The terms of engagement are shifting in the ongoing e-reader wars.
Yesterday, Toronto-based Kobo, maker of the Vox tablet and other e-reading devices, was acquired by Tokyo-based e-commerce firm Rakuten, for $315 million in cash from majority-shareholder and Canadian book-retailer Indigo and other shareholders.
According to Kobo CEO Michael Serbinis, the acquisition will impact on the company, publishers and readers.
Jeremy Greenfield: What was the impetus for the acquisition?
Michael Serbinis: From our standpoint, this really gives us an opportunity to accelerate our growth, both with Rakutan’s financial resources, e-commerce platform, base of customers, as well as their distribution internationally. It offered the opportunity to get bigger, faster and to do so with someone that has the short-term financial capabilities and a long-term view on this and a significant balance sheet.
Rakuten are the Amazon of Japan. They are about four-to five times the size of Amazon’s business in Japan. They are a $15 billion company by market cap. They have over 50 million customers worldwide.
JG: Kobo has said in the past that one of its differentiators was that the Kindle Fire and iPad were not focused on reading and that Kobo devices were. Does this mean that, like the Kindle Fire is for Amazon, future Kobo devices will be not just for reading but also a sales and marketing platform for Rakuten?
MS: I think that’s an obvious extension from where we are today. There’s a ton of synergies between our devices and their commerce platform and those are synergies that I think customers would love to see.
I’ll say no more for now, but stay tuned for next year in what we bring to market in how we capitalize on those synergies.
For now, Vox is a great reader that allows you to have a great social experience.
MS: It falls into two categories.
Growing our presence internationally and being able to go into new countries faster. There’s a lot of synergy in countries where Rakuten is already present.
We expect to be in Japan early into the new year; we expect to be in brazil next year and this is all possible now. We did a handful of countries this year and we’ll do a couple dozen next year.
The other thing is product innovation. With the financial resources of Rakuten, we can really accelerate the product innovation on the devices, apps, the product experience, our social platform and integration with Facebook.
JG: Was this investment you weren’t getting from Indigo and your other investors?
The monies we raised are very public. In 24 months, we raised about $80 million. We’re looking to significantly increase our spending. That’s something that Rakuten can do and that’s something that Indigo can’t do given their scale.
JG: What does this acquisition mean for publishers?
MS: One thing that we find consistently around the world is that publishers do not want to be in service to one master. They are looking for – as are retailers – options from a distribution standpoint and looking for a strong second player worldwide. That’s something we’re set up to become. We’ve made great strides on a shoe-string and in a short time. With Rakuten we will deliver on that promise.
JG: Does this mean any layoffs?
MS: None whatsoever.
MS: The company remains based in Toronto. We’ve got over 250 people here and just under 300 in the whole company. We’re likely to double that in the next 12-to-18 months – hiring across the board.
We’re always looking for engineering talent. Increasingly we’re building out local presences, hiring for business development and marketing. We’re hiring probably a couple hundred engineers in the next 12-to-18 months.
JG: Are any senior executives leaving?
MS: Myself and the team are all sticking around. We see a path to growing Kobo to billions in sales.
JG: Is there a retention plan in the deal for you or any other senior executives?
MS: We don’t comment on our employment agreements, but needless to say it’s going to be a pretty exciting place to be.
JG: Anything else you’d like to add?
MS: [The acquisition is a] great validation for us. One of the things you always hear about from journalists is “how can you possibly compete” and “how are you going to possibly survive.” Two-thirds of the book market is outside North America and we’re planning on getting the lion’s share of it as it goes digital.
Write to Jeremy Greenfield