Sramana Mitra: There are major trends in the space right now. For example, Amazon has made it very easy for independent or self-publishers to maintain a whole portfolio of books. A lot of major writers are moving to that mode of publishing. Especially in the business books genre, there’s a major shift. These are in your sweet spot. For example, in our organization we have a portfolio of eight books out. In the next 18 months, we’re going to be doing 12 more books all in the entrepreneurship genre. How would you work with publishers like that?
Tony DiCostanzo: It depends on who the self-publishing house is that they work with. We have relationships with AuthorHouse and Sourcebooks, which are major book publishers for independent authors. Their entire catalog becomes available to us. We typically add a self-published title once we start getting enquiries for it rather than proactively looking for them, because it’s hard to identify which ones will rise above the rest just because of the sheer number of books available. One exception to that would be the major business writers who take a self-publishing path. It is difficult.
One that would be similar to your organization would be Gallop. Gallop currently has eight titles in print. Rather than owning the distribution process, they own the content development process. They create all of these business titles, but they work with major publishers to get them out to the trade in order to ensure that customers have easy access to those books. Through our relationship, in that case, with Perseus Books, we are able to buy their content. We feature all of that on our website. Perseus Books works with close to 400 of these smaller publishing houses that create content, but they don’t actually have the capability to distribute it out to the market place. There are a number of these types of consolidation houses that we have direct relationships with and through which can acquire the books. The challenging part is figuring out which ones to add in this massive sea of self-published content. Typically, it’s about reacting to the market. When someone asks us for that type of content, we can make it available to the next customer that asks.
Sramana Mitra: In terms of building the business and the trends of the business, what are you seeing? What role is Amazon playing in this business right now?
Tony DiCostanzo: Certainly, the e-book side is more competitive than the physical books. They’re becoming more of a competitor. They’re starting to advertise on some of our keywords, which throw a little more competition into the space. From a customer service standpoint and from a pricing standpoint, I believe we lead in 95% of those cases in terms of offering the customers tiered pricing and direct access to our staff. We don’t have auto-attendance to answer the phones. Everybody who calls has a live person answer the phone within two rings. There’s a much better touch point model to the way that we conduct business. We try to differentiate ourselves in those ways.
The supremacy of Amazon has a lot to do with name recognition more than anything. When people think of books, they think of Amazon. They just command such a huge percentage of mind share. Our victory comes about when somebody stumbles upon us and realizes how low we offer the products for. With this tremendous amount of customer support and account management, they’ll then refer us to other people buying books for leadership or management programs or speaking events. That’s how we’ve been able to grow. Unfortunately, we just don’t have the mind share that these other businesses have. We have to find other ways to compete with them.
Sramana Mitra: What is the size of the bulk book business?
Tony DiCostanzo: When you add the entire marketplace, there’s no major player that you could say represents 70% of the market. Some of the statistics point to the fact that these bulk opportunities represent about 20% of book sales. That would put the total market at about $3 billion.
Sramana Mitra: You are the market leader in the space?
Tony DiCostanzo: I believe we have the best name recognition in the space. There are larger competitors when you look at the educational space. We’re newer to that market. We’re trying to put our penetration into that space. At this point, there’re people that specialize in educational space. Follett comes to mind as the market leader there. They own bookstores on college campuses. They have relationships with schools in every state. They certainly have larger sales. The distinction that we have is we’re the only player across all of these channels. We don’t focus just on education. We also have a tremendous amount of corporate, literacy, government, and religious content. No one else takes that approach. Nor is there anyone that does a combination of physical and e-book distribution in bulk. We also have a huge advantage with that joint offering.