Slides used to guide a 90-minute workshop on digital printing offered at O'Reilly Media's 2010 Tools of Change conference. Co-presented by Ashley Gordon and Brian O'Leary

1. Making the case for digital printing Tools of Change in Publishing Ashley Gordon and Brian O’Leary February 22, 2010

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

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 The firms shown are representative; list is not exhaustive

6. Among digital printing vendors, there is overlap… 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. 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

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. 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. 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)

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) *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. 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

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)

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. 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. 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. Digital printing can lower the unit cost of books sold

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

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 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).

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

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

23. 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

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

25. 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

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

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. 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. 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. 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