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RIP Bilbary

bilbaryWhen Bilbary burst on to the digital publishing scene in late 2011 it got a lot of attention for its novel ideas, including plans for a rental ebook platform. Sadly, it now seems novel ideas were all the company had going for it, which could explain why the company quietly went bankrupt earlier this year.

The Bookseller reported today that Bilbary, once the shining light of indie ebook startups, is out of business. The company actually shut down in May or June of this year, but it wasn’t until last week that someone noticed it was gone. (Andrew Rhomberg of JellyBooks gets credit for that.)

Bilbary had been shedding senior management since at least March of this year, and they had been shedding real estate since last September, when they closed their London office.

The company had raised around 2 million pounds in its early days, but was not able to either generate enough revenue to support itself or enough growth or forward momentum to interest investors and soon ran out of money.

As the old saying goes, the main reason startups die is that someone launched them in the first place.

But if you ask Bilbary founder Tim Coates, Bilbary was caught between Amazon and publishers. Coates told The Bookseller: "The dispute between Amazon and publishers on e-book pricing [and the agency model] makes it impossible to invest. We are in a situation where investors are terrified of risking a new venture because no-one knows what the pricing structure will be. As long as the argument has been going on, any investor says, 'What is the pricing model?' and you can’t answer them. Bilbary was caught in the crossfire from the industry dispute and we weren’t alone."

I think that explanation is nonsense; the truth is a lot more complex and less palatable. The fact of the matter is, the odds are stacked against publishing industry startups in the first place.

I haven’t had a reason to report on it much, but I tend to listen when people like Andrew Rhomberg of JellyBooks and Micah Bowers of Bluefire talk on Twitter about the resistance they have faced in getting the major publishers, all of whom are very conservative, to try some thing new. (This is to some degree confirmed in the administrator’s report.)

For example, Bilbary originally launched in very late 2011 with the idea of offering an ebook rental service. This fell through when none of the majors went for the idea –  a detail which Tim Coates should have been able to predict based on his years as the managing director of the UK bookstore chain Waterstones.

The problems publishing startups have encountered help explain why, for example, Booklamp sold out to Apple and Readmill sold out to Dropbox. it’s not just that the tech companies had the money; they were also willing to spend it.

But I am not sure that it would explain Bilbary. I have my own sources on this story, but I was asked not to share the details about financial mismanagement.

But I can share that I was told that Tim Coates bailed on Bilbary months before the company shuttered. He’d already registered his new startup, Freckles, in March without telling anyone else at Bilbary.

According to Coates, Freckles is going to focus on the library ebook market:

What I’ve suggested is we bridge that gap between publishers and libraries – and the place to bridge it is the library management system. If a publisher produces a print book, it goes to Baker & Taylor, to YBP, to Ebrary – and then the information is placed on a library management system, a catalogue. The reader looks at the catalogue and says, 'Ah, they have this book.' What I suggest is that with e-books, you don’t have to do that, you can take the complete output of publishers and place it on the catalogue and readers can make the choice. There’s no reason why every library can’t offer every e-book in the world.

In short, Freckles is going to compete with OverDrive. Considering that this is one of the things Bilbary tried and failed to do, I’m not sure that Freckles will have much greater success.

On the one side Freckles will still have to work with publishers, while on the other side they will have to compete with OD, a company with deep pockets and the demonstrated ability to adapt to offer the same services as their competitors.

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Ereading Dot Com October 21, 2014 um 10:23 am

Thanks for reporting on this.

What blows us away here at (almost literally, as we’re about to enter fundraising mode) is that Bilbary raised nearly $4 MILLION dollars. And they did so clearly without doing their due-diligence and learning about the market they were storming into, entering it with a monthly burn-rate that I know was just ridiculous. All I had to read was "shedding senior management" and "London office" to figure out that much.

It has taken us going on five years to build our business model to be both sustainable, competitive, and profitable. Reading stories like this–knowing what I do about companies like Diesel, Books on Board, etc.–it really bothers me that investors were taken for a ride based on false promises and an utter lack of understanding of the book business.

Four-million dollars. Not quite, but close enough. Just unbelievable.

If I was one of their investors, I’d be seriously ticked off. Then again, I wouldn’t BE one of their investors, because I would have done MY due diligence and figured out pretty quickly–as I did back then–that an ebook-only store was not sustainable at the time and would not be sustainable for many years to come.

Richard Dean Starr
Co-Founder & CEO,
Eread Technologies, Inc. / /

Nate Hoffelder October 21, 2014 um 1:19 pm

It’s closer to 3 million dollars than four, but you’re right in that they wasted a large some of money in less than 3 years. And to make matters worse it looks like Coates is going to do it a second time.

I wonder if he’ll be able to find investors this time around?

Ereading Dot Com October 21, 2014 um 1:37 pm

Yeah, you’re right. I was counting in the additional $1.2 million or so as lost opportunity capital, too. I just had my conversion from pounds to dollars screwed up.

Once I actually did the numbers and checked the conversion, it came up to $3,145,350. I’ll be frank with you: in my experience, they may have reported that, but I virtually guarantee you that there was more raised pre-seed that hasn’t been reported. Not because I "need to be right", but because we’ve experienced that ourselves and I’ve seen it with other start-ups.

Every high-profile failure like that, especially due to incompetence, makes it that much harder for well-thought-out start-ups to raise capital.

Either way, I hope Coates is unsuccessful in raising funds for his new venture. I stated elsewhere that The Freckles Project sounds like they’re developing experimental face creams and cosmetics, and that there’s a strong possibility they MIGHT be experimenting on helpless monkeys and other small, furry animals.

That’s tongue-in-cheek, of course, but come on, really: The Freckles Project?

Ereading Dot Com October 21, 2014 um 1:38 pm

Make that the additional *pledged* $1.2 million.

DaveMich October 21, 2014 um 3:51 pm

What I suggest is that with e-books, you don’t have to do that, you can take the complete output of publishers and place it on the catalogue and readers can make the choice. There’s no reason why every library can’t offer every e-book in the world.

There’s a great reason. They can’t afford it. Libraries that use overdrive 'purchase' individual books for their 'collection', which is what they offer to their users. Libraries won’t – and can’t afford to – allow their users to just purchase whatever books they want without the librarian controlling the purse strings. Good luck with that startup, fella.

Nate Hoffelder October 21, 2014 um 4:22 pm

Actually, it wouldn’t be too hard for OD to add a request function where patrons could ask for, but not actually buy, specific titles. I’m not sure if anyone is doing it already in paper, though.

Will Entrekin October 21, 2014 um 6:53 pm

From a different bookseller article:

while there was initial “interest from publishers, they later proved unwilling to enter into contracts allowing the trade books to be loaned, consequently the company secured content for sales only to enable it to get to the market sooner”

So what killed it wasn’t Amazon so much as it was corporate publishers who initially expressed interest but then later withdrew.

As you note when you mention how conservative they are, etc.

But of course it’s easier for Jones et al. to play the Amazon-is-evil card. Which just shows how lazy they are. Sometimes publishing industry "journalism" is worse than Gawker.

Nate Hoffelder October 21, 2014 um 7:59 pm

Yes, I should have looked at the administrator’s filings. That actually reported the truth. Bad, Nate, bad. No cookie.

Edit: Fortunately i can cover my mistake by adding a single sentence.

Ereading Dot Com October 21, 2014 um 8:31 pm

No, what killed it was taking more than $3 million dollars, blowing the money like it really DOES grow on trees, all based upon a flimsy idea with no partnership deals in place, a poorly-considered brand identity, and an even weaker overall business model that demonstrated a stunning lack of awareness of the marketplace.

In business, you can get almost anyone to express interest in almost anything that sounds plausible and potentially profitable for them. But that' s a long way from a real commitment.

The fact that publishers are mentioned as only "expressing interest" says a lot, I think. What I believe happened is that Mr. Coates lured investors using connections gained during his time with Waterstones, and they in turn helped him to raise additional capital. That’s pretty obvious, I think.

At the end of the day, Mr. Coates' investors should have done their due-diligence, too. Many investors trust their references to an investment. They shouldn’t; they should take the time to actually READ the business plan and then compare the text to the numbers and make sure everything lines up. Doing some research takes work, but many investors seem unwilling to do that, to their peril. This is a shining example of that.

The common wisdom is, many investors just "flip to the numbers" and look them over. Well, that’s dumb. The numbers without context are nearly useless, especially with a startup, where so much of the financials involves forecasting–an imprecise thing at best.

Tim Coates October 22, 2014 um 4:56 am

Richard, Nate – much of your analysis is correct – and while I can’t talk about the internal discussions that took place, I can try to say things that might help illuminate.

Incidentally the company effectively folded in February/ March – until it had done so and the authorities advised so, all my efforts were aimed at trying to resolve matters in the best way for the shareholders and I haven’t done and wouldn’t do anything that would run contrary to that.

My email is [email protected]

LC Cooper March 4, 2016 um 3:11 pm

Adding my two cents to this post mortem–as a self-published author, I was lured to Bilbary on the premise of robust distribution channels.

Deep within Bilbary’s contract was a demand that Bilbary would be granted ownership status of all submitted titles.

After a period of back-and-forth with Bilbary middle management that did result in some improvements to the contract, it was clear that Bilbary would not modify its contract to state that submitting authors and/or publishers would retain ownership of their titles.

I walked away at that point and griped about the Bilbary mess in a blog post.

Today, while culling through old emails, one triggered my curiosity to learn of Bilbary’s fate. Melancholy, yet relieved, I do hope that Bilbary rests in peace.

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