BookExpo America 2012 CEO Panel on New Business Models
featuring:
F+W Media’s David Nussbaum; Sourcebooks founder Dominique Raccah; and Safari Books Online’s Andrew Savikas.
Moderator Christopher Kenneally, Copyright Clearance Center
for podcast release Monday, June 18, 2012
KENNEALLY: Welcome, everyone. Welcome to a program called New Business Models for Publishers. My name is Christopher Kenneally, I’m with Copyright Clearance Center, and it’s a pleasure to be here this afternoon for this program. The ancient Greeks would have said that there was nothing new under the sun. But they didn’t know about the book business in 2012. Ask that question here today, what’s new? Ask it of anybody at Book Expo, and you will get a multitude of answers, covering the entire house, from HR, to IT, to sales and marketing, and of course editorial.
What’s interesting too about this question of what’s new in the business is it affects not only the companies and the people in the book business, but the books themselves. The things that we produce are behaving sometimes less like books, and more like software or apps, and other things that we wouldn’t have thought of as being part of the book business only a few years ago. So I’m looking forward to discussing those points with our panel.
I should tell you that regrettably, one of the panelists scheduled to be here, Adam Salomone from Harvard Common Press, cannot join us today. But we do have a terrific trio of people up on the stage here. I’m going to introduce them all briefly. On the end is David Nussbaum, he’s the Chairman and Chief Executive Officer at F+W Media. David, welcome.
NUSSBAUM: Thank you, Chris. Glad to be here.
KENNEALLY: We should tell people that F+W Media is a community-focused content creator and marketer of products and services for enthusiasts. The company offers a diversified portfolio of e-books, books, magazines, events, competitions, e-commerce education video, and more.
To David’s right is Dominique Raccah. Dominique, welcome. Dominique founded Sourcebooks in the spare bedroom of her suburban Chicago house in 1987, and they celebrate their 25th anniversary this year. They had a big party for that last night. It was at first a specialty house serving the financial services industry. And her vision for the company has changed over the years, and Sourcebooks is today the largest woman-owned trade book publisher in the country, but it is still based in Naperville, Illinois.
And then finally to Dominique’s right is Andrew Savikas. Andrew is CEO at Safari Books Online. Andrew, welcome.
SAVIKAS: Thank you, Chris. Glad to be here.
KENNEALLY: Safari Books is a joint enterprise of O’Reilly Media and Pearson Education. Safari compiles technology books from leading authors and publishers into an online database that technology, IT, and management professionals can use quickly and easily. So that’s by way of introduction.
And I want to start the conversation, and very much want to see that this is a conversation, with David. And to help familiarize the audience who may not be following this story, since you arrived at F+W in 2008, the company has shifted from being very much a book business to a community business. Tell us about that, and why that matters today.
NUSSBAUM: Right. Thanks, Chris. Our company has shifted pretty dramatically over the past four years. At one time, the company was exclusively print. One time, really, going back to 2008. And now we are fully multimedia, multi-platform. And really, the first major act that the company took when the new management team came in was to take a business that was organized by vertical – we had a book division, a magazine division, and an events division – and everybody in the company, that’s 500 people, one day had new jobs. Where they were in the art community, in the craft community, in the writing community, and we have 18 communities at our company.
KENNEALLY: That’s as new as it gets. You gave people new jobs.
NUSSBAUM: Everybody got a new job. Pretty much every single person. They walked in one day with one certain job, and the next day with a different job. And there was a learning curve. But what it enabled us to do, really, is to offer consumers and retailers an outreach to these vertical communities in many, many ways outside of the printed product. And that was a time when e-books were still at a very early stage, iPad hadn’t come out yet, so applications were still really early stage. But it helped us launch into all of these different products.
KENNEALLY: Right. And along the way in the last four years, F+W has acquired a lot of different companies. One of the ones that just most recently you acquired is the Martha Pullen business. You can tell people a bit about that. But what interests me is that that’s a business that is a content business, but also a goods business. And that’s important to the direction that F+W is going
NUSSBAUM: That’s right. One of the things that we’re trying to do as a business is understand that a consumer is not solely a book consumer. A consumer, particularly in a vertical, or in a passion, they consume a lot of goods and services. And in fact, only 10% of their dollars are spent on the book, 90% are spent on the rest of the hobby. If you’re a practical painter, you’re going to buy paints, and smocks, and easels. So all of these hobbies, it works that way. So we want to be in the business of providing content and services to the consumer in these verticals.
And the Martha Pullen business was an interesting acquisition. We bought the company in February, and Martha Pullen’s very well known in the South and Midwest. She’s a leading crafter, one of the people who started the trend of heritage sewing. And so with that business, we acquired books, and we acquired magazines, but we also acquired a community of people who had a passion for sewing. So now they buy from us all kinds of accoutrements that go around their hobby in addition to the book.
So it feeds each profit center really, really well. You want the book, and you’re going to want the products and services around that book. So the e-commerce business for us, which did not exist in 2008, in fact we launched it in ’09, is now a $30 million business for the company. And we were the first publisher really to aggressively get into e-commerce. And what that has enabled us to do, and I’m going to take one more second, because I think my colleagues should get a chance to speak.
KENNEALLY: Oh, absolutely.
NUSSBAUM: It’s enabled us to not only reach the consumer one to one, but to learn so much about that consumer from a data perspective, from a purchasing perspective, from a preferences perspective, that it helps us create better products and services to sell through our retail channels. So our retailers report, since we’ve gotten more close to the consumer, that their sell-through has gotten much better. Whether it’s Barnes and Noble, Amazon, Michael’s, specialty retailers, independent retailers, the sell-through of our books has improved, because we are so close to the consumer.
KENNEALLY: And in the acquisition of the companies, you’re acquiring the consumers with them, and that’s an important piece.
NUSSBAUM: That’s correct. I’m sorry, guys.
KENNEALLY: Don’t worry. I’ll make certain that everybody’s going to talk.
NUSSBAUM: OK. We will only acquire a company if we also get a consumer database that really acts as our consumer panel, as well as purchasers. So Martha Pullen came with, I don’t know, 300,000 or 400,000 names of people who are active in the hobby. So yeah, that’s an important piece of our plan.
KENNEALLY: And I appreciate your graciousness, David. But don’t worry, we’re going to let everybody else speak, and we’re only five minutes in. So plenty of time for everybody. But I want to turn to Dominique, and talk about your role. You’ve been very much in the forefront of declaring this new world. Discovering it and sort of making it your own. In the position of being somebody who’s led the charge, what’s it feel like to be out there?
RACCAH: So I think what excited me, and has continued to excite me, about digital is what I see as the promise of digital. You know, when I got into book publishing, we used to say that only 5% of Americans went into a bookstore in an average year. And if you’re a book publisher, you’ve got to believe that beyond the 5%, there exists a market for your books, right? That there are people who are going to be interested in your books that don’t necessarily go into a store.
And so the promise of digital for me began with the belief that we could get the right book into the right hands – a book into every hand. Every hand that needed a book across the world. And that’s been the inspiration that has really led me. I would say the promise of digital has really led my discovery process. That’s the thing that’s been inspiring me.
KENNEALLY: Right. And one of the things that’s happening at Sourcebooks, it seems to me, is the way that it is as much a software developer, if you will, as it is a book business, or a book company. Is that fair?
RACCAH: Well, certainly we’re turning more and more that way. The things that really interest us are all use-case problems, right? In fact, I find I have a whole new vocabulary. Like, there was a vocabulary I didn’t have two years ago, or three years ago, and I have it now. So what interests me, for example, in children’s books is, is there a way to actually create a better bond between kids and their parents, and between kids and books?
What inspires me in the education space is can we create methodologies that simplify the going-to-college process? So if you have a kid who is about to go off into this college process, you’re going to discover, and it’s just clear, it’s really complicated and people hate it, all right? So there’s like, loads and loads of pieces to it. It is complicated, and it is a grueling and difficult experience. So what we’re doing is really trying to simplify, and sometimes it involves books, but sometimes it involves other kinds of objects.
And what’s kind of cool is kind of like what David was saying. I’m really interested in solving these problems. So that solution sometimes – ooh, sorry. Oh, OK, is that better? It’s not better? OK. Is David’s mic better? OK, sorry. I’m very sorry.
So that solution – I talk about pain points and solutions, right? So we work on pain points, and so the pain point might be the going to college process, and the solution, some of it will be books, but some of it is going to occur as webinars, as video, as software. And what interests me is creating a suite of solutions that will make us better at solving the problem.
And my experience is identical to David’s, and that’s why I was really excited that we were on a panel. Because all of us, you’re going to hear some themes. But my experience has been identical to David’s, in that by going after the problem, we have gotten so much better as marketers, and so much better at delivering the right kind of content, right?
So I did a presentation on data-driven publishing for IDPF two days ago, and even in things like the romance space, which you would not normally think of as a highly data-driven space, we’re doing stuff like titling, and covers, and positioning. And you know, in YA, we’re doing all that work. And as a result, we were talking to Barnes and Noble. But you know, our mass-market print sales are up double-digit in a environment where mass-market print sales are down double-digit, right? So that’s the kind of different you’re talking about.
KENNEALLY: Well, Andrew Savikas, the kind of difference that Safari presents to the marketplace is first of all, it’s a startup really. I mean, 10 years old now, begun in 2001 as a collaboration with Pearson. But you didn’t have to struggle with a legacy business, and kind of bring that into the future with you. I’m sure that made a difference. But tell us how.
SAVIKAS: Yeah, that’s a very good point, Chris. I think one of the reasons that Safari has managed to succeed as well as it has is because of the foresight that both O’Reilly and Pearson had in knowing that something this different, which many people in both organizations had concerns about, relative to cannibalization and competition of what at the time was obviously, almost entirely a print business.
But recognizing that for this business to succeed, not only did it need collaboration from across the aisle, so to speak, of multiple publishers, but the opportunity to incubate and to grow on its own, independently of the expectations and assumptions that underlie the existing business. And certainly for the first several years, questions remained about whether it was worth the investment, and was the market developing enough?
And that certainly proved worth the investment when – I think it was five or six years into the company – on O’Reilly’s side at least, it became the second-largest channel, after Amazon. So larger than Barnes and Noble for that publisher. And I think it has helped immensely to have the space to grow and develop alternative and new models, to learn some of those same kind of lessons, to understand what it means to sell and market a subscription product through the Web to consumers.
To sell, and market, and support an enterprise software product to HR directors and chief learning officers. To learn that we needed to partner with a reseller when it comes to the academic library space. These are all things that neither of the joint venture partners or, I would say, many of the other publishers we work with, have a lot of expertise in. And so we were able to develop and expand capabilities that were very different from what was needed to succeed either in the print, or eventually the standalone e-book model.
NUSSBAUM: I have a couple of follow-ups to both my colleagues here, because they’re making some similar points that I want to really emphasize. One is they both said that either there’s different skill sets needed, or there’s a different language that’s used in the publishing business today. Before the session, I was kind of jotting down all the different roles that exist in my company that did not exist on January 1st of 2009. And this is a just a short list, because I didn’t have a lot of time.
E-commerce specialist, e-mail segmentation and e-mail builders, as a specialist. SEO and SEM people who exclusively do SEM and SEO for our products. Online product managers. Content marketing managers. Product curation and purchasing managers. So that’s just a small set of the titles that exist at the company today that did not in ’09. We have about 525 employees at our company, 530. 3.5% of our employees in ’09 were digital-focused. Today, it’s close to 40%. So it’s really a dramatic change in the makeup of our company.
And the other point that I kind of wanted to follow up on, too, is as you learn more about the consumer, as you gather more data, you have as a publisher, and ultimately, all your partners do, too, many more revenue streams outside of just the book. And again, I just jotted down a few of them, and I came up with 12 that my company now has that it probably did not have in 2009.
Obviously the book, the e-book, e-commerce revenues, online competitions, online education, offline education events. Online video subscriptions, magazine subscriptions, magazine advertising, Web advertising, webinars, and now we’ve just launched our e-book subscription sites. So we’re taking the one piece of content, the book, we kind of call it in our company, content explosion. And it becomes many, many other revenue sources.
KENNEALLY: Let’s talk about subscriptions, because again, that seems to be a common point. And Andrew, I’ll bring you back in and ask about the subscription model as Safari has put it in place. And you’re surprised, until recently at least, that more publishers haven’t tried it themselves?
SAVIKAS: Yeah, absolutely. I think we are all increasingly comfortable and aware of subscription access-based models. Certainly for media, you know, Netflix for movies and TV shows. On the music you have Rhapsody, you have Pandora, you have Spotify, you have Rdio. A lot of activity in that space. And even in the more tangible, physical world, you have Airbnb, and Zipcar, and TaskRabbit, and this sort of movement toward pay-as-you-go.
It is often more cost-effective to pay for limited access, rather than invest the upfront needed to buy a car, or assemble a massive library of movies and TV shows. And I see no reason why this same model, the subscription-based, the access-based model, wouldn’t work for books. And certainly not as the entirety of the way that people find, and discover, and use books.
But in the same way that Netflix has found a very successful part of the ecosystem for movies and TV shows, I could certainly see a lot of consumer interest in paying for a subscription model access to at least some type of library of content. And I’m sure I think that speaks a lot to what David and F+W are doing, with their subscription models. And I know Dominique has also put their toes into the water with their romance product.
KENNEALLY: Well, can you talk about some of the economics that underlie it for us, from the single purchase to the pay-per-use?
SAVIKAS: Sure. And of course, I think we at Safari Books Online are in a bit of a different scenario, because we sell and market to professionals. We’ve heard, I think, both Dominique and David talk about solving customer problems. And for us, the problem we’re solving is not delivering a set of books. The problem we’re solving is that a company has employees who need to solve technical and business problems and challenges. They need to learn and develop their skills. And that’s what we provide.
Especially for our corporate audience, we’re selling as a learning product, as something that they can deploy to their staff so that they can understand and expand their vocabulary when it comes to technology, or in the case of a software engineer, solve a particular problem using this collection of resources, both books and videos.
So I think some of the pricing and economic expectations may be a bit different from what you might see in more of a consumer offer. But for us, it’s worked out very well. We offer to individual subscribers, who pay by the month for up to – our most popular plan is $42.99 a month, and that’s for subscription access to 22,000 books and videos. It’s an all-you-can eat model. People can read, and watch, and dip in and dip out, as they feel free.
And then we also have versions of that, that we package up and sell to corporations and government agencies. So you may have a financial services firm, or an aerospace company, that has 5,000, 8,000, 10,000 engineers, or IT staff, or day traders for a financial company, for example. And they want to arm those employees with this great reference access to books and videos. It’s about learning.
KENNEALLY: That’s a very satisfying offer to the corporate librarian.
SAVIKAS: It is. It is. And so they are able to, for their perspective, a very cost-effective way to pay per user, to deploy 22,000 of the best books and videos in these subjects across their entire organization.
KENNEALLY: Right. And Dominique, the subscription model that you’ve been working with is in the romance genre. Tell us about what you’ve been doing. There’s a book club offer as well.
RACCAH: Right. So we’re interested in actually creating community in the romance area, and connecting authors and readers in some interesting ways. And we started less than 60 days ago, about 45 days ago, with something called Discover a New Love. The great thing about this is having hard numbers and real metrics, and really being able to look at it and say, oh yeah, we’re actually ahead, we’re behind, whatever we are, we are, you know? But at least you know.
So we’re actually running ahead, and it’s a very solid kind of model, where it’s an online e-readers club. And people pay $9.99 for six months, and they get a book a month, and they choose out of four books, and it’s pretty straightforward.
KENNEALLY: But they’re getting more than books, which I think is the point about the community. There’s an opportunity to come together to have parties and do things.
RACCAH: Connect with, yeah. Yeah. And the parties turned out to be a big deal. I was really – you know, people really engaged, and people are excited about it. And then we’re going to be moving, and we’re adding – so the great thing about this kind of a model is you start here and you just keep adding little things, and testing small things, and seeing, you know? Andrew told me it took something like six years to really kind of get your model to work. And I suspect that it takes time, and we’re moving pretty briskly, and kind of well.
KENNEALLY: Right. And David, you’ve made some announcements around the subscription model for F+W. You alluded to a couple of them, but there’s the Artist’s Network, there’s a whole ramp-up you’re doing for a number of these. Tell us about those.
NUSSBAUM: Yeah. We also launched in romance, following Dominique’s lead. Although actually, we were working on it the same time. She’s just faster than we are. Our model is very different, which I’ll describe in a second. First of all, our company, a bit like Andrew’s, had a bit of a leg up, because we are in these vertical markets, so we have database, so that helps. We reach about six million consumers every month, and those consumers are segmented by hobby, by passion, by purchasing habits, and so forth.
So some of our markets, like in the Artist’s Network marketplace, we have probably about 400,000 people who have identified themselves as being passionate about creating art. So in that particular market, that was the first launch. We did that about 30, 45 days ago. Our model is – and keep in mind, this is highly illustrated titles. So it was harder to sell e-books, in part because of the platform.
So in this model, first of all, the consumer chooses the platform. You can rent or subscribe to these books on an iPhone, on an iPad, on the Fire, on your laptop. So it gives them a lot of flexibility, unlike the walled gardens that some of our colleagues in the business have specialized in.
Secondly, unlike Dominique’s model, we’re an all-you-can-eat model. So for a price, and it depends on the marketplace, you pay that price, and you can go in and take part in what’s up there, as many or as few as you choose to in a particular timeframe. Again, we have a pretty big advantage in that we’ve been publishing art-related content for – Stacy (sp?) would know, but it’s 20 years, 30 years. We have a deep backlist, and we continue to produce new content, plus we’re offering video up there, and all kinds of interesting models.
The romance model is one that we announced actually yesterday. And that’s a bit more of a brand-new launch for us, in that we were not in the romance market previous. We identified it as an opportunity, not only because Dominique did it, but because romance and mystery, which is another category that we’re launching into – or have launched into – is very much of a community, just like art, craft, writing, design. So we identified it as an area that we are very comfortable playing in.
And in that model, again, a bit different than Dominique, is that we’re launching the titles, they’re all brand-new. And it’s again going to be all-you-can-eat model. We launched it on – what’s today? So we launched it yesterday, I think it was, actually. No, sorry, it was Monday. And part of the launch, we have a contest going that if you subscribe, you have a chance to win a Kindle device with 25 titles already loaded on. I mean, it’s free initially.
So the big challenge is, and I’d be interested to know how Dominique’s handling that, is building audience in a community like that. As I said before, in the art market, or some of our other markets, we have audience, we know how to build audience there. Here, we’re starting from scratch. So how do you build audience?
We’re doing it two ways. One is, as I said, we reach six million consumers on a monthly basis. They don’t only create art, they don’t only craft, they don’t only do woodworking. They must have other passions, whether it’s reading mystery, or romance, or whatever it is. So we’ll cull that list a little bit. And then we’re looking at joint venture partners who are mass media types, who also, frankly, want to get into the e-book game. So we’re exploring some of those partnerships.
KENNEALLY: One of the challenges in this new environment is something else. You mentioned flexibility as far as the device platform. Discoverability is something that’s key. And so the offering has to be strong, but it has to be put into such a package that people can find what they’re looking for. Talk about that, and then I want to ask everybody else here on the panel about how they are meeting that challenge of discoverability.
NUSSBAUM: So at our company, we live on four tenets, basically. And every one of our staff, I believe if you woke them up in the middle of the night and asked them to repeat those tenets, they would tell you it’s the four C’s. It’s content, community, curation, and commerce. And we think about these four things in every product that we generate, in every business that we’re involved in. And that’s where, you know, discovery comes in, is that we have experts who work for us, either full-time editors, part-time editors, authors, who really help us curate the content.
So for the romance, for example, we have somebody who specializes in finding the best material, finding the best authors, bringing it to market, building the social network on the platform, building community. So curation is really important to us. They’re all equally important. Content, community, curation, and then obviously commerce.
KENNEALLY: I have to say, though, at my company, we only care about three C’s. Copyright Clearance Center.
NUSSBAUM: There you go.
KENNEALLY: I got the plug in. Andrew, what about discoverability as Safari sees it? How are you approaching that issue?
SAVIKAS: Sure. That’s a very good question, and it’s been a learning experience for us as we moved from being really, primarily a reference kind of a service, where the idea was, this was a more effective and useful way to have access to – instead of having five, or 10, or 15 commonly used books on your shelf, this way they would be accessible electronically, and available anywhere through the Web browser.
The reality is, over the last decade, the use case, to use Dominique’s phrase from earlier, around ready reference, and very quick problem solving, has really moved away from reference books. Certainly no surprise to many of you in the room that reference-style publishing is different today than it was 10 years ago. And so many of the customers we serve, rather than try to find the answer to their question in a book, will do what many of us do when we’re trying to look up a very quick answer to a small problem, and that’s use Google.
So one of the things that we’ve had to do at Safari is adapt from presenting ourselves, and trying to fulfill the need of having a vast reference library, as high quality as we might think it is, and really adapt to become more about learning. Yes, you can look up the very specific answer to your question on Google, but if you want to really understand the vocabulary of the Android operating system, or if you want to really understand what it means to do good UX developments on iOS, you want the trusted, quality resources that are going to help walk you through, in many ways, sort of an informal, but a curriculum of sorts.
And so one of the things we’ve done to adapt to that is to try to make our service more useful for that scenario. So we have often gone to, especially our corporate customers, who will come to us and say – we had one, for example, a bank that was making a transition to a technology called IPv6, and it’s not really relevant what means, but it was a massive internal IT project, and they needed to train several hundred of their staff on what this technology meant, and what the change was.
And we were able to work, through the editorial relationships we have with publishers, with an editor who was expert in the technology, to map that organization’s learning goals to the books and video we already had, and present them with, effectively, a syllabus and a curriculum for them to solve their training needs.
And so we’ve done that in several other areas with companies, and we’ve done that more generally with what we’ve called these sort of bibliographies, as an example. To put into the service small, short e-books that are essentially just lists of other books that say, if you want to develop your skills at an intermediate level in Android software development, here’s where you go. Here’s how to do that. And the initial feedback from those has been very positive, and has helped us inform our product development, to try to say, what can we do to make the service easier for both us and for our customers, in particular, to do that kind of curation themselves?
I mean, ideally, we’d want people to be able to say, they have gone through the pain – to use one of Dominique’s examples – they have gone through the pain in the process of trying to get a kid into college, for example. They know what the good resources were, what helped them. How can we use that information to help them share that sort of curation and paths through the content to solve their problems?
KENNEALLY: Dominique, perhaps you can give us an example of the way you’ve approached that at Sourcebooks. It’s a different kind of challenge, but it’s very similar to what Andrew faced.
RACCAH: Yeah, I actually want to think about this a little differently. Because I think that it’s a little bit different to think about a reader’s experience than it is a reference user’s experience. So I just want to move to a different kind of a thought process. So you want to be wherever the reader is, right? So thinking about discovery from that point of view, so let’s start with the book.
So one of the advantages that I think we have in Discover a New Love is that we ship about four million e-books and physical books into the romance space a year. OK? So that’s four million touches that we have. So putting just a reader response mechanism into a book will help you. That’s why it’s kind of a little different than starting from nothing, because I think David’s got, actually, a tougher gig than I’ve got. Because I’ve already – I’m touching people in some ways. So that’s one place that people are looking for something, right? They’re already reading your book, and you help them to find community and content.
Another place they’re looking, obviously, is online. And where we find readers looking online is in places like blogs, and so we have enormous relationships with, you know, that whole community. And they’re already talking to us about the books that we’re developing, so helping them to create a partnership in that way –
KENNEALLY: A relationship, yes.
RACCAH: Right, exactly. And then obviously social, right? So, you know, we have great relationships that have a social mechanism tied in, and really building on that. So the other things that I see us doing, that I think I’m kind of interested in is developing perks for our members that are – and I know you do this really well. But like, just really thinking about that in a way that serves that community.
You know, so one of our favorite authors has got a huge panoply of books about a particular world, and I think there are, I want to say, 12 books in that particular series, you know? And everybody’s interested in actually, book zero, which is actually the book where the parents of this whole group of people met. OK, and we’re looking at making that available exclusively, you know, on Discover a New Love, because that’s a community that really is interested in it.
So developing some set of exclusive content, and then also working with authors in kind of an interesting way. So I think there’s a methodology for doing this that’s discovery, you know, in a lot of little ways that can accumulate.
KENNEALLY: Right. We all got our ideas in two places. We think of them or we steal them. And in the case of book merchandising, it’s certainly worthwhile to look at what others are doing and follow suit.
RACCAH: Absolutely.
KENNEALLY: And so Andrew, I know you’ve made it a practice to look and see what Apple is doing in their merchandising, and see how that may relate to your offering.
SAVIKAS: Yes, that’s a good point. I think this came up in a conversation I was having about whether Apple – that iBooks was not quite meeting some publisher and consumer expectations for the amount of sales happening through that channel. And it occurred to me that with iTunes, for example, Apple had enough of a head start that they didn’t really have to be all that great of a music store. They were really the only music store that you could use with your iPod, and that sort of thing.
And I would say that in general, I don’t think – and this is as an Apple TV owner as well – I don’t know that Apple is all that great at merchandising media content. I think they do a reasonable job of sort of a utilitarian, in many ways, kind of a thing. But where they are very, very good at, and the place that we looked to, and we’re trying to find inspiration and ideas for merchandising, for example, is not iTunes, or iBooks, or Apple TV, but it’s how Apple merchandises their own products. I mean, to see them both physical and electronic.
Apple Stores are the most profitable retail environment by square foot in the world. It is breathtaking the way they merchandise their physical products. And of course on their website, and the way they seamlessly blend those, the way that I can be in the mall, see the line for iPads, not want to wait in line, pick up my phone, pay for the iPad, walk up and pick it up. I mean, that kind of way to recognize and acknowledge the lack of boundaries between these physical and electronic ways is, I think, a very impressive source of inspiration for merchandising.
RACCAH: Can I make a comment?
KENNEALLY: Sure. And then I want to ask David, too, about where you look beyond F+W for inspiration, or for just a convenient path.
NUSSBAUM: You mean besides Dominique and Andrew here, yeah?
KENNEALLY: And besides these two here, yeah.
NUSSBAUM: Did you want to make a comment first?
RACCAH: Yeah, I did want to. Thank you, David. Thanks. I wanted to comment on what Andrew said, because we had dinner a couple nights ago, and we had exactly this conversation. And I think – well, obviously, I think both these guys are brilliant. But I think that what Andrew says is incredibly smart. And the challenge for Apple in the bookstore, and I think this is what I said to you then was that, you know, they’ve got a very limited list to curate.
When they’re curating their own devices, it’s a very limited set of products. When you’re curating a bookstore, you’re talking about millions of items, and that becomes – and to boot, the categorization schemes are not the – you know, we can have a long conversation about BISAC if you want. You know, there are challenges there. So I think that that’s part of the issue for them, and for all of us, is to think about curation in new ways.
NUSSBAUM: So to answer your question, it’s probably of nosurprise to people in this room, I’m not from the book publishing industry historically. I’ve been in the business now since ’08, and it’s fun, and I love the business. But my background is really in Internet and tech media. And so the inspiration I tend to get is from technology companies and Internet companies.
And what that really means, and it really goes to the culture of our business – what it really means is we are going to aggressively test and launch new products. We’re going to take risks and be willing to fail, which we certainly have. We are going to move rapidly on decision-making. You know, at my company, we can buy a company and make a major launch decision within a few days. So it goes, really, to the culture of the business than any one product or so forth. But then, because of where our business is heading, whether it’s applications and e-books and so forth, it kind of marries very well.
So I think some of our companies, I think that’s one of the threads that’s weaving through our conversation here, is we’re more technology companies today than we ever were before. And by the way, we have to be. Because we are not only competing with, you know, Dominique and I on the romance side, but we’re competing with Google and Apple, and now Microsoft, and the line goes on and on.
If you walk the hallways of this show, I don’t know if you guys have this experience, but there are more tech companies here, and I don’t think they’re exhibiting, but they’re in the aisles, grabbing us to talk about some new piece of technology that they’ve discovered. They’re going to solve all our problems. So high number of those. So the business is really changing dramatically from that perspective, I think.
KENNEALLY: Right. And of course, what’s happened along with that is that the kind of content that’s produced isn’t simply text, it’s far more than that. And as you’re putting a project together, even thinking of it as a book starts to go away. And I would like to ask everybody here to address that. How you, inside the business, handle development of original content when you are thinking beyond the book.
NUSSBAUM: Yeah, so that goes to the core of, I think, what our company does today. I mean, when I first joined this company, and I got up on a stage in front of all of our employees, the very thing I said is, we are no longer publishers. Which is a pretty dramatic statement to make to a group of publishers. I mean, we publish books and magazines. But I really didn’t want us thinking about the business that way.
And so really, what’s emanated from that is that we don’t acquire a book. We don’t decide to launch a book. Because we have 50% is author-driven and 50% is not. But we acquire the content, and before we make a decision to go forward, whether it’s with an author or internally, we have to see, on a P and L, all the other ways that you’re going to leverage that content to make money.
When we first started that, it was a complicated process. It’s gotten simpler, (a), because of experience, and (b), because we lost 1,000 storefronts over the last year or two. So our people have to think that way, otherwise it’s hard to come up with the right economics. So I think that was a major way that we thought differently about the book.
And then finally, you know, I mean, we talked a lot about the publishers, and what they’re thinking. But you know, there are three key factors that I think have really influenced how we also work with our authors, and how we also work with our retailers. One I talked about a little bit was that consumer data. So we have a tremendous amount of consumer data, and we continue to get more sophisticated about that data. So that helps us with the sell-through, and it helps us have our authors sell more product.
Secondly is that multimedia integration that we’ve talked about. So we’re offering packages of goods. Whether it’s the hard goods that you talked about, Chris, or video, or access to a subscription website, but what that’s meant is higher margins for our authors and the retailers who participate in that.
And then finally, the multi-platforms, because we’re on so many platforms that I described, we can promote an author, we can promote a product, in many, many different ways. Including, by the way, that database. So when we go and we pitch an author to join our company, we come with a number of assets that a lot of times, our competition does not. And it’s the same thing when we work with our retailers, really to help our retailers also reach these consumers.
KENNEALLY: Andrew, one of the things that the subscription model that Safari offers to your partner publishers is the way it can gather data, and that would clearly have an influence in the projects they’re going to be working on in the future. Tell us about that.
SAVIKAS: Yeah, absolutely. I mean, one of the benefits that we have of the model, which almost by definition, requires us to keep track of what people read, because that’s how we pay the publishers. And that means we know what everyone’s reading. We know the time of day, we know the device, we know all of the things that, quite frankly, I mean, Amazon knows this stuff, Google knows this stuff, Apple knows this stuff, Kobo knows this stuff. Well, Kobo talks about it.
You know, other people aren’t talking about this data, and certainly not sharing it explicitly with publishers. And so we’re happy to do that when we can, to help publishers make better decisions, because we think that’s going to help us make sure we have the best material.
So for example, we’re able to track, on a page-by-page basis, which content within the chapter, within the book, where it’s being used. We can slice and dice that from our corporate customers, versus the library users, versus the individual subscribers. And it gives our publishers, as well as us, of course, a rich set of data that we can use to make better decisions.
KENNEALLY: You can see, you know, which chapter’s hot and which is not?
SAVIKAS: Yes, yes. Absolutely. That’s very true. And sometimes, that can be both good and bad. It can be a little disconcerting to an editor to see that a particular chapter, or part of a book, just really isn’t being read. But also, little hot spots show up that mean, you know what, maybe we can complement this book with a short training video, for example.
So one of the things, data-wise, that we learned was historically, our product and service was the browser base. So you came to work, you sat down at your desk, you turned on your computer, and throughout the day, you might come into our service, to Safari Books Online, look something up, try to do something. It was generally done in relatively short amounts of time throughout the workday. Monday through Friday, work hours.
What we’ve seen as we have – two things happening. One is expanded mobile access through the mobile browser, and through the iPad. And also because we’ve expanded our video offering, is that we’re seeing significantly more usage on the mobile side. For example, the peaks are not during the workday, it’s during the commute times, especially the evening commute. And then the most active day for our iPad app is on Saturdays.
And a lot of that usage is people sitting down – because it’s not always the easiest thing to do to take 20, 30, 40, 90 minutes away from your workday to try to learn a new skill. But it’s a lot easier to do that on a Saturday afternoon, when you can sit down on the couch with a beer, a glass of iced tea, and watch that 30 minute, 40 minute, 60 minute video.
So having that data both to help us make decisions, but also to be able to share that information with publishers, to say, here is a solid, robust, growing channel for paid video content. That’s a great message to be able to deliver to them to help them make different decisions.
KENNEALLY: Dominique, before we go to questions from the audience, I want to ask you about, you know, give us a lesson that data has taught you. I know data’s of great import to you.
RACCAH: So we’re using data in everything, and I love the two trends that Andrew just shared with you. But I think that’s one of the things that, you know, my model has been a lot O’Reilly. And I love being able to look at trends in our own data that say, hey, publish more of this, publish less of that, which allows us to be in front of something going on in the marketplace. Or this cover direction more than that cover direction, or this title more than that title. And we’re doing all of that. You know, we’re positioning books better, and that allows our retailers to have a better experience. So if you hear a theme here, one of the themes is certainly data.
KENNEALLY: Well with that, I want to thank everybody on the panel. David Nussbaum, Chairman, Chief Executive Officer at F+W Media.
NUSSBAUM: Thank you, Chris.
RACCAH: Thanks, Chris.
KENNEALLY: Dominique Raccah, CEO of Sourcebooks, Andrew Savikas, CEO at Safari Books Online. Thank you.
SAVIKAS: Thank you, Chris.
KENNEALLY: Thank you.
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