European Digital Distributors Meeting 2015: e-book platforms, mediators and audiences

On June 11 took place at Casa Lector in Madrid the European Digital Distributors meeting, an event focused on solutions for e-book distribution. Special attention was devoted to the evolving readers’ behaviour, librarian and education systems requirements, new audiences and institutional markets – libraries and schools.

Participants were welcomed by José Manuel Anta (Director of FANDE, the Federation of National Associations of Distributors of Publications); Luis González (Fundación Germán Sánchez Ruipérez) introduced the event and provided an overview of the TISP project and the Smart Book, highlighting the relevance of the topic and the potential for synergies.

The first presentation by Frederike Freundt (Head of Digital Development, Hugendubel), was about the Tolino strategy, its leadership in digital distribution in Germany and its potential collaboration with European partners. The Tolino alliance brought together several retailers in 2012 to create an e-book platform; before, most German booksellers had their own digital sales solutions, but none was strong enough to fight Amazon’s competition, so several of them decided to build an alliance, and looked for a strong partner to supply an ecosystem (devices, etc.) – Deutsche Telekom. Now all retailers involved (such as Hugendubel) have their own shops in the ecosystem and can run them on Tolino devices. Booksellers focus on marketing and sales, they “own” their customers, decide on offers and prices and provide a web shop; Deutsche Telekom provides the ecosystem and hardware/apps.

Ms Freundt identified a number of benefits from the Tolino experience: joining forces allowed operators to generate the huge investment needed to provide a solution professional enough to become a market leader (an investment that no single bookseller could afford); for the first time a product was developed in tight cooperation among booksellers; the alliance’s buying power enables economies of scale for purchasing devices; the roadmap and features of apps and clients are defined in tight cooperation with DT and the booksellers. She outlined the rollout milestones, from the launch of the devices in early 2013 to the expansion of the initiative beyond Germany to Austria, Switzerland, Belgium, Italy (thanks to the partnership with Messaggerie Libri) and the Netherlands, to the joining of Libri (the largest wholesaler in Germany) in 2014, which meant that basically all German booksellers have now access to a digital solution. In the short term, Tolino will seek further internationalisation (DT is in charge of that), form new partnerships and work on new devices.

Ms Freundt outlined the Tolino ecosystem, stressing the importance of devices as a link with the customers, and of the shop front-ends that every bookseller has, and described the cloud service offered, which enables the cross-device availability of e-books, the synchronisation of last-read positions, bookmarks and the likes and the upload of users’ own content to their library, among others. She presented the Tolino product family and mentioned plans to launch a new app generation for Android and Apple OS to strengthen the Tolino brand. Moving on to strategy, Ms Freundt mentioned the results of Tolino’s brand marketing on brand awareness: while right after the launch of the devices in April 2013 7.5% of people knew Tolino, by January 2014 the share had risen to 65%. Tolino is available in all retailers’ channels: it’s currently sold at more than 1,500 points of sale (this presence being one of the differentiations traditional booksellers can leverage from) and the in-store presentation is a key success factor – customers can experience the product and ask questions (many customers are adults or elderly, download books in the store, etc.).

The experience so far has been very positive: Tolino is now present in 6 countries, with 20 different brands in over 1,500 PoS; it serves about 3.5 million readers, who make more than 1.5 million transactions per month, from some 1.5 million devices, and offers more than 1.8 million titles. The Tolino ecosystem is pushing back against the competition of the internet giants, and in particular Amazon, whose sales of e-books it overtook in Q3 of 2014; Amazon got back with a huge promotional campaign for Christmas that year, but Tolino currently still leads the market by a small margin. The strategy has yielded a double pay-off: while the e-book market is yet only a fraction of online physical sales, e-book consumers create an uplift in print sales, too, as they go to retailers’ websites and buy also physical books there. All in all, the openness of Tolino’s model and its allowing interoperability have been essential for its success.

Ms Freundt then presented more in detail the case of Hugendubel, one of “tradition going digital” (the retailer was founded in 1893), which has adopted a multi-channel concept based on four sales channels and one strong brand: a profitable and strongly increasing online business, a competitive e-book solution, stores in nationwide top locations and an integrated B2B business (libraries, etc.) combine to create one brand experience. Physical stores are an engine for digital sales (customers get advice, etc.); it is important to always have someone in shop to show and demonstrate the Tolino products. Ms Freundt finally outlined some challenges for Hugendubel: the optimal interlocking of the four sales channels, improving each pillar to stay competitive in all sales channels, managing change, increasing sales of Tolino devices in their own 90 stores (focus on sale and service), converting loyal store customers in customers, identifying store customers, intensifying multi-channel marketing activities and increasing sales of Tolino devices through third party partnerships.

In the following session, Duco van Lanschot presented the Blendle system for digital press distribution. Blendle, called ‘the iTunes of press’, is a small, developer-heavy start-up (45 people, more than two thirds are developers) that offers sales by article; it has a user base of 300,000 people in the Netherlands, two thirds of which are under 35 years old. The model is pay-per-article, there’s no need for a subscription, and it based on the idea that (young) people would actually pay for news in digital. The offer covers newspapers and magazines; publishers set the price (based on the length of the article, all well below 1 €) and a refund button is available (the rate of usage is 5% and feedback is requested). A single article costs approx.. 0,20 euro. At the end of an article, the system asks people to share it on social media (a highlight, not the entire article, as the idea is to educate young people to pay) and proposes to upsell the full newspaper/magazine edition. Blendle tries to mimic the original publication’s font and presents itself in general very differently than a PDF kiosk: it has a social component, staff picks, curated categories, recommendations, a search function, alerts.

According to Mr van Lanschot, Blendle is about discovery (amidst a sea of internet content), frictionless paying (one account for everything, one-click pay, refunds), a cool reader experience with all the content available (so as to make it cool to read and pay for quality journalism); thus it has managed to become bigger than Apple News. New subscribers are given 2.50€ for free – rather than for example one week for free, so that they start getting used to paying right away. Blendle accepts more or less all formats from publishers (so that they don’t need to do extra work). Right now the company is losing money, but they needed to hire many developers to create a great service; they’re growing fast, and just got investment capital from Axel Springer and the New York Times.

Next was a roundtable on e-book distribution business trends. The first speaker was Susan Breeuwsma, business development manager of digital media at CB, provider of logistics for the media, fashion and health industries in the Netherlands and Belgium, and in particular of storage, distribution, order processing, billing, ISBN registration and title information and metadata management for the publishing industry. Ms Breeuwsma provided an overview of the e-book market in the Netherlands, saying that currently 198 retailers sell e-books and 315 publishers produce them, for a total availability now of 40,000 titles and a market share of 5.2% (Q1 2015). She spoke about the library market, comparing e-book sales and loans: currently 7,000 titles are available for loan, and top sales are very different from top loans, as on average e-book titles in libraries are 3 years old; still, lending has been very successful among users, with 840,000 loans against 2.2 million sales in 2014 (and 2.5 against 2.8 million expected in 2015). CB is developing analytics on e-book consumption.

Gianluca Ambrogio, CFO of Bookolico, presented his company as the first Italian e-book streaming service. Shortly after its launch, it was selected as best new app by Apple, getting 5,000 downloads in a few days; now it has more than 10,000 users and offers more than 12,000 titles. Users pay a subscription fee (9.99€ per month) to have access to an unlimited catalogue; every time users read at least 3 pages of a book, publishers get a payment. The service has a social side: users can see what friends read, make recommendations, post comments, share, etc. There is a notifications section, where publishers can advertise titles and events; publishers and authors have their accounts/pages, can interact with users. The idea is to make it easy to discover books; Bookolico supports multimedia content, via the ePub 3 format.

Mr Ambrogio outlined the key elements of the model: views are created whenever a user turns a page and publishers get paid every month based on total views; there is a social element (following friends, authors and publishsers, getting updates, making connections); a statistics tools allows to collect data and track users’ behavior.

Per Helin, founder and CEO of Publit (Sweden), declared that he and his associates had created the company because frustrated by a dysfunctional book market. Started with print-on-demand and then passed to e-book distribution, now they are exploring new models, from library lending to bundling print and e-books. The aim is to move to a true on demand model, making intense use of metadata flows (everything is mapped via Thema) and offering business analysis and distribution services. also offers a shop for publishers to sell directly to consumers and a self-publishing platform.

David Fernández, CCO of Lektu, briefly presented the Spanish e-book sales platform launched with the idea that DRM did not help to fight piracy; Lektu thus provides DRM-free files, to ease the user’s experience. For Mr Fernández, the focus for publishers is to provide quality content at a good price; the website sells all kinds of digital content at a wide range of prices and also includes free offers.

In the ensuing discussion, upon a question on micropayments and slicing content, speakers argued that it could be useful but that not all types of content lent themselves to it, and that micropayments were not very rentable at the moment due to high fees. Reflecting on how most subscription models look the same and seemingly haven’t been too successful in other fields, one speaker said that they could be the future if one finds the right way to propose them to the market; it took a long time in the music sector and it is a challenge, and the right content and creating user-friendly apps to provide a good experience are the key to success. Another agreed that it was an issue of user experience rather than business models. Ms Breeuwsma claimed that some publishers were not too eager to jump in yet, while Mr Helin said that according to some research he had made publishers want to take risks (“it’s in their DNA”) and should indeed try different business models; he added, however, that publishers themselves need to have the rights to enter these agreements, so that authors’ attitude also matters. He explained that some publishers were creating their own applications for streaming and argued that some degree of concentration in the sector was desirable, or some segmentation by niches. He acknowledged that being main users of subscription heavy readers, this could reduce sales, but Mr Ambrogio argued that many users read only part of books, maybe to discover and then buy them.

The debate moved then to e-lending, which the moderator argued had not been considered a business for a long time, whereas now publishers were seeing the figures and thus the opportunity (for example, it represents 13% of sales for HarperCollins). Mr Helin recalled that his company had started with e-lending and acknowledged that it was a business channel, interesting as libraries are one of the stakeholders closest to readers; as customers become data, he added that libraries were happy to provide data (non-personal). He said that it was not easy to convince publishers, but that those who did it right would benefit from it; he added that e-lending represented now 50% of digital sales in Sweden, a share in decline (dependent on how much money governments want to put in). Ms Breeuwsma claimed that e-lending had proven a proper sales channel in the Netherlands, where it represented 40% of digital sales: libraries pay an advance to publishers and once it is used up it can be renewed; she wondered what will happen when subscription models hit the market.
She then said that some publishers hesitated to sell directly for fear of retaliation from the retail sector, but argued that there was more money for publishers and authors from going direct. Mr Fernández said his platform offered the possibility, and explained that most of their publishers sold only via them and Amazon, expressing the will to overtake Amazon. Mr Helin said they also had a direct-to-consumer platform, not much used by publishers, in his opinion mostly not to upset booksellers. Ms Breeuwsma argued that in the Netherlands publishers were past such concern, but did not take up the possibility anyway because it required a different set of skills.

Finally, the moderator raised the topic of analytics, asking what could be done with the high amount of data that could be aggregated through digital sales, reader data and distribution data, which publishers did not seem to use much for the time being. Mr Ambrogio said it was possible to discover readers’ preferences and habits, what they do, what they like or not. Ms Breeuwsma added that combining data and analysing was a new business opportunity. Mr Helin commented that he loved data, but explained that it was difficult to be proactive and argued that analytics seemed to take away some of the “metaphysics” of publishing and selling books (the magic, the instinct).

The following session was the roundtable ‘Libraries as an emerging market for e-books?’. Jill Bourne, Director of the San José Public Library (USA), said that e-books were the library’s fastest-growing sector, and that while titles availability was still limited, usages grew exponentially as it increased. Ms Bourne lamented that e-books were financially burdensome for libraries, saying that the current systems were not sustainable; she also pointed out the issue of user experience, as multiple platforms and barriers made it confusing. She wished for a seamless integration of e-books in library catalogues rather than having to redirect users to commercial sites.

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Kari Lämsä, Manager of Library 10 in Helsinki, said that they didn’t work with e-books yet, but were trying to develop physical library services, adapted to the new needs of users; he said that for libraries the main issue was to move beyond being just a place for storing books.
Anja Flicker, Director of the Würzburg Public Library, said that they were of the first libraries to lend e-media in Germany, and that they currently held 20,000 items and had made 70,000 loans last year. She said the sector was growing fast and lamented, from a customer perspective, that not all titles were available, claiming that it should be up to libraries to choose. She said that DRM systems were difficult to handle and made for a complex user experience, pointing out in particular at the impossibility to return an e-book before the deadline.

James English, from the New York Public Library, recounted his experience with the Big Five publishers in the US, who at first did not want to sell e-books to libraries, but after negotiations, discussions about models and the argument by librarians that their patrons wouldn’t have bought e-books in the first place, they entered into agreements. He then listed some issues with access to e-books, such as the fact that the experience is cumbersome, there are too many different applications, content is isolated and there is a lack of interoperability. He said this was the reason why they advocated for standards for e-book platforms, arguing that libraries did not need to make profits but provide a good user experience. He then presented the Library Simplified initiative, launched by a group of libraries to find a solution to create an ideal process for e-book lending. He claimed that current market solutions were flawed, in that it could take up to 19 steps today to get an e-book to a reader, which explained in his view the low level of e-book adoption in libraries. He recommended then for libraries to take advantage of the changes in the book industry, use their core strengths and also bear in mind the importance of improving accessibility for the visually impaired. He regretted the fact that 90% of the library market was in the hands of one vendor and that DRM were widely used more to lock in customers than to actually protect content. He said some library policies were also an impediment (for example the need to go to a library to get a library card instead of being able to get it online) and called for improving content licensing systems.

Mr English went on to provide more details about the initiative (which involves also IDPF and the Readium Foundation): from a current situation (“the platform game”) featuring a set of specialised ecosystem, each comprising a platform, often with lock-ins, he called for collaboration and support for open standards (such as the Open Publication Distribution System, used to create catalogues thet enable the aggregation, distribution, and discovery of books, journals, and other digital content by any user, from any source, in any electronic format, on any device) and formats (such as ePub). He recommended considering alternative publishers and using DRM for actual rights management rather than locking in users. He outlined the initiative’s approach: in the short term the aim is to improve the user satisfaction and acquire more content, and in the long term to spread the adoption of open standards. He recounted some progress made so far: an app for iOS is in phase Beta (and soon an Android one will be out), 130,000 titles are hosted on multiple systems, the 3 major vendors are involved, 40,000 public domain titles are also available and everything works via normalised classifications; the borrowing process has been simplified. The system will of course be open source.

In the following discussion, librarians insisted that so far e-book borrowing was too complicated for users but that it was an opportunity to reach out to more users, who would not go to the library. Asked about the risk of disrupting the e-book market, especially if libraries provided universal access, Ms Bourne said that they’d conducted studies on the impact of e-lending on the public’s attitude to purchasing, which showed no signs of disruption, as people who borrowed books tended to also buy more. Mr English also quoted a Pew study according to which library users buy more books, adding that many of their patrons (the economically challenged) on the other hand would not buy books anyway; he argued that libraries increased audiences for books, offering room for other retail models. Ms Flicker explained that her library could make as many loans as the copies bought and had a limited budget, which as a consequence limited the impact of their activity, as books were not available for everybody all the time. Talking about budgets for collections, Ms Bourne said that 6% of their 6 million USD budget was now devoted to digital and that the share was growing, and explained that her library also bought e-books in consortia with other libraries and that there had been conversations about a national digital library; Mr English said digital lending was 5% of their activity but he expected it to become 50% in a few years.

The next session was a presentation of the e-book market in Brazil, by José Henrique Guimarães, CEO of book and e-book distributor Acaiaca Distributora de Livros. Mr Guimarães provided an economic overview of Brazil, and a summary of the Brazilian book industry: 10th largest book market in the world, with a value of 1.54 billion € in 2014, publishers’ sales went down 5.16% that year, but excluding the sales to the government (22.8% of the total market) the change was actually +1%; in the last 10 years book production increased 52% in volume and 16% in value; e-books represent 0.3% of the market. Mr Guimarães talked about distribution channels and e-commerce in Brazil: reading materials (books, magazines and subscriptions) account for 8% of orders online (4th item); Amazon’s Kindle was launched in December 2012. The whole book value chain is tax-free except for e-readers.

Mr Guimarães identified retail as the strongest part of the book supply chain in Brazil, saying it was very efficient. E-book sales are concentrated among six main retailers (Apple, Google, Amazon – which has only 1% of the print book market, Kobo, Cultura, Saraiva), while independent bookstores sell 1% of e-books. E-book distributors are Acaiaca Digital, DLD, Bookwire, Xeriph.

Mr Guimarães listed the main bottlenecks in the market as: the economy being still quite closed to external commerce and investment; doing business being complicated (due to red tape, lack of infrastructure, etc.); the majority of publishing houses being family-owned and thus lacking the resources (financial and not) to move to digital; piracy being an important concern; language acting as a barrier for foreign competition; the market being so protected that many publishers tend to be more conservative in decisions about e-book sales. He then pointed out some challenges and opportunities: as the government, which buys about 100 million books per year, signaled that it wants to migrate to digital, a huge impact is expected; e-reader devices may become tax-free; a fixed book price law is in transit in the Congress; the local market lacks a metadata standard; the conversion of back catalogues is still a difficult task.

In conclusion, Mr Guimarães argued that there was still a myopic vision about opportunities in the e-book market; that with so small a digital market, payback was considered too slow and this hampered the conversion of back catalogues; that nonetheless, the digital market overall was growing fast (e-commerce, m-commerce, tablets); and that all in all, considering e-book sales as the result of improved education (willingness and ability to read) plus purchasing power plus infrastructure plus content availability, the prospects were good.

The last session was a presentation of digital distributor Odilo by its founder, Rodrigo Rodríguez, who described its international strategy as a European e-book distributor. Mr Rodríguez identified Odilo’s mission as to provide patrons with easy access to content while guaranteeing fair compensation to creators; the company creates technology, services, marketing and support so that libraries can serve users and content providers can meet libraries and users. The model thus focuses on the three pillars of users, libraries and content providers (publishers/authors/distributors); in Mr Rodríguez’ view: it aims to offer users a good experience (via elements of social reading, a single point of access, etc.), going beyond a simple list of books available; for libraries, it provides content freedom and an opportunity for smart purchases, being an open platform where libraries can buy content from wherever they want; and it gives content providers security, flexibility and a global vision. In essence, the company provides technology to serve any business model, in order to facilitate for publishers the making available of content and for libraries the buying of it. Odilo currently has clients in 7 countries and users in more than 40; its team grew from 15 to 45 people between 2011 and 2015.

Odilo’s international strategy is based on teaming up with local players and develops along three steps: users, content and technology. It also collaborates with sector experts (such as universities) and various content providers (Big 5, local distributors, independent publishers, subscription and self-publishing platforms). Odilo’s vision is that libraries are innovative and demand control over their collections, user experience is key for patrons, and collaboration opportunities among providers are to be embraced. The company does not have a single business model, but usually it charges libraries for its technology (software as a service) and they can buy content from the Odilo Marketplace; they offer both streaming and download (also offline reading with Adobe DRM, but users do not need Adobe account). As a conclusion, Mr Rodríguez listed some focus and interest areas for Odilo: DRM, market and audience data, subscription models, libraries as business opportunities, collaboration with print distributors and booksellers and the possibility to create a formal association of distributors (not only digital).

Conclusions of the meeting were presented by Jose Manuel Anta (FANDE) who identified the key issues of the discussion in DRM, marketing data, subscription models and models of cooperation between content distributors and libraries, print on demand, international integration of e-book distributors.

DOI: 10.17400/SB-2015-07-01

2 thoughts on “European Digital Distributors Meeting 2015: e-book platforms, mediators and audiences

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