26 May 10Andrew McDonald
At a time when traditional publishers and some social networks are still struggling to make meaningful revenues online, Graphic.ly CEO Micah Baldwin believes that marrying a hybrid social network and marketplace around a single type of content could be the answer. Though Graphic.ly has only been live for a month, it is already working with seven of the top 10 comic book firms, a host of independents, and claims to have more than 10,000 registered users. By Baldwin's own admission, the company is still a long way from profitability. However, as a new generation of iPad-influenced devices come to the market, will the comic book community and store thrive or will its niche market be swallowed by already-established social networks and e-book stores?
> What makes Graphic.ly different from other e-publishing startups?
The short answer is our community. If you look at a comic book there're two sides to it: there's the art and the storytelling and then there's the sharing and discussion. We allow you to do both in one place. Most e-books, [on] a Kindle for example, you read the book and if your friends happen to be around you can talk about it, or you have to go somewhere else to talk about it - Facebook or what-not.
>What is your business model?
We enter an agreement with comic book publishers and creators and they allow us then to distribute their content digitally, and then we sell it though our various platforms. We consider it to be a revenue share. So we don't pay anything unless the book is sold. If we sell a book for a dollar the publisher gets a chunk, and then we get a chunk of that revenue. It tends to be 70% [that goes to the publisher] and we take 30%.
We're working with Marvel. DC currently doesn't work with anybody. We're working with IDW, we're working with Top Cow - basically about six or seven of the top 10 [comic book publishers], which constitute about 95% of the market.
I don't even think we're close to the 'p' of profitability yet. Depending on what happens over the next 12 months, I wouldn't be surprised if we were not profitable for the next 18 months. We're in serious build mode. I won't give you [revenue] figures; mostly because I just don't know them, and they're small. We've been out for a month. We're a little bit ahead of plans, which is good. We're getting more users and more purchases than we expected early on, which I think is great.
> Who are your main competitors?
What I really feel our competition is right now, is the acceptance of digital by mainstream publishers. In reality, our greatest competition right now is the direct market. But because the direct [print] market is so large, and the digital market is so small, publishers are hesitant to really engage in digital, because they're afraid to take away or distract from the direct market. So in my mind, our competition right now is education; getting people to understand there's a direct market and a digital market and accentuate one-another and both help each other to grow.
In terms of companies, probably the big competitors out there are iVerse, which has an iPhone and an iPad app; Comixology, it has an iPhone and an iPad app. Those are probably our two competitors in the market space.
> What's the biggest challenge you currently face?
We're growing so fast that just trying to find solid developers and solid designers has been tough; just the growth of the company - managing that has certainly been a challenge.
In terms of the industry, I think that there's going to be this interesting shift. If you look at music, MP3s when they first came out, they were literally rips of CDs. Then slowly people started to realise how the digital format worked - that a three-minute song was better than a four-minute song, and you don't need to think about it in terms of an album. Artists started to develop music almost specifically for digital, with a digital mindset. I think the same thing will happen with digital content.
First we'll just replicate print; we'll look exactly like the print book and all the activity that you see in terms of development will be around replicating that. Things like page flips....Then we'll realise that the form factor allows creators to be much more creative and all of a sudden we'll see things that don't look like books at all - that are just extensions of the entertainment as a comic book. I think in the end, we'll end up with this 360 view of entertainment, where now I'm reading a book, but it's connected to a movie, which maybe is connected to a videogame. It will be something that's much more immersive and complete.
For now we're just replicating the print, because that's what we're getting from the publishers. What we're trying to do is create an experience that sort of hints at the next phase.
>What is the hottest trend in digital media right now?
The hottest thing right now is location. There seems to be a lot of interest around location. There's also a fair amount of interest around real-time. Both of those things are things that we could easily inject into our system, in some really innovative, interesting ways.
In digital content, I really think because newspapers and magazines are hurting as badly as they are, the question is how do we take something that traditionally I bought every day like a newspaper, [or] was delivered once a month like a magazine, and allow people to consume it digitally? I think the biggest trend right now is in digital content, but the monetisation of digital content.
The biggest revenue components that newspapers lost over the years was personals and classifieds. Craigslist killed them on classifieds, Yahoo! killed them on personals. The question is can they capture back the local market? What's the best way to capture your local market? [That's to] engage the community.
Graphic.ly is built on the premise that engaging its audience with social networking tools will fuel purchases through its integrated marketplace. By focusing on comic books it promises to plug a market that is not addressed by other online e-book retailers. Baldwin insists that because being part of the community effectively makes you a comic book buyer, "we don't think we have to get that big to be profitable as a company".
Apple's iPad launch should have a positive impact on Graphic.ly. The emergence of a new tablet sector promises to give a whole new lease of life to the digital publishing market, particularly when the content involves colour graphics and rich media. With the recent announcement of the Chrome web store, Baldwin also claims that "the web is going to be a very interesting area for us to play in".
However, Graphic.ly still faces challenges. Though its aim is to make its titles as widely available as possible (users buying a title on their iPad can access it on their desktop and their iPhone), there is still no open file format for comic books. This means that users are inevitably locked into Graphic.ly's in-house file format, which is not compatible with the likes of Amazon's Kindle. The firm is also bound by the wishes of comic book publishers, who are still trying to find their feet online. While Graphic.ly lets its publishing partners set the prices of their digital titles, DC, a leader in the industry, currently does not license its titles to any site.
Disney acquired Marvel for a massive USD4.24bn in December last year and comic books remain a huge industry. However, as Graphic.ly is a small startup, there is a concern that its early efforts could be eclipsed by moves in this the market from one of the big online e-book retailers, or even a comic book publisher itself. In terms of Graphic.ly's own growth, Baldwin claims that moving beyond comics is something that the company has "definitely looked at." Though by doing so, the company could risk watering down its dedicated comic book fan-base.
AT A GLANCE:
CEO: Micah Baldwin
HQ: Boulder, Colorado
Commercial launch: April 2010
Number of employees: 20
Investors: Draper Fisher Jurvetson (DFJ) Mercury, Startz Media, Northstar Capital. Angels: Chris Sacca, Dave McClure, David Cohen, Jake Nickell and Paige Craig
Funding to date: USD1.2m
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