Xentral Methods bets on e-book market

• Raised venture funding from Malaysia-based Teak Capital in 2012
• Technology built inhouse from Cyberjaya offers high barrier to entry

HAVING graduated from the United Kingdom as a mechanical engineer, Faiz Al-Shahab (pic above) failed to land a job despite the three interviews he went for in Kuala Lumpur in 2000. He promptly repacked his suitcase and headed back to the United Kingdom, where he not only got a job but created history in an automotive company as the youngest engineer to be made team leader.
 
So what was the problem with landing a job in Malaysia? “Well, it may have had to do with the fact that I had long hair then, and wore torn jeans,” he laughs, recalling his non-conformist days.
 
Today, the clean-shaven and close-cropped Faiz is cofounder and managing director of Xentral Methods Sdn Bhd, a South-East Asian e-book and interactive content portal.
 
It raised funding from venture capitalist firm Teak Capital in 2012, received a Cradle Fund Sdn Bhd grant for RM150,000 (US$41,000), had revenue of close to RM1 million (US$270,000) in 2014, and is the only e-book publisher in Asia with titles in Bahasa Malaysia, Mandarin and Tamil.
 
Xentral Methods has both a B2B (business-to-business) and B2C (business-to-consumer) business, both of which are cloud-based. The B2B business is delivered through a proprietary library system platform that is used to deliver e-books to seven libraries including the National Library in Kuala Lumpur.
 
As to the business model, it licenses to libraries which then lend out to their patrons in a catalogue package. The B2C model is based on profit-sharing upon any ala carte sale, with a subscription model for education content on its e-Academic platform.
 
The B2B business was not planned, however.
 
“We got in by chance. Towards the end of 2013, the Sabah state library came to us as it wanted Malay language e-books and we were the only vendor that had this content,” says Faiz.
 
“Instead of just supplying them the books however, we decided to build that library system to deliver the books to them,” he adds.
 
 Xentral thus chanced upon a very niche field. As Faiz explains, “no other publisher or technology vendor is offering this library system because they simply do not understand the book industry.”
 
Faiz does, through his family publishing business, which he joined in 2007 upon returning from the United Kingdom. He then led the push into e-books in 2010 with two other cofounders, premised on the belief that e-books would one day, sooner rather than later, dominate the industry.
 
The early years were predictably challenging. “Trying to talk to publishers in the first two-and-a-half years was tough as there was a lot of hostility towards digital content, and there were times when I was practically thrown out of some offices,” he says.
 
The turnaround in the last two years has been dramatic, as not only are those same publishers all-ears, some are even keen to invest in Faiz and his company.
 
Since the beginning of this year, something has definitely changed in the B2C market towards e-books, with Faiz talking about experiencing “tremendous growth since the turn of the year, with sales doubling every month.”
 
The reason for the market receptiveness eludes Faiz, who can only hazard a guess that it has something to do with the PC upgrade cycle and especially with Windows desktops.
 
This can only be one of the causes, simply because of his B2C customer base, 67% are on Android devices, 23% on iOS, and the rest on Windows and using his cloud reader which is browser-based.
 
Surprisingly, tablets play a small part in this reader ecosystem. “Unlike in the United States, the Asian market is altogether different with the smartphone as the primary content device for consumers,” he says.
 
Aware of the reality that the dominant Android market is splintered with various devices and form factors, but needing to encourage more e-book creation, Xentral built eStudio (pic below), a cloud digital publishing software, in August 2014.

“Designed to be mobile first, it will allow you to make responsive, interactive and lightweight content without any programming knowledge,” says Faiz, claiming this tool to be a first in the world.
 
The content built on the software will automatically recognise and respond to the form factor of the device it is being displayed on.
 
The response has been good, with traction overseas and in Malaysia itself. In fact, industry regulator the Malaysian Communications and Multimedia Commission (MCMC) has commissioned Xentral Methods to train 70 schools and 21 libraries in the city of Kemaman in Trengganu in using eStudio.
 
The schools will then compete in creating the most attractive annual yearbook in an interactive digital format.
 
Faiz is hopeful that the Kemaman project will lead to a larger engagement with the MCMC.
 
One of the things that he is proud of about Xentral Methods is that everything is built inhouse in Malaysia.
 
“Nothing is outsourced and nothing is supplied to us,” he says.
 
“Right from eStudio to our copyright encryption engine, digital warehousing, server communications management, e-commerce engine (www.e-sentral.com), CMS (content management system), application programming interface, and cross-platform e-reader applications – the whole ecosystem is made in Cyberjaya.”
 
In making the decision to build everything inhouse, Faiz is helping to fulfill the goals of Digital Malaysia, the Malaysian Government’s programme launched in 2012 that aims to foster a cohesive digital ecosystem to ensure Malaysia becomes a developed digital economy.
 
Specifically, Xentral Methods meets the objective of shifting behavior from being consumption-centric to becoming production-centric, or to change the consumer mindset so prevalent in technology use so that Malaysian individuals and businesses produce as much as they consume from digital technologies.
 
For the one-time automotive engineer, the time and investment – Faiz has spent RM1.2 million (US$330,000) thus far – in building his own suite of products, he believes, will help create a high-entry barrier and pay off in the long run.
 
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