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Making the case for digital printing
Tools of Change in Publishing Ashley Gordon and Brian O’Leary February 22, 2010
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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
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The vocabulary of digital printing … ! Digital printing
! Wholesaler/distributor
! Print on demand
! Distribution/fulfillment
! Short-run printing
! Metadata
! Ultra-short-run printing
! Chunking/bundling/repurposing
! One-off printing
! Alphabet City: PDF, XML, DAD/ DAM, ONIX
! Self-publishing ! Content ! Author services
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It’s useful to first confirm the overlapping models
Digital printing vendors
Onsite services
Author services
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A range of digital printing suppliers ! Lightning Source (Ingram)
Digital printing vendors
Onsite services
Author services
! 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 5
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Among digital printing vendors, there is overlap‌
Pure POD (1 to 100)
Lightning Source
Ultra short run (50 to 500)
Quebecor-World (Eusey Press)
Traditional short run (300 to 2,000)
Transcontinental
Offset (1,000+)
Various
Vendor examples are representative only (not a complete or preferred list; vendors can and do cross segments) 6
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All part of an evolving value chain ‌
Digital printers
Wholesalers
Partners/ Retailers
Lightning Source (Ingram)
Ingram
Amazon
CreateSpace (Amazon)
Baker & Taylor
LibreDigital
Textstream (B&T)
NetGalley
Bookmobile
SharedBook
Colorcentric
Value Chain International
Edwards Brothers
ReadHowYouWant
ePac Quebecor-World R.R. Donnelley Friesens Sheridan Transcontinental 7
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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
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Typical limitations of digital printing services ! Paper choices ! Trim sizes ! Maximum page counts ! Foil stamping or embossing ! Rough cut edges ! Sewn bindings
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.
! Case-bound color ! Spot colors
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How do you typically work with these vendors?
Digital printing vendors
Onsite services
Author services
! 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)
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Author-services firms come in many shapes ! Author House (Indiana)*
Digital printing vendors
! iUniverse (Nebraska)* ! Trafford (British Columbia)* ! xLibris (Pennsylvania)* ! Lulu (North Carolina)
Onsite services
Author services
! 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 11
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How do author services firms typically work?
Digital printing vendors
Onsite services
Author services
! 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
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On-site services (POD “kiosks”) are more limited ! Instabook (Bookends)
Digital printing vendors
Onsite services
Author services
! 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)
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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
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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
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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 – Lightning Source press release, 9/2/2008
! University of Nebraska Press selects Lightning Source to bring Nobel Laureate titles to market – Lightning Source press release, 10/15/2008
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Digital printing can lower the unit cost of books sold
Returns/ unsold
Manufacturing cost
Spoilage/ shrinkage
Carrying costs
Total cost per book sold
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Digital manufacturing costs are typically higher
Returns/unsold
Manufacturing cost
! Unit costs per POD book printed are higher than seen with conventional technologies (studied books between 80 and 320 pages)
Spoilage/ shrinkage
Carrying costs
Total cost per book sold
When POD is dismissed by publishers, it is typically based on manufacturing costs alone.
! 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
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POD can help reduce or eliminate returns/unsold copies
Returns/unsold
Manufacturing cost
! POD technology allows publishers to choose their inventory objectives
Spoilage/ shrinkage
Carrying costs
Total cost per book sold
! 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
Our research shows that the share of unsold copies is often much higher on small press runs (smaller base, greater uncertainty).
! Titles printed POD can also be fulfilled directly, through contracted services
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POD can also reduce inventory spoilage/shrinkage
Returns/unsold
Manufacturing cost
! Shrinkage (loss or theft) and spoilage (from handling) can consume as much as 10% of a print run
Spoilage/ shrinkage
Carrying costs
Total cost per book sold
While spoilage and shrinkage vary significantly across titles, the longer a book is held, the greater the loss becomes…
! 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
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Reducing inventory cuts carrying costs
Returns/unsold
Manufacturing cost
! Warehouse costs can range from $0.12 to $1.80 per copy, per year
Spoilage/ shrinkage
Carrying costs
Total cost per book sold
Because warehouse and financial expenses are usually not part of a departmental or title budget, the costs are often not factored into POD analyses.
! 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
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However, this analysis compares just “books in print” Dimension
POD
Traditional
Manufacturing cost
Higher per unit printed
Lower per unit printed
Returns/unsold
Little or none
Varies by title
Spoilage/shrinkage
Little or none
Up to 10% of inventory
Carrying costs
Little or none
Warehouse storage Cost of capital
Flexibility
Fill in when required
Some lead times
There is another, important consideration unique to POD…
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POD also helps keep niche content in print
Lower costs per book sold
Higher manufacturing costs for POD Lower expenses for returns/unsold, spoilage and carrying costs “Order, then print” model supports more timely inventory decisions
More lowvolume titles in print
Greater revenue and profitability
OOP/OSI is no longer a forced (economic) decision
Prices based on POD expense and full understanding of costs
Editorial value can be protected without incurring significant upfront costs
Predictable expenses Search and filter helps drive demand
Lowers risk (“Why not stay in print?”)
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OUP: an example of backlist life Click-to-Buy Conversion Rates Buy %
Buys
Income
1%
7,348
$293,927
2%
14,696
$587,854
3%
22,045
$881,782
4%
29,393
$1,175,709
5%
36,741
$1,469,636
6%
44,089
$1,763,563
7%
51,437
$2,057,490
8%
58,785
$2,351,418
9%
66,134
$2,645,345
10%
73,482
$2,939,272
! 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)
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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)
Maximum offline-retail title count
OOP or OSI invoked
Title count ranked by demand
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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 – Publishers Weekly, 5/19/2008 “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 – Publishers Weekly, 12/8/2008
! SharedBook Introduces Smart Button™ Technology Through Partnerships with Encyclopaedia Britannica, Legacy.com, and SOHO Publishing – Press Release, 2/9/2009
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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 …
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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
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So what to make of all of this data? Benefits
Digital printing can save publishers money that they can pocket or invest in new titles Digital printing offers an effective alternative to keep content from going out of print or “OSI� Digital printing (and its service component) may help grow book sales: availability supports demand
Potential roadblocks
Setup costs are worth thinking about (conversion from printed copies can add up) Pricing is not always transparent Vendor capabilities (e.g., fulfillment) vary
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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
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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)
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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
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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
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