Making the case for digital printing Tools of Change in Publishing - - PowerPoint PPT Presentation

1

Making the case for digital printing

Tools of Change in Publishing Ashley Gordon and Brian O’Leary February 22, 2010

2

2

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

3

3

• 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 …

4

4

It’s useful to first confirm the overlapping models

Digital printing vendors Author services Onsite services

5

5

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

Digital printing vendors Author services Onsite services

The firms shown are representative; list is not exhaustive

6

6

Among digital printing vendors, there is overlap…

Pure POD (1 to 100) Ultra short run (50 to 500) Traditional short run (300 to 2,000) Offset (1,000+)

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)

7

7

All part of an evolving value chain …

Digital printers Wholesalers Partners/ Retailers

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

8

8

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

9

9

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.

10

10

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

• rdered); limited inventory

(order 1, print “n”); and minimum inventory (fill-in)

Digital printing vendors Author services Onsite services

11

11

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)

Digital printing vendors Author services Onsite services

*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

12

12

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

Digital printing vendors Author services Onsite services

13

13

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)

Digital printing vendors Author services Onsite services

14

14

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

15

15

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

16

16

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

17

17

Digital printing can lower the unit cost of books sold

Total cost per book sold

Manufacturing cost Returns/ unsold Spoilage/ shrinkage Carrying costs

18

18

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

Total cost per book sold

Manufacturing cost Returns/unsold Spoilage/ shrinkage Carrying costs

When POD is dismissed by publishers, it is typically based on manufacturing costs alone.

19

19

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

• rdered titles
• Titles printed POD can be sold

as non-returnable

• Titles printed POD can also be

fulfilled directly, through contracted services

Total cost per book sold

Manufacturing cost Returns/unsold Spoilage/ shrinkage Carrying costs

Our research shows that the share

• f unsold copies is often much

higher on small press runs (smaller base, greater uncertainty).

20

20

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

Total cost per book sold

Manufacturing cost Returns/unsold Spoilage/ shrinkage Carrying costs

While spoilage and shrinkage vary significantly across titles, the longer a book is held, the greater the loss becomes…

21

21

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

Total cost per book sold

Manufacturing cost Returns/unsold Spoilage/ shrinkage Carrying costs

Because warehouse and financial expenses are usually not part of a departmental or title budget, the costs are often not factored into POD analyses.

22

22

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…

23

23

POD also helps keep niche content in print

Lower costs per book sold More low- volume titles in print Greater revenue and profitability

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

24

24

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

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

25

25

Where POD may help meet long-tail demand

Maximum

• ffline-retail

title count OOP or OSI invoked 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

26

26

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

27

27

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 …

28

28

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

29

29

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

30

30

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

31

31

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)

32

32

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

33

33

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