Print On Demand (Toc 2010) Final

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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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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 …

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It’s useful to first confirm the overlapping models

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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

The firms shown are representative; list is not exhaustive

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Among digital printing vendors, there is overlap…

Lightning Source Transcontinental VariousQuebecor-World(Eusey Press)

Vendor examples are representative only (not a complete or preferred list; vendors

can and do cross segments)

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All part of an evolving value chain …

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

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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

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.

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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 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)*

iUniverse (Nebraska)*

Trafford (British Columbia)*

xLibris (Pennsylvania)*

Lulu (North Carolina)

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

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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

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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)

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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


University of Nebraska Press selects Lightning Source to bring Nobel Laureate titles to market


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Digital printing can lower the unit cost of books sold

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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 titlesWhen POD is dismissed by

publishers, it is typically based on manufacturing costs alone.

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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 ordered titles

Titles printed POD can be sold as non-returnable

Titles printed POD can also be fulfilled directly, through contracted services

Our research shows that the share of unsold copies is often much

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

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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

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

the loss becomes…

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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 expenseBecause warehouse and

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

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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

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

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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

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Where POD may help meet long-tail demand

Maximum offline-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

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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

[email protected]

[email protected]

mailto:[email protected]

mailto:[email protected]

Print On Demand (Toc 2010) Final

Education

Transcript of Print On Demand (Toc 2010) Final