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Growth of Online
Bookselling
Russ Grandinetti
VP, Kindle
Frankfurt Book Fair
October 8, 2013
Bookselling Is Fundamentally Changing
Offline
• Am I in the right locations?
• Can customers find my book on the shelf?
• How do I compare to other book choices?
Online
• How do I get a customer to think about books?
• How do customers hear about and find my book among
all that selection?
• Am I attractive relative to their other entertainment
choices?
Bookselling is Fundamentally Changing
Source: Bowker
US UK
% of consumer book purchases (print + digital units) made online
27%
35%
42%
26%
31%
37%
2010 2011 2012 2010 2011 2012
0 1 2 3 4 5 6
Kindle Speed of Growth
USUK
DE
JP
Amazon Paid Kindle Sales As % Amazon Print Book Sales
Years since local Kindle launch
100%
Kindle Owners Buy More Books
4.0
2.7
4.3
2.9
2008 2012
US UK DE
Digital Creates Incremental Demand
+35%
2.6x
Greater availability creates:
• more word-of-mouth
• more reviews
• higher sales rank
• more recommendations
Print
Sales
Kindle
Sales
6 Months Before
Kindle Release
6 Months After
Kindle Release
Roger Hargreaves Mr. Men series released in 1971
in print, in 2012 in the US on Kindle
Online Is More Efficient For Publishers
Print
• Better In-stock
• Lower Return Costs
• Improved Working Capital
• Lower Transportation Costs
• Never Out of Stock with Print-on-Demand
Online Is More Efficient For Publishers
Digital
• Zero Marginal Cost of Selling One More Unit
• Transportation
• Manufacturing
• Distribution
• Working Capital
• Instant Global Reach
• Perpetually In-Stock
Online Is More Profitable For Publishers
“...we expect to benefit from increased profit contribution and
improved working capital dynamics due to diminishing physical plant
requirements, inventory and returns related to our print business as
well as faster payments for e-books.” –HarperCollins
“operating EBIT was higher year on year, especially in the United States.
This rise was helped by continued cost-cutting measures and lower
return rates in North America and the United Kingdom due to increased
e-book sales.” – Random House
“publishing adjusted OIBDA for 2011 rose 28% to $92 million from $72
million for the prior year, reflecting lower direct operating costs” due in
part to “the decline in expenses resulting from an increase in more
profitable digital sales as a percentage of total revenues.”– Simon &
Schuster
Online Is More Profitable For Publishers
Source: CBS Corporation Financial Results
Simon & Schuster reported global financial results
9.9% 10.4%
13.1%
Y/E Q2'11 Y/E Q2'12 Y/E Q2'13
12.1%
20.1%
25.7%
Operating Income (OIBDA)
Digital % of Total Sales
English Books Sell Globally
English Kindle Book sales to non-English speaking countries
2009 2010 2011 2012 2013 YTD
Foreign Books Sell Globally
Foreign language Kindle Book sales to English speaking countries
2009 2010 2011 2012 2013 YTD
Bookselling Is Fundamentally Changing
Offline
• Am I in the right locations?
• Can customers find my book on the shelf?
• How do I compare to other book choices?
Online
• How do I get a customer to think about books?
• How do customers hear about and find my book among
all that selection?
• Am I attractive relative to their other entertainment
choices?
Consumers Are Not Just Comparing Books
15
Books Need to Compete
$1.29$0.99 $1.99
$4.99 / Free w/
Subscription FreeFree
16
What Is This Customer Thinking?
Formats Price
Paperback €7.22
Kindle €15.99
Risks of Not Moving Fast Enough
• Slow Catalog Digitization
o Increased Piracy, Loss of Sales
• Delaying eBook release
o Increased Piracy, Loss of Sales
• Digital Pricing too high (close to or above print)
o Loss of Sales to competing low-priced content
(books, apps, movies), Piracy
• Lack of POD Utilization
o Missed “surprise” units, lower international sales
And miles to go before we sleep
98% 95% 89%
71% 64%
53% 46%
US UK DE FR JP IT ES
Not on Kindle
% of top 1k authors in print with at least one Kindle book available
And miles to go before we sleep
% of Spanish, German, Italian, and French titles for sale in US
77%
51%
25%
5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Spanish German Italian French
Millions
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2007 2008 2009 2010 2011 2012 2013 YTD
Inventory-Free Distribution
Amazon Print on Demand Selection
0
0.0005
0.001
0.0015
0.002
0.0025
0.003
0.0035
0.000%
0.005%
0.010%
0.015%
0.020%
0.025%
0.030%
0.035%
Inventory-Free Distribution
JK Rowling Revealed
Print OOS
Print Back
In Stock
Page Views
Print Sales
Kindle Sales
The Cuckoo’s Calling – Amazon US Sales
Est. “In Stock” Print Sales
Improve Digital Quality
Metadata – help customers find your books
1) Title / Author
2) Language
3) Series Information
Content Quality – improve the reading CX
1) Fix spelling, typos, missing paragraphs/images
2) Book navigation
Attention is a Scare Resource:
Kindle Daily Deal
CONFIDENTIAL
DD+1
+2
+3
+4
+5
+6
+7
+8
+9
+10
+11
+12
+13
+14
+15
+16
+17
+18
+19
+20
+21
+22
+23
+24
+25
+26
+27
+28
+29
+30
with deal
no deal
Attention is a Scare Resource:
Kindle Daily Deal
110x
18x
4x5x
DD+7
DD+14 DD+30
3000x
30 days after the typical Kindle
Daily Deal promoted title units
were still trending 4 times
higher than the pre-promo run
rate
DD+1
Discoverability: Goodreads on Kindle
On The Horizon: Kindle MatchBook
Gives customers who purchase, or have previously
purchased, a physical book from Amazon the option to
purchase the Kindle version for $2.99 or less.
Why does it matter?
• Incremental Revenue
• More Deeply Engaged Readers
• Happier Customers
Bookselling is Fundamentally Changing
Source: Bowker
US UK
% of consumer book purchases (print + digital units) made online
27%
35%
42%
26%
31%
37%
2010 2011 2012 2010 2011 2012

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Amazon on The Global Transition to Online Bookselling (Russ Grandinetti at Launch Frankfurt 2013)

  • 1. Growth of Online Bookselling Russ Grandinetti VP, Kindle Frankfurt Book Fair October 8, 2013
  • 2. Bookselling Is Fundamentally Changing Offline • Am I in the right locations? • Can customers find my book on the shelf? • How do I compare to other book choices? Online • How do I get a customer to think about books? • How do customers hear about and find my book among all that selection? • Am I attractive relative to their other entertainment choices?
  • 3. Bookselling is Fundamentally Changing Source: Bowker US UK % of consumer book purchases (print + digital units) made online 27% 35% 42% 26% 31% 37% 2010 2011 2012 2010 2011 2012
  • 4. 0 1 2 3 4 5 6 Kindle Speed of Growth USUK DE JP Amazon Paid Kindle Sales As % Amazon Print Book Sales Years since local Kindle launch 100%
  • 5. Kindle Owners Buy More Books 4.0 2.7 4.3 2.9 2008 2012 US UK DE
  • 6. Digital Creates Incremental Demand +35% 2.6x Greater availability creates: • more word-of-mouth • more reviews • higher sales rank • more recommendations Print Sales Kindle Sales 6 Months Before Kindle Release 6 Months After Kindle Release Roger Hargreaves Mr. Men series released in 1971 in print, in 2012 in the US on Kindle
  • 7. Online Is More Efficient For Publishers Print • Better In-stock • Lower Return Costs • Improved Working Capital • Lower Transportation Costs • Never Out of Stock with Print-on-Demand
  • 8. Online Is More Efficient For Publishers Digital • Zero Marginal Cost of Selling One More Unit • Transportation • Manufacturing • Distribution • Working Capital • Instant Global Reach • Perpetually In-Stock
  • 9. Online Is More Profitable For Publishers “...we expect to benefit from increased profit contribution and improved working capital dynamics due to diminishing physical plant requirements, inventory and returns related to our print business as well as faster payments for e-books.” –HarperCollins “operating EBIT was higher year on year, especially in the United States. This rise was helped by continued cost-cutting measures and lower return rates in North America and the United Kingdom due to increased e-book sales.” – Random House “publishing adjusted OIBDA for 2011 rose 28% to $92 million from $72 million for the prior year, reflecting lower direct operating costs” due in part to “the decline in expenses resulting from an increase in more profitable digital sales as a percentage of total revenues.”– Simon & Schuster
  • 10. Online Is More Profitable For Publishers Source: CBS Corporation Financial Results Simon & Schuster reported global financial results 9.9% 10.4% 13.1% Y/E Q2'11 Y/E Q2'12 Y/E Q2'13 12.1% 20.1% 25.7% Operating Income (OIBDA) Digital % of Total Sales
  • 11. English Books Sell Globally English Kindle Book sales to non-English speaking countries 2009 2010 2011 2012 2013 YTD
  • 12. Foreign Books Sell Globally Foreign language Kindle Book sales to English speaking countries 2009 2010 2011 2012 2013 YTD
  • 13. Bookselling Is Fundamentally Changing Offline • Am I in the right locations? • Can customers find my book on the shelf? • How do I compare to other book choices? Online • How do I get a customer to think about books? • How do customers hear about and find my book among all that selection? • Am I attractive relative to their other entertainment choices?
  • 14. Consumers Are Not Just Comparing Books
  • 15. 15 Books Need to Compete $1.29$0.99 $1.99 $4.99 / Free w/ Subscription FreeFree
  • 16. 16 What Is This Customer Thinking? Formats Price Paperback €7.22 Kindle €15.99
  • 17. Risks of Not Moving Fast Enough • Slow Catalog Digitization o Increased Piracy, Loss of Sales • Delaying eBook release o Increased Piracy, Loss of Sales • Digital Pricing too high (close to or above print) o Loss of Sales to competing low-priced content (books, apps, movies), Piracy • Lack of POD Utilization o Missed “surprise” units, lower international sales
  • 18. And miles to go before we sleep 98% 95% 89% 71% 64% 53% 46% US UK DE FR JP IT ES Not on Kindle % of top 1k authors in print with at least one Kindle book available
  • 19. And miles to go before we sleep % of Spanish, German, Italian, and French titles for sale in US 77% 51% 25% 5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Spanish German Italian French
  • 20. Millions 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 2007 2008 2009 2010 2011 2012 2013 YTD Inventory-Free Distribution Amazon Print on Demand Selection
  • 21. 0 0.0005 0.001 0.0015 0.002 0.0025 0.003 0.0035 0.000% 0.005% 0.010% 0.015% 0.020% 0.025% 0.030% 0.035% Inventory-Free Distribution JK Rowling Revealed Print OOS Print Back In Stock Page Views Print Sales Kindle Sales The Cuckoo’s Calling – Amazon US Sales Est. “In Stock” Print Sales
  • 22. Improve Digital Quality Metadata – help customers find your books 1) Title / Author 2) Language 3) Series Information Content Quality – improve the reading CX 1) Fix spelling, typos, missing paragraphs/images 2) Book navigation
  • 23. Attention is a Scare Resource: Kindle Daily Deal CONFIDENTIAL
  • 24. DD+1 +2 +3 +4 +5 +6 +7 +8 +9 +10 +11 +12 +13 +14 +15 +16 +17 +18 +19 +20 +21 +22 +23 +24 +25 +26 +27 +28 +29 +30 with deal no deal Attention is a Scare Resource: Kindle Daily Deal 110x 18x 4x5x DD+7 DD+14 DD+30 3000x 30 days after the typical Kindle Daily Deal promoted title units were still trending 4 times higher than the pre-promo run rate DD+1
  • 26. On The Horizon: Kindle MatchBook Gives customers who purchase, or have previously purchased, a physical book from Amazon the option to purchase the Kindle version for $2.99 or less. Why does it matter? • Incremental Revenue • More Deeply Engaged Readers • Happier Customers
  • 27. Bookselling is Fundamentally Changing Source: Bowker US UK % of consumer book purchases (print + digital units) made online 27% 35% 42% 26% 31% 37% 2010 2011 2012 2010 2011 2012