The Rise of EbooksA Conversation with Mark Coker of Smashwords

April 11, 2009

Smashwords, Inc. Ebook Publishing Platform and Online Bookstore 15951 Los Gatos Blvd. Ste.16 Los Gatos, California 95032

On The Web: www.smashwords.com

Why Ebooks Failed in the late 1990s Paper reading vastly superior to

screen reading Overpriced DRM=confusion, frustration Limited selection

Wholesale Ebook Revenues Surpass $100 million

0

20000000

40000000

60000000

80000000

100000000

120000000

2002 2003 2004 2005 2006 2007 2008

Data: AAP http://www.publishers.org/documents/S12008Final.pdf58% compound annual growth for 6 years vs. 1.6% all books

Annual growth rates, p- & e-

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

180.0%

2003 2004 2005 2006 2007 2008

All Books

Ebooks

Data: AAP http://www.publishers.org/documents/S12008Final.pdf

Monthly growth, y-o-y ebook vs. overall market

-50.0%

0.0%

50.0%

100.0%

150.0%

200.0%

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

All Books

Ebooks

Data: AAP http://www.publishers.org/

Do Ebooks Really Matter?

$113,220,000 (ebooks)

$24,225,025,000 (all books)

= 0.467%

Build it and they will come

Statistics understate results of early movers in ebooks For books available in both e- & p-,

10% of Amazon’s sales are ebooks

Why ebooks are succeeding now Screen reading now rivals paper Amazon + Oprah iPhone (Stanza 1.5 million users) Free books are gateway drug Greater content selection Prices coming down DRM on death’s doorstep

Will Ebooks Replace Print Books?

Ebooks are similar to print books and stone tablets

Each offers lovingly prepared packaged units of words

Each delivers words on a substrate medium

Each is cool Each represents a different way to

enjoy a book

Consumers may one day prefer ebooks over print Ebooks are less expensive Digital can enhance reading

experience Screens will become better than paper Changeable font size Portable Compact Library in the cloud

Books as both hub and spoke within richer, more immersive experience

How ebooks will impact book supply chain for publishers

printerP-publisher Shipper/w/d customerbookseller

E-publisher customerebookseller

E-publisher customerebooksellerE-distributor

E-publisher customer

The ebook opportunity for publishers Publishers become more important, not

less important curators of content re-imagine the book

Digital opens worldwide market Lower cost books

higher per unit profit lower cost = larger available market

Digital enables frictionless discovery and sampling may drive print sales and ebook/print bundles

How to publish in e- Straight form narrative works best

Picture books, complex layout, more challenging

Formatting is different goal: one book, many devices keep it simple!

Pricing is different Don’t use DRM Multi-format is essential (see next

slide)

Why Multi-Format Matters

Q&A

About Smashwords Ebook publishing platform and online bookstore Social media-enabled selling and marketing tools Distribution to Stanza Free Smashwords Style Guide for formatting tips Free Smashwords Book Marketing Guide 85% net to publisher

Where to find me:Web: www.smashwords.comBlog: blog.smashwords.comTwitter: twitter.com/markcokerEmail: mc at smashwords dot com