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LogicalIdea
The
Company
息 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
Qu辿 podemos aprender del cambio digital en el
mercado editorial angloparlante
LogicalIdea
The
Company
息 2013 The Idea Logical Company, Inc.
Some stipulations about the
history lessons
 Were 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
息 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
息 2013 The Idea Logical Company, Inc.
And real change is about
to accelerate
LogicalIdea
The
Company
息 2013 The Idea Logical Company, Inc.
How did the US get here?
LogicalIdea
The
Company
息 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
息 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
息 2013 The Idea Logical Company, Inc.
Amazons special position;
Amazons 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
息 2013 The Idea Logical Company, Inc.
1998-2007: Amazon consolidates,
ebook attempts dont 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
息 2013 The Idea Logical Company, Inc.
Reasonable to think in mid-2007
(not so long ago)
 The eBook idea just wont catch on
 Investments in digitization can slow down
 At that point: more ebooks in PDF than any
other format
LogicalIdea
The
Company
息 2013 The Idea Logical Company, Inc.
And then the game changer: Kindle
in November 2007
 Amazons 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
息 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
息 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
息 2013 The Idea Logical Company, Inc.
B&N wakes up; Kobo also plays
 B&N crashes a Nook program in
2009, launches in October
 Indigos Shortcovers becomes Kobo, takes
Borders business
 But it still appears that Kindle is 90% of the
market
LogicalIdea
The
Company
息 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
息 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
息 2013 The Idea Logical Company, Inc.
Since the dismantling of agency
 Amazon share has risen; B&Ns has
dropped
 Prices of ebooks have steadily declined
(DBW bestseller list)
LogicalIdea
The
Company
息 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 dont
 Enhancement not proven commercially
viable
 New tools arriving for illustrated to cut costs
(Apple, Inkling, Vook, others)
LogicalIdea
The
Company
息 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
 Amazons power grows, including as a
publisher
LogicalIdea
The
Company
息 2013 The Idea Logical Company, Inc.
Guessing about the future, three
things really matter
 Scale
 Verticalization
 Atomization
LogicalIdea
The
Company
息 2013 The Idea Logical Company, Inc.
Startups seem to focus on things
that really dont 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
息 2013 The Idea Logical Company, Inc.
Scale
 Publishers live in a world of Amazon, Apple,
Google
 Barnes & Noble didnt have necessary scale
 Scale is a moat: what Random Penguin
could do
LogicalIdea
The
Company
息 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;
cant be done book by book
 Rebecca Smart (Osprey) remark on
audiences
LogicalIdea
The
Company
息 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
息 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
息 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

More Related Content

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

  • 1. LogicalIdea The Company 息 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 Qu辿 podemos aprender del cambio digital en el mercado editorial angloparlante
  • 2. LogicalIdea The Company 息 2013 The Idea Logical Company, Inc. Some stipulations about the history lessons Were 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 息 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 息 2013 The Idea Logical Company, Inc. And real change is about to accelerate
  • 5. LogicalIdea The Company 息 2013 The Idea Logical Company, Inc. How did the US get here?
  • 6. LogicalIdea The Company 息 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 息 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 息 2013 The Idea Logical Company, Inc. Amazons special position; Amazons 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 息 2013 The Idea Logical Company, Inc. 1998-2007: Amazon consolidates, ebook attempts dont 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 息 2013 The Idea Logical Company, Inc. Reasonable to think in mid-2007 (not so long ago) The eBook idea just wont catch on Investments in digitization can slow down At that point: more ebooks in PDF than any other format
  • 11. LogicalIdea The Company 息 2013 The Idea Logical Company, Inc. And then the game changer: Kindle in November 2007 Amazons 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 息 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 息 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 息 2013 The Idea Logical Company, Inc. B&N wakes up; Kobo also plays B&N crashes a Nook program in 2009, launches in October Indigos Shortcovers becomes Kobo, takes Borders business But it still appears that Kindle is 90% of the market
  • 15. LogicalIdea The Company 息 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 息 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 息 2013 The Idea Logical Company, Inc. Since the dismantling of agency Amazon share has risen; B&Ns has dropped Prices of ebooks have steadily declined (DBW bestseller list)
  • 18. LogicalIdea The Company 息 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 dont Enhancement not proven commercially viable New tools arriving for illustrated to cut costs (Apple, Inkling, Vook, others)
  • 19. LogicalIdea The Company 息 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 Amazons power grows, including as a publisher
  • 20. LogicalIdea The Company 息 2013 The Idea Logical Company, Inc. Guessing about the future, three things really matter Scale Verticalization Atomization
  • 21. LogicalIdea The Company 息 2013 The Idea Logical Company, Inc. Startups seem to focus on things that really dont 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 息 2013 The Idea Logical Company, Inc. Scale Publishers live in a world of Amazon, Apple, Google Barnes & Noble didnt have necessary scale Scale is a moat: what Random Penguin could do
  • 23. LogicalIdea The Company 息 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; cant be done book by book Rebecca Smart (Osprey) remark on audiences
  • 24. LogicalIdea The Company 息 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 息 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 息 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