Amazon Faces Serious International Competition, From Japan

A major deal was announced yesterday which should propel Kobo into the top tier.

The Japanese e-commerce giant Rakuten purchased Kobo – outright – in a straight cash deal for $315m.

It sounds like Kobo will continue to be run as a standalone company – the CEO is staying in place and all the employees are keeping their jobs – only now they will have the financial backing of one of the Top 10 internet companies in the world.

Make no mistake, this deal means that Kobo is now a serious player.

Rakuten

Rakuten are a huge international internet services, online retail, and e-commerce company with 10,000 employees, a market capitalization of around US$10bn, and major operations in Brazil, Germany, Taiwan, China, Thailand, Indonesia, as well as, of course, their home country of Japan (where they are much stronger than Amazon’s local operation).

They also own Buy.com after purchasing them last year for $250m, bought the UK-based Play.com in September for $40m, bought the busiest e-commerce site in France last year for $270m, and have significant interests in developing markets such as Russia.

In short, they are strong where Amazon are weak. Many Asian countries, including Japan, can’t even purchase e-books from Amazon, although a Kindle Store has been rumored for both Japan and China recently.

Kobo had already made inroads into the international market, opening stores in the UK, France, Germany, Australia, New Zealand, and Hong Kong. Last month, they signed two key strategic partnerships with major local chains – WH Smith in the UK, and FNAC in France – to add to deals they had already struck with Whitcoulls in New Zealand and Cheung Kong in Hong Kong.

They claim 50% of the e-reader market in Canada and around 10% in the US, although whether the latter number has held up since the collapse of their American partner, Borders, and the launch of new devices from competitors, is doubtful.

Indeed, the partnership with Borders was supposed to be their leg-up in the lucrative (and relatively developed) US market. Since that deal went south, much of Kobo’s focus has been on the far more open international arena where many of the major players (Apple, Amazon, Google) have yet to establish a presence in many markets.

Kobo had really struggled to get local retail partners in key international markets and, without the brand recognition of someone like Amazon, they couldn’t hope to shift significant numbers of e-readers (and hence e-books) through their own websites.

This deal changes all of that.

One of the major challenges that Amazon faces in their international expansion is in getting local content for new Kindle Stores. Without sufficient local content, they can’t launch. Naturally, local publishers have been dragging their heels – fearful of being disintermediated by Amazon, while at the same time exploring their own retail options.

Hiroshi Mikitani, the CEO of Rakuten, is fully aware that these local publishers may find it easier to deal with a company that is not Amazon. In an interview with the Wall Street Journal he said, “Everyone is very afraid of Amazon, publishers and retailers. We are more of an alliance-oriented company than Amazon. We want to establish relationships with retailers, rather than seeing one company dominating everything.” (Link may expire in a few days.)

As for Kobo, this deal could catapult them into first position in Asia, given the extensive presence (and deep pockets) of its new parent company, and give them a significant head-start in potentially lucrative markets such as Brazil.

Mike Serbinis, the CEO of Kobo, in that same Wall Street Journal article, said, “This is not a one-country game. Two-thirds of the book market is outside North America. We’re going into countries where we will be No. 1.”

The international market is bigger than it looks

The international book trade is estimated at around $90bn, of which, the US is responsible for about 30%. However, exclusively measuring the trade by revenue generated can lead to analysts vastly underestimating the potential size of international e-book markets.

Local book-price variances hugely skew those numbers. Books are expensive in the US and often more so in the UK and certain Western European markets. If you were to measure international markets by units sold, the picture would be very different.

Why is this important? E-books are cheaper, and will continue to get cheaper as the market develops. There is extraordinary downward pressure on price in the US from a combination of retailers like Amazon (and competitors who all price-match each other), increasingly militant readers (organizing boycotts and switching to lower priced books), and independent operators such as self-publishers and small presses (who are selling at bargain basement prices).

In fact, without the Agency Agreement (which prevents Amazon from discounting e-books from the major publishers), prices would already be far lower in the US.

As more of the market transitions to digital, lower prices per book sold will be paid by readers who won’t have to shell out $25 for a hardback to get new releases from a favorite authors.

And, as the unit price drops in markets such as the US and the UK, the international market will more reflect the picture we see when we look at relative unit sales, rather than relative revenue generated.

Take a country like Argentina, for example. Someone looking at GDP per capita may conclude that it’s not a country where people are going to be queuing around the block to buy Kindles or iPads.

This would be a mistake. GDP is an incredibly crude barometer. For example, the cost of housing prisoners is included. In a country like the US, with (by far) the largest per capita prison population in world gets the cost of housing, feeding, and securing those 2.5m prisoners gets added to its GDP.

The US has just 5% of the world’s population, but 25% of the world’s prisoners. This skews GDP, and is just one of the many, many ways that this metric is an imperfect measure of a country’s general economic well-being, or it’s citizens relative ability to purchase things like e-readers.

I know from living in Buenos Aires that Argentina (like many countries in the so-called “developing world”) is awash with gadgets – smartphones are ubiquitous and MP3 players, laptops, and internet cafes are common – and the people have an undying love affair with books.

There are bookstores everywhere, writers are hugely respected, and it could be argued that reading is much more important in cultural terms than in the UK or the US. The Buenos Aires International Book Fair (one of the top five in the world) attracts over one million people each year (from the general public) through its doors.

Naturally, as the cost of living is much lower than the UK or the US, books are much cheaper, and measuring the relative e-reading potential by the revenue generated by the publishing industry doesn’t reflect those lower prices.

Why is this important for indie writers? We sell books cheaply. Our books will be much more affordable to the average reader than trade-published books.

If you think how much US readers (with much more disposable income) baulk at paying $14.99, you can imagine how much more attractive an indie book at 99c or $2.99 will be to someone in Buenos Aires.

And this is just one country of 40m people in a region with 400m people. Brazil has nearly two-thirds the population of the US and no real bookstore infrastructure (many books are sold, quite effectively, door-to-door). It is ripe for e-reading.

Yesterday, the CEO of Saraiva – the largest book retailer in Brazil – announced that the recent Steve Jobs biography became the biggest selling e-book in the company’s history, with e-sales matching 22% of print sales.

While the nature of the book (and its target market) is skewing those astonishing numbers, these figures still surprised everyone in the Brazilian book business, as the digital market there is still considered to be in its infancy.

The retailers said that price was a key factor (the digital version is around two-thirds of the price of the print version), and that the size and weight of the print book (628 pages, hardback) brings the relative comfort and convenience of e-reading into sharp focus.

It’s the first bona fide e-book phenomenon in Brazil, but it won’t be the last, not with an army of tech-savvy purchasers evangelizing about the benefits of e-reading.

And while the potential in Latin America is huge, the potential in Asia is just staggering.

I will be writing more later in the week about the untapped, under-rated international markets, but, until then, try this excellent article from bestselling UK author Mark Williams.

Self-publishers & Kobo

How does this deal affect self-publishers? Well, if you aren’t listing your books at Kobo, you should remedy that immediately. At the moment, the only easy way to get into the Kobo store is through Smashwords.

I don’t know any self-publisher who is seeing significant Kobo sales. Indeed, many self-publishers don’t list with them after pricing issues in the past. Kobo had taken it upon themselves to automatically discount many titles (as Google do right now), removing pricing control from self-publishers.

Amazon, with their strict price-matching policy, dropped the prices of the affected books, knocking many writers out of the golden 70% royalty zone. Because of the delays in the Smashwords system in getting new prices out to Kobo (which would stop Amazon matching the lower price), many decided to opt out altogether rather than risk losing so much royalty money – often for several weeks.

This issue was resolved earlier this year, and Kobo have since pledged not to discount any Smashwords titles. Clearly, Kobo are poised to grab a much larger share of the international market and any self-publisher should be listing with them right now.

For those who refuse to use the Smashwords system, I have two pieces of good news.

First is that – at some point next year – Smashwords will allow the direct upload of EPUB and MOBI files, so those who take pride in their e-book formatting won’t have to be subjected to the crude indignities of the Meatgrinder system.

Second, Kobo plan to open up their system for direct publishing, just like KDP. This will be the preferred option for many, given the lack of control self-publishers have over how their listings appear on Smashwords partner sites. In addition, there have been many reports that those who upload with partner sites directly (such as PubIt) have far greater visibility.

Finally, many self-publishers have felt that Kobo was hostile to them, and that their listings were ghettoized. Some have suspected that this attitude was a result of the (former) majority shareholder being Indigo – a Canadian chain of bricks-and-mortar bookstores – who felt their natural partners were trade publishers, and who didn’t seem that comfortable with the idea of self-publishers listing with them in the first place.

A Japanese e-commerce company may notice that a third of the top-selling e-books on Amazon are from independent operators and may take a more progressive attitude towards our business.

About davidgaughran

David Gaughran is an Irish writer, living in London, the author of "Mercenary" and "A Storm Hits Valparaiso" as well as "Let's Get Digital" and "Let's Get Visible."
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90 Responses to Amazon Faces Serious International Competition, From Japan

  1. Jaye says:

    Very interesting article, David. I don’t know enough about business, especially international business to have an opinion. My gut tells me that all this competition is going to be very very good for readers.

    • I think I can strip out most of the business talk :)

      Kobo is a small company without huge amounts to invest. But they have shown that their devices can do well, if they can get people to try them. The problem was getting people to try their devices when most people hadn’t heard of them. This deal means that one of the largest internet companies in the world now owns Kobo and will be pushing Kobo e-readers hard on their major sites in Brazil, France, Germany, Thailand, China, Japan etc. It means that Kobo just leapfrogged Amazon in several key markets – for example, Kobo’s new owner is much bigger than Amazon in Japan – which is a huge market.

      Competition is great for readers. It usually means lower prices, better service, and better products as each company fights for your business. If one company can’t beat Amazon on price, they will try having better customer service, or better features on their devices, or a nicer e-bookstore. Readers will win, ultimately.

  2. Pj Jones says:

    This is good news for us indies. TY, David. I wonder what this deal will mean for Barnes and Noble. I have seen a downward trend in Nook sales over the past few months.

    • Barnes & Noble are finally waking up to the potential in international markets. They are looking to move into the UK market at some point next year (possibly in partnership with Waterstone’s). But they are coming to this game very late and I have little faith in their ability to catch-up. I don’t see Barnes & Noble lasting long term (either internationally or even in the US) without being bought out by a company with much deeper pockets.

      • It would have to be a sale like this Kobo one, disconnected from the brick and mortar. Nobody on earth wants to be freighted with that dead brick and mortar. That’s the Nook’s only chance, for an eBay-type company to buy the e-commerce side of BN and abolish the rest.

        And then, of course, there’s a great opening for creative and adaptive indie bookstores to find some cheap real estate…

      • Yep, agreed. Any value in even a small portion of the retail network would have been greatly reduced by the fire-sale of everything Borders-related. B&N are making dumb decisions, pushed by bean-counters. They see book sales falling, so they are taking out book racks and putting in more scented candles and keychains. There seems to be logic in that if you take the narrow view that sales of scented candles are up and sales of books are down. But this fails to take account of the bigger picture. B&N is a bookstore. People go there to buy books (and Nooks). Purchases like coffee and keychains are incidentals. People don’t go there primarily for coffee and general merchandise, they go to Starbucks or Walmart. At what point is B&N no longer a bookstore? If they turn it into a general store that happens to sell Nooks and a few books, do they really think they can compete with someone like Walmart who does all of that – at lower prices and with a larger selection – and sells Kindles too?

      • Pj Jones says:

        Well, I hope they change their current strategy, and fast.

  3. Brendan Bannigan says:

    Concern is growing in the US over the launch of Amazon’s Kindle lending initiative. Amazon launched the new service last week aimed at Kindle-owning Prime users, but publishers have expressed concern over titles appearing in the programme without agreement, while agents said they were worried over how the ‘free’ loans would impact royalty rates.
    From the Bookseller Nov 9th
    Hello David,
    I’m following your blog and wondering what you opinion on the above is.
    Best Wishes

    • Hi Brendan,

      I like the Bookseller, but, as a trade mag for bookstore owners, their articles about Amazon can be quite jaundiced. This, I think, is just a storm in a teacup. Readers can only loan out one book per month. I don’t think that’s going to have a huge effect on the market. Besides, Amazon are purchasing one copy for each time they lend a copy out, so authors and publishers should see their royalties increase as a result of being included, not decrease.

      My guess is that Amazon want to expand this program (and include the larger publishers who have opted out) and that this is a trial balloon. I don’t think their long-term strategy is to continue buying a copy each time they lend a book out – clearly that’s not sustainable. I think that was done to assuage fears of the viability of the program. I imagine it will evolve to a “lending fee” similar to what is done in UK libraries.

      Dave

      • And part of the reason Amazon is signing its own authors. The future is uncertain there, too, but right now I’d rather be in the tiny pool of lendees and worry about the future after I’m dead…

  4. Bill King says:

    Fascinating stuff, Dave, as always. Rakuten’s interest shows quite how mainstream e-books are becoming. It’s a serious money business now.

    • In terms of cultural industries, books are bigger than everything bar television – bigger than games, music, and movies. We are so used to getting the poor mouth from publishers (and the antiquated way they ran the business) and that was often overlooked. Books were always a big money business. Now that e-books have proved themselves in the US, and the spectacular growth shows no signs of abating or plateauing, serious players from other industries are getting involved. It’s not just Rakuten (and Google). Telefonica (one of the largest carriers in the world, bigger than Verizon and AT&T combined) recently launched their own e-reader and e-bookstore, and have a huge store network across Europe and Latin America.

  5. I’m one of those that does very well at Kobo. In fact, my books sell better at Kobo than Amazon and B&N combined. I deal directly with them, I don’t go through Smashwords, and Kobo has been nothing but a pleasure to deal with. It’s true that they will have a new system for authors to upload directly and they have hired a new person for author relations. He’s got some great ideas on how to help authors in getting their books noticed, and I look forward to where they’re going. Interesting times coming!

    • Hi David,

      That’s great to hear (congrats). More than Amazon and B&N combined? That’s astonishing, in fact.

      I have lots of questions. Did you always upload direct? In other words, are you able to compare performance/visibility via Smashwords and going direct? How did you approach them in the first place to publish through them direct? Finally, do you get a breakdown in your sales numbers by market (i.e. do they say how many you sold in Australia v Canada v UK)?

      Dave

      • I used to go through Smashwords and then had them remove the books when I went direct with Kobo. Sales through Smashwords were abysmal – next to none.

        In regards to approaching them directly, there is a link on their site with info on how to publish directly (http://www.kobobooks.com/companyinfo/authorsnpublishers.html). It’s been up there for quite some time. I’m surprised more people don’t take advantage of it because they really are a pleasure to work with.

        As for breakdown in sales numbers, yes, they break it down very nicely, including: Date, Partner, Country, State, and Zip/Postal Code.

    • Tony Slater says:

      Wow, thanks for that David! I’ve followed the link you supplied and sent an email straight to the Kobo team. Being featured directly by them would be great – particularly now that WH Smiths, a major books and stationary chain here in the UK, is going to start stocking the Kobo ereader. I’m so glad you were read this post before I did! That link is pure gold.
      Tony

      • I think you need ten titles before they consider you a “publisher”. As someone else suggested, you could form a cooperative with some other writers to bypass that requirement.

  6. Sibel Hodge says:

    Great post, David. Let’s hope Kobo do a direct publishing initiative soon. I sell hardly any via Smashwords distribution, and I’ve also heard books uploaded to other sites like Pubit direct instead of going through Sw have greater visibility.

    • Early 2012 is what I heard. Whether that is sped up/slowed down/stays the same because of this deal is anyone’s guess. Probably the last one as this takeover won’t be formally concluded until early next year.

  7. Thanks for this David. I hope they make it easy for non-US authors to upload directly to them.

  8. It’s funny because I was looking at Kobo the other day and realized that none of my titles show up. Searches for the book titles, my name… no results. After reading this I double checked and SW says they’ve shipped them (months ago), so I send a little note asking WHY my books aren’t showing up in the Kobo store. Hopefully this will get fixed.

    Even better is the news that Kobo is going to do the Zon thing and allow us to publish directly. Exciting news, indeed!

    • The search is awful in Kobo’s e-bookstore. That should be one area where Rakuten’s expertise can really help them. Sometimes I see my books, sometimes I don’t. I never see them on Kobo’s international partners, except for “If You Go Into The Woods” which shows up in the Australian version of Borders for $3.99. Which is bizarre.

      All of that should dramatically improve in the future, not least when we can upload direct.

  9. Atl says:

    It’s Rakuten, not Ratuken – kind of a big deal as the latter would have an entirely different meaning in Japanese!

    • Oops! Good catch. The worst bit is I triple checked that, and still got it wrong. Article amended – thank you.

      P.S. I won’t ask the meaning of what I wrote, but will presume it is something rude.

  10. Spot on–I pegged them as #2 the moment they made international inroads this fall. Sadly, I think BN is on the ropes, but this should assure that there will be competition that will keep everyone (even authors) on their toes.

    I’ve recently started using my Kobo direct account and it gets the books in a lot faster–but now I have to wait for the interminable pull-out from Smashwords so I can handle all the titles myself. I am glad to hear they are building a direct upload platform. David Burton’s my guru on that stuff!

    • ;)

      I do recommend that the moment you get approved to work with Kobo, you pull the Smashwords titles immediately. That way there’s no duplicates. The same can be said for going direct with Apple. Get the SW versions down first, otherwise things can get more complicated.

      • Is that more complicated in terms of price-matching or falling foul of their ToS? I ask because I’ve heard it can take weeks for SW to pull the Kobo titles.

    • Yeah, I’ve been writing about their potential since back in May. Getting good partners in the markets was slowing them down, but they expanded remarkably quickly despite that and the limited amount of funds they had to invest. Scaling up to partner with a major international operation presents its own challenges, of course, but I think they should be up to it.

      I’ll look into going direct with Kobo too – I sell nothing with them through Smashwords, although, I think my books are only starting to appear there now, and haven’t even filtered out to all international sites yet.

      As for B&N, it’s hard to see a sustainable future for them that doesn’t involve a buy-out. They were way to slow to even start thinking about the international market, and I have zero confidence that they have the internal expertise to exploit that potential – and they are starting way too late, only thinking about going into the UK next year when the market is already booming there, Amazon are relatively entrenched, and Kobo have signed key partnerships. A deal with Waterstone’s would be smart, if they can convince them to drop the idea of developing their own e-reader (which is, again, far too late, and they lack the internal expertise).

      The problem for B&N is that they slapped a $1bn price-tag on the company, and Liberty coudn’t see the value in that once they got a closer look at the books. I would imagine that any investor would only be really interested in the digital side and that the physical side of the business is a huge drag on its potential. Potential investors would probably want to massively downgrade the store network (or get rid of it altogether) and use the stores exclusively as Nook showrooms (with a couple of book racks for diehards). Barnes & Noble are probably too attached to the physical side of the business to countenance such an offer – which is the only thing, in my opinion, that gives them a long-term future.

      • Adam Pepper says:

        I’ve been waiting months and still havent seen my books listed on Kobo via Smashwords. I’d love to hear more about listing direct. That may be the way to go.

  11. Pingback: Kobo Acquired By Japanese E-Commerce Firm | The Passive Voice

  12. I know an author who is doing very well with Kobo but has been really frustrated going through Smashwords to get there. I didn’t know one could go directly to them, and I suspect he doesn’t either. His biggest problem with them so far has been s…l…o…w… response to questions and problems. Hopefully, this will take care of that.

    I’m excited at the prospect of getting my pen name stuff out with yet another distributor, especially a savvy company that sees money in indie titles. I’m very interested in their access to Australia and New Zealand.

  13. tssharp says:

    Smashwords is meant to publish books on Kobo, isn’t it? I went to their site and couldn’t find my work, that’s a bit worrying, as I’d want to be part of that market if it’s going to be expanded.

    • The problem was that Kobo only had the capacity (or desire?) to take 1,000 books a month from Smashwords, but Smashwords were publishing far in excess of that each month, so what started out as a backlog, became a non-moving bottleneck. All Smashwords titles in the queue were going to be pushed out en masse last week, but I believe that is taking place next week instead. In short, you should be able to see your books in Kobo soon (assuming no further delays, which are possible).

  14. This is great news! I have been surprised to find out how difficult it is internationally to get an ebook. I didn’t realize how much trouble it could be, especially through Amazon.

    As a (possibly irrelevant) sidenote, I have a Kobo which I bought from a Borders last year. The Borders software was horrible and rarely ever worked the way it should have. If I told it to sync my Kobo so that I could upload my new books, the desktop app would override my bookmarks and there was no easy way to go back to a certain page at that time. (Now they have the “go to page” option which was installed with an update this year.)

    If anything, partnering with Borders probably hurt sales in the US because frustrated readers would have told all their friends to avoid Kobo. I think things are more hopeful now without the partnership.

    • Thanks for that insight on the Borders/Kobo partnership. They certainly backed the wrong horse in the US, and that damaged them in all sorts of ways. I remember when the Borders liquidation was confirmed, Kobo had to hurriedly issue a press-release to it’s US customers that they weren’t going down the tubes with them. Not great PR.

  15. Very, very exciting! Have been waiting for something like this to happen; the international market is starving – I think – for ebooks that they currently can’t download from Amazon. Imagine a giant bookstore whose works are denied to you… ouch:) This will hopefully open things up considerably for those residing outside the US…

    • And even most of those that can download are hit with the boneheaded Amazon Surcharge of $2 on all e-books. But yeah, most of Africa and Asia and all of the Middle East have no access at all.

  16. tssharp says:

    Does this mean we’re all going to have to start hiring Japanese/Chinese/Korean etc translators? ;)

  17. I was starting to get worried over why my book wasn’t appearing at Kobo yet, after being accepted into Smashwords’ Premium Catalogue in the middle of last month. So far the only Smashwords retailer I’ve been able to find it is at Sony, and it had no book description, no about-the-author or anything, even though I thought Smashwords was supposed to export those details too. I took a quick look at one of your books, David, and all the information was there – did that eventually come through from Smashwords or is there something you have to do yourself?

    I had no idea you could go direct through Kobo – I’ll have to look into that. Glad to hear a direct upload of .mobi and .epub is coming to Smashwords too.

    • The only book of mine that I can see in the Kobo store is “If You Go Into The Woods” despite “Transfection” getting into the Premium catalogue a couple of days later (June I think), and “Let’s Get Digital” (finally) being accepted in early August. Any information there is pushed out from Smashwords. In fact, I’m sure that’s an old description, and the new updated one (from July) hasn’t made it through yet. Lucky that wasn’t a crucial change, a typo correct, or a price change I wanted to do.

      The Kobo/Smashwords partnership isn’t working too great, but if they can clear this backlog, it should improve. The proof, as always, will be in the pudding.

  18. Aron White says:

    David,
    Great post. The idea that self-published writers have to also be business people is becoming truer and truer all the time. I like how your posts sound like a company considering new or emerging markets to enter and the positives and pitfalls for doing so. We all benefit and keep up the great work :)

    • Some people resist it, but I don’t think there needs to be any contradiction between the creative side and the business side. I’m an artist when I am writing and a business man when I am selling. Two different roles, and can be kept quite separate if you prefer. Also, people often talk like selling yourself like it’s something new, or something that has only become important with the rise of self-publishing. If you look back, many of the great artists were great showmen (and women) and many of the best writers were experts in self-promotion. A lot of the stuff we are trying as “new” would have been old hat to Mark Twain, Charles Dickens, Robert Heinlen, and Stephen King.

      • Aron White says:

        I completely agree. There’s this entrenched idea among writers that promoting yourself somehow sacrifices your art and makes that person a sell-out, but as you say, some of the most legendary authors of the past century weren’t afraid to self-promote. I think for a lot of people the fear of self-promotion is similar to the fear of public speaking. Writing is safe because we can lock ourselves in a room and write in peace, but self-promoting involves socializing, mingling and schmoozing with our readers, something that can be a bit frightening at times, particularly for someone who hasn’t done much of that before.

  19. Dave says:

    Does this mean we’re all going to have to start hiring Japanese/Chinese/Korean etc translators?

    …AND Spanish, Portugese, Hindi-Urdu is probably a good idea and maybe even Arabic-Farci in addition to European languages.

    It will be very interesting to see the when/who/how of translation and marketing services in the near future. I would be willing (and I’m sure so would others) to take a lower royalty percentage for international e-distribution and marketing if Amazon or Kobo assembled their own specialty divisions to facilitate this.

    Instead of ignoring the “silly indie fad” and pretending the abysmall numbers in paper publishing are strictly due to the economy, this is something the Big 6 could begin capitalizing on right now were it not for their entrenchment, acting as foreign marketing and distributors. It’s what they’ve always done. But that would require some forward thinking and actually recognizing that the visible e-publishing future right now is something their not taking steps to be a part of.

  20. It’s not that I’m lazy, just constantly overwhelmed. What an extreme disappointment to discover that Smashwords has yet to get my two novels out to Kobo. I know. I just checked. Thanks for the link. I’ll work on going direct as well. As usual, David, you are so good at writing a post that shines light on all the nuances and trends of the self-publishing world. Thank you!

  21. The problems with Kobo were NOT remedied earlier this year, David.

    They are still not updating prices and just about a month ago I was forced to drop Kobo in order to keep Amazon from matching prices that had not been updated for MONTHS. I will not be adding Kobo any time in the foreseeable future. They MAY become a market force IF they are competent. I haven’t seen that competence yet.

    One of the things people miss about Amazon is that they are successful in large part simply because they are competent at what they do.

    I think blaming Smashwords for not “getting out to Kobo” is the wrong end of the stick. Smashwords gets it out to everyone else. For some reason Kobo doesn’t bother to update their information.

    • I think there are a couple of things wrapped up here. The problem that was remedied earlier this year was Kobo arbitrarily discounting the price of books. That, as far as I know, has been fixed.

      The problem I think you are referring to is Kobo not updating, meaning things like price changes aren’t taking effect. That’s a separate issue caused by a bottleneck. Each time you update a price (or the blurb), that gets pushed out as a new listing to Kobo, overwriting your old listing. As such, all those price updates get thrown into the queue with all the new books, and updated books, that are caught in the Smashwords system waiting their turn to get shipped to Kobo. New books have been appearing at a rate of thousands and thousands a month on Smashwords. On top of that, thousands more would have been updated by authors and publishers.

      Kobo were only accepting – I think – 1,000 books a month from Smashwords (they vet everything on the Kobo side too). Smashwords authors had several thousand more than that in the queue each month, so the delays just grew and grew.

      I’m not blaming Smashwords for this at all. The issues seemed to be on the Kobo side (and still haven’t been resolved).

      • It is Kobo’s choice to only update 1000 a month which is what I have also heard. B&N, Apple and pretty much everyone else can do better. Not Kobo. Until they can, I would be cutting my own throat by including them. Not that I change prices that often, but let’s face it. It’s one of our few ways of playing the system to use one price at Amazon and another on Smashwords. That means I need to be able to change prices there and have it actually happen downstream.

  22. Great post, Dave.

    I was working on a follow-up to the MWi article in light of this anouncement, but you’ve covered all the bases and plenty more.

    I suspect Kobo will do for Amazon what Apple did for Microsoft, halting them in their tracks. And then…

    Successful businesses look at what the competition is doing right, emulate them and then leapfrog them. My prediction is Kobo will be looking at those huge untapped markets Amazon dismisses, and begin publishing. But not Amazon style.

    My guess is Kobo will start to sign-up successful English-language authors for translation rights and make them available in Japanese, Mandarin, Hindi, etc, and put these authors before literally billions of potential new readers.

    And as most trad-pubbed writers will already have signed away their world rights I suspect Kobo will start with successful indies who still have all their rights to play with.

    • That’s a huge stretch. Mind you, the more the competition, the better for us so I wouldn’t mind seeing it–IF they decide to treat indies decently for a change.

      But I’ll have to see Amazon stopped in their tracks first. You are leaving out a very important consideration which applies. At the moment, Amazon is very GOOD at what they do. Kobo has not proved the same. If or when they do, then we’ll see.

      • But they don’t need to halt Amazon, just take advantage of Amazon’s idiocy in not letting half the world buy their ebooks (almost no-one on the African continent can download from Amazon), and imposing a totally unjustified $2 surcharge on the rest.

        If you live in Germany, no surcharge.A 99c ebook costs 99c. Step across the border to Poland the same ebook will cost you 2.99. $2 will be added to your bill because you happen to live in the wrong place.

        Kobo can never compete fully with Amazon in the core rich English-speaking markets where Amazon is up and running (although the WH Smiths team-up in the UK may give them an edge). But for most of the world Amazon is either a closed shop or a very expensive one.

  23. Pingback: Self-Publishing Review | Blog | The Next Big Thing: Kobo?

  24. Pingback: RetailWire Discussion: Japan’s Amazon Buys Kobo’s E-Reader Biz « Meyers Research Center: THE BLOG

  25. Patrice says:

    Fascinating reporting, as usual, David. Thanks for all of this exciting detail about possibilities to come.

    The info in the comments regarding Smash and Kobo is tremendously useful. Makes me glad I haven’t put much up on Smash yet.

    Now all we indies have to do for world domination is write good books and get rid of those pesky formatting errors!

  26. Stefan says:

    For all the excitement, I side with those like J.R. Tomlin who still want to see Kobo deliver.
    I would be as happy as the next guy about some competition for Amazon on the international level, but up to now Kobo is just promises.
    They seem to have problems with managing their sites as far as technical aspects are concerned (server capacity?), but also on the editorial side – just take a look at the starting page. Not to mention their slowness in producing versions in other languages (to their half-translated German site they’ve now added another half-baked French one, kobobooks.fr). And I still have to be convinced that social reading will be more than a fad, if at all (especially when it is linked to a specific device/app). “Hey Charlie, have you seen? I’ve got the “Afternoon Rush Hour” award badge.” – “Wow, cool!” Not.

    • Look,

      I agree with both you and J.R. on Kobo. But what you have to consider is that they started from zero. They are a start-up. I think they only launched 18 months ago, and in that time they have managed to grab around 10% of the US market, 50% of the Canadian market, and bankrolled an impressive international expansion – all on a shoestring budget. They have produced touch-screen e-ink readers and a new tablet which competes with the best from the big boys. I think that is an impressive performance.

      Now, before either of you go crazy, there are lots and lots of areas where they need to improve. The customer side is often a mess – that’s why I thought the partnerships with Fnac in France and WH Smith in the UK were so important – those guys were going to handle the storefront and the customers would only be passed to Kobo to complete the transaction. In other words, it addressed their weaknesses (poor customer service, no retail presence).

      What this deal does is give Kobo a massive international presence from one of the Top 10 internet companies in the world, and it gives them customer service experience from the very top tier – I think their new parent company is one of the Top 3 e-commerce companies in the world. Again, exactly what Kobo needed.

      I’m not looking at where Kobo are today, I’m looking at the potential in tomorrow. Whether they realize that or not remains to be seen.

      Dave

  27. Aaron Driver says:

    BookBaby has signed a distribution deal with Kobo. In an email yesterday, BookBaby customer support told me it would be up and running within a “few months”. That might be a good alternative to Smashwords (no commission, for starters) and if they do it well it might be easier than uploading directly.

  28. This is all great news about Kobo, particularly that they may drop the barrier to indie authors directly dealing with them. But I think they tend to overstate their penetration in the marketplace. For instance, you report they have “50% of the e-reader market in Canada.” I have no doubt that’s true if you add up the numbers one way as their only real competition for a customer buying an e-reader in Canada is Sony. But, while there are no Kindle sales in Canada, Canadians buy a lot of Kindles.

    • Hi Larry,

      I deliberately used the phrase “they claim 50%” as I personally think it’s suspect for just the reasons you mentioned. I have no doubt they are massaging the figures. On a similar note, I wonder if Amazon count all Amazon.com sales when making their estimates of how much of the US e-book market they control. Because they major players don’t release hard numbers, people are free to say whatever they like. Thus, Barnes and Noble can claim 27% of the market, Apple can claim 22%, Amazon can claim 70%, Kobo 12%, Google 5%, and Sony 8%. You don’t need to be a math’s genius to realize that something doesn’t add up there.

      Dave

  29. I have the same problem Shea has, I do a search and nothing comes up and I published with SW back in March. I think its better to uploaded them myself.

  30. Wow! That was an extremely thorough and informative blog post. Thank you! Sometimes I cannot believe how quickly changes are taking place in today’s publishing world. For the first time in months, I took a few weeks break from writing and spent much less time than usual on the Internet, and I come back to this significant a change in publishing. As you’ve pointed out, these developments could be huge.

  31. Steven Lewis says:

    Why is it I suddenly want to learn how to write in Portuguese? Great post and very thought provoking. Thanks, David.

  32. Wendy Kehoe says:

    Hi, David,
    This is such a great post, full of relevant, detailed, and exciting information. Thank you so much for writing about the news and sharing your insights.
    Our small publishing company, You Come Too Publishing, has only been able to get about half of our books (10) on Kobo via Smashwords this past year. We were excited a few weeks ago because in the last reporting period we had a nice jump in sales on Kobo with those 10 books. We really want our others on soon. Looking ahead, Kobo seems full of opportunity.
    If anyone is thinking of going to Kobo directly now, just know that you will need to purchase your ISBN (Smashwords gives those for free), which can usually be pricey through traditional routes. We just found EPubBud however, and they offer single ISBNs for $5.00 each (http://www.epubbud.com/).
    Thanks again,
    Wendy Kehoe
    You Come Too Publishing
    http://www.youcometoo.com/

    • Hi Wendy,

      Sorry, this one was in the spam filter. It tends to gobble up anything with more than one link. Just make sure that site isn’t re-selling ISBNs. If you use a re-sold ISBN, the original purchaser will be credited as the publisher of the book.

      Dave

  33. Wendy Kehoe says:

    Great post on today’s Konrath blog as well!
    Thanks again,

    Wendy Kehoe
    You Come Too Publishing

  34. Neil says:

    This is a big deal. Having some deeper pockets should help Kobo. Will they advertise in the USA? I rather like the Amazon Kindles, but that doesn’t mean I do not want competition!

    Hopefully the issues that slowed Kobo adoption are resolved through an influx of funds.

    I doubt we’ll settle on more than 3 or 4 major ebook players. We have:
    1. Amazon
    2. Sony (I believe they are larger globally than B&N)
    3. B&N
    4. Kobo
    5. Apple
    6. Google

    We have two or three vendors more than the market will support (in my opinion).

    Neil

  35. My Kobo sales were averaging $4000 a month. Since Borders disappeared that’s dropped to about $3000. But it’s not insignificant. They are a player, and they’ll continue to grow.

  36. Oh, I forgot to mention – if you want to get on Kobo direct, partner with other authors to form a publishing co-op. One of you can incorporate in your state (or form an LLC). Kobo does have a contract for publishers that doesn’t discount (it’s similar to the SW contract – w/o SW’s 10% cut taken out of course). We do that at Excessica and can get on Kobo directly that way.

    • That’s a useful suggestion Selena. I think I will have ten titles at some point early next year, once my translations are ready and some new stuff is out, so I might hold off for that before going direct.

  37. brennalyonns says:

    I suppose what irks me is that people act as if this bias against selling worldwide is a US phenomenon. It’s not. US authors and publishers (at least the indies) WANT to sell worldwide and do so where we can. From our own publisher sites, we sell anywhere that doesn’t block us. But when we try to distribute to major channels, we find they are less accommodating and/or have problems making the “connections” in countries we want to sell in. When you sell “worldwide” on Amazon Kindle, you’re selling in 4 areas. When you sell “worldwide” on iBookstore, you’re selling in 32 countries. Mind you, this is not the choice of the publishers and authors. We want more territories.

    FWIW, I’m glad most of my publishers use Kobo as a distribution channel. I’m hoping the ones that don’t will soon add Kobo. But… From an author standpoint, this isn’t really anything of interest. The only way I can access selling on Kobo for self-published re-releases is via Smashwords, and their system creates a substandard product to what I can personally create. So, this doesn’t open new doors for me for my self-published re-releases.

    • Hi Brenna,

      I share your frustrations with Smashwords’ Meatgrinder. I hand-code all the HTML for my own e-books so that they are formatted perfectly for every device, and it pains me to have to upload a Word doc and see the inelegant file that the automated system produces. I made the decision that it was worth it to gain access to the stores that I couldn’t otherwise, especially Barnes & Noble as they don’t allow international self-publishers to use PubIt. Smashwords also gives me a place to send international readers who are affected by the $2 surcharge Amazon slaps on most e-books.

      For those who refuse to use Smashwords because of the Meatgrinder, the good news is that Smashwords will be allowing users to upload EPUB and MOBI files direct, from next year.

      I should note that, as per the comments above, there is a way to list with Kobo directly. You need to have a minimum of ten titles (those with less can band together), and you need your own ISBNs – but it can be done.

      This post is about the future. Kobo will not become a bookselling force overnight. This deal won’t even be concluded until early next year. And it’s going to take a lot of investment from their new parent company – not least in scaling up Kobo in employee terms – I think they only have 200 people working for them.

      By next year, Smashwords should be allowing direct uploads of EPUB and MOBI, and Kobo plan to have their own direct self-publishing platform open, so even before Kobo become a major force, the options for listing there should get a lot easier.

      Dave

  38. Pingback: Put your eggs… « creative barbwire (or the many lives of a creator)

  39. Interesting. Hopefully, with more of an international focus, KOBO will become more non-US author friendly (B&N being an example of a site that is not) because I know I do a much better job of putting my book listings together than Smashwords does. I would like to have more control about how my product is presented and this move could lead to it (hopefully for all sites).

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