While on the subject of ebooks in the international industry: recent developments around Canada’s Kobo have brought new definition to its challenges in the industry.
Bought in 2012 by Tokyo media giant Rakuten, Kobo has made an aggressive internationalist posture a mainstay of its commercial profile, citing 26 million readers for its catalog of more than 4 million books, a consumer base spread across more than 190 countries.
While Kobo has never achieved convincing traction in the States—and its trade-show presence has diminished markedly in the last two years—it still came as a surprise when Rakuten’s fourth-quarter earnings report this month revealed that the parent company had taken a $68 million (7.8 billion yen) “impairment charge” on Kobo. Another term for this is a write-down: a company writes down its “goodwill,” or the worth of an asset that has been over-valued.
In comments to Porter for Publishing Perspectives, Kobo CEO Michael Tamblyn echoed the Rakuten line, talking about “slower than expected growth in English-language ebook markets” resulting in “an adjustment in Kobo’s long-term value.”
But even as Tamblyn spoke of January’s content sales being “the strongest in our history,” Michael Cader at Publishers Lunch (subscription required) was assessing the damage that Rakuten had announced (the italics are ours): “Rakuten paid roughly 24 billion yen to buy Kobo, so the current write-down—along with two smaller write-downs in the first and third quarters of 2015 of about 2.65 billion yen in total—means that they have taken charges of about 44 percent of the purchase price from three years ago.” Forty-four percent is not peanuts. In lay terms, this means that Rakuten bought something it now sees as significantly less valuable than it looked when it did the deal.
Tamblyn, an ebullient and well-liked figure in world publishing circles, has kept up a brave line through all this. “I couldn’t be more confident in Kobo’s place in the future of books,” he said to Publishing Perspectives.
But in a long hand-wringer of a feature in Kobo’s hometown newspaper, Toronto’s Globe and Mail, Shane Dingman points out that Kobo now stands behind both Amazon and Apple in world rankings of ebook retailers.
Tamblyn tells Dingman that Kobo Writing Life, the company’s self-publishing platform, accounts for 15 percent of all the books Kobo sells. He asserts that pecking order among retailers isn’t his focus: “Our goal isn’t to be the world’s largest manufacturer of e-reading devices. It’s ‘Can we be the best possible bookseller?’”
But our colleague Thad McIlroy, a publishing consultant based in Vancouver, isn’t liking what he sees, telling Dingman that Kobo’s “great Achilles heel is they don’t have a significant US business.” McIlroy says that Apple has upped its game. “I am worried for Kobo,” he says. “I don’t know how Michael is going to maintain Kobo’s market presence.”
Bottom line: It’s good to keep in mind that Rakuten’s write-down of Kobo was part of a bigger picture. The Japanese corporation is making what TechCrunch’s Jon Russell calls “a new strategic focus” that has featured a total of $340 million in write-downs on a range of its businesses. Nevertheless, Kobo’s valuation has taken a big hit. Although it’s primarily a psychological exercise at the moment, there’s good reason to watch closely. The prospect of a diminished or lost member of the major ebook retail club isn’t a happy one for authors.
Jane Friedman has spent her entire career working in the publishing industry, with a focus on business reporting and author education. Established in 2015, her newsletter The Bottom Line provides nuanced market intelligence to thousands of authors and industry professionals; in 2023, she was named Publishing Commentator of the Year by Digital Book World.
Jane’s expertise regularly features in major media outlets such as The New York Times, The Atlantic, NPR, The Today Show, Wired, The Guardian, Fox News, and BBC. Her book, The Business of Being a Writer, Second Edition (The University of Chicago Press), is used as a classroom text by many writing and publishing degree programs. She reaches thousands through speaking engagements and workshops at diverse venues worldwide, including NYU’s Advanced Publishing Institute, Frankfurt Book Fair, and numerous MFA programs.
