Zoo aims to take the eBook to the next level

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MEDIA software group Zoo Digital has big plans for its eBook software as electronic publishing moves beyond simple novels and into more complicated areas like children’s illustrated books, encyclopaedias and cookbooks.

At the moment eBooks have focused on text-only publications, but Sheffield-based Zoo believes the introduction of more adventurous formats will play to its strengths.

Zoo’s chairman Roger Jeynes said: “Our tools come into their own with richer content. If you’re just reproducing text it’s a trivial activity, but if you need pictures to match words our tools understand the structure of the book.”

Zoo believes other suitable “content-rich” formats include gardening books and instruction manuals.

“Publishers are just waking up to the possibilities of going beyond existing formats,” said Mr Jeynes. “You can have audio and video clips. It’s a sweet spot for our tools.”

Zoo believes eBooks are its biggest growth area long term, but it is also seeing a boost from adapting titles for Blu-Ray. This comes from the large Hollywood studios looking to make the most of the back catalogues rather than new releases.

Zoo’s finance director Helen Gilder said that in the early days of Blu-Ray the Hollywood studios focused on the flashiest adaptation, but this has changed.

“Now studios realise they don’t get additional sales from that. Now they are going for something more standard which plays into our strengths,” she said.

She added that a reduction in the cost of Blu-Ray players has also boosted sales of the format.

She was speaking yesterday as Zoo announced a return to profit in the second half after challenging conditions in the first six months when the DVD market was going through a particularly turbulent time.

Zoo’s large Hollywood studio customers are reducing the number of titles being released on DVD. This is due to a combination of the difficult economy and customers switching from a physical library of DVDs to a digital one.

Last summer, Zoo was particularly hit by a reduction in TV releases on DVD.

Analyst Andrew Darley, at house broker FinnCap, said there had been a sharp fall in the number of titles being released on DVD. He estimated that DVD production has fallen from 40 per cent of titles to just 15 per cent.

The company made a pre-tax loss of £1.3m in the year to March 31 compared with a £329,000 profit last year.

Revenues for the year fell from £9m to £7.2m.

Ms Gilder said that the group made an operating loss of £580,000 in the first half and an operating profit of £130,000 in the second half, leading to an overall operating loss of £450,000 for the full year.

Another growth area is subtitling, which Zoo used to outsource because it made it no money.

“We’ve now developed a software tool that can automate subtitling,” said Mr Jeynes.

“In the past subtitling has been very labour intensive, but we have great hopes for our new software, which can translate into different languages... match language to different countries and different formats such as Blu-Ray and DVD.”

Mr Darley said: “These results indicate revenue stabilisation in the second half and continuing product development which has contributed to an 86 per cent increase in the customer base.”

The group’s customer numbers have risen from 37 last year to 69.

“With growth in customer numbers, the opportunity for growth in spend per product per customer, and an expanded product set, Zoo has a credible path which presents a sense of optimism absent at the interims,” added Mr Darley.

“While macroeconomic caution prevails, delivery of forecasts presents the opportunity for the Zoo share price to increase significantly.”

The group has reduced its US headcount and restructured its cost base to give a lower fixed overhead, better equipping it to deal with volatility in the market.

It is forecast that one in five titles sold in Western Europe will be an eBook by 2015. US publishers are already seeing that level of take-up.