February 5, 2014

What’s coming for Kobo, and what happened to its CEO?


Japan Canada

via Shutterstock

Even with 18 million users and 4 million e-book titles, Kobo feels like the underdog of the ebook world. At the end of January, Kobo and Amazon tied for “online bookstore of choice,” according to a small survey conducted by Good e-Reader and reported by the Christian Science Monitor.

Someone’s got to try to give Amazon a run for its money in the world of online bookselling, and with Barnes & Noble moving away from the Nook, I find myself almost rooting for this little Canadian company that is backed by an enormous Japanese retailer. They make nice with indie booksellers; when they heard Amazon bought Goodreads, they got out.

But the retailing giant that owns Kobo is facing a serious challenge: Japan is about to start collecting taxes on sales of foreign content, beginning in 2015, so the selling-online-content-out-of-Canada-to-readers-in-your-home-country-without-sales-tax thing is going to be a headache for Rakuten.

Rakuten bought the company in November 2011 for $315 million in cash. (Oh, your company is for sale? Hmm, let’s see, do you accept cash?) They’re going to have to do some clever footwork to keep the prices of their online content low in Japan. Amazon, on the other hand, only charges sales tax on its home turf in nineteen states.

Yesterday Michael Serbinis stepped down as chief executive of Kobo, and was replaced immediately by Takahito “Taka” Aiki. Was this inevitable after Serbinis orchestrated Kobo’s acquisition by the Japanese retailing giant, or is something else in the works?

At the end of January, Rakuten named Jessica Joines the chief marketing officer, and the company rolled out a new omni-channel marketing platform called “Cadence.” If that sounds like Greek to you, it means Rakuten Marketing will be able to see how many times a customer is exposed to a message before making buying, and how much that purchase cost, all in real time.

Aiki was CEO of Rakuten’s telecom company, Fusion Communications, and the company credits him with growing the online membership of Tsutaya, a bookstore and video rental company, by 250% in only two years (from 2002 to 2004). He’ll have some serious work to do in an ebook market that has changed a lot since then.

Under Serbinis’s leadership, Kobo expanded its business to 4 million ebooks in 190 different countries. Serbinis will stay on as vice chairman.

It’s not clear why Serbinis stepped down. He may be glad the company has made its transition, and ready for a break after four years. He may be blamed for last year’s self-publishing debacle, though it’s kind of late for the company to pin the “barely legal” business on him. It sounds like Rakuten needs their own people on the ground as they work out a way to keep steep discounts on their home turf, in spite of the new legislation, and growing their business internationally. But the book business is small potatoes to one of the biggest companies in the world, and their stocks are hitting historic highs. Is something else coming?

PublishersMarketplace included one parenthetical line in their report that hints there’s more to the story: “There’s some other Kobo news we’ve been waiting on for a while, but this wasn’t it.” We’ll keep you updated.


Kirsten Reach is an editor at Melville House.