Yesterday, we announced that O'Reilly is no longer selling books and videos on shop.oreilly.com. We heard from some of you that you're unhappy about that decision, especially because no other sellers offer DRM-free ebooks in multiple digital formats. You're right about that, but there's more to the story. And since we’ve always been transparent with our customers, here's some additional context about why we made those recent changes.
O’Reilly has always been a privately held, self-funded company, and it’s a distinction we wear with pride. We don’t have any investors but our customers, who fund us by buying our products and services. That keeps us attuned to what the market is really telling us. But it also means we have to make decisions as we grow and change while living within our means—decisions about investments, about markets, and about our customers and employees.
O'Reilly started out as a book publishing company. I remember with pride joining the “animal” brand. But from the beginning, I knew that our core competency was not the actual books we printed but rather the knowledge of the network of authors and speakers who agreed to work with us to produce important and relevant content. That talent developed content that worked its way into books. But we always recognized that there were other ways to spread that knowledge, which led us to add a conference business, and a digital subscription business.
When the digital revolution started, Tim and the team had the foresight in 2000 to build Safari (which, by the way, has nothing to do with Apple’s Safari browser, which it predated by many years. It works in every browser!). We believed, correctly, that reading a book cover-to-cover was only one of the ways people used our content. Many of them needed information on-demand, and we could best deliver that through an all-inclusive online service. That was why we reached out to our competitors and brought them into the platform. And the business began to grow. The promise was simple—everything you need to be the best developer or engineer possible.
Access to new subscription customers, both individuals and businesses, gave us even greater visibility into the needs of our users, which also took us into topic areas beyond technology. At the same time, digital enabled new learning modalities such as video and interactive content. I know I’m condensing many years into one paragraph, but you see the point. Times were progressing and we needed to progress with them.
As new learning modalities emerged, O’Reilly moved to embrace new formats. We developed an amazing video training series (thanks to a talented author base and editorial team willing to try something new), we purchased a small screencasting company and integrated it into our editorial offerings, we developed Oriole, our own interactive learning technology that integrates video and in-browser coding, and developed a formative assessment program for our popular video learning paths.
And we saw the adoption of these learning formats explode inside of Safari. By 2017 these new formats were the top products in the service.
Meanwhile, sales of books have declined consistently year after year since 2000! Ebooks expanded the market for a while, and direct distribution from oreilly.com was a great way to make them widely available while traditional retailers other than Amazon were slow to embrace that market. But starting a few years ago, ebook sales too started to flatten, and then to fall. Running oreilly.com as a distribution platform was effective, but also costly. It required a dedicated investment in e-commerce software, staff, marketing, and so on. It also required us to choose whether to direct incoming customers to the declining e-commerce business to buy standalone units, or to our growing subscription business.
As the slowdown accelerated, the contrast between the rapid growth of the subscription business and the interest in learning in new ways became ever more striking. Now, don't get me wrong, we believe in books, and the effectiveness of text as a tool for sharing knowledge, but the business model that had given us such a great start three decades ago has changed deeply. Amazon is pretty much the only retailer still supporting computer books, and the unit sales are a small fraction of what they were in the past. We came up with creative ways to keep publishing books, supplementing our “definitive” books with smaller reports that we give away for free download, or as sponsored products, to capture either niche technologies or new approaches to learning. But all of this new creation meant we had to grow while balancing our total investment spending.
Now I want to go back to my first statements about being self-funded and privately held. Being a private company gives us the freedom to take risks and invest in what we believe our customers need, without optimizing for the kinds of returns that VCs demand. It also means we have to pay as we go—there are real limits to how much we can risk, and if we get it wrong, our customers and employees lose.
So we had to make a tough decision, and we chose to support the side of the business that has the most customers, that is growing the fastest, and that supports all of the learning modalities that customers are demanding.
But we are also sensitive to those of you who still prefer to learn from and to own books. We are still publishing books, and you can buy them directly, either on paper or in a variety of electronic formats from a number of resellers, just not directly from us. We’ve closed our online store, not our publishing operation! We still support those who prefer the model of ownership to subscription.
And we also listen. After our announcement, the bulk of your requests have been for PDFs versus kindle or EPUB format. We're already working on offering PDF downloads as part of the Safari subscription, as well as other new features to support offline reading. And we are looking into ways for our resellers to support unit sales of PDFs. I regret that we didn’t get those arrangements in place in advance of this announcement.
As always, our digital books are available on Amazon as well as at B&N and (DRM-free) at Google books.
Many of you have also commented that the books moved from lay-flat to regular bindings. That decision came when we became acutely aware of excess inventory sitting in warehouses as print declined. So we became one of the first book publishers to publish print-on-demand (POD) books, where lay-flat is not possible. The reality of POD is actually higher unit costs (think economies of scale … printing one versus printing thousands at once) but far less waste. The benefit of course is fewer dead trees, as well as lower costs overall.
We know many of you are disappointed. But we have to reinvent to stay relevant in this competitive market and to continue our mission of spreading the knowledge of innovators. The formats may change, but the mission stays the same.