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LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Mike Shatzkin
Founder & CEO, The Idea Logical Company, Inc.
EspacioTendencias
Buenos Aires Book Fair | 26 April 2013
LESSONS LEARNED ON THE DIGITAL ROAD
How digital change developed in the US book
marketplace and the English Language
LECCIONES EN EL CAMINO
Qué podemos aprender del cambio digital en el
mercado editorial angloparlante
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Some stipulations about the
history lessons
• We’re talking primarily about consumer
trade books, not all books
• US: No borders, mostly 1 language, 1
currency
• US: Tilt to online growth (no sales tax)
• US: Ubiquitous credit cards, robust
infrastructure for delivery
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Where are we now in the US market?
• 25+% ebooks; about 50% for fiction
• Print in stores probably under 50% of sales
• Stores disappearing
• Amazon power and leverage and margin
increasing
• Paradoxically, and temporarily, B&N has
more leverage too
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
And real change is about
to accelerate
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
How did the US get here?
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Three seminal developments
in the 1990s
• Desktop publishing made pre-press cheap
• Amazon began selling; unlimited shelf space
• Ingram created Lightning Print; no minimum
print runs
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
So launching new books got
progressively more difficult
• Nothing went out of print
• Publishers without sales forces could
compete
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Amazon’s special position;
Amazon’s brilliance
• No sales taxes on Internet sales; national
policy
• Huge Wall Street investment in Amazon
• Relentless consumer focus
• Use of deep pockets to ward off competition
(I2S2)
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
1998-2007: Amazon consolidates,
ebook attempts don’t take
• RocketBook and SoftBook in 1999 or so; too
few titles and no traction
• Microsoft and Palm become the market;
Amazon buys Mobi
• BN gives up on ebook business in 2002
• Amazon relatively unchallenged in online
print; share just grows
• Sony Reader launches in September, 2006
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Reasonable to think in mid-2007
(not so long ago)
• The eBook idea just won’t catch on
• Investments in digitization can slow down
• At that point: more ebooks in PDF than any
other format
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
And then the game changer: Kindle
in November 2007
• Amazon’s all-out targeted marketing
• Content downloads directly into the device
• Huge push to increase title count
• $9.99 pricing (not initially seen as a threat)
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Very quick outsized impact
• Early adopters ($400 device) were heavy
readers
• By mid-2007, sales are eye-catching
(relative to prior ebook sales)
• Amazon begins to own an obviously-
important market
• Combined online print and ebook hegemony
marks Amazon as a threat
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Publishers already getting nervous
• “Windowing” introduced by Sourcebooks in
2008; others follow
• “Protecting print sale” and bookstores
become priorities
• Amazon selling many ebooks at below their
cost
• Publishers worry about getting “the call”
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
B&N wakes up; Kobo also plays
• B&N crashes a Nook program in
2009, launches in October
• Indigo’s Shortcovers becomes Kobo, takes
Borders business
• But it still appears that Kindle is 90% of the
market
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Apple joins the game; introduces
“agency pricing”
• Q1 2010; 5 of Big Six move to Agency
pricing on April 1
• Apple requires it; B&N and Kobo support it
• Amazon share starts to decline, perhaps
below 60%
• Random House introduces agency pricing in
March 2011 (a year later)
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
US government alleges collusion
around intro of agency in Apr 2011
• Three publishers settle quickly
• Random House not charged; Penguin and
Macmillan hold out
• Eventually, all settle
• Discounting (with minimal controls) is
legitimatized
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Since the dismantling of agency
• Amazon share has risen; B&N’s has
dropped
• Prices of ebooks have steadily declined
(DBW bestseller list)
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Other “facts” about the ebook
market
• Only narrative reading has really worked
• Juveniles beginning to sell; illustrated and
reference don’t
• “Enhancement” not proven commercially
viable
• New tools arriving for illustrated to cut costs
(Apple, Inkling, Vook, others)
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
US publishing over the next few
years
• Bookstores disappearing
• Random-Penguin merger will have
enormous market impact
• Future for illustrated is cloudy
• Amazon’s power grows, including as a
publisher
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Guessing about the future, three
things really matter
• Scale
• Verticalization
• Atomization
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Startups seem to focus on things
that really don’t so much
• Social reading (must be vertical to work)
• Subscription (must be vertical or have scale
to work)
• Services to “authors” (rather than to
“brands”)
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Scale
• Publishers live in a world of Amazon, Apple,
Google
• Barnes & Noble didn’t have necessary scale
• Scale is a “moat”: what Random Penguin
could do
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Verticalization
• Selling content alone will probably not be
enough
• Internet inherently fosters depth by subject
rather than breadth
• Audience-finding is inherently expensive;
can’t be done book by book
• Rebecca Smart (Osprey) remark on
audiences
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Atomization
• Any entity that touches stakeholders should
and will publish
• Profit will be a tertiary consideration to these
players
• They drive down prices and splinter markets
• Much more of a challenge to publishers than
self-published authors
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
A business model is ending
• Owning copyrights for profit a diminishing
business
• Providing publishing skills to non-publishers
a growing business
• As things change: being more audience-
centric promotes efficiency, buys time
LogicalIdea
The
Company
© 2013 The Idea Logical Company, Inc.
Happy to talk some more…
Questions?
Email me at mike@idealog.com
See my writing at http://idealog.com

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Lessons Learned on the Digital Road: How digital change developed in the US bookmarketplace and the English Language

  • 1. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Mike Shatzkin Founder & CEO, The Idea Logical Company, Inc. EspacioTendencias Buenos Aires Book Fair | 26 April 2013 LESSONS LEARNED ON THE DIGITAL ROAD How digital change developed in the US book marketplace and the English Language LECCIONES EN EL CAMINO Qué podemos aprender del cambio digital en el mercado editorial angloparlante
  • 2. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Some stipulations about the history lessons • We’re talking primarily about consumer trade books, not all books • US: No borders, mostly 1 language, 1 currency • US: Tilt to online growth (no sales tax) • US: Ubiquitous credit cards, robust infrastructure for delivery
  • 3. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Where are we now in the US market? • 25+% ebooks; about 50% for fiction • Print in stores probably under 50% of sales • Stores disappearing • Amazon power and leverage and margin increasing • Paradoxically, and temporarily, B&N has more leverage too
  • 4. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. And real change is about to accelerate
  • 5. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. How did the US get here?
  • 6. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Three seminal developments in the 1990s • Desktop publishing made pre-press cheap • Amazon began selling; unlimited shelf space • Ingram created Lightning Print; no minimum print runs
  • 7. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. So launching new books got progressively more difficult • Nothing went out of print • Publishers without sales forces could compete
  • 8. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Amazon’s special position; Amazon’s brilliance • No sales taxes on Internet sales; national policy • Huge Wall Street investment in Amazon • Relentless consumer focus • Use of deep pockets to ward off competition (I2S2)
  • 9. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. 1998-2007: Amazon consolidates, ebook attempts don’t take • RocketBook and SoftBook in 1999 or so; too few titles and no traction • Microsoft and Palm become the market; Amazon buys Mobi • BN gives up on ebook business in 2002 • Amazon relatively unchallenged in online print; share just grows • Sony Reader launches in September, 2006
  • 10. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Reasonable to think in mid-2007 (not so long ago) • The eBook idea just won’t catch on • Investments in digitization can slow down • At that point: more ebooks in PDF than any other format
  • 11. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. And then the game changer: Kindle in November 2007 • Amazon’s all-out targeted marketing • Content downloads directly into the device • Huge push to increase title count • $9.99 pricing (not initially seen as a threat)
  • 12. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Very quick outsized impact • Early adopters ($400 device) were heavy readers • By mid-2007, sales are eye-catching (relative to prior ebook sales) • Amazon begins to own an obviously- important market • Combined online print and ebook hegemony marks Amazon as a threat
  • 13. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Publishers already getting nervous • “Windowing” introduced by Sourcebooks in 2008; others follow • “Protecting print sale” and bookstores become priorities • Amazon selling many ebooks at below their cost • Publishers worry about getting “the call”
  • 14. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. B&N wakes up; Kobo also plays • B&N crashes a Nook program in 2009, launches in October • Indigo’s Shortcovers becomes Kobo, takes Borders business • But it still appears that Kindle is 90% of the market
  • 15. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Apple joins the game; introduces “agency pricing” • Q1 2010; 5 of Big Six move to Agency pricing on April 1 • Apple requires it; B&N and Kobo support it • Amazon share starts to decline, perhaps below 60% • Random House introduces agency pricing in March 2011 (a year later)
  • 16. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. US government alleges collusion around intro of agency in Apr 2011 • Three publishers settle quickly • Random House not charged; Penguin and Macmillan hold out • Eventually, all settle • Discounting (with minimal controls) is legitimatized
  • 17. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Since the dismantling of agency • Amazon share has risen; B&N’s has dropped • Prices of ebooks have steadily declined (DBW bestseller list)
  • 18. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Other “facts” about the ebook market • Only narrative reading has really worked • Juveniles beginning to sell; illustrated and reference don’t • “Enhancement” not proven commercially viable • New tools arriving for illustrated to cut costs (Apple, Inkling, Vook, others)
  • 19. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. US publishing over the next few years • Bookstores disappearing • Random-Penguin merger will have enormous market impact • Future for illustrated is cloudy • Amazon’s power grows, including as a publisher
  • 20. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Guessing about the future, three things really matter • Scale • Verticalization • Atomization
  • 21. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Startups seem to focus on things that really don’t so much • Social reading (must be vertical to work) • Subscription (must be vertical or have scale to work) • Services to “authors” (rather than to “brands”)
  • 22. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Scale • Publishers live in a world of Amazon, Apple, Google • Barnes & Noble didn’t have necessary scale • Scale is a “moat”: what Random Penguin could do
  • 23. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Verticalization • Selling content alone will probably not be enough • Internet inherently fosters depth by subject rather than breadth • Audience-finding is inherently expensive; can’t be done book by book • Rebecca Smart (Osprey) remark on audiences
  • 24. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Atomization • Any entity that touches stakeholders should and will publish • Profit will be a tertiary consideration to these players • They drive down prices and splinter markets • Much more of a challenge to publishers than self-published authors
  • 25. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. A business model is ending • Owning copyrights for profit a diminishing business • Providing publishing skills to non-publishers a growing business • As things change: being more audience- centric promotes efficiency, buys time
  • 26. LogicalIdea The Company © 2013 The Idea Logical Company, Inc. Happy to talk some more… Questions? Email me at mike@idealog.com See my writing at http://idealog.com