Michael Serbinis likes to think of himself as a David, but on this recent evening he looks more like a Steve — Steve Jobs to be exact.
It’s a rainy night in Toronto and about two dozen members of the city’s book publishing companies and media circles have gathered in a basement theatre at a swanky Yorkville hotel to hear from Mr. Serbinis, chief executive of Canada’s e-publishing startup, Kobo Inc.
As he stands at the front of the darkened theatre clutching a can of Red Bull, Mr. Serbinis is trying to do his best impression of the Apple Inc. CEO. There’s even an Applelike air of secrecy to the event, with everyone in attendance being asked to sign a non-disclosure agreement on the way down in the elevator.
In typical Steve Jobs fashion, at a methodical pace he walks the audience through a series of eye-popping stats to illustrate Kobo’s growth over its nine-month history before taking a few subtle digs at his competitors.
Finally, he tops it all off with the unveiling of a new product: Kobo’s new wireless eReader, the latest addition to the company’s arsenal in the battle for control over the exploding market for electronic books.
“I know what you’re thinking, ‘Now I have to sign an NDA to go to a Kobo event? What is this, Fight Club?’ ” he says with a laugh. “Well, when you’re David and you’re fighting Goliath, every day feels like Fight Club.”
The Goliaths of which Mr. Serbinis speaks are indeed the titans of the technology industry and present a formidable challenge for the young company. Kobo’s eReaders and digital bookstore compete with Amazon.comInc.’s Kindle reader, digital offerings from Google Inc. and, of course, the iPad and iBookstore operated by Apple. But so far, Kobo is holding its own. Since launching in December, Kobo has attracted more than a million users to its service. Each week, its applications, which run across multiple smartphones, on book publisher websites and various e-readers and tablets, are accessed from more than 200 countries. There are now more than 2.2 million digital books available in the Kobo store. Its eReaders are sold in bookstores across North America and around the world.
When the company, which is privately run and does not publish financial details, launched it had just 20 employees; by the end of this year, Kobo’s head count will be close to 200, said Mr. Serbinis, who allows that net revenue is growing at between 300% and 500% per quarter.
What separates Kobo, whose parent company, Indigo Books & Music Inc., owns 60% of the Toronto startup, from its competitors is its singular focus on digital books and digital books alone, Mr. Serbinis said in an interview.
Unlike Amazon, the company doesn’t sell physical products — except its eReaders — and its devices aren’t multi-purpose machines such as Apple iPads.
“We’re the only pure play that’s in this game and from the very beginning we’ve focused on being global, being open and being the best partner for all the device manufacturers for booksellers,” he said. “Those three things combined with the fact that the market has just exploded, that’s a recipe for massive growth and scale.”
Digital books aren’t a new business, but the increasingly popularity of smartphones, tablet devices and Web-enabled e-readers such as Sony Corp.’s Reader — all of which support Kobo’s e-book store– is beginning to prompt book lovers to think about going paperless.
Sales of electronic books are rising at such a breakneck pace that they’re beginning to take a significant bite out of traditional and self publishing revenues. Mr. Serbinis said that when the company launched, it anticipated that digital books sales would account for about 3% to 5% of publishing industry revenues by 2014. Today, he expects that number could reach as high as 50% in the United States by 2014, based on data from the International Digital Publishing Forum.
In the United States, sales of digital books grew from about US$50-million to $170-million between 2008 and 2009, according to Dmitriy Molchanov, an analyst who tracks the market for research firm The Yankee Group.
However, in the first quarter of 2010 alone, sales of digital books topped US$90-million. It’s difficult to gauge the overall size of the market for digital books in the United States since Amazon still accounts for between 41% and 43% of sales and hasn’t released any revenue figures for its digital business, Mr. Molchanov said.
“It’s a substantial market, but to put this in perspective, revenue from e-reader device sales in 2013 will be roughly US$2.5-billion,” he said.
As the market for e-readers bifurcates between low-cost reading-only devices and high-end devices capable of supporting video and other functions, Kobo’s challenge will be to decide which path to follow and then how to scale quickly enough to keep up with competitors such as Amazon and Sony, Mr. Molchanov said.
Last week, Kobo made an appearance at Research In Motion Ltd.’s annual developer conference at which the BlackBerry maker unveiled its tablet, the PlayBook.
Kobo announced its e-book store will come pre-loaded onto every PlayBook RIM sells and that the new book publishers application will integrate with RIM’s BlackBerry Messenger service in an attempt to make e-books more social.
Until now, publishers and digital book retailers have been working on the foundations of the e-book market: digitizing content, making the books easy to buy and figuring out business models.
Now that the market is beginning to establish itself, Mr. Serbinis said, it’s time for companies like Kobo to take the next step. As part of the BBM integration, the new PlayBook Kobo app will allow users to start book clubs over the service, shop for books with friends and share favourite passages.
“Bringing the culture of the book and the culture of reading to the digital realm is really open territory at this point,” he said.
“If you think about it, books are topics of conversation at the dinner table or when you’re out with friends, they’re used to celebrate milestones, they’re given as gifts … none of that happens yet in digital.