Coping with big change in a small market

-the case of the Danish book market

In June 2016, I was one of four invited speakers at the Book Business Conference arranged in connection with Seoul International Book Fair by South Korean industry organization Korean Book Trade Promotion (KBTP). I was asked to give an overview of the current state of the Danish book market, as well as an account of current infrastructural challenges, and a report on the Danish adaption and implementation of EDItEUR’s THEMA subject classification codes in the supply chain. This is the transcription of the presentation I gave.

Denmark is a small Scandinavian country. Internationally, Danes and Denmark are among other things known for:

  • The Little Mermaid and other fairytales by Hans Christian Andersen
  • Nobel-prize winning physicist Niels Bohr
  • The World famous Lego bricks
  • A liberal way of life, our public social security system and our tax rates.

Two factors have a significant impact on the book market in Denmark: Not more than 6 million people live in this small Northern European country, and we Danes are the only ones in the World who speak Danish. The book market is small and closed.

Statistics from the Danish Publishers Association tells us, that the total turnover for Danish publishers in 2015 was 1,7 billion DKK or 254 million USD. The unit sales in 2015 can be estimated to be between 20 and 25 million copies.

Such a small customer base is obviously a challenge to the book industry. There is not a lot of money to invest, but readers’ demand for variety and new possibilities remains the same as everywhere else. In addition, so does the complexity of the solutions needed. Consequently, the stakeholders of the book market remain cautious and hesitant before experimenting or investing in new infrastructure; everything comes down to a question of priorities, and there is not much room for failure.

On the other hand, there are very positive aspects too. When it comes to reading habits, Danes are avid readers[1]: In 2014, 39% of the grown-up population read fiction every week. Moreover, 54% read every month. The same thing can be said about our sister nations – Sweden, Norway, Finland and Iceland. In addition, the World has set their eyes on Scandinavian literature, not least because of the ‘Nordic Noir’ crime wave, so more Danish literature than ever is sold and translated for foreign markets.

Therefore, despite the challenges, it is actually possible to live from writing, publishing and selling original Danish books of high quality.

In these days of digitization, globalization and changes in people’s media usage and preferences, Danes are both ready and willing to buy and read their books in new ways. Denmark is a country where most people have access to the internet[2]. In 2015, 94% of all families had access to the internet.  96 % of people between 16 and 64 years of age have used a mobile phone regularly. 75% of the grown-up population are familiar with buying services or products online. Furthermore, the public administration has digitized its services to a very large degree: 92% have acquired a digital ID allowing them to interact digitally with the authorities, and 9 out of 10 municipalities communicate digitally with the Danish State.

2]. In 2015, 94% of all families had access to the internet.  96 % of people between 16 and 64 years of age have used a mobile phone regularly. 75% of the grown-up population are familiar with buying services or products online. Furthermore, the public administration has digitized its services to a very large degree: 92% have acquired a digital ID allowing them to interact digitally with the authorities, and 9 out of 10 municipalities communicate digitally with the Danish State.

For the book industry, this bears the promise of opportunity for digital book production, digital reading and digital commerce.

Photo by Malcolm Lightbody on Unsplash

e-books and audiobooks

Danes do read e-books and audiobooks[3]. In the trade market, digital books accounted for 10 % of the Danish publishers’ annual turnover in 2015. If we look at trade fiction alone, digital books accounted for 15 % of the annual turnover; in non-fiction it held 7%, and in childrens books 5,2%. These numbers may seem low, but in a country with no Amazon presence to drive the market for digital reading ahead, it is not surprising that the growth is slower.

We have had e-books on the Danish market since 2009. From the very beginning, near 100% of the trade books were sold without technical DRM – they only have a digital watermark on them. I think this is amazing. The industry can be proud of making this decision and the international community can actually look to Denmark to learn what does and does not happen when DRM e-book protection is not in play. It would be interesting to study e-book piracy in Denmark and compare it to piracy in DRM dominated markets.

Digital subscription services

E-books as well as audiobooks are also sold in digital subscription in Denmark. Readers and listeners pay a monthly all-you-can-eat fee. The books are streamed or otherwise delivered online to the customers’ reading apps. In spite of what we hear about the difficulties that US based subscription services like Scribd and the now closed-down Oyster have, European subscription services seem to have much more success. Until very recently there were two dominant players in the market, but this month of May Swedish-based Storytel bought the Danish service Mofibo for an amount of approximately 17 million US$. At the occasion of the purchase, Mofiboclaimed officially to have 40,000 subscribers.

What is remarkable for the Danish market is that almost all publishers are aboard. Their willingness to experiment remains intact, as there is no initial investment before getting involved. Of course, the business model is challenging, and the pressure on prices is significant. Nevertheless, I am optimistic to see that Danish publishers despite these obstacles want to move and learn.

There are still challenges getting translated works into subscription services. The original publishers and rights holders are more sceptic towards literature subscription models than their Danish colleagues are. On the other hand, we also see new genres perform well in subscription, e.g. romance fiction that in physical form always was distributed in the magazine supply chain. With online subscription, romance fiction finds its way to book readers.

Another important observation is that any kind of book series seem to be particularly well suited for online subscription: readers will always find the next book immediately ready.

Library lending of digital books

In Denmark we also have public library lending of e-books and audiobooks. It is an area as difficult in Denmark as anywhere in the world. The model for e-book lending is radically and structurally different from library lending of physical books. Without going into details, we already know that the most difficulties have to do

  • with the business model: should it be licence-based, click-based or a flat-rate model?
  • with so-called “friction”: should library e-books present themselves as attractive as those bought in the market should?
  • with simultaneous lending, and
  • with the question of quarantine for new titles.
Photo by freestocks.org on Unsplash.

Since the launch of the public service some 6 or 7 years ago, we have seen the large publishers get involved and get out of it again, several times. The agreements have been limited to a few years each time, and the conflict turns around business model and possible cannibalization of the emerging trade market for e-books. Right now, several large publishers have withdrawn their titles from the library service, not least because of several important authors’ dissatisfaction with the terms on which their books were lent from libraries.

Public focus typically concentrates on the potential conflicts, when discussing the library e-books. A Danish publisher recently suggested that we look at it in a more positive way: Danish publishers and libraries keep returning to the table of negotiations. When publishers feel that library lending prevents their efforts to create a sustainable digital book market, they take out their books. But only to renegotiate a new agreement that they and their authors they represent can live with. In periods where all parties have agreed on the model, Danes have access to almost all the titles that are available in the trade market via the library service too. Such an adherence from publishers is not found in many other countries. 

We need better metadata!

With the appearance of subscription services and library lending of e-books came also stronger articulated demands for richer metadata and higher quality of them. It is in digital contexts, that good metadata can make a significant difference.

This demand exposed the enormous challenges for both metadata suppliers to deliver better metadata, and for metadata distributors to react to changes in demand as new types of information were called for.

This leads us back to the book industry supply chain and to the digital infrastructure. Let us look at its state and conditions.

A supply chain split in two

A result of the – understandable but no less delaying – reluctance to investment is that the supply chain in the Danish book market appears fragmented. The distribution system is divided in two parallel eco-systems for physical books on the one hand and digital books on the other.

Physical books are warehoused, and book metadata as well as book ordering is handled in a central system that is tightly tied to the needs and business model of brick and mortar bookstores. Its data format is proprietary, it is not very detailed and it is not suited for supporting digital search and discoverability. It is out of date when compared to the needs of online retailers.

The system is owned by DBK, a foundation whose purpose is to develop and optimize the Danish booktrade. DBK is also the dominant distributor of physical books.

A need for further standardization

Distribution of digital books is taken care of by Publizon, owned by Denmark’s two largest publishers. Thus a business supposed to make money. Publizon distribute metadata about e-books and audiobooks in ONIX 3 format. ONIX is the highly efficient industry standard XML format for sharing metadata throughout the industry. The digital book eco-system is the only part of the Danish supply chain where ONIX is in use. Yet.

The very division of the supply chain in two separate tracks, as well as the requirement for publishers to deliver metadata in different formats means,

  • that publishers spend more time and money to deliver metadata in different formats
  • that it is left to the retailers – who need both data feeds – to merge and unify data and to ensure correct processing of different formats
  • that the industry as a whole must finance the operation and maintenance of two very different systems
  • that the risk of errors and inconsistencies is much higher than it could be
  • that the serchability and discoverability of the books in the market remains much lower than it should be.

We could agree in no time that the ideal situation would be a supply chain build extensively on industry standards: End-to-end ONIX 3 usage, high quality metadata content, comprehensive subject classification in THEMA, Editix for transaction data, etc., etc.

However, we are a small industry in a small country. So how can we get closer to the goal? How can we prioritize the efforts, and what has already been done?

Two ways of persuading stakeholders to invest in better infrastructure are

  • Either to demonstrate the likeliness of an attractive return on investments
  • Or to identify tasks that are easy to carry out and implement

To be able to demonstrate the profitability of having high quality metadata floating through the supply chain in a standardized format, we would need to have these metadata in such a system at hand. Otherwise, we could not measure any effect. This obviously presents itself as a classic Catch 22.

Therefore, we need to begin by identifying the easy wins. The question of better subject classification turns out to be one of these.

A big step: Translation and implementation of EDItEUR’s THEMA codes

It is easy to talk about subject classification. The purpose of it is clear. Most people understand the nature of a classification ontology, when presented to it. It is also easy to demonstrate that optimization in this field will be profitable for everybody.

When the number of stakeholders is small – as it is the case in our small market – it is equally easy to bring people together. When we agree to do something, it is only very rare that too many cooks get involved.

Most often, the original metadata for a book is born with the first printed edition. As the publisher subsequently decides to put other versions of the book on the market, employees will reuse and adjust its metadata. The new version might be a trade paperback, an e-book or a downloadable audiobook.

Traditionally, subject classification of products in the eco-system for physical books has consisted in assigning each book one single code indicating on which shelf to put the book on. This is definitely not a purely Danish tradition, and it really was not a bad system back in the days. Such a shelfing system was an efficient method to ensure that when a customer requested a specific book, the bookseller would be sure to find it.

Nevertheless, for online browsing or general discoverability, the system falls to the ground. As a physical book cannot belong to more than one physical shelf, it can only have one code. Therefore, a book could not have the shelf code for both “thriller”, “historical fiction”, “paperback” and “book written in English”. As you can see, shelfing systems did not only use subject classification as its criterion – sometimes media type or language was better, if there was special interest or commercial potential around some of these.

Therefore, already in 2009 when we established Danish e-book distribution, there was a need for a dedicated and more detailed system for subject classification. You cannot put an e-book on a shelf. We went with the British BIC system for the classification of digital books. It was the best alternative, even though we cannot easily express subjects and conditions regarding matters of special interest for Danish customers. This was where trouble began:

  • Publishers suddenly had to deliver a shelfing code for the physical book and a BIC code for the digital book.
    • Most publisher systems only supported the shelfing code. Therefore, they assigned the BIC code on distribution time. Sometimes the system followed a mapping scheme and generated the BIC code automatically. This would cause loss of information and precision. Sometimes employees assigned the code manually, which had a built-in risk of sending a different code next time the metadata should be redestributed.
    • Even when publisher system did handle both code sets, there would still be the extra amount of time spent on maintaining two sets of data that ought to be stored in one common source record.
  • The online retailers selling both physical and digital books would have to remap shelfing codes and BIC codes. These retailers faced the unattractive situation that Michael Tamblyn of Kobo once baptized map-o-rama. After conversions and different processes, you can imagine, that the resulting data were highly inconsistent and often ended up with a physical book having one code and its digital counterpart having another.

The industry as a whole welcomed the announcement of a new, international subject classification scheme. They got together and decided to bring order to the mess. There were obvious advantages to be obtained. For publishers the new standard promised reduction in time (and thus money) spent on the metadata production, plus higher quality and much better discoverability, leading to growth in sales. For retailers it would mean less effort to map and compare all these different schemes – especially those who operate internationally and often have even more mapping to do cross-boarders.

The Danish Publishers’ Association and The Danish Booksellers’ Association took the initiative to establish a Danish THEMA group. Large and small publishers participated, and so did physical and online booksellers as well as distributors of metadata for both physical and digital books.

The group asked DBC, which is a public institution who delivers digital infrastructure to Danish libraries, to translate THEMA codes to Danish, and to adapt the THEMA qualifiers to reflect Danish circumstances and areas of special interest and value. The international steering committee for THEMA (driven by Editeur) officially approved the translation at its meeting in connection with the Frankfurt Bookfair in October 2015.

The Danish THEMA group also called for DBC’s assistance to assign THEMA codes to all titles in the back catalogue as a whole. They delivered one THEMA code for every book – hopefully of higher precision than the exisiting shelfing code or BIC code.

At the same time, distributors started implementing support for THEMA codes and planning for periods of overlap, where both old and new classification would be maintained.

So far so good.

This is where we stand today:

  • Publishers have received lists with simple – but hopefully trustworthy – THEMA classification of their back catalogue. Their job is now to check the quality of the new code and to enhance the classification by assigning supplementary codes. The work is in progress, though not very fast.
  • Publishers must also implement support for THEMA in their title management systems, and they must begin to establish and develop rules and best practices for the future assignment of the codes.
  • Metadata distributors in both the physical and the digital eco-systems have implemented THEMA support.
  • The overlap period have been prolonged by request from some of the large retailer chains. They need more time.

We still need to see the full effect of the implementation of THEMA codes. Nevertheless, system support is in place, and awareness is rising. As soon as we have enough THEMA codes live in the supply chain, we will begin to measure their effect.

If we keep focusing on learning, and if we succeed in establishing efficient feedback loops, we can use the case of THEMA to bootstrap further supply chain improvements and standardization efforts to minimize errors and to raise quality and book discoverability for the benefit of the Danish book industry.

This may actually be the best way we can cope with big structural change in a small market like Denmark: Using the easy-wins, the obviously beneficial and operationally surmountable tasks, to deliver trustworthy data about where our resources are best spent. Hereby we can raise strategic awareness from the industry’s decision makers about the need for better metadata and standardization. And only by working both strategically top-down and operationally bottom-up, we can decide on what to do next, and measure the effects of it.

[1] Percentages according to report Books and Literature 2015 from Danish Agency for Culture

[2] Percentages according to Statistics Denmark

[3] Percentages according to the Danish Publishers’ Associations statistics for 2015.