Given that nearly 90% of Russian households are expected to have Internet access by 2012, it is easy to see why e-books, online retailers, and electronic libraries are getting so much attention (and investment interest) in recent years. Russian publishers, fueled by the success of their U.S. counterparts, are busy converting e-books and working with service providers to put the titles online. But this being a new sector in the Russian book market, challenges abound. Here, a few dominant players talk to PW about the general e-book industry, their successes, and the challenges ahead.
At OZON.ru the power of the Internet has turned a resource portal started by a group of sci-fi lovers from St. Petersburg in 1998 into an e-commerce powerhouse. Now regarded as the Amazon.com of Russia, it accounts for 50% of all online book sales in the country. Last year, it sold 5.2 million copies of books (in print and electronic formats), representing 38% of the group's sales. "In general," says CEO Bernard Lukey, whose team is, naturally, paying a lot of attention to e-books and foreign titles, "the online book market grows about 30% year-on-year, while bricks-and-mortar operations slide into negative territories. And despite the fact that the e-book market is nearly insignificant—representing less than 2% of total online book sales—we believe its volume will increase significantly during the next five years. The same upward trend is also expected of foreign books sold through the Internet." More than 90% of all foreign titles on OZON.ru are in English, imported from wholesalers or publishers in the U.K. and Europe. Visitors can browse through 250,000 books, which account for nearly 30% of the products offered online.
Partnering with major publishers to convert titles into e-books is standard procedure. "This conversion business is a loss leader, but we have the utmost faith in the future demand for e-books. The problem for the book industry is how to monetize the content and add value to e-books," says Lukey. E-books on OZON.ru are priced around 25% to 30% of print books, or around 65 rubles ($2.20).
"Our Web site also offers old books—which is something very Russian—and out-of-print titles, including collected works, encyclopedias, and entire libraries. As long as there is interest in a specific segment," continues Lukey, "we will work on turning it into an online business." (Lukey added an online travel agency two years ago to meet customer demand.) Customers have 18 payment and 14 delivery options, with shipping anywhere in the world. "You just have to let us know how you want to pay for it and where to send it," says Lukey.
And like its American counterpart, OZON.ru has also gone into e-reader production. Its monochrome e-ink device, OZON Galaxy, launched in 2009 and has sold about 2,000 units at 9,900 rubles ($340) each. "We are planning to produce over 5,000 units of the second generation—which will come with an integrated Wi-Fi module—with one of Russia's largest mobile operators," adds Lukey.
Asked about the Russian publishing industry in general, Lukey says, "The book market needs to grow. And there are two ways to go about it: add more translated titles or venture into more promising segments such as children's and business. At the same time, publishers should look into developing cheaper versions of the same title—essentially targeting the long tail. Presently, the book market is in decline with fewer new titles, but prices keep going up."
LitRes, which boasts a catalogue of more than 45,000 Russian e-books, has effectively become the largest digital content provider in the nation. "Our Web site has more than 400,000 registered users and about one million unique visitors per month," says general director Sergei Anuryev, whose collaboration with service provider MintRight last June has allowed the titles to be distributed to global e-book sellers such as iBookstore, Barnes & Noble, Nook, Sony, and Nokia. "It has been a very successful collaboration, but our major market is still Russia." The 40-strong LitRes team provides conversion services to the publishing community—offering 17 e-book formats, including Mobi, LRF, ePub, and PDF—and complete marketing support.
Established in 2007 as a literature resource (hence the company name), LitRes has witnessed the tremendous changes in the Russian e-book market. "Back in 2008, there was virtually no e-book market here. It was then just a new market opportunity with a questionable future and abstract sales volumes. Now it is a viable segment with concrete sales volumes and channels, but it is constantly changing." Not all Russian publishers are releasing new titles in e-book format, Anuryev cautions, "and we need to do more to encourage these publishers to do so. Only market leaders such as Eksmo, AST, and Ripol release their front lists in e-books."
The average e-book price has also increased since those early days. "But this is only because we started very low, at around 10% of the print book price. Now it is up to 30%, and there is potential for further increase—but not too fast, of course." Then there is the price difference between a new e-book title and an old one that is published, say, three years ago. "The difference can be huge. For instance, a new e-book from a bestselling Russian author may sell for $8, but only $2 each for his old titles. It must be said that this pricing policy is in tandem with the policy adopted by Russian publishers."
Transaction-wise, the main method is pay-as-you-buy, "but there are other models depending on our partners," says Anuryev. "We have subscription plans, where customers pay a monthly fee and download a specified number of titles, or online reading, where customers can read as many titles as they like within a certain period but are exposed to sponsored advertisements. Then there is the loyalty program, where customers with approved club membership can download a specific number of books per month."
For now, e-piracy is a big challenge at LitRes. The company has initiated about 10 lawsuits against various parties (mostly operations based outside of Russia) and is working to introduce changes to Russian law pertaining to publishing activities. Going forward, Anuryev's major plans, besides educating and getting more publishers to offer e-books, are to produce mobile apps and develop e-books for the library market.
Four-year-old DDC (Digital Distribution Center) is a division within ProfMedia, one of Russia's largest media and entertainment companies. There, two projects take the spotlight—KnigaFund ("Book Fund") and BestKniga ("Best Book").
Launched in 2008, KnigaFund has one major goal: to develop and support the legal distribution of educational content via the Internet. A sizable investment from ProfMedia has allowed it to acquire 10,000 titles in the past three years. KnigaFund now counts more than 100 universities across Russia and CIS (the Commonwealth of Independent States, i.e., Russia and the former republics of the Soviet Union) as its subscribers. "Current subscriptions have exceeded 50,000, and we are now the biggest and most demanded content aggregator of educational and scientific literature in the region," says general director Sergei Zyatitsky, whose team added 10 universities to its client list in the last quarter of 2010. To date, its database boasts more than 54,000 titles, with 2,000– 5,000 new ones added every month. Local partners are some 80 publishing houses, while major overseas partners include Wiley & Sons, Pan Stanford, Nova Science, and World Scientific Publishing.
The challenge to the ELS (Electronic Library System) model, says Zyatitsky, is in "convincing universities that our service is crucial to improving the quality of Russian higher education. Fortunately, President Medvedev's endorsement of this project has helped to promote and smooth the process. Naturally, there is some resistance to the adoption of ELS and other digital innovations. The response to the call to protect copyright has also been slow in certain quarters. In fact, there were times when piracy at universities and colleges was rampant and went unchecked."
But the biggest headache for Zyatitsky is the emergence of various small e-libraries, mostly offering illegal content and outdated titles at very low prices. "We are now working with various government agencies and nongovernmental organizations to close loopholes that may allow such e-library providers to flourish. This is an important step forward. We need to let local and foreign partners know that the purpose of KnigaFund is to provide legally obtained and up-to-date material for Russian universities. Our partners must be assured that they hold the rights to their titles in the KnigaFund repository in entirety and that it is free from piracy. Most importantly, our students must have reliable and fast access to the best quality reference material possible to meet their learning needs." Just recently, all 500 computer terminals at the Russian State Library were given free access to KnigaFund's e-catalogue "in a bid to promote ELS as well as counter e-piracy."
Zyatitsky's goal this year is to increase ELS subscriptions by 50% and to grow DDC's other verticals. "I would also like to see the same increase in our online bookstore, BestKniga, which now has around 6,000 e-books in various genres."