As e-book sales continue to climb, so too does the number of companies retailing e-books and developing applications that can read them regardless of platform. E-book retailing is no longer the Wild West—it’s a crowded, competitive industry largely steered by Apple, Amazon, and Barnes & Noble. But there is room for innovation and market share, according to seven companies toiling in the industry. Their aggressive approaches—which include promotional techniques, technology overhauls, and educational engagements—have helped shape business models that are up to the competitive challenges of a fast-moving industry.
Baen Books: A DRM-Free Pioneer
Baen Books is an independent publisher and retailer of science fiction and fantasy books, with a collection of about 600 e-books and about 700 titles in print. Located in North Carolina and operating with a small team, Baen is also a pioneer of e-book retailing. By 1999, it was selling e-book downloads and CDs containing e-books, all free of digital rights management or coding that restricts an e-book to a certain platform or device.
“Our readers tend to be the early adopters and tech experimenters, so we were responding to their requests for e-books,” says Baen’s publisher Toni Weisskopf. “It took a few years to figure out the best way to deliver the books and in what format, but it worked out fairly quickly because we did listen to them. And in the early days, a lot of our marketing went towards convincing people to try this radical new format. You had the early adopters, but you also had to convince your regular readers to try, so we marketed with free e-books and giveaways with monthly subscriptions.
“We discovered that e-books were not in any way cutting into our paper sales,” Weisskopf continues. “On the contrary, they were expanding our audience and giving a boost to our backlist—both in electronic and paper format. That’s the way it was for 10 years or so, then the rest of the world caught up with us.”
In other words, Weisskopf says, once e-book reading devices became more popular, the market for e-books became apparent to everybody. Baen had to adapt its strategy. “We had to go from the sole distributor of our e-books to letting other retailers sell them as well—the audience had expanded so quickly and so explosively.”
Despite working with Amazon’s Kindle store and Apple’s iBookstore, among other distribution channels, Baen’s e-books are still DRM free, and most are below $9.99. Indeed, offering DRM-free e-books is Baen’s signature marketing strategy. Its most recent New York Times bestseller was David Webber’s Shadow of Freedom, part of his long-running science fiction series featuring the character Honor Harrington. “The more people who read your books, the more people will buy your books,” Weisskopf says of Baen’s DRM-free model. “The more readers you make, the more books you sell. It’s as simple as that.”
Besides its DRM-free retailing, Baen offers podcasts on the latest goings-on at the company. It also offers the “Baen Free Library” of e-books, with the option to donate to authors. Among its latest plans: Baen is serializing its audiobooks, thanks to a partnership with Audible, and it is also planning a mobile application for its retail store.
Asked about sales, Weisskopf says, “Our paper numbers have slid a little bit or held steady, and our e-book numbers are growing exponentially year by year. I don’t think we’re seeing the huge 5,000% percent numbers that other people have been, but that’s because we’ve been selling e-books for over a decade.”
Reading Rainbow: An Icon Goes Digital
Reading Rainbow on Apple’s App Store is a digital revival of the children’s television series that ran from 1983 to 2006 on PBS. Reading Rainbow host LeVar Burton purchased the rights to the show in 2011, and his company, RRKidz, released the iOS application in June 2012. One year later, the application houses more than 300 children’s books from the likes of Sleeping Bear and Abrams, and it features more than 50 original video field trips, hosted by Burton, plus some classic Reading Rainbow segments. RRKidz operates in Los Angeles and San Francisco with a dozen full-time employees across various departments, including publishing, video and book production, and customer service.
Each week, about two books and a video are added to the Reading Rainbow application, with customers paying a monthly subscription of $9.99 or a six-month subscription of $29.99. From the start, RRKidz decided it didn’t want to sell individual titles. Individual sales could be difficult for families, explains co-founder Mark Wolfe. “We never want to get kids into the position where their parents say, ‘My kid wants to read, but I can’t afford another $2.99 purchase this month.’ The cost of an unlimited subscription à la Netflix really works for kids to say, ‘I wonder what that looks like,’ open it up, read it, like it, or stop reading … it’s no harm, no foul.”
Wolfe says more than 46,000 books are read and more than 41,000 videos are being watched each week. “That, for us, is millions of minutes each week.” While he wouldn’t specify the number of users, he claimed that Reading Rainbow’s retention numbers and conversions—users who browse free content then make a purchase—are “substantially higher than anybody in our space. People are really well-engaged.”
Whether due to content or PR, there are several reasons that Reading Rainbow’s engagement levels are high. The PBS series had a 23-year run, earning generations of viewers over time and giving Burton an iconic status. The iOS application had a spotlight on Late Night with Jimmy Fallon. In March, Reading Rainbow began featuring books and videos produced by National Geographic Kids, which have been popular, Wolfe says. Plus, Burton now boasts more than 1.5 million followers on Twitter.
“Everyone knows when they can trust LeVar, they can trust the brand,” Wolfe said.
Scholastic: The Big Storia
While Reading Rainbow has the fame of Burton and a generation-spanning television series, publisher and distributor Scholastic has decades of success in the educational and children’s literature markets, and now it has a robust e-book application, Storia. Available on Android, iOS, Windows desktops, and Kindle Fire, Storia has about 4,000 titles, including Scholastic trade books and those from such publishers as Hachette and HarperCollins. Individual and bundles are sold via Scholastic’s Web site, with the pricing varying by publisher (e.g., Clifford books are below $10), and purchases are synced with Storia accounts via the cloud. Aligning with Scholastic’s goals, Storia is marketed to teachers and parents, who can assign e-books to children, and track reading times and activity. “Our initial approach was to build a deep backlist, then expand with third parties as well,” says Deborah Forte, executive v-p and president of Scholastic Media.
Scholastic, like its competitors, sees value in enriched e-books with interactive features aimed at complementing the text. Forte says Storia has about 350 e-books with audio read-throughs, and 650 e-books with “a full suite of enrichment.” With audio and games related to the editorial content and lessons, comprehension of, say, new words, is reinforced. Forte also cites Storia’s “level dictionary,” a feature that allows “a very young reader who doesn’t know a word to touch the word, and the definition will be read aloud.”
Storia is designed and supported in-house by experts in media, marketing, technology and editorial, according to Forte. She says that, from the beginning, Storia needed to be device agnostic. “As a distributor, one of the challenges that we had to face was that we needed to optimize our operations to be able to have a cross-platform reading application that could meet the needs of our readers; it had to be able to handle all formats of all books.”
Asked about growth and related metrics, Forte offered that Scholastic is seeking more third-party publishers and would like to double its enriched e-book collection in a year. “Our first-year plan has been exceeded. What we found is that the parents who have downloaded Storia are purchasing more from us, and reading more. That’s fairly consistent with e-reading. Those who jump in tend to read more.”
Ruckus Media Group: Collaborative Reading
The children’s literature market has room for smaller companies. With a six-person core team based in Wilton, Conn., and with support from Kiwi Tech, a tech development company in New Delhi, India, Ruckus Media Group bills itself as the “leanest, meanest operations out there,” says CEO Rick Richter. He admits that his small company is up against “the major players who have millions to spend in this space.” So to differentiate itself, Ruckus has started a number of initiatives.
In December, the company launched its Ruckus Reader application for iOS devices. Richter calls it a muscle application. Designed for families, it houses interactive e-books and videos—about 110 of them, most of which are less than $5—from such franchises as Veggie Tales and My Little Pony, a top seller of late. The “Ruckus Weekly Report,” sent to parents via e-mail, indicates a child’s time spent reading and playing in the application, as well as progress in terms of reading comprehension.
“The assessment tool is really to ping parents and get them thinking and talking with their kids about their reading experiences,” says Richter. “Thinking big—what if you knew everything that your child was reading at school? Sometimes a stone wall exists between the school and the home.”
Ruckus is hoping to shatter that wall completely. It was recently awarded a National Science Foundation grant to develop Read Together While Apart Technology, its collaborative reading technology. It’s developing RWTA in collaboration with the University of Michigan. “In a case where a parent or caregiver can’t be with the child,” Richter says, “they can read the same book together and interact. The research we’re doing could have unforeseen implications.”
Before the Reader’s launch, Ruckus was releasing standalone applications and iOS “bookshelves”—applications that house e-books—for select publishers. Richter says the Ruckus Reader is the company’s most sustainable model. “We learned pretty quickly that, in a world of 800,000 applications, it’s pretty easy to get lost. Many folks have tried and moved on from the single application model.” He distills Ruckus’s business model to two questions: “What does it cost to acquire the customer? And what is the lifetime value of the customer?”
Speaking of metrics, Richter says Ruckus Reader sees several thousand downloads a day, “and we take in all of our downloads organically, meaning [consumers] find us through one of our brands,” not through paid advertisements in any form (e.g., Facebook and in-app advertisements). Noting My Little Pony, he says, “we keep about 50% of our audience 90 days after they download the app, which is incredible from an engagement standpoint.”
Demibooks: Composing Storytime
Demibooks is another case of a small company with big ideas. The tech development company with a core team of six, based in Chicago, offers its Demibooks Storytime application, available for the iPad. Launched in 2012 and hosting about 40 titles, Storytime features interactive e-books enriched with animation, video, sound, and more, from self-publishers and those from such established publishers as McGraw-Hill and Kane Miller Books. But these books aren’t simply loaded into Storytime—whether by Demibooks or independent professionals, all books on Storytime have been designed with the company’s Composer Pro software, which can be downloaded on Apple’s App Store. The company’s Composer Studio, a subscription service that helps developers streamline app publishing, is available via Demibook’s Web site.
“The iPad is the platform to create, not just to consume,” says Rafiq Ahmed, CEO of Demibooks. “Look at how you experience something on the tablet. It just doesn’t lend itself well to taking print books and digitizing them. What is working well is if you’re imagining up and creating new content—whether it’s a new character or what have you.”
The sales of Composer books on Storytime work like this: Apple takes 30% and Demibooks 25%, with the rest paid out to the developer. If a Composer book is uploaded as a standalone application on the App Store, Apple takes 30% of each sale, with the rest paid to the developer. Developers have hundreds of titles in production, Ahmed says. In several cases, books are standalone apps and are featured in Storytime.
One factor pushing Demibooks is its direct-to-consumer sales partnership with Usborne Books & More, the direct sales division of Education Development Corporation (which is a Demibooks investor). Books from Usborne’s catalogue, including Kane Miller Books, are now available on Storytime. It’s one reason that Storytime’s most popular download is Michelle Nelson-Schmidt’s book Jonathan James & the Whatif Monster. “The author goes around and promotes it heavily to schools in combination with the Usborne sales team,” Ahmed says.
Ahmed wasn’t abashed about the low number of titles on Storytime. Composer was downloaded thousands of times back in 2011, when a free version hit the App Store, but Composer Pro and Studio, he says, have attracted those who are well-versed in professional software. More time is spent on preproduction—art, layouts, etc. “The actual time in Composer,” Ahmed says, “is the smallest of the whole production.”
Inkling: A Habitat Thrives
Outside of those advancing children’s literature in the digital age, the San Francisco–based company Inkling, founded by former Apple education exec Matt MacInnis, has seen a high level of interest since releasing its cloud-based digital-publishing platform, Habitat, free to the public in February. Inkling bills itself as a curator of knowledge, supporting those who publish in medical, business, fitness, cooking, and more. Anyone can download Habitat and publish their e-book to Inkling’s digital storefront. Inkling keeps a 30% royalty on units sold through its store, now populated with about 500 titles. The company of 100 has partnerships with travel books publisher Lonely Planet, Pearson, and DK Publishing, among others.
Thousands of organizations are working with Habitat, says MacInnis, the company’s CEO, also noting that top publishers, including Pearson, work with the Enterprise edition of Habitat. “We’ve released quite a few titles that are entirely independent of Inkling,” says MacInnis, citing books on yoga and growing food. “There’s a mixture of people showing and building content for the store, commercial entities coming in, and then there are the big 10 publishers, all of whom are engaged with us.”
“We’ve doubled our average daily revenue—just in terms of content sold, not Habitat—in the last six months,” MacInnis says. “Pearson was an Enterprise launch publisher, and soon we’re going to talk more about that and a bunch of other companies that have launched in the last few months. I’ll bite my tongue for the time being.”
MacInnis wants 1,000 books in the Inkling store by next year. He believes Habitat will keep driving Inkling’s business, and he also is bullish on the Inkling Content Discovery Platform, the technology that takes the underlying structure of Inkling content and makes it available for sale via Google searches. According to MacInnis, Inkling’s visibility on Google grows at a compound growth rate (searches and number of clicks) of 12% per month, and the conversion rate is tens of dollars per thousand visits. “People do not go looking for books; they go looking for knowledge, and we make that knowledge available to them through Google, even if it’s locked up in a book, and if they want to keep accessing that content, they can pay for it. And it works.”
Dark Horse: Dynamite Promotions
Like Inkling, Dark Horse Comics has been pleased with its traffic and growth, as it just celebrated the second anniversary of Dark Horse Digital, uniquely an in-house retail venture at a time when most comics publishers make use of Comixology for their digital business. Dark Horse Digital is available on Android, iOS, Nook, Kobo, and Kindle devices. Dark Horse has about 120 employees and operates in Milwaukie, Ore. As part of its anniversary celebration, Dark Horse offered 50 digital comics for free, and it recently announced it was selling digital comics from Dynamite Entertainment, known for such series as Battlestar Galactica and Vampirella. One million downloads were recorded during Dark Horse’s anniversary promo.
“We did a lot of preparation, so the increased traffic wouldn’t affect the site or our ability to deliver comics, and we didn’t have any significant issues or downtime,” says Mark Bernardi, director of Dark Horse Digital. “In addition to all the free comics, we had very strong sales that weekend and added several thousand new customers. We consider it a huge success.”
Bernardi says Dark Horse is “very aggressive in our use of newsletters and other communication methods with existing customers. We use social media to promote digital every day, whether it’s just an announcement or a ‘flash sale’ or some other offer. We do some online advertising and, not surprisingly, we get a lot of traffic from our corporate site Darkhorse.com. The ‘buy digital edition’ buttons on every book on the site generate a lot of sales. Licensors and creators also give us a lot of support in getting the word out about Dark Horse Digital.”
Bernardi also says Star Wars titles, Buffy the Vampire Slayer, and Michael Mignola’s Hellboy series are among the bestsellers in digital and print. “We also have had tremendous sales of game-related titles such as Dragon Age and Mass Effect.”
What does that mean? Bernardi says that “average monthly sales through the Web site and apps are up about 25% compared to last year. Add to that the other platforms we’ve added in the past year to 18 months [Nook, Kindle, etc.], and sales are close to 100% higher than last year.”