Understanding and using printondemand POD effectively

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Understanding and using print-on-demand (POD)
effectively

• Tools of Change - Frankfurt
• October 13, 2009

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This afternoons panel

• David Taylor, President, Lightning Source and SVP
  Content Acquisition for Ingram Content Group
• Dr. Moritz Hagenmüller, CEO, Books on Demand GmbH
• Brian OLeary, Principal, Magellan Media
  Consulting Partners

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Print on demand a summary

• Three overlapping segments
• Can make financial sense when you look at all of
  the costs involved with creating and managing
  inventory
• Potentially significant opportunity to use POD to
  maintain or grow the availability of niche
  content
• The benefits available from POD depend on the
  size, page count and annual demand for any given
  title
• Models (tailored to address the nature of
  specific imprints and titles) can help identify
  the best uses

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Three overlapping segments

• Lightning Source (Ingram)
• BookSurge (Amazon)
• Colorcentric
• Edwards Brothers
• Quebecor-World
• R.R. Donnelley
• Friesens
• Transcontinental

• Author House (Indiana)
• iUniverse (Nebraska)
• Trafford (British Columbia)
• Lulu (North Carolina)
• xLibris (Pennsylvania)
• Bookends (New Jersey)
• Blurb (California)
• Picaboo (California)
• Picturia Press (California)

• Instabook (Bookends)
• Espresso (U of Alberta)

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POD can lower unit costs of books sold
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Manufacturing costs are typically higher

• Unit costs per POD book printed are higher than
  seen with conventional technologies (studied
  books between 80 and 320 pages)
• Unit costs per POD book sold can be lower,
  depending on sell-through for a title
• POD can be set up to produce a single copy of one
  or more consistently formatted titles

When POD is dismissed by publishers, it is
typically based on manufacturing costs alone.
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POD can reduce returns/unsold copies

• POD technology allows publishers to choose their
  inventory objectives
• Supports zero inventory (order, then print) as
  well as structured maintenance of low volumes of
  ordered titles
• Titles printed POD can be sold as non-returnable
• Titles printed POD can also be fulfilled
  directly, through contracted services

Our research shows that the share of unsold
copies is often much higher on small press runs
(smaller base, greater uncertainty).
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POD can also reduce inventory loss

• Shrinkage (loss or theft) and spoilage (from
  handling) can consume as much as 10 of a print
  run
• Little or no inventory also means significantly
  reduced spoilage/shrinkage
• Coupled with fewer returns or unsold copies,
  lower spoilage also improves PODs cost per book
  sold

While spoilage and shrinkage vary significantly
across titles, the longer a book is held, the
greater the loss becomes
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Reducing inventory cuts carrying costs

• Warehouse costs can range from 0.12 to 1.80 per
  copy, per year
• Costs of capital (paying for printing well ahead
  of when the books are sold)
• For slow-moving titles (demand below 50 per
  year), carrying costs can exceed manufacturing
  expense

Because warehouse and financial expenses are
usually not part of a departmental or title
budget, the costs are often not factored into POD
analyses.
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This analysis compares just books in print
Higher manufacturing costs for POD Lower
expenses for returns/unsold, spoilage and
carrying costs Order, then print model
supports more timely inventory decisions
OOP/OSI is no longer a forced (economic)
decision Editorial value can be protected
without incurring significant upfront
costs Lowers risk (Why not stay in print?)
Prices based on POD expense and full
understanding of costs Predictable
expenses Search and filter helps drive demand
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Meeting long-tail demand
Potentially cost-effective use of POD for online
orders (titles still in print but slower-moving)
Use POD to keep titles in print, growing revenues
Demand (sales)
Title count ranked by demand
Maximum offline-retail title count
OOP or OSI invoked
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One significant analytical footnote

• The model assumes that every book printed
  conventionally and not spoiled is sold
• Theres no reduction in the model for copies not
  sold
• A smaller conventional press run can look like a
  good financial option if demand is predictable
• Where demand is uncertain (or certain to be less
  than your minimum conventional print quantity),
  POD can become a better option

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So what to make of all of this data?
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Suggested POD resources

• Industry associations
• Cambridge University Press University of Chicago
• Publishing Research Quarterly
• Leading vendors
• Your current vendor (depending on the
  relationship)
• Leading-edge experimenters
• brian.oleary_at_magellanmediapartners.com (copy of
  this presentation)