1. The Canary in the Digital Coal MineWhat can publishing learn from a decade of digital music? Milan, February 2nd 2012

2. Introduction Sascha LazimbatSince 2010 Managing Director A2 Electronic Publishing2007 - 2010 Managing Director Business & Corporate Development Warner Music Group C&EE2005 2007 Co-Founder, Zebralution Digital Music Distribution2001 - 2005 Head Of Music & Video Vodafone Germany

3. Similarities- Similar traditional value chain- Similar copyright framework- Similar operational challenges- Same new digital retailers

4. Differences- Music already became digital with the CD- Users consume music in a different way- Songs can travel without translation- Its 2012 and the world keeps spinning faster!

5. What happened to the music industry sincethe turn of the century?- Global recorded music revenues down > 30% German music industry turnover 2001-2010 in million , source: Bundesverband Musikindustrie

6. What happened to the music industry sincethe turn of the century?- Global recorded music revenues down > 30%- Out of 5 major companies, only 3 survive

7. What happened to the music industry sincethe turn of the century?- Global recorded music revenues down > 30%- Out of 5 major companies, only 3 survivex x

8. What happened to the music industry sincethe turn of the century?- Global recorded music revenues down > 30%- Out of 5 major companies, only 3 survive- 1/3 of jobs in the industry lost Blue line: employees in German music industry 2001-2010, source: Bundesverband Musikindustrie

9. What happened to the music industry sincethe turn of the century?- Global recorded music revenues down > 30%- Out of 5 major companies, only 3 survive- 1/3 of jobs in the industry lost- At the same time: more music released and consumed than ever before

10. Timeline of physical / digital music units700,00 Rio and Napster iPod 2G Musicload iTunes YouTube 100 Mill. iPhone in Rapid- iTunes Creative closes, and Store in Launch MySpace EU share #10 DRM- MP3- Kaazaa MySpace EU, Accounts website free,600,00 Player launches Launch Vodafone worldwide Amazon iTunes MP3 MP3 in SW + phones EU iPod500,00400,00300,00200,00100,00 0,00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 PHYSISCHE TONTRGER PHYSICAL SALES DIGITALE VERKUFE DIGITAL SALES GEBRANNTE CDs/DVDs BURNED CDs/DVDs ILLEGALE DOWNLOADS ILLEGALAll figures for Germany only in millions of units. Sources: GfK MediaControl Download-Report, Brenner-Studie Bundesverband Musikindustrie

11. Shift in music consumer spending Basis in Mrd. 5,10 5,13 4,48 4,49Source: Veranstaltungsstudie 2008 idkV / Musikmarkt/ GfK MediaControl

12. The record companiesresponse:the 360 model d2c online ads Synch Merchandising Endorsement fan clubs compass image: Smial, used under http://creativecommons.org/ licenses/by-sa/3.0/deed.en

13. Physical products are still the musicindustrys cash-cow in Europe Configuration- specific digital market shares for the UK in 2011: - Albums 23,5% - Singles 99,3% Sources: IFPI Digital Music Report 2012, BPI, Trendreport Bundesverband Musikindustrie

14. AssumptionsPublishing must...- support legal alternatives to piracy- be prepared for decreasing revenues- look for additional revenue streams- not neglect its physical product

15. Digital Rights Management - Apple utilizes ConsumerAll major labels Fairplay groupsinsist on DRM - other retailers critize Apple rely on Windows DRMOpenletterFrom SteveJobs, Feb.2007 EMI drops DRM other majors follow in 2008DRM is nowadays only used within subscription conditional downloadservices like Napster, Spotify etc.!

16. Assumptions- DRM frustrates consumers when it does not work seamlessly and incompatibilities arise- DRM benefits closed eco-systems and hurts independent retailers and device makers- DRM has not saved any media industry, neither will its abolishment destroy any industry

17. Digital music retail landscape- iTunes clear market leader- Amazon second where the company operates local stores- Few serious la carte competitors- Subscription services strong in some markets

18. Ebook digital retail landscapeWho else?

19. Assumptions- Amazon will be here to stay, making it difficult even for Apple and Google- Bricknmortar booksellers will struggle to compete with the Internet champions- There may be niches for specialized retailers and different business models

20. Turning physical dollars into digital cents

21. Turning physical dollars into digital cents,Part II

22. E-Book end consumer prices - a spot check No. Title Source Price 1 Stealing Phoenix For. Publisher 6,45/0,99 2 Entfhrt Self-Publisher 0,89 3 Grimms Mrchen For. Publisher 0,99 4 Sonne, Wind und Mond Self-Publisher 0,99 5 Kindle - das inoffizielle Self-Publisher 2,99 Handbuch 6 Der Junge, der Trume Trad. Publisher 8,49 schenkte 7 Holunderksschen Self-Publisher 2,99 8 Der Beobachter Trad. Publisher 8,99 9 Verblendung Trad. Publisher 8,99 10 Der Hundertjhrige, ... Trad. Publisher 11,99German Kindle store charts on randomly picked day in January 2012

23. E-Book end consumer prices - a spot check No. Title Source Price 1 Stealing Phoenix For. Publisher 6,45/0,99 2 Entfhrt Self-Publisher 0,89 3 Grimms Mrchen For. publisher 0,99 4 Sonne, Wind und Mond Self-Publisher 0,99 5 Kindle - das inoffizielle Self-Publisher 2,99 Handbuch 6 Der Junge, der Trume Trad. Publisher 8,49 schenkte 7 Holunderksschen Self-Publisher 2,99 8 Der Beobachter Trad. Publisher 8,99 9 Verblendung Trad. Publisher 8,99 10 Der Hundertjhrige, ... Trad. Publisher 11,99German Kindle store charts on randomly picked day in January 2012

24. DIY in the music industry: Long Tail or Long Fail?- 76,685 albums released in the U.S. in 2011- 88,5% of sales from just 1,500 titles- Only 1,215 albums sold more than 10,000 copies- 80% of titles sold less than 100 copies- DIY service providers like CD baby pay out an average $100 per artist / annum

25. DIY: in the future, everybody will be famous for fifteen minutes- Tila Tequila: most famous person on MySpace in 2006- 32 million views of her song- Releases failed to enter Billboard charts- Became the star of a now cancelled reality show Photo: Philip Nelson, used under http://creativecommons.org/licenses/by-sa/2.0/deed.de

26. DIY: which music artists can do it on theirown?established artists newcomers withformerly on majors strong fan base

27. Self-Publishing: the eBook revolution- John Locke and Amanda Hocking enter Kindle million club- KDP generating substantial Kindle sales- Apple launches iBooks Author- Self-publishing platforms

28. Our own experience with self-published titles- Short stories by one of Germanys most popular bloggers- Social media marketing buzz via Twitter- #1 iBookstore, top 5 Kindle store

29. eriginals berlin e-book imprint- No traditional marketing or PR- Social media marketing- Digital retail marketing- #1 & #2 iBookstore releases and seven further top 50 ebooks

30. Why does self-publishing work better for ebooks than for music? An assumption...- Music purchases are triggered by a combination of stimuli - radio, MTV, billboards, reviews, interviews, live shows etc.- Readers seem to rely much more on trusted recommendations - social media/social reading/recommendations will be king! BUT: PRICE MAY BE ANOTHER KEY TO SELF-PUBLISHINGS BIG SUCCESS STORY!

31. Digital music pricing: superstar vs.newcomer

32. What readers say about 99 cent self- published books For 99 cent its The book is definitely worth well-written and buying! perfect for its Big reading fun price tag at xxs-price A great book Total crap! save for the Would be OK for dialogues! free but at 0,99 it s too expensiveSource: all quotes from German iBookstorecustomer reviews

33. What did Steve Jobs say?I can tell you asone of the largestsellers of contenton the internet todate - price itaggressively andgo for volume. Photo: Matt Yohe, used under http://creativecommons.org/licenses/by-sa/2.0/deed.de

34. Outlook- More books will be read, but readers will spend less- Everybody in the business will have to do more to keep afloat- Only lean organizations will survive- Self-publishing might be a game-changer

35. Thank you! sascha.lazimbat@a2ep.dehttp://www.linkedin.com/pub/sascha- lazimbat/0/5a6/44b