The Global Transition to Online Bookselling -- Presented by Russ Grandinetti, Vice President for Kindle Content, Amazon At Publishers Launch Frankfurt, Frankfurt Book Fair, 8 October 2013 Amazon now operates its books business locally in 11 countries across North and South America, Europe and Asia, affording them a detailed view of how quickly sales are moving online around the world – across both print and digital. Russ Grandinetti, Amazon's VP of Kindle Content, will talk about the pace of that transition globally and how that evolution compares to what’s already taken place in English in the US.  Grandinetti will also touch on a number of other topics about the continuing changes in the bookselling and publishing world as he sees them from Amazon's unique perch.

1. Growth of Online
Bookselling
Russ Grandinetti
VP, Kindle
Frankfurt Book Fair
October 8, 2013

2. Bookselling Is Fundamentally Changing
Offline
• Am I in the right locations?
• Can customers find my book on the shelf?
• How do I compare to other book choices?
Online
• How do I get a customer to think about books?
• How do customers hear about and find my book among
all that selection?
• Am I attractive relative to their other entertainment
choices?

3. Bookselling is Fundamentally Changing
Source: Bowker
US UK
% of consumer book purchases (print + digital units) made online
27%
35%
42%
26%
31%
37%
2010 2011 2012 2010 2011 2012

4. 0 1 2 3 4 5 6
Kindle Speed of Growth
USUK
DE
JP
Amazon Paid Kindle Sales As % Amazon Print Book Sales
Years since local Kindle launch
100%

5. Kindle Owners Buy More Books
4.0
2.7
4.3
2.9
2008 2012
US UK DE

6. Digital Creates Incremental Demand
+35%
2.6x
Greater availability creates:
• more word-of-mouth
• more reviews
• higher sales rank
• more recommendations
Print
Sales
Kindle
Sales
6 Months Before
Kindle Release
6 Months After
Kindle Release
Roger Hargreaves Mr. Men series released in 1971
in print, in 2012 in the US on Kindle

7. Online Is More Efficient For Publishers
Print
• Better In-stock
• Lower Return Costs
• Improved Working Capital
• Lower Transportation Costs
• Never Out of Stock with Print-on-Demand

8. Online Is More Efficient For Publishers
Digital
• Zero Marginal Cost of Selling One More Unit
• Transportation
• Manufacturing
• Distribution
• Working Capital
• Instant Global Reach
• Perpetually In-Stock

9. Online Is More Profitable For Publishers
“...we expect to benefit from increased profit contribution and
improved working capital dynamics due to diminishing physical plant
requirements, inventory and returns related to our print business as
well as faster payments for e-books.” –HarperCollins
“operating EBIT was higher year on year, especially in the United States.
This rise was helped by continued cost-cutting measures and lower
return rates in North America and the United Kingdom due to increased
e-book sales.” – Random House
“publishing adjusted OIBDA for 2011 rose 28% to $92 million from $72
million for the prior year, reflecting lower direct operating costs” due in
part to “the decline in expenses resulting from an increase in more
profitable digital sales as a percentage of total revenues.”– Simon &
Schuster

10. Online Is More Profitable For Publishers
Source: CBS Corporation Financial Results
Simon & Schuster reported global financial results
9.9% 10.4%
13.1%
Y/E Q2'11 Y/E Q2'12 Y/E Q2'13
12.1%
20.1%
25.7%
Operating Income (OIBDA)
Digital % of Total Sales

11. English Books Sell Globally
English Kindle Book sales to non-English speaking countries
2009 2010 2011 2012 2013 YTD

12. Foreign Books Sell Globally
Foreign language Kindle Book sales to English speaking countries
2009 2010 2011 2012 2013 YTD

13. Bookselling Is Fundamentally Changing
Offline
• Am I in the right locations?
• Can customers find my book on the shelf?
• How do I compare to other book choices?
Online
• How do I get a customer to think about books?
• How do customers hear about and find my book among
all that selection?
• Am I attractive relative to their other entertainment
choices?

14. Consumers Are Not Just Comparing Books

15. 15
Books Need to Compete
$1.29$0.99 $1.99
$4.99 / Free w/
Subscription FreeFree

16. 16
What Is This Customer Thinking?
Formats Price
Paperback €7.22
Kindle €15.99

17. Risks of Not Moving Fast Enough
• Slow Catalog Digitization
o Increased Piracy, Loss of Sales
• Delaying eBook release
o Increased Piracy, Loss of Sales
• Digital Pricing too high (close to or above print)
o Loss of Sales to competing low-priced content
(books, apps, movies), Piracy
• Lack of POD Utilization
o Missed “surprise” units, lower international sales

18. And miles to go before we sleep
98% 95% 89%
71% 64%
53% 46%
US UK DE FR JP IT ES
Not on Kindle
% of top 1k authors in print with at least one Kindle book available

19. And miles to go before we sleep
% of Spanish, German, Italian, and French titles for sale in US
77%
51%
25%
5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Spanish German Italian French

20. Millions
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2007 2008 2009 2010 2011 2012 2013 YTD
Inventory-Free Distribution
Amazon Print on Demand Selection

21. 0
0.0005
0.001
0.0015
0.002
0.0025
0.003
0.0035
0.000%
0.005%
0.010%
0.015%
0.020%
0.025%
0.030%
0.035%
Inventory-Free Distribution
JK Rowling Revealed
Print OOS
Print Back
In Stock
Page Views
Print Sales
Kindle Sales
The Cuckoo’s Calling – Amazon US Sales
Est. “In Stock” Print Sales

22. Improve Digital Quality
Metadata – help customers find your books
1) Title / Author
2) Language
3) Series Information
Content Quality – improve the reading CX
1) Fix spelling, typos, missing paragraphs/images
2) Book navigation

23. Attention is a Scare Resource:
Kindle Daily Deal
CONFIDENTIAL

24. DD+1
+2
+3
+4
+5
+6
+7
+8
+9
+10
+11
+12
+13
+14
+15
+16
+17
+18
+19
+20
+21
+22
+23
+24
+25
+26
+27
+28
+29
+30
with deal
no deal
Attention is a Scare Resource:
Kindle Daily Deal
110x
18x
4x5x
DD+7
DD+14 DD+30
3000x
30 days after the typical Kindle
Daily Deal promoted title units
were still trending 4 times
higher than the pre-promo run
rate
DD+1

25. Discoverability: Goodreads on Kindle

26. On The Horizon: Kindle MatchBook
Gives customers who purchase, or have previously
purchased, a physical book from Amazon the option to
purchase the Kindle version for $2.99 or less.
Why does it matter?
• Incremental Revenue
• More Deeply Engaged Readers
• Happier Customers

27. Bookselling is Fundamentally Changing
Source: Bowker
US UK
% of consumer book purchases (print + digital units) made online
27%
35%
42%
26%
31%
37%
2010 2011 2012 2010 2011 2012