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Kobo Inc. CEO Mike Serbinis (left) and Indigo Books & Music Inc. CEO Heather Reisman (Raina+Wilson/Raina+Wilson)
Kobo Inc. CEO Mike Serbinis (left) and Indigo Books & Music Inc. CEO Heather Reisman (Raina+Wilson/Raina+Wilson)

ROB Magazine

Inside the Kobo deal that netted Indigo $165-million Add to ...

The big job meant that Serbinis spent most of his time travelling. The adventure had worn thin by 2005. Recently married and with a child on the way, Serbinis decided it was time to move back to Toronto, close to where both his and his wife’s parents lived. When he asked Nickerson for job suggestions, he got a recommendation that made him laugh out loud: chief information officer at Indigo.

“I said, ‘Whoa, you’ve got to be kidding. Why would I ever do that?’’’ The antique business of selling written words on paper, Serbinis says with a laugh, “wasn’t rocket science.” When Nickerson told him the job came with a rare opportunity to work for a passionate owner-entrepreneur, he reluctantly agreed to meet Reisman.

Over lunch, Serbinis told Indigo’s chief two things. Digital technology would shake her business to the core. And his long-term plan was to run his own company.

“I was thrilled to hear that,” declares Reisman. “Anyone at 33 with that kind of background who doesn’t have that kind of big ambition,” she says with a shrug, “I’m not so interested.”

Getting the job at Indigo proved to be easier than convincing Indigo’s executives—or anyone in the publishing sector—that a digital tsunami would soon overwhelm the world of books, newspapers and magazines. At the time, the market share of books sold through electronic devices was in the low single digits. To Serbinis, that was the wrong data to track. What mattered was the online habits of consumers. They were reading e-mails, documents and news on the Internet. It was only a matter of time before they started reading books online too.

By early 2008, the publishing sector’s indifference to digital reading had become “a very frustrating thing for me,” Serbinis says. So he told Reisman it was time for him to move on. “I said: ‘I love you, I have learned a ton from this world, but I need to go start something.’”

The something was a software start-up that would create an online portal for digital books. Reisman agreed to support the venture, but, still cautious, invested only about $5 million by the end of 2009, its first year. Serbinis, meanwhile, would stay with Indigo, but he could borrow six employees to launch his project, initially called Shortcovers.

The digital service offered anyone with an iPhone, Android phone or BlackBerry an application for downloading book chapters, short stories, blogs and news articles. For 99 cents, at most, people reading on their phones could download a book chapter and share it with friends. If they wanted the whole book, they could download it for between $10 and $20 or follow the traditional route of ordering a hardcover. While other electronic booksellers such as Amazon and Apple only made e-books available on their own devices, Shortcovers was designed as an open platform. It allowed consumers to buy electronic books and build digital libraries that were accessible on a wide variety of smartphones or tablets.

It is likely that Shortcovers would have never expanded beyond the portal stage had Reisman not been a director of the U.S. clothing retailer J.Crew. After a board meeting in early 2010, she returned to Toronto and called Serbinis, Nickerson and half a dozen of her top executives into a meeting. Some of the J.Crew directors had received the new Kindle 2 for Christmas, and they “were all gushing,” she told the team. The high-powered board members were not talking about books, she said, but rather the Kindle itself. “What people are falling in love with is their hardware; that’s the connection.”

It was the moment Serbinis had been waiting for. After years of his warning that the book retailing sector was on the verge of a crisis that he believed would see e-books take over a major chunk of the $33-billion North American consumer and textbook market by 2015, Indigo was finally grappling with the digital demon. Reisman passed around her new Kindle, and while other executives debated the risks, Nickerson rotated the Kindle and played with its small keyboard for about half an hour. “This is not right,” he told the group, and started to sketch. It took him about half an hour to draw his minimalist version of an e-reader. It was smaller than the new Kindle, it did not have a keyboard and needed only a few buttons to operate. “It has to be cheap like borscht, and you have to make it feel like a book,” he said.

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