- big learning experiment

Started working with bookish social networks, Second Life, started blogging and proposing specific digital projects

Began to think about the marketing potential.

But no real market up to the end of 07…

Then we heard this was coming.

Over night the landscape changed Sony had announced they were coming to the UK The device would be an improvement on the US model They would be using the open epub format for their ebooks Content was needed for preloading on the device- we had 4 out of 20 slots Waterstones, the UK largest dedicated book chain, would sell the device in store They would also produce an online store where people could buy ebooks There would be heavy promotion in the media and, crucially, physical stores Waterstones were hungry for titles

Sony had announced they were coming to the UK

The device would be an improvement on the US model

They would be using the open epub format for their ebooks

Content was needed for preloading on the device- we had 4 out of 20 slots

Waterstones, the UK largest dedicated book chain, would sell the device in store

They would also produce an online store where people could buy ebooks

There would be heavy promotion in the media and, crucially, physical stores

Waterstones were hungry for titles

We would have to build a publishing process for hundreds of ebooks- and fast This would involve sorting out contracts, all our business systems, assembling and keying in the metadata. Not to mention scheduling all the titles, monitoring them, over seeing the production process, the transfer of files to the third party aggregator, liaising with the retailers, Q&A each title and then sending it back for adjustments. In essence we had to build the whole publishing process in miniature. X 600 In the end we launched with 300 titles- more than virtually any other trade publisher. We were the top selling publisher at launch, in volume and revenue, and in doing so had built a robust ebook publishing process.

Our ebooks 600 by the end of this year Including all our best known names like Wilbur Smith, Jeffrey Archer and Alice Sebold Spread across all our imprints, frontlist and backlist- our strategy is to focus on frontlist and cherry pick core stock backlist Secondary focus on genres that perform well as ebooks We are now publishing frontlist titles in parallel with print Strong growth in revenue We sell some DRM free ebooks

600 by the end of this year

Including all our best known names like Wilbur Smith, Jeffrey Archer and Alice Sebold

Spread across all our imprints, frontlist and backlist- our strategy is to focus on frontlist and cherry pick core stock backlist

Secondary focus on genres that perform well as ebooks

We are now publishing frontlist titles in parallel with print

Strong growth in revenue

We sell some DRM free ebooks

And not just ebooks…

Enhanced ebooks- like DVDs New models for content

New ways of marketing

And ways of talking to our peers.

International Markets: What’s Going On?

The biggest… US is the world leader in ebooks This is driven by: The size of the market The availability, penetration and attitude to technology Ready finance Strong ecosystem of retail, publishing and technology creates virtuous circle

US is the world leader in ebooks

This is driven by:

The size of the market

The availability, penetration and attitude to technology

Ready finance

Strong ecosystem of retail, publishing and technology creates virtuous circle

International Digital Publishing Forum figures suggest we are at the beginning of massive growth (upwards of $20 million per quarter in 09). These figures are from just fifteen publishers and excludes the massive library and mobile reading markets- the real numbers are much higher. Upwards of 15-20% of total sales are coming from the Kindle on ebook titles.

Kindle is a Big Factor Amazon Kindle offers wireless download All books priced at $9.99 Endorsed by Oprah Retails at $359 Hundreds of thousands of titles Sold over 500,000 units- although no one knows the exact figure

Amazon Kindle offers wireless download

All books priced at $9.99

Endorsed by Oprah

Retails at $359

Hundreds of thousands of titles

Sold over 500,000 units- although no one knows the exact figure

New Potential US market potentially worth billions Smartphones creating new reading models Google Book Search now a very major player, driving sales to publishers worth millions

US market potentially worth billions

Smartphones creating new reading models

Google Book Search now a very major player, driving sales to publishers worth millions

How about us?

UK- small, but growing Drivers of growth have been the Waterstone’s/Sony partnership and library aggregators in academic- Waterstones currently have 14k titles Borders are also moving and have been selling the iLiad W.H. Smith now selling ebooks All universities are hooked into ebook aggregators

Drivers of growth have been the Waterstone’s/Sony partnership and library aggregators in academic- Waterstones currently have 14k titles

Borders are also moving and have been selling the iLiad

W.H. Smith now selling ebooks

All universities are hooked into ebook aggregators

Some hard figures Publishers Association say total UK download market worth £85 million in 2008- 3% of the market Audio downloads very significant This represented 27.4% growth on the 2007 figure, but 127% growth in the general consumer category Academic/professional the biggest element Sales of the Sony Reader “exceeded expectations”; under 100k (300k worldwide)

Publishers Association say total UK download market worth £85 million in 2008- 3% of the market

Audio downloads very significant

This represented 27.4% growth on the 2007 figure, but 127% growth in the general consumer category

Academic/professional the biggest element

Sales of the Sony Reader “exceeded expectations”; under 100k (300k worldwide)

Some lessons: What sells in print also sells in digital Merchandising and positioning on the retailer front page is key It is worth getting in on small and niche channels early and building a system - they will grow, and when they do it will be fast Demographics are from across the age range, but many people reading ebooks are in their fifties. They have disposable incomes, lots of books and want something for travel Getting a title good publicity, and then hooking this into the ebook is a key part of selling them. They work in virtuous, and vicious, cycles

Some lessons:

What sells in print also sells in digital

Merchandising and positioning on the retailer front page is key

It is worth getting in on small and niche channels early and building a system - they will grow, and when they do it will be fast

Demographics are from across the age range, but many people reading ebooks are in their fifties. They have disposable incomes, lots of books and want something for travel

Getting a title good publicity, and then hooking this into the ebook is a key part of selling them. They work in virtuous, and vicious, cycles

Are we here yet? Not quite.

The iPod Moment Myth Not going to be one moment Kindle, Apple will make a big difference Mobile and gaming platforms coming in New colour, touch and flex technologies

Not going to be one moment

Kindle, Apple will make a big difference

Mobile and gaming platforms coming in

New colour, touch and flex technologies

The iPhone and DS matter 37m iPhones and iPod touches have been sold, 22m of them iPhones (in 21 months) UK market is 5% of this; US is 45% with 18-44 males making 70% of the market 51% of US smartphone web traffic and 18% globally is from the iPhone 70% of users have downloaded an app with over 1 billion apps being downloaded in 10 months There are 41, 556 apps in the App Store- 78% of them (32,326) are paid for- games are the biggest category, books the fastest growing The DS has sold over 100m units in five years, while the Wii has sold 45m units in 3 years The new DSi has wireless web access and an application platform

37m iPhones and iPod touches have been sold, 22m of them iPhones (in 21 months)

UK market is 5% of this; US is 45% with 18-44 males making 70% of the market

51% of US smartphone web traffic and 18% globally is from the iPhone

70% of users have downloaded an app with over 1 billion apps being downloaded in 10 months

There are 41, 556 apps in the App Store- 78% of them (32,326) are paid for- games are the biggest category, books the fastest growing

The DS has sold over 100m units in five years, while the Wii has sold 45m units in 3 years

The new DSi has wireless web access and an application platform

These guys?

Sony Enters France and Germany As with Waterstones, Sony has partnered with leading retailers FNAC in France, Libre and Thalia in Germany Kindle- wireless hold up in UK and Europe, phone apps could be a way forward German publishers banding together for the Libreka project

As with Waterstones, Sony has partnered with leading retailers

FNAC in France, Libre and Thalia in Germany

Kindle- wireless hold up in UK and Europe, phone apps could be a way forward

German publishers banding together for the Libreka project

While out here, it’s a very different story…

Japanese Keitai fiction New form of mobile fiction pioneered by teenagers Now a market worth hundreds of millions - has saved Japanese publishers Keitai writing template site Maho iLand gets 3.5 billion views per month Keitai novel “Love Sky” has been downloaded and bought over 12 million times. The young author-Mika- is now a millionaire

New form of mobile fiction pioneered by teenagers

Now a market worth hundreds of millions - has saved Japanese publishers

Keitai writing template site Maho iLand gets 3.5 billion views per month

Keitai novel “Love Sky” has been downloaded and bought over 12 million times. The young author-Mika- is now a millionaire

China has seen a similar phenomenon but with online novels. Commercial publishing houses, as in Japan, are now repackaging these as print titles with huge sales volumes. “ Novel” is the seventh most searched for term on Chinese search engine baidu.cn. Perhaps in Asian societies there is less attachment to the book as an object?

So…the world is changing.

And our models are changing with it.

Not So Fast At the minute ebooks replicate print Same publishers, agents and writers Same content Same retailers Same internal processes Same price Same sales pattern

At the minute ebooks replicate print

Same publishers, agents and writers

Same content

Same retailers

Same internal processes

Same price

Same sales pattern

But things are shifting nonetheless… Some emerging models and trends we are thinking about:

Content is changing The model of DVDs is coming in to play- many publishers looking at adding value Bundling and chunking mean that text will not be tied to the length and format of a book Multimedia elements will start to come into play There will be new interactions between print and digital- like O’Reilly

The model of DVDs is coming in to play- many publishers looking at adding value

Bundling and chunking mean that text will not be tied to the length and format of a book

Multimedia elements will start to come into play

There will be new interactions between print and digital- like O’Reilly

Producers are changing Opens up new long tail, crowd sourced and networked opportunities for content creation Publishers have to redefine their intermediary role Retailer consolidation with the big players on one side Grass roots distribution on the other

Opens up new long tail, crowd sourced and networked opportunities for content creation

Publishers have to redefine their intermediary role

Retailer consolidation with the big players on one side

Grass roots distribution on the other

Marketing is changing From broadcast to conversation Viral possibilities opens up a new frontier Social media tools are free But are “owned” by their users Allows consumers to kick back as well as appreciate

From broadcast to conversation

Viral possibilities opens up a new frontier

Social media tools are free

But are “owned” by their users

Allows consumers to kick back as well as appreciate

Readers are changing Want frictionless delivery Do not like industry measures like DRM software Are increasingly expecting things for free Are talking to each other online Expect digital to be cheap and easy

Want frictionless delivery

Do not like industry measures like DRM software

Are increasingly expecting things for free

Are talking to each other online

Expect digital to be cheap and easy

Platforms are changing Audio downloads are growing at a huge rate Mobile is the new big platform for digital publishing Games platforms like the Nintendo DS have huge promise Many new websites allow for “social publishing” Distribution could be either download or online access

Audio downloads are growing at a huge rate

Mobile is the new big platform for digital publishing

Games platforms like the Nintendo DS have huge promise

Many new websites allow for “social publishing”

Distribution could be either download or online access

Pricing is…?? Currently contentious Generally pegged to print price Retailers want to exert downward pressure to drive sales Publishers don’t want to fall off a cliff Consumers of books are willing to pay Although pricing experiments confirm there is a strong correlation between lowering price and increasing sales

Currently contentious

Generally pegged to print price

Retailers want to exert downward pressure to drive sales

Publishers don’t want to fall off a cliff

Consumers of books are willing to pay

Although pricing experiments confirm there is a strong correlation between lowering price and increasing sales

IP is…?? Piracy danger only just emerging Books available on bit torrents Document hosting websites like Scribd and Wattpad already displaying many novels Takedown notices more frequent But we don’t want to alienate readers

Piracy danger only just emerging

Books available on bit torrents

Document hosting websites like Scribd and Wattpad already displaying many novels

Takedown notices more frequent

But we don’t want to alienate readers

The killer device is…??

The view from where we are: There has been a lot of progress Systems set up, programmes in place, revenues coming in Experimenting and learning fast has been key Having an open mind to new things helps As does a rigorous approach to the details

Conclusion + = … ?

The End. Thank you! Michael Bhaskar http://thedigitalist.net / www.10membranes.com