Podcast: Ebook bundling with Mary Alice Elcock

Onto week two in our Tech Forum podcast series! In this episode, we have Mary Alice Elcock from BitLit, who spoke about the hybrid reader and ebook bundling. If you’d like to see her presentation slides, they’re available here.

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(Scroll down for a transcript of the conversation.)

Transcript

Mary: The generation that we expected to bring the ebook revolution to fruition, the "digital native", either doesn't really exist or just isn't that interested in preferring ebooks over print. Ebooks have flattened out significantly and according to BNC, publishers are reporting that sales of ebooks represent, let's say 15% of their overall sales. This is not to utter doom and gloom about the ebook business, but I think it does suggest that the ebook proposition was framed incorrectly. It should not be an either or debate but a case of one with the other dictated by convenience.

Zalina: Hi, I'm Zalina Alvi, the Community Manager here at BookNet, Canada. I hope you enjoyed last week's episode featuring Kevin Ashton and his guide to surviving the ebookalypse. This week's talk is from bundling aficionado, Mary Alice Elcock, who kind of offers her own take on navigating the new print plus digital world we're living in. She's the VP of Marketing and Publisher Relations at BitLit which created the Shelfie App that lets users take photos of print books they already own and then download free or discounted digital versions of eligible titles. So they're basically really into book bundling, which is what her presentation at our recent Tech Forum Conference was all about.

In it, Mary Alice described the concept of the hybrid reader and how publishers can cater to readers who want to have the best of both the print and digital worlds. She also addressed some important questions like, will ebook bundling erode traditional ebook sales? Which price points are most likely to attract readers to bundle their books, and can ebook bundling be used as a discoverability strategy? If you'd like to see the slides that went along with her presentation, you can find them on our SlideShare page at slideshare.net/booknetCanada. Now, here's Mary Alice.

Mary: So in order to give you a little bit of background, when I first joined the publishing industry, it was right at the moment that Amazon had launched Kindle and every conversation felt like it started with the word ONIX and ended with the word ebooks. I was working at Douglas and McIntyre at the time and helping onboard us to Amazon and later Shortcovers that then became Kobo and working with Inthrill and lots of other new vendors and I also was manually writing every ONIX record that we set out.

Looking back, this feels like the moment that ebooks were becoming mainstream. At the time, many of us speculated that just as the CD had gone the way of the dodo, print books were going to become collector's items. But today, I think we all realise that that really hasn't happened, preferring ebooks over print. Ebooks have flattened out significantly and according to BNC, publishers are reporting that sales of ebooks represent, let's say, 15% of their overall sales.

This is not utter doom and gloom about the ebook business, but I think it does suggest that the ebook proposition was framed incorrectly. It should not be an either or debate, but a case of one with the other dictated by convenience. And the numbers bear this out. In Canada, about 58% of people who had read a print book in 2012 had also read an ebook. And the numbers are similar at stateside. In January 2014, Pew reported that 76% of Americans had read a print book and 28% of them had also read an ebook.

Although every report I see tells me that on both sides of the border purchases of E-readers and tablets are on the rise, the fact of the matter is that actually only 4% of readers have gone digital only. What that means is that we, or what I think it means, is that we now publish in the age of the hybrid reader. So people like myself and maybe like you who read books both in print and digitally, I will admit that I often find myself using my E-reader when I'm not keen on other people knowing that I'm reading, you know, "50 Shades of Grey", "Twilight", those titles that you read just to make sure you know what's going on, but I also really liked my E-reader when I'm on the road. I travel a lot for work and I find that it's easier to just throw my E-reader in my handbag and I have 15 books with me instead of trying to pack 15 books into my suitcase and not being able to bring my blow dryer and, you know, the whole drama that ensues.

So to illustrate my point, I was looking back and remembered that I had been reading this fabulous book called "Longbourn". I'm sure that you all heard about it. It's really a very good book that I have actually finished now. Not to spoil the secret but when I first started reading it, I told everybody about it. I was like, there's is this amazing book, you need to try it out. I was texting my friends. Then I went on a trip and I didn't bring it with me and started rereading "50 Shades of Grey". And later I realised that I just never finished it, which also means that I stopped talking about it because I was, you know, embarrassed that I had abandoned a wonderful novel for you know.

I'm using this as a way of illustrating that in the absence of bookstores, and given what I would say are not the strongest online recommendation engines, I don't know about your Amazon recommendations but mine are not real, readers have returned to the personal recommendation. So in the slide above, you can see a chart from Codex's quarterly survey in 2013, which reflected that between 2010 and 2012 personal recommendations were what was on the climb. So to me this begs the question, how do we get people to recommend a book beyond publishing a book that everyone wants to read?

So the answer from my company BitLit, some publishers and at least one multinational retailer, is to make the book easier to read literally. Not in terms of literacy but in terms of actual reading. Make it simple and convenient for readers to read when and how they want, but providing them with the book in both the print and digital format. If someone wants to read "Longbourn" like me in print when they're at home, but on the Kindle when they're on the go, then they should be allowed to do so because that also means they will talk about it, promote it, and make their friends read it.

In fact, just the act of offering the ebook with the print book will arguably make a reader take notice of you, the publisher and your brand. Indeed, in 2012, when ECW first launched their free bundling programme, "Publishers Weekly" reported one of the major reasons being to build relationships with readers and to start a dialogue. This is supported by internet marketing guru Nicholas Level who writes, "The number one job of free content is to build the ability to talk to your audience a second time."

So I would argue that the four major reasons to bundle your ebooks with your print books is to promote the print sale, the incremental income that you can garner from selling the bundle, it increases the publishers' brand recognition and it also creates a dialogue between the reader and the publisher. So you've decided, let's just say, you know, for argument's sake, that we've all decided that we want to start bundling. The next question is, of course, how are you going to go about doing it? Do you want to bundle directly through a retailer? Can you manage sending out your own ebook files? How are you going to sell the thing?

There are a lot of ways that publishers offer bundling directly. In Canada, ECW and Coach House as many of you know had a mention of the offer inside the book, letting readers know that they can simply email in proof of purchase, and they'll receive an ebook via email. So on the slide, you can see a sample of a copyright page from Coach House and the offer is circled. This is really unobtrusive and yet, we've actually found at BitLit that this is one of the most effective ways of advertising your bundle.

One of my favourite ways to publish your bundles is the University of Kentucky and they rent a Tumblr and people post a picture of themselves holding their book, and then they get sent the ebook. I think this is really fun and it's actually a great marketing and community building piece while also offering your readers a service. Then I think O'Reilly is actually the first person to ever offer bundles, and they offered a point of sale with the print book through their website. This can be fairly easily incorporated into a robust direct sales platform.

Other publishers like Kaplan offer all of their books via coupon code inside the book, and to avoid up charging the consumer, they've actually increased the cost of the print book and baked the ebook into the overall cost. So as of 2013, about 15% of Canadian publishers offered bundling directly and were split about 50/50 between whether to offer it for free or at a price. I'd say that number has probably shifted a bit. I know that's because I work with a lot of Canadian publishers, but for the most part, that's probably true stateside as well.

So in order to compare the various modes of bundling, I wanted to break down Publisher Direct into the following points. In Publisher Direct, ebooks are available from a single publisher. So readers have to contact publishers on an adhoc basis to acquire their ebook, which can be … it's not the best service in terms of the consumer, it's better in terms of the publisher. Generally, Publisher Direct is based on proof of purchase. There are absolutely exceptions but this means that there tends to be a time limit on how long they can claim the ebook and the time it would be how long they keep the receipt. And then the publisher is allowed to set the price or obviously is able to set the price through Publisher Direct.

I've noticed that often when they do so, the price will be free and also DRM free and that's mostly because it's hard to administer otherwise. The publisher is also responsible for delivering directly to the reader but in exchange they gain access to the name and email address of the reader and can start the dialogue and begin marketing other books to them.

Of course, not all publishers want to handle ebook bundling directly because it can be administratively taxing. One of the most widely known methods of bundling is MatchBook. I think we all know about MatchBook. This is Amazon's version of ebook bundling whereby anyone who has bought a book through Amazon since 1995, can now log into MatchBook and download an ebook edition to their Kindle assuming the publisher has agreed, and the pricing is limited from about 0-2.99 unless you publish textbooks.

I don't know if anybody noticed but Cengage recently launched their ebooks through MatchBook at 9.99. So much becomes pretty easy because they take care of the proof of purchase for the publisher. Once a reader purchases a book that's available, they can log into the MatchBook system at any time and download the ebook. Of course it assumes A, that you've purchased a book that's available, and B, you live in the US. I think it's also worth noting that the case can be made the match because really about converting the last paper book users into Kindle users and I certainly think that there's credence to that argument.

So if we summarise how MatchBook works in the same way we did for Publisher Direct, we come up with these key points. Like Publisher Direct, there are limitations on the titles and the readers library that can be bundled. Only books purchased through Amazon can be bundled. So all the books that I bought my friend or I purchased from my grandmother, I'm going to be able to bundle them, but to be perfectly honest, I don't really have the same taste as my grandmother, so maybe not the books that I want.

Amazon also has very limited price settings and I think, I mean, Amazon always has limited price settings. But to say that an ebook is only worth 2.99 is not particularly fair. They also only deliver to the Kindle platform, so anyone using a Kobo is out of luck. And finally, Amazon never shares their data. So there's no opportunity for a direct reader to publish their conversation. It's just as opaque as a bookstore sale.

And finally, we have BitLit. BitLit is an ebook bundling app that aims to create a hub for bundled ebooks. Readers take a shelfie or a photo of their bookshelf and the app catalogues all the books on their shelf and lets them know which books are available to bundle. Once the reader has found the book they can bundle, they snap a photo of the cover which we match to the JPEG we receive from the publisher, and then they write their name on the copyright page, which we match to the name on their credit card account, and then they receive an email with a download link to all available formats. Honestly, this takes longer to describe than it does to do. To bundle a book through BitLit, all you need is a pen and a smartphone, about 15 seconds and the book.

To follow through, we can see that BitLit acts almost as a hybrid between Amazon and Publisher Direct, so we see ourselves really as a complementary service. BitLit makes it possible for publishers to offer ebook bundles retroactively on any books they own, including books received as gifts because it's based on physical book ownership. Through BitLit, publishers are at liberty to set the bundle of ebook price and decide on the type of DRM they feel most appropriate to their content, be that DRM free, watermarking, or Adobe. BitLit can deliver any file type including audio, and at the end of each month, we communicate back to the publisher, the names and email addresses of the readers who've bundled allowing publishers the ability to market directly to their readers. We really want to be your partners in marketing.

So in the chart above, and this is really for when this gets shared on SlideShare, and everyone's like, "Oh, I wish I just had a slide with everything on it." I've laid out the biggest differences between each of the options available, and ultimately, I think it's up to the publisher. What best fits your content, what best fits your time, what best fits your business. So to extend, you know, our imaginary world, we've all decided bundle, we've settled on the way that we're going to do it, and now I think the next question is, how are people going to discover that we even offered it?

Working with a partner like Amazon or BitLit, obviously can take some of that work out of it. We do a lot of outreach to media. Things like Lifehacker have brought us thousands of users, but obviously, there's still some work on the publisher side. So just as in a bookstore, your most effective marketing piece is your book. All of our data suggests the best place to advertise your bundle is on the book itself.

Here you can see three examples from three of our publishing partners. So like ECW, Brindle and Glasses added a decal to the back of their book that advertises the free bundle. Engage Books created a full page advertisement in all of their books and Morgan James added a bookplate to the copyright page. This particular book is launch, which was a "New York Times" bestseller and we've seen thousands of copies of this book come through. Morgan James titles are our most bundled books because when people purchase and are reading, they immediately discover the offer. What has always surprised me about the success of the bookplate is that people actually read the copyright pages. I just thought that you'd put stuff there.

Another way that we found is very successful in terms of promoting bundles is by working with an author platform. So during the summer BitLit partnered with HarperCollins to promote seven books, including a title called "Heart-Shaped Box" by Joe Hill. We bundled "Heart-Shaped Box" over 1000 times more than any other book in the program because of Joe Hill's involvement. In the case of all the other titles, we might get an author tweet, we might get a little bit of a blog post. But with Joe Hill, we were really able to run a content marketing campaign with Twitter and giveaways and a Q&A and landing pages on our site and his site and the conversation really helped sell the bundle.

Another method of promotion we've been experimenting with is bookstore promos. So during the summer, BitLit partnered with 13 bookstores in Canada and 7 in the US to promote a summer reads program. The image you can see here is from McNally Robinson. All of the books that were included were from independent publishers and were all available for free. That's just how we set it up. We saw about 180% lift across titles that were promoted on the tables, and had stickers advertising the free ebook. This is a programme we're going to be looking at extending in the coming months and hopefully expanding further into the states.

Promoting the bundle in the bookstore aids discoverability is it sets the titles apart. It gets you on a table, it calls out this offer. More than that, advertising the bundle also helps guard against showrooming. So one of the things that I've seen in a lot of data recently is that readers are going to bookstores browsing, searching on Amazon, buying the book there it's cheaper. So ultimately, they buy the book online even though they're in a bookstore. Bundling allows bookstores to participate in the digital realm and I think that that's really important. But they don't actually have to change anything about their business model.

At the same time, it also gives publishers a window into a sales transaction that they don't traditionally participate in. When I was working at Dena and we would see data come in and we would know, you know, this bookstore sold 50 books but who did they sell them to? We can't email and say, "Hey, you know, David Suzuki has a new title coming out and you bought this book at type on Queen." That option just isn't open.

And finally, another tool that we've been seeing is very successful for us is the Shelfie. So readers use Shelfie when they first launch the app, they take a photo of their bookshelf, the app tells them all the books on the shelf, lets them know what's available to bundle. This also allows us to catalogue all the books that a reader has, which means when we bring on new publishers or bring in new titles, we can let the reader know, "Hey, your book is available." Since launching Shelfie in October, we've seen that overwhelmingly this is how readers are finding their available books.

The best part of this is that readers are often rediscovering the books on their shelf. They rediscover the books they already own, which I think is in and of itself a kind of magic. I don't know about you, I have about 1,500 books in a very tiny apartment and the first time I took a shelfie, I found myself immediately taking books off my shelf because I was like, "Oh my God, I forgot that I had that book. I forgot I paid 32.99 for that hardcover and never read it." Shelfie is an amazing tool to allow you to maximise those longtail sales and make a sale on an ebook that somebody may be bought the print book from you 5 years ago, 10 years ago. It really doesn't matter the age of the sale.

So now that we've talked about how readers will discover your bundling offer, I think we need to talk about money. It's a really big picture of money. To start, I'd like to take you through the breakdown of pricing for a bundled ebook and what the publisher stands to receive. So I'm a bit of a cookbook geek and I am using "Nom Nom Paleo" as my example. This book retails from our partner Andrews McMeel for $35 in print, 12.99 as an ebook. Andrews McMeel prices their bundles at about 20% of their digital lists, so the bundled ebook is available for 2.99.

So looking at the profit of a print book to start, and obviously, this changes publisher to publisher but with the original $35 print price, 14.88 is left after accounting for the retailer margin and the distribution of costs. Of that, we need to account for a minimum of 15% printed editorial costs and 5% marketing costs. I've seen this done in other places, on DBW, for example, and some people prefer to place the whole cost of marketing and editorial on the print book but I feel like it should be split between the print and the ebook because in today's marketplace, it's not really an option to not create both. So I set this up to show 2.63 in printing costs but I've split the editorial and marketing costs over the print and ebook for $1.31 and $0.88 respectively. And then we also need to account for the royalties which I've set at 8% of cost for $2.80. Then after the cost of returns, we end up with a publisher net of about 6.26.

So now we're going to look at the ebook sold alone. "Nom Nom Paleo" retails for 12.99, which is a pretty significant discount off of the hardcover. After 50% off to the retailer, we're looking at 6.50 less distribution costs of 10%. Cost of production on a per unit basis is lower at $0.15, ebook specific production cost divided by average unit sales. But as you can see, we have the shared cost of marketing and editorial. Author royalty is usually set at about 25%. I think that's fair. So we're looking at $1.62 for a publisher net of 2.40.

And then we throw in the bundled income. So the ebook is sold at 2.99, BitLit takes 5%, Apple and Google takes 30%, the cost of Adobe DRM is about $0.23, and then we add distribution costs and author royalty and the publisher is looking at $1.03. So it's not a lot of money. It's obviously less than the ebook. But you have to remember that we're adding the bundled income into the print book. So it's almost like money that was just left on the table when you made the initial print sale. You'd be looking at an overall profit of 7.29, which is an increase of 16%.

Obviously the numbers move but suffice it to say that with bundling you stand to increase the profit margin on the print book and make more overall than you would have made on the sale of either print or an ebook. Our surveys have shown that less than 1% of readers will natively bundle because of overall cost making the sales of your bundle gain rather than cannibalization of the ebook.

I wanted to pause here for a moment and talk further about cannibalization of ebooks. I know a lot of publishers are nervous of ebook bundling because of the fear that it will undermine the value of the ebook entirely. But ebooks are only partially about money. They're also concerned with the value the publisher is applying to the reader. If you look at data from the 2012 Canadian Book Consumer Report from BNC, we know that while 74% of publishers create ebooks to increase sales. The next two most popular reasons are both consumer driven. Accessibility at 72% and demand at 68%.

So if eBooks are largely created to increase accessibility and demand, ebook bundling by its nature supports that goal. In addition, ebook bundling is in support of print sales, but publishers stand to make more money anyway. No one can bundle your ebook unless they've already paid for the print book. And remember, less than 1% of readers will natively bundle, so this is a bonus rather than a cannibalization. It's basically a win-win.

So now we've talked about the financial benefit of bundling, but we haven't talked about how to price your type of content. In order to discuss that, we're going to first need to talk about the audience for your books. For bundling just like any book sale, I think the price elasticity is directly influenced by the people consuming your content. The same reader who will pay for one type of content is more inclined to want another type of content for free.

So in order to talk about audience, my team and I sat down and we came up with three personalities to talk about our readers. The first of these is Suzy. Suzy likes to cook, enjoys a good romance novel, reads the odd self help book, she's not unlike Mary Alice Elcock. Like most women who bundle, Suzy is less likely to pay for a bundled ebook. In fact, her numbers show a two to one difference based on gender. She is however willing to pay for cookbooks.

So our theory on that, it's a little loose, is that because women are often responsible for the household expenses, Suzy's likely to pay for something that's for her family, but less likely to pay as higher price for something that's just for herself. I should say that this isn't across the board. If Suzy really loves the book, she's going to pay for it just that the negotiation is different. In short, books with a reader like Suzy need to be priced lower or priced for free in order to motivate her to bundle unless there's something that she can add back to her family.

Our second persona is Jay. Jay is a designer with all the accoutrements thereof. He reads books on UX and UI but on the weekend he likes to go to concerts, he often hikes with his dog, Wilbur, probably in Vancouver. He buys books for work but also enjoys biographies. Jay is willing to pay a higher price for a title he needs for work like this O'Reilly title on "Lean UX", but is less willing to pay the same price for his hiking book. Our data supports this is about 45% of our paid ebook titles have to deal with technology. So from publisher partners like O'Reilly, Elsevier O'Reilly.

Finally, we have Neil. Neil is a programmer by day and a night elf by night. He is interested in bundling his favourite sci-fi titles and authors and wants to be able to have ebook editions of books he uses for work. He also likes to read about men he admires, like Joss Whedon and Wil Wheaton. Like Jay, Neil is most willing to pay for books he can use at work but also willing to pay for his favourite sci-fi trilogies. Nineteen percent of BitLit's paid sales are for fiction and 15% of that is actually sci-fi fantasy. Neil is the most willing to pay for a bundled ebook, partially because he's an early adopter and supporting bundling aligns with his wish to support innovation.

So I don't think it will surprise anyone here that the number of people who are willing to bundle increases the closer you get to free. I think we all understand that. In terms of finding the right price point, when we surveyed readers prior to launching BitLit, we determined the bundling pricing sweet spot was going to be about 75% off, but with a year's worth of sales behind us, we now see that as being closer to 82% off the digital list. I think this is probably because of the fact that digital list and digital street price aren't actually the same number. So now you're thinking, I publish the kind of content that people don't want to pay a lot for the bundled ebook, so what's the value for me in bundling?

Obviously, there's the promoted print book sale and I think that that's very valuable but I also think that we need to harken back to what ECW espoused when they first launched the programme. The value is in building the relationship with your reader, which is why going direct or working through BitLit offer a greater advantage than bundling through Amazon. The chance to connect with your reader, to suggest new books, to build a rapport so they are as invested in your brand as they are in a single book is huge. Imagine if instead of thinking, I really want to read another David Suzuki book, readers thought, I love that I can bundle books from Greystone. I should see what else they publish. I think I heard "Eating Dirt" was great, which it was.

So the question actually becomes, which is more valuable to you? Does the value of the bundling lie in the incremental sales value? I've heard from many publishers that incremental sales or whether you're seeing growth now that ebooks have plateaued and bundling can certainly add value there. Or is the value to you as a publisher in having built a relationship with your reader? Giving them something for free now in order to make them happy, so they'll buy your next book. And remember, you're giving them something for free after they've paid for something, so it's a slightly different negotiation. Which makes the question of pricing your bundle about whether you see the value of bundling and marketing your book, or if you see the value in sales or a hybrid of both.

The last thing that I wanted to say about pricing is experiment. Almost all of our publishers price differently. Some price based on genre, others on the format that they can supply, so EBUBs will be more expensive than PDFs. Some price based on the year that the book became available. So a frontlist title is priced higher because that's the title that's been promoted and the backlist titles are priced lower.

I think it's necessary to stay on top of the results of your pricing and what's working and what isn't. Pricing based on frontlist backlist makes a lot of sense from a publisher perspective, but I'm not sure that it makes as much sense from a reader perspective. Do readers know the year that a book has come out necessarily? So consider your audience and don't be afraid to reevaluate.

So we've talked about why you should bundle, how you can accomplish it, how you should price and how much money you stand to make. Let's return to the purposes of bundling that we discussed earlier just to kind of recap. The first benefit of bundling is the sale of the print book. Funnily enough, actually, as I was working on this presentation last night, we had an email come through our info at BitLit and we had a reader named Daniel say, "I looked at two different price books this weekend where I would have bought the print item if the ebook had been available. And since it wasn't available, I decided to hold off on the print purchase."

So the publisher has actually missed out on both print and ebook sales opportunities because he couldn't do that and I think more and more receding readers expect to be able to do that. The second reason is that you can increase the income from your initial sale. Arguably given that ebook sales aren't increasing and nor our print books for the most part, increasing overall sales is all about finding sources of incremental value. Bundling is a great example of this and so is Wattpad or subscription services like Scribd or Oyster. The number of ebook vendors with different business models who have materialised in the past few years is indicative of the need to grow sales in new ways.

We've also talked about how bundling can increase the publisher's brand recognition. This is true for both priced and free ebooks as it sets your titles apart from the madding crowd. Publishers have traditionally struggled with branding because the author is so often the brand. If we look at some of the publishers I talked about though, ECW, Coach House, Angry Robot, O'Reilly, their brands are far more recognisable because of the choices they make and the decisions they take that set them apart. Finally, what I would call the most valuable reason to bundle is the opportunity to create a dialogue between you and the reader. To make the reader your fan and in doing so create a loyal customer who's interested in supporting you for years to come.

Zalina: If you'd like to hear more talks like this, make sure to subscribe to the podcast. We're on iTunes, Pocket Casts, and SoundCloud. Next week, we've got Nathan Maharaj from Kobo talking about how price affects reader engagement. If you want to learn more about what we do, you can find us at booknetcanada.ca. Thanks to Mary Alice for speaking at Tech Forum, and everyone who attended or helped to put it together. We gratefully acknowledge the financial support of the Government of Canada through the Canada Book Fund. And of course, thanks to you for listening.