Reaching a New Generation of Readers

Making Information Pay Conference 2007

Nicole Poindexter, Hachette Book Group

Introduction: Hachette Book Group USA

Digital Publishing: Past

1455 Gutenberg’s Printing Press

1878 Dewey’s Numeric

Classification

1935Mass Market books start

with launch of Penguin

The Wall Street Journal--1999

‘Over the past decade, the book industry has lagged behind the rest of the entertainment and media world in embracing technological change. Few book publishers, for instance, had a systematized method of keeping track of manuscripts and marketing materials for completed books. Final drafts were stored all over the place, and unsold back copies took up valuable space in company warehouses.’

HBG USA’s Early Digital Publishing Efforts

• Time Warner Electronic Publishing

– 1995 Quick Reads Program

– Interactive CD-ROMS

– Modus Operandi

HBG USA’s Early Digital Publishing Efforts

• Launched in April 2001• Online community and eBook store• iWrite…online writing collaboration• Closed December 2001

– “Almost two years and more than $10 million later, Time Warner Trade Publishing will close ‘with great regret’ its electronic publishing division iPublish.com and let 29 employees go.”

– Wired 12/04/2001

iPublish

Why weren’t we successful?

Content

Capabilities:Company +

Partners

Customer

Technology

Technology• Concepts required Web 2.0 in the Web 1.0 world• Technology had not entered the mainstream

Content• Content not strong enough to surpass limitations in capabilities and technology

Capabilities: Company and Partners• TWBG did not control key aspects of successful product delivery and business model• Partners not aligned for success of product

Customer• Could not create a product that would satisfy customer needs or inspire them to switch from other choices

Digital World Today

8

CustomerHow are people using the Internet?

0

10

20

30

40

50

60

Millions of Households

U.S. Census Bureau Statistics

Households with Internet Access 1998 - 2003

1998

2000

2001

2003

Horrigan, John B.. Home Broadband Adoption 2006:. Pew Internet & American Life Project, May 28, 2006. http://www.pewinternet.org/pdfs/PIP_Broadband_trends2006.pdf

• By 2007, Nielsen reported more than 211,000,000 internet users in the U.S. -- An increase of 121.4% from 2000• Exponentially increasing Web content escalates importance of search and filters

•Rise in comfort level of using digital resources thanks to rise in online commerce

• In the News industry the Web leveled the playing field between print and broadcast—driving both online

CustomerAre people reading books?

Source: Excerpted from “Surveying the Digital Future” A project of Center for the digital. Future—USC Annenberg School, 2007 Response to question: During any typical week, about how many hours of your leisure time, if any, do you spend with the following activities not online?

9.2 hours per week spent online at

home

Hours Spent in Leisure

CustomerAnd will they be reading books tomorrow?

0%10%20%30%40%50%60%70%

1982 1992 2002

Literary Reading Rates by Age Group

Source: National Endowment for the Arts, Reading at Risk Survey, 2002. Percent of people who answered Yes to “Have you read a novel, short story, play or poem in the past year?”

18 - 24

35 - 44

45- 54

55 - 64

65 - 74

75 - 84

85 +

CapabilitiesPartnerships can fill capability gaps

Content Aggregation

Search/ Filter

Digital Delivery/ Storage

eCommerce

Relationship with

Consumer

Metadata/ ONIX

Company

Lightning Source

Lightning Source Lightning Source

• Our early efforts in digital publishing laid the groundwork – We began documenting our digital rights and

building digital rights into our contracts (1999)

– We began digital repository for our files (2000)

– We created standards for the structuring of our digital layout files (2001)

– We began tagging our content in XML (2002)

CapabilitiesInvestments in Digital Infrastructure

TechnologyeBook adoption vs. Book adoption

One standard format for eBook seed files

eBook files should handle graphics well and work across hardware platforms

Consumer friendly Digital Rights Management

Lower consumer price points for eBooks

eReader hardware should be low priced, multi-functional and easy to use

Need to reach critical mass of titles available as eBooks

Inexpensive

Portable

Transferable (sharing, pass along, gifts)

Valued as objects (and signifiers of status)

No batteries required!

The 4 B’s (the bedroom, the bath, the bus, the beach

eBook Adoption Criteria Book Adoption Criteria

ContentNew media is radically changing content

• Consumers want to create content in new ways

• Consumers want content targeted to their individual needs or interests

• Consumers want to create community around content

• Consumers are attracted to multimedia experiences

To act or not to act

To act or not to actArguments against Action

• Publisher revenues from digital content are fairly small today

•Basic criteria for wholesale e-book adoption are not yet present – especially lack of low cost eBook reader

• Implementation of digital publishing is difficult and costly

• We are concerned about piracy and loss of ability to monetize our intellectual property

To act or not to act Arguments for action

•Numbers of book readers are declining; internet/ digital content consumption growing rapidly

•Search can be a powerful marketing tool exposing readers to backlists

•The time to prepare is now. The next generation of readers are digital natives.

•We will have no chance of controlling our content and being able to monetize it if we are not proactive/ able to put into digital formats

*Source: The New York Times, April 2, 2007

Why HBG USA is taking action now

• Arguments for non-action diminishing– Easier to implement with players like Bookstore and NewsStand– eBook adoption criteria moving in the right direction

• Opportunities associated with taking action becoming clearer– Search, tagged/ chunked content, mobile phone delivery– Direct relationship with the customer– Process benefits– Must be ready to serve our future readers

• Control argument– Standards only possible if we participate

We think factors today are likely to make digital efforts more successful

Content

Capabilities:Company +

Partners Technology

Technology• Widespread broadband access makes downloading content easy• Advances in eBook readers and smart phones make future of widespread eBook adoption more likely

Content• Tagging, chunking, collaboration and other concepts should enhance content so that the customer perceives value

Capabilities: Company and Partners• Willing partners relieve some of the investment requirements• HBG past investments in technologies to reduce costs make incremental investment manageable

Customer• Customers are demanding content when and where they want it; they want to participate in the creation of it and want it tailored to their needs• Will they pay for it?

Customer

Capabilities: Challenges

• Digital publishing is not the same as physical– Implementation requires vision, the commitment to invest and a

shift in culture

• Need to decide which capabilities the publisher must own and which can be outsourced

• Need to develop industry standards – Without them, implementation is more difficult and much riskier

What will it take to implement digital publishing strategy ?

Content: Challenges

• Leverage current consumer activities online– Community– Content creation

• Provide content in new formats– Chunked– Multi-media

• Continue to provide quality and credibility of value inherent in book publishing

• Publishers and Editors must get involved in planning and marketing of digital content from the beginning

How can we adapt book content to the new medium?

Technology: Challenges

• Technology could emulate the book reading experience– Easy to use – One eBook and DRM standard– eInk technology for ease of reading– Comparably priced with book reading experience

• Or, technology could enhance the book reading experience– Multi-function device– eCommerce capabilties– Multi media experience including audio and video– Support consumers new content interests (community, sharing,

creation of new content)

How can technology encourage adoption instead of being a barrier to it?

Customers: Challenges

• Increasing marketing exposure through the Internet– Digital distribution of content should definitely increase awareness

of and hopefully purchase of our titles – digital and physical

• Reducing the costs of publishing through process benefits– Some of the technology investments should reduce our costs to

produce physical books

• Selling content

• Once consumers switch, will it erode or enhance our physical book business?

How will we make money?

Conclusion

There are challenges to pursuing a digital strategy

− Partners can make implementation easier− The path to financial success is not clear

The world today points to a future in which digital will be an important way to reach book customers

− Meeting customer needs requires alignment of technology, capabilities and content−Not clear what will be the “tipping point” or when it will come

Mistakes have been made before in this arena, and will probably be made again

−But, can we afford not to try?