Making the case for print on demand

1. Making the case for print on demand An O’Reilly Media webinar Brian O’Leary, Principal Magellan Media Consulting Partners December 3, 2008

2. Overview of this afternoon’s presentation • Describing the print-on-demand “universe” • Print on demand vendors • Author services • Onsite (“kiosk”) services • How to think about print on demand • Representative print-on-demand economics • Answer any questions you may have

3. It’s useful to first confirm the overlapping models

4. Print on demand and ultra-short run suppliers • Lightning Source (Ingram) • BookSurge (Amazon) • Colorcentric • Edwards Brothers • Quebecor-World • R.R. Donnelley • Friesens • Transcontinental The firms shown are representative; list is not exhaustive

5. Even within POD vendors, there is overlap… Lightning Source Quebecor-World (Eusey Press) Transcontinental Various Vendor examples are representative only (not a complete or preferred list; vendors can and do cross segments)

6. POD vendors serve more than just publishers • Lightning Source, the largest supplier, gets about 70% of its business from publishers • Most of the balance is ordered through author-services firms • A small portion is given over to content aggregators (course packs, etc.) • LSI noted (2006) that 81% of its titles were priced between $9 and $24.95 Source: J. Kirby Best, “Inventory Availability and Rapid Turnaround Increase Sales”, Publishing Research Quarterly, Fall 2006

7. Print on demand 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

8. 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)

9. Author-services firms come in many shapes • Author House (Indiana)* • iUniverse (Nebraska)* • Trafford (British Columbia) • Lulu (North Carolina) • xLibris (Pennsylvania) • Bookends (New Jersey) • Blurb (California) • Picaboo (California) • Picturia Press (California) *While both are now part of Author Solutions, these two firms offer different types of author services The firms shown are representative; list is not exhaustive

10. How do these firms typically work? • Compete for authors as customers; may make some money selling books • Authors invest in editing and POD 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

11. The menu of available services can be extensive • Editing (copy, line, content, developmental, research, proofreading, indexing, cover copy polishing) • Design and layouts (formatting options by type and complexity; cover design; illustration and photo selection) • Conversion (from digital file, from printed materials, e-book conversions, PDF generation) • Marketing and promotion (bookmarks, postcards, reviews, press kits, co-op advertising, clipping services, publicity support) • Digital marketing (newswire, e-mail marketing, web design and hosting) • Sales (distribution, online sales, retail sales)

12. On-site services (POD “kiosks”) are more limited • Instabook (Bookends) • Espresso (U of Alberta) • Limited 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)

13. POD can help lower the unit cost of books sold

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

15. 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).

16. 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…

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

18. However, this analysis compares just “books in print” But there is another, important consideration unique to POD…

19. 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

20. 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) Title count ranked by demand Maximum offline-retail title count OOP or OSI invoked

21. 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 • For this example, we modeled a 6 x 9 title, 256 pages in length • Pricing changes over time, but this snapshot provides a good look at the demand scenarios in which POD makes sense • We can come back to the actual model with your own data after the break (this is an introduction to the analysis)

22. Here’s a look at POD costs for one possible supplier Prices and service offerings are evolving; this chart represents pricing at the time of the initial study

23. Here’s the table with data from another vendor Prices and service offerings are evolving; this chart represents pricing at the time of the initial study

24. Using per-copy data as the base, a cost-benefit analysis Prices and service offerings are evolving; this chart represents pricing at the time of the initial study

25. With 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

26. So what to make of all of this data?

27. Discoverability and access in a POD world • Lower-demand titles are less likely to make it to bookshelves • Successful POD strategies use online to promote titles • Google Book Search, Amazon SITB, BN Search are all valid options • Consider POD vendors that can seamlessly fulfill • Try to balance the market power of Amazon and Booksurge • Use social media to leverage content discoverability, syndication • Direct sales probably not successful in the near term • Channel conflict • Challenges managing fulfillment • Individual authors without a platform may be best served by author services

28. “Questions without buckets” • What not to do? • Stick with the old model without understanding the cost of inventory • Digitize everything without understanding the eventual market • Let someone else own your digital files if other, recombinant uses apply • Improving the process of creating custom books (more than just POD) • Combining POD and online access (also more than POD; it’s the outgrowth of a cohesive content strategy)

29. Case study (a few examples) • John Wiley & Sons • Penn State University Press • Information Age Publishing • University of Alberta Bookstore • Plus Cambridge University Press and University of Chicago, which can also serve as POD resources

30. Print on demand: a summary • There are three overlapping segments in the market for POD goods and services • POD can make financial sense when you look at all of the costs involved with creating and managing inventory • There is a 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 can help direct publishers to the best use of POD, which can then be tailored to address the nature of specific imprints and titles

31. Suggested POD resources • Book Industry Study Group • Cambridge University Press; University of Chicago • Publishing Research Quarterly • Leading vendors (e.g., Lightning Source, Edwards Brothers) • Your current vendor (depending on the relationship) • Leading-edge experimenters • Knowledgeable consultants • brian.oleary@magellanmediapartners.com (copy of this presentation)