J.T. Colby & Company, Inc. et al v. Apple, Inc.

Filing 78

DECLARATION of Claudia T. Bogdanos in Support re: 77 MOTION to Preclude the Testimony of Defendant's Rebuttal Expert Witness Stephen M. Nowlis.. Document filed by Ipicturebooks LLC, J.Boyston & Company, J.T. Colby & Company, Inc., Publishers LLC. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H, # 9 Exhibit I, # 10 Exhibit J, # 11 Exhibit K)(Chattoraj, Partha)

EXHIBIT F

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
J.T. COLBY & COMPANY, INC. d/b/a BRICK
TOWER PRESS, J. BOYLSTON & COMPANY,
PUBLISHERS LLC and IPICTUREBOOKS LLC,

Case No. 11-cv-4060 (DLC)
EXPERT REPORT OF MIKE SHATZKIN

Plaintiffs,
-againstAPPLE, INC.,
Defendant.

I have been asked by the attorneys for Plaintiffs in this matter to review the Expert Report of
Gregory S. Carpenter and evaluate the relevance of his opinions for the publishing world.
Mr. Carpenter demonstrates a complete lack of familiarity with publishing and how it works,
with the result that his evidence is largely irrelevant and his conclusions largely flawed as they
are applied to this particular case. The role and behavior of "brands" in book publishing is
somewhat unlike the way they play out in other consumer goods. The publishing ecosystem does
not primarily recognize a corporate branding source, but operates within a trifurcated branding
structure: the author, the imprint or series grouping within the publishing house by which the title
is published, and then the publisher. Creators, retailers, and end consumers all play various roles
within the tri-level world of "book marketing." As a result, a more classical understanding and
definition of brand and brand-building behavior does not adequately explain brands in publishing
and, indeed, can well be misleading, as it is in Mr. Carpenter's report.
Specifically, this report will explain the following:
1. How the multi-level, branding -- author, imprint or series, and publishing company -- emerged
and how it works in the publishing business.
2. How the relatively recent shift in the industry, due to a trend toward book purchasing online
and the rapid growth of digital or electronic/e-books, has moved the focus from
business-to-business branding to building business-to-consumer brands.
3. How the iBooks brand could have capitalized on its legacy to build a valuable consumer
franchise had Apple not adopted the same name.

publishers were the most advantaged, because they had large numbers of consumers who read
multiple titles from their lists. Romance readers already knew the company name and imprint
"Harlequin." Science fiction fans knew Tor and Baen. The consistency of the content experience
they offered had, without any elaborate effort on their part, built brand awareness that translated
into online pow er.***
The niche publishers, and the niche imprints of general publishers, quickly established
themselves as viable consumer brands as measured by online success: getting website visitors,
signing up consumers for email notifications of new publications, and, in some cases, being able
to spawn new enterprises on the back of the customer base their content consistency had created
for them.
One great example of that is from a niche publisher called Hay House in San Diego: a publisher
of "mind body spirit" books. Hay House built email lists earlier than most publishers and has
used them for years to promote its new titles in a much more cost-efficient way than most
publishers have available to them. It also started doing events where its reader base paid fees to
spend time with Hay House authors.
Indeed, events have become an important ancillary business for some niche publishers, building
on the base of enthusiasts their publishing has delivered them. F+W Media, a private-equity
financed rollup of "enthusiast" (i.e. vertical or niche) publishers, has a whole events business
serving multiple opportunities created by its disparate communities to assemble for paid
gatherings.
The major publishers have recently started to join this trend. Because they are determinedly
"general" (and because they are built on publishing the biggest commercial books, the likelihood
of commercial success, not topic or genre, must be the dominant criterion by which they make
acquisition decisions), they tend not to have large lists within topic areas the way a specialty
publisher like Hay House or F+W does. But they often do have lists in genres, particularly in
science fiction and romance, which have been the two biggest genres in the inexorable and
fast-paced ebook evolution.
The iBooks Brand
The iBooks imprint published a large number of titles primarily in the science-fiction genre
(665), followed by graphic novels, horror, and fantasy, which have turned out to be of substantial
interest on the Internet and have sold well as ebooks. Although the sales of iBooks overall were
modest (5,689,950 units, with sales of science-fiction titles alone totaling 1,944,314 units),
particularly compared to a big general publisher, its specialization in a genre that is characterized
by customers who make many repeat purchases in the genre suggests the potential for a core
audience that would recognize it as a publishing specialist. It is thus reasonable to surmise that
were there no distractions suggesting that the iBooks brand meant something else (namely,
Apple and/or Apple's iBooks/iBookstore), it is likely that the publishers of iBooks would have
had the opportunity to build on that awareness to create a powerful niche brand in the digital
space.

Mr. Carpenter's Fundamental Lack Of Industry Understanding And Flawed Conclusions
Against this industry-specific background, the many errors in Mr. Carpenter's report are made
plain. Intended as a tool to understand the branding issues in this case, his report is simply not
applicable to the world of publishing. Mr. Carpenter's fundamental misapplication of general
branding principles results in erroneous and misplaced opinions and conclusions.
Mr. Carpenter writes that "creating consumer awareness and recognition requires significant
investment by the brand owner." (Paragraph 9.) That is not true in publishing where almost no
money is spent -- or has been spent -- creating consumer awareness and recognition of brands.
Publishing brands are built on the awareness of what is being published under the author,
imprint, series, or publishing-house name. This imputed value of the brand from the content it
delivers has been the method of building brand awareness for book publishers throughout the
history of publishing, from when it was basically strictly marketing to gatekeepers up to the
current era where consumers have become direct targets.
Mr. Carpenter posits that "by selecting target customers, developing a unique value proposition
to those target buyers, and delivering that value consistently, an organization can endow a brand
with meaning and hence value." (Paragraph 11.) This actually turns publishing practice on its
head. What happens is that publishers deliver a "value" -- a kind of book -- consistently under an
author, imprint, series, or company brand. The audience self-selects around the content, and the
value of the brand is created over time by the experiences readers and consumers have with the
published books.
Mr. Carpenter states: "in working to build a brand that is recognized by consumers, companies
need to engage in a variety of activities to educate consumers and create awareness of that
brand." (Paragraph 12.) In fact, I am not aware of any publishing brands -- not Dummies,
Harlequin, or others -- that have built their brands that way. Their brands were built on the
strength and consistency and ubiquity of their content; other activities might have a
brand-enhancing effect, but in publishing they are actually new-fangled exploitations of the
brand, not efforts to build it.
Mr. Carpenter goes on to say: "Possible means of establishing brand recognition include
advertising, marketing and other promotional activities; creating personal experiences in which
consumers interact with the brand; and combinations of those methods." (Paragraph 12.) This
has not been the history or experience of publishing. Advertising for brand building is virtually
non-existent, as is brand-focused marketing. The creation of personal experiences for interaction
is a recent development around new opportunities (such as live events); it has not been an
established method for building awareness to sell books.
Mr. Carpenter writes that "Creating a brand requires educating buyers about the meaning of a
brand, and continually educating new buyers as they enter the market." (Paragraph 14.) Again,
this does not describe the reality in publishing. Publishers sell books. If a reader consumes
enough books that deliver a consistent experience under the heading of an author, imprint, series,

6

I declare under penalty of perjury that, based upon the information available to me, to the best of
my knowledge, the foregoing is true and correct. I reserve the right to supplement this report.

Date

Mike Shatzkin