Transcript: How to Break Into a New Industry and Sell to the World's Biggest Customers | Yael Yekutiel (Inside the Business)

How Canarit started almost by chance

Eyal David: [00:00] Yael, what's up? How are you?

Yael Yekutiel: [00:00] Great, it's Thursday, the best there is.

Eyal David: [00:00] So good to have you here. Inside the Business is a slightly different series. We're not really talking here about startups, technology and fundraising; we're talking about a business, and going very deep into it, into the decisions that led to it, and really into the story of the founders, a bit more about mistakes, opportunities and risks. Yael, you founded Canarit with Gil Geva, your partner. Almost by chance, during COVID, you entered an industry you didn't know, which I think is very, very interesting to touch on, and you started working with the world of books and audio. And today you've actually built a business around it, and what interests me most in this story is how we can look at it as a case study, not just about books, but about how you enter a new industry and build a business there. We can also really talk about all the threats happening right now, and the opportunities, around AI, new publishers, Spotify, right, we'll talk about that, and Audible. So come on, take us back to the beginning: how did you get into this world?

Yael Yekutiel: [00:56] I came back to Israel before COVID, after almost twenty years of living in New York, where I always worked in high-tech. I wasn't quite sure what was going on, there was COVID, we didn't know what was happening, and then someone connected me with Gil and told me: she has an idea for a very creative product, but she doesn't really know what to do with it; you know how to take ideas nobody thought were real and turn them into a business and a market; go meet and see what happens. And we really did meet, at a hidden café in Tel Aviv that was open at the time, and we talked for four hours until they kicked us out, but by the end of the meeting we knew we could build Canarit.

Eyal David: [01:37] What background did Gil come from?

Yael Yekutiel: [01:37] Gil comes from the world of sound design. She worked on Broadway, and she worked on films, some of which were nominated for an Oscar for sound editing, so she comes from that world of designing soundtracks and designing sound. I come more from the business, technology and marketing side, and we complemented each other well, and we both really, really, really love books. We buy books, we read books in huge quantities, we talk about books. In general, when it comes to books, anyone you ask will tell you that books are a passion business; whoever works in this field has to really, really love it.

What a cinematic audiobook actually is

Eyal David: [02:09] So what does Canarit actually do today, and for whom?

Yael Yekutiel: [02:09] Canarit does a few things. When we founded the company, we founded it as a production company specializing in cinematic adaptations of books. That is, we take written books and turn them into an audio version, but we work in the genre called cinematic audio, which means a whole cast of actors, not narrators. These are actors from TV, from film, usually fairly well known, and they get full direction, exactly like in theater, like in film; we direct them. On top of all these recordings we build a musical score, special effects, sound effects, like in the movies, and we wrap all of it in a surround envelope, so that someone can sit with headphones, even close their eyes and listen to the movie, and feel like they're sitting inside a cinematic world.

Eyal David: [02:59] And who do you sell it to?

Yael Yekutiel: [02:59] We sell it to publishing houses, they are our clients. At least that's how we started: we started working with the big publishing houses in the United States. They were our first clients. Later on, we also started working with authors.

Eyal David: [03:14] So in the end, you sell it to them, and they sell it on, right? Because it's actually B2B?

Yael Yekutiel: [03:14] Right. They sell these audiobooks exactly the way any book is sold. Amazon, Audible, Spotify, all the usual platforms. In Israel there's the e-vrit site, which also sells Hebrew audiobooks. For whoever consumes these books, they buy them in exactly the same way, and if they listen to audiobooks, they listen to the cinematic audiobooks the same way too.

Eyal David: [03:37] You mentioned a little earlier who actually consumes these books and which categories it goes to, and that's super interesting, we'll get to it in a moment. I was also thinking about kids, which is probably great for this. Say I'm an author, I just finished writing a book: what actually happens until it gets, for that matter, to a page on Audible or a page on Spotify? What does that look like?

Yael Yekutiel: [04:02] An author can decide independently that they want their book to become an audio version, or their publisher decides they want to do it. At that point, for example, if the production is handed to Canarit, we look at the text, we treat it exactly like a film script, we analyze all the main characters and supporting characters and start casting them. We also talk with the author or the publishing house and understand from them what vibe they want to give the book, what atmosphere, how they want to market it, because all of these things affect the nature of the production. At that stage we start casting the actors, really holding auditions exactly like for a film. And once we get to the actors who best fit each role, for main characters who talk a lot with each other, we do a kind of chemistry test, to check how they sound together, that the dialogue really sounds natural. It's a fairly long process, but the moment you nail it and land exactly the right actors, it's the most sublime, most satisfying feeling in the world. To hear someone reading your words, and suddenly all the characters you wrote, if you're an author, suddenly come to life, and you say: this is exactly how I imagined it all when I wrote the book. There's no more beautiful feeling than that.

Eyal David: [05:16] How long does a production like that take, for that matter?

Yael Yekutiel: [05:16] Producing a full cinematic book, meaning a full cast of actors, a musical score, sound effects, surround, all of that, can take between eight months and a year, too. American publishing houses usually work in a very, very orderly way; they commission all productions two years in advance. They want the production two years ahead, and then they put it in their book catalog a year before it's even scheduled to reach stores or listeners. So those are the time frames we work with. In Israel the time frames are much shorter.

Eyal David: [05:50] If I look for a second at a regular audiobook, what does that look like? I wrote a book, and now let's say I work with a publisher, how does that work? Just a regular audiobook, basically?

Yael Yekutiel: [05:56] Publishing houses in Israel will usually want to produce a regular audiobook. There's a very well-known roster of actors today who narrate a large share of the books, and that's it. They narrate the book, record it, just make sure there are no really, really, really jarring mistakes, like saying a number with the wrong grammatical form, or one word instead of another, things like that. If it's a fantasy book, it's very important that we pronounce all the new creatures the author invented correctly, because fantasy books have a lot more than zombies and vampires; there are all kinds of characters nobody has heard of, so you need to practice how to pronounce the name. And that's it, post-production is relatively very short: you make sure there isn't too much background noise, and the book goes live.

Eyal David: [06:39] And then at the end, where do I upload it?

Yael Yekutiel: [06:46] If it's a Hebrew book, in most cases it's uploaded to e-vrit, which is really a very successful site. There are a few more sites like Storytel and indiebook that also sell Hebrew audiobooks.

Eyal David: [06:56] And if I'm not operating in Israel? Because you also... What does the business actually look like in terms of activity? Is most of it in Israel?

Building a mostly-US business from Israel

Yael Yekutiel: [07:04] Most of our activity is in the United States, I think 70 percent, maybe even 75 percent of our activity is in the United States. Really, when we founded Canarit, we founded it as an American company, and our intention was: another week or two and COVID will be over, and we'll all go back to the US and work from there. The book industry, the biggest headquarters of the global book industry, sits in Manhattan, so it was clear to me I was going back there. COVID did things a bit differently; it took a year, two years, until it was possible to go back, and by then we had pretty much settled here and built an operation that's fairly virtual, that knows how to work mostly over Zoom and email. We even did the recordings virtually and remotely.

Eyal David: [07:43] Yes, tell me, that made me think: what did you bring with you from high-tech that maybe helped you get organized here, in that respect? Because I hear that you moved fast and built operations, and worked with freelancers, that's how it sounds.

Yael Yekutiel: [07:57] So yes, my background is high-tech, and Gil's background really is sound design and working with actors, and she did that for many years in Los Angeles. What made it possible for us was that Gil had a very, very, very good network of actors, studios and sound editors in Los Angeles, some of them Israelis; some we brought to Israel, and they've been working with us here ever since. I had the experience of work methods and due diligence, and how to approach large strategic clients, how to go through their due diligence with them, work with teams, how to reach the CEO or a VP or the president of the company, even if it's a very, very large company, because I know that he or she, only they can actually make a decision or give the instruction: go check out this small company nobody understands what it does, because it sounds interesting, so go check them out. So I think all these work methods from high-tech, that you have about two and a half days to conquer the world and if not, then not, that's deeply embedded in me and I'm used to working that way, so we worked that way at Canarit too.

How they spotted the business opportunity

Eyal David: [09:02] Do you think it's also a bit seasoned with startup chutzpah?

Yael Yekutiel: [09:02] Definitely, yes. At the same time, I think that in startups too, yes, there's the chutzpah and there's the daring, you can't do without it, and lots and lots of optimism, maybe even to the edge of naivety, because you have to believe. If you don't believe, if you don't really see yourself creating something new in the world and making it mainstream, then you have nothing to do in high-tech, certainly not in startups. And yes, in our field, we knew the audio market is very, very big, we listened to lots of audiobooks, and as Gil said to me in our first meeting: why can't it sound like a movie? I don't want to hear a narrator reading it like it's an ad for a new financial product, I want emotions, I want to feel like I'm in a Harry Potter movie. And we knew... we simply knew the market had to go there, we just saw it. Tell you why we saw it? Because that's what we saw, because we love books and we love fantasy and we love entertainment.

Eyal David: [09:58] Because we talked about passion, and it seems Gil, and also a bit from what you describe here, you came in with a lot of passion. And if, it's also interesting to know for a second what the market size is and so on, but what actually made you think there was a business opportunity here at all? Because in your head it was more business-minded.

Yael Yekutiel: [10:15] Because of the size of the market, because of the very, very fast growth of players like Audible. Audible is a subsidiary of Amazon. Amazon simply decided one day to invest more than four hundred million dollars to turn it into the biggest hub in the world for audiobooks. There are more than a million titles there today, and the numbers grow every day. Just to give you an example of how much this market is growing: every day between one hundred fifty and two hundred audiobooks are added to Audible alone. That means around seventy-five thousand new audiobooks a year.

Eyal David: [10:48] In all languages, or in English?

Yael Yekutiel: [10:54] In English, we're only talking about English right now. If you also think about the Spanish-speaking, Portuguese, and Scandinavian markets too, it's an area that's developing very, very fast in audio; the numbers are much bigger.

Eyal David: [11:08] So basically you looked at the market size, you're saying, and at that gap, I see.

Yael Yekutiel: [11:08] Both at the market size, and we also looked at which books are very successful in audio. We said, wait, there are whole series of books like Harry Potter, lots of books in that style. These are books whose audience went to see all the movies; they're used to seeing dragons going "whoosh" over your head, and screams and explosions and lots of emotion. How can they give that up in audio? And we started doing it: we started producing short stories, we started producing demos. And when we had demos we felt really represented something, some were demos of war movies, some were demos of fantasy movies, some were more romantic, some had ten actors, some had two, the effects we used were different, the music was always different, and we created demos, each one between four, five and ten minutes, and with them we started approaching the market and telling them...

Eyal David: [12:09] Wow, that's intriguing, that's good, we'll get to that, really how you make the first sales. Tell me, and after you understood there was a business opportunity, yes, I'm also sure you're analytical and dug deep there, that actually interests me a lot, but...

The Israeli attempt that ended with zero results

Yael Yekutiel: [12:22] Yes, yes. Anything there is to read on the internet, every number, we read it all.

Eyal David: [12:28] And you didn't come from the market. So, I'm trying to understand for a second, was there some gap? I'm sure there was. Where you thought your customer actually needs something, and you discovered something else?

Yael Yekutiel: [12:34] Because basically, I don't want to say we got stuck, but because COVID basically forced us not to go back to the US right away, as we'd planned at first, we sat in Israel. And in Israel, very quickly, also because the vaccination pace was very, very fast and all that, people were allowed to go out more, and go back to workplaces and so on. In the US, not yet. Especially in Manhattan, there was more or less a lockdown. So we stayed here and said, OK, we're here, and we can already start getting around. Let's start approaching Israeli publishing houses; we really love original Hebrew literature, we're Israelis. Let's start approaching the big publishers and see what they say. I can't say whether it was a mistake, but it was definitely a step that cost us a lot of time, a lot of resources, caused us a lot of heartache, and the result was zero, maybe even less than that. Nobody wanted to talk to us, nobody wanted to work with us. Two meetings that I did manage to set up with someone in the end, because I pretty much forced him, let's put it that way, he understood that if he didn't set a meeting with me on the phone, I'd just show up there. They basically gave us to understand that it was a waste of our time and better to do something else: you seem nice, but go to a field you understand better. And that's it.

Eyal David: [13:53] So we really are talking about mistakes in the end, that's maybe a mistake we can talk about. I'm actually curious, let's turn for a minute to the area that interests me more: the American market, which I don't know at all in this respect, and you didn't know it in this respect either, I mean these publishing houses, right?

Yael Yekutiel: [14:11] I knew it from other directions. In my last ten years in high-tech, when I lived in New York, most of my clients were from content and entertainment, so a lot from TV, and also a lot from film. We worked with Warner Brothers, we worked with NBC, and we also worked with big media companies like Fox News and so on, and we also worked a bit with publishing houses. So I understood them, I knew them, some more, some less, I understood the approach. Books less, the book market less.

Eyal David: [14:41] So you got there, and I'm saying, you had all kinds of assumptions, right? You were here, you were stewing in COVID, and that maybe actually helped you sharpen things, and when you went out and met those clients, and you've come a long way, looking at it now from a distance, what did you actually learn? That at the start you basically assumed this is what they'd want, and... well, it wasn't...

The assumptions that turned out to be wrong

Yael Yekutiel: [15:05] I assumed that... and I know it's wrong, it's wrong to assume this, I know it from my startup days: that you assume everyone will understand the problem you're about to solve, and will want to solve it. Well, no. We approached lots and lots of senior people, but not necessarily the most precise people. And there were people who really said: wow, that's very interesting, but I'll talk to legal; and legal doesn't understand, and thinks they can't do it right now, and basically my copyrights don't allow me to work with a format like hers. And then I have to explain to them that there's actually no legal problem here, because...

Eyal David: [15:35] Why would there be a legal problem here, sorry?

Yael Yekutiel: [15:41] Anything to do with copyright has to be very, very precise. So a publisher, for example, acquires the copyright to a book. The rights have to be itemized; it's not enough to say "all rights available," as people tend to say today, meaning all the rights. You really need to specify: does it include audio? Does it include TV? Does it include film? And in many cases, film and TV no longer belonged, those rights no longer belonged to the publisher. Why? Because that author's agent closed a different deal. And then many times the publisher came back to me and said: listen, there's a debate here, does a cinematic audiobook fall under the rights as a book, or does it fall under what's called performance rights, which belong to the studios. And then he sent me to the studios, and the moment they sent me to a studio, I knew I wasn't going to get anywhere. So we had to find a different approach. It took us a long time to understand that.

Eyal David: [16:32] So your original assumption was that it's very easy to take the material they already have and run with it, but you realized there's a legal limitation here that doesn't allow it, because a cinematic book isn't one of the layers.

Dozens of learning conversations to understand how the industry really works

Yael Yekutiel: [16:50] We did a lot of research on this, we talked to a lot of people. I asked lots and lots and lots and lots of senior people in the industry to jump on Zoom with me and do what's called an informational interview, which is an interview that isn't a sales pitch: I just want to get information from you and consult with you. And to the Americans' credit, they're always very, very open to that, very generous with their time, and if they know I'm not about to try to sell them something, they'll share lots of behind-the-scenes information with me that I simply had no access to, because I don't sit in their legal department. And after a good few dozen interviews like that, which we also did all on Zoom, we understood that there was actually no problem here. I mean, there was a problem: the obstacle was that we'd approached the wrong people. And then I simply said, that's it, I'm not doing what polite people do anymore, I'm doing what I know how to do. I simply made a list of all the presidents, CEOs, senior VPs of all the global Big Five Publishers, which everyone knows, like Penguin, like Harper and so on; they control 70% of the global book market, certainly in English, and I simply approached only them. We sent them a very short email, two sentences, two demos, and an offer: we can produce this for you for amount X.

Stop being polite and go straight to the top

Eyal David: [18:08] Wow, wait. That's it?

Yael Yekutiel: [18:08] That's it. That's what was in that email.

Eyal David: [18:08] Excellent.

Yael Yekutiel: [18:08] Eighty percent got back to us pretty much immediately, I mean within two days, and wanted more information, and after we gave them more information, because they had lots and lots of questions, they also asked, OK, let's jump on the call, which basically means Zoom. And there were some who got back to us later, or who didn't even get back to me, but I set up a meeting with them, for example at the book fairs in London, in Frankfurt, in New York. We attended all of them, and set meetings in advance with everyone, and then even those who hadn't gotten back to me say to me: oh, okay, let's talk.

Eyal David: [18:45] Wait, wait, wait. First of all, crazy percentages, but I'm trying to understand for a minute. So first of all, what I take from this is that you actually took a good practice from startups, customer discovery, basically.

Yael Yekutiel: [18:59] Yes.

Eyal David: [19:04] For learning purposes, so they didn't feel threatened, and it's amazing that they also jumped on these calls with you.

Yael Yekutiel: [19:04] I knew they would. Yes, it usually works, I have to say.

Eyal David: [19:11] And then you basically went and said, OK, I'm looking at the big whales, basically where the money is in this field, so you went to the seventy percent, basically, and that's amazing. How did you actually manage to create an email, a short one, that's interesting enough for them to jump on a call with you? That really interests me, because a lot of people do cold emails, because that's basically what you did here. Even though you mapped them, even though the emails were very tailored to them, I'm just curious.

How to write a cold email to giant customers

Yael Yekutiel: [19:39] Totally. Look, I know what they do. I read all their press releases, we read all their reports. I didn't make promises, I didn't say, I can create a new 20-million-dollar business for you in five minutes and it'll cost you nothing. We didn't say things like that. But yes, we gave a very precise value proposition. I used, again, I worked there for many, many years, I worked only with American clients, only with Americans. That understated American language is deeply embedded in me. I also studied as a child, as a teenager, at British or American schools, I know the language. So I used their language a lot: on one hand very understated, not saying excellent and exciting and very emotional things like that, but rather "I think it would be a good opportunity." Things like that.

Eyal David: [20:23] And what was the value proposition, what was the offer?

Yael Yekutiel: [20:29] I did a lot of research on how much it costs them to produce an audiobook today. And I simply gave them a value proposition: I gave them a five-minute demo, and told them, I can produce one like this for you, at a cost very, very similar to your production costs today.

Eyal David: [20:38] OK, so wait a second, we've already gone really tactical here, because this really interests me. So you sent an email that already had a file attached, for that matter?

Yael Yekutiel: [20:50] Of course.

Eyal David: [20:50] Gorgeous, so the demo is already there, you can actually feel what it's like.

Yael Yekutiel: [20:50] Even more, two or three demos, yes.

Eyal David: [20:50] Gorgeous. So basically, you didn't leave them any reasons not to get back to you.

Yael Yekutiel: [20:56] Right.

Eyal David: [20:56] Maybe reasons to land in their spam, because it has files, but basically you didn't leave reasons, because there's an argument here of: here's how much it'll cost, or not how much it'll cost, why it's worth doing, and here's what it'll look like?

Yael Yekutiel: [21:09] No, and also how much it could cost them; I gave them a range, and I knew that range wasn't much beyond what they spend today. Some, again, some were very interested, some were sure that... surely this won't happen, and surely she isn't serious, but we'll talk to her anyway, because the demos, they loved the demos. I mean, when we approach creative people, people whose business is creation and art and so on, if they love the art, that's what interests them. Afterwards, the costs or all kinds of operational issues, you can negotiate on that, you can talk about it, but if they love the art, then it starts with that. It's like if they love a book: you can tell them a million stories about the book, but if they haven't read the first five chapters and connected to it, the book won't go anywhere, at least with them.

Eyal David: [21:56] I'm curious, what about the fact that you didn't come from the book industry, in your opinion, helped you see what active players there didn't see?

Bringing innovation to a 150-year-old industry

Yael Yekutiel: [22:03] I don't think it's that active players there didn't see it, but there's something very interesting about the book industry. The book industry that exists today has actually existed for between 150 and 200 years. Of course the book industry started much earlier, yes, when they invented printing. But the book industry as it is today, the big companies like Penguin Random House and HarperCollins, and lots and lots of other companies like them, have existed for between 150 and 200 years. Sometimes the same family that founded the company is still somehow a partner in the company today. Even though all these companies are giant companies, publicly traded, worth billions of dollars, still, even the original family is usually still involved. So on one hand there's a very, very established industry here, very conservative, that knows the work very well, and they do things the way they know how. On the other hand there's lots and lots of innovation, and just as they entered the audiobook market, it's an industry that sees what's coming, an industry that has been through a lot, in many respects. It went through wars, it went through periods of book burning, it went through terrible periods of all kinds of blacklists of authors and actors and people it was forbidden to work with, this happened all over the world, and it always knew how to get around it, it always knew how to overcome it, and I think innovation is part of that.

Eyal David: [23:29] Five years or so? Five years? OK, so let's talk about AI. What's being done today, what does this chain even look like? In general, maybe let's start from the end for a second. If today I send a demo like that by email, I basically need it to sound really, really good, because with AI you can produce one very easily, in one or two clicks. Also this whole value chain you mentioned, that happens from the moment I wrote a book until it gets here, AI has come in strongly, come in strongly at the big ones too. So where is it already changing things? Let's start with that.

How AI is changing books and audiobooks

Yael Yekutiel: [23:59] It's changing things on several levels. Even today, there are books written by AI, meaning even before I thought of producing a book in audio, there are books that were written by AI. There's a name for it in the industry, they call it AI Slop.

Eyal David: [24:13] So basically you're saying that... I see, we're speaking a lot of English here... the place where your offer shines is basically when there's an audience for this thing, and they now want, for the true enthusiasts, to create a version that's wow.

Yael Yekutiel: [24:27] Yes.

Eyal David: [24:27] So if I work with a book that was just written by AI, it probably won't fall into that category.

Yael Yekutiel: [24:27] Right.

Eyal David: [24:33] Let's dive into where AI actually comes into cinematic audio. Into the production process.

Yael Yekutiel: [24:33] So look, today, if you go into Amazon, there's a button you can press, and they'll produce your book with AI in an hour and a half.

Eyal David: [24:46] How much do they charge for that? Do you know?

Yael Yekutiel: [24:46] Nothing. A few hundred dollars. There are a few problems with it. First of all, it's all still very, very synthetic. We assume the technology will improve very quickly in the coming years, it could even be within a year, because it happens in very, very big leaps. Today, at least, the narration is synthetic. Yes, you can choose a female voice, a male voice, you can choose the age and so on. AI still has a problem in that it doesn't really know how to identify nuances, emotions, all kinds of things like that, so it can make lots of mistakes. And so it also requires a human pass over every word, to make sure there are no mistakes here, or at least no significant mistakes. So that exists. As for whether the book will sell, most of the major platforms in the world today require you to state that the book was written or produced, sorry, by AI. In many cases they'll put it in the algorithm, push it out, and push it down. It will be very hard for you, as a reader, to get to a book that was produced by AI, because the algorithm simply doesn't like it. Again, we assume this will change within a few years. At Canarit we don't work with AI at all, to the point that if an author comes to us, and I look at the cover, and I say to him, did you design the cover with AI? And he tells me, yes, and... you have to design a new cover, with no AI at all. The reason is that if I try to sell it to an international publisher, they run it through dozens of filters whose purpose is to catch any possibility that the book used AI, and if there's even the slightest suspicion, they simply disqualify it. They receive hundreds of books every day that people want them to produce, to buy. If there's a suspicion of AI, they'll simply put it aside.

Eyal David: [26:30] How much does a production like that cost?

Yael Yekutiel: [26:30] A production like that, sorry?

Eyal David: [26:30] You mentioned the Harry Potter example, for instance, right?

Yael Yekutiel: [26:38] Yes, now, Harry Potter isn't really a representative example. Harry Potter, what Audible did, they wanted to showcase their whole entry into this field of cinematic audio. Audible started out like Netflix, a platform for distributing audiobooks. Today they already have an in-house studio, a very big studio that produces lots and lots of audiobooks, and they wanted to create some kind of marketing move. They knew it would be a loss leader, and they produced a series of Harry Potter books, multi-cast, fully cinematic, with all the most famous actors in Hollywood. They don't report how much the production cost; my sources at Audible say between 20 and 30 million dollars. And there's no expectation of getting the investment back.

What a cinematic audiobook costs to produce

Eyal David: [27:21] And how much does it cost, just say, the order of magnitude of a production at your place, a process like that of 8-9 months, as you mentioned?

Yael Yekutiel: [27:27] An English book, let's say we're looking at about 70, 80,000 words, that translates to roughly between 10 and 12 hours of listening. It's a book built on actors, not narrators, actors who are all A-list in audiobooks, some also known from TV and film, professional direction, a musical score written especially for the book, to highlight all the action moments, all the romantic moments, the moments of tension, sound effects. And we're not talking about, like it used to be, a creaking door, a creaking stair, things like that. We're talking about sound effects where, when you listen to the book, you won't even know there's an effect there, but it's some kind of ambience that makes you feel the tension, makes you feel the noir, makes you know that something else terrible is about to happen, without me saying anything, but you'll feel all these things. All of these are productions at very, very high levels, they take a lot of post-production. We work both in Israel and in Los Angeles, so we work with the most cutting-edge studios; our studios are also studios that Sony Music uses, or Universal Music uses.

Eyal David: [28:41] Now I'm starting to imagine what your email looked like. That sounds familiar.

Yael Yekutiel: [28:41] Yes, yes. We spell out all these things, they know it, it's very, very transparent. For a book like that, for a big publisher who also wants it to succeed, and knows they're going to put some marketing money behind it too, the production is around, can be between ten thousand dollars and 30 thousand dollars per production, sometimes more. If, say, a publisher wants me to use a very specific actor, then of course there's the rate for certain actors. If they want me to write original music, from beginning to end, instead of using library music, which we also rework, we turn it into an original score, but it still comes from libraries, then that has significance. Original music can bump it up by another fifty thousand dollars. We've done that before; we did it for a production of Pride and Prejudice. Lots and lots of movies were made of it, there are lots of versions of the book. We released a cinematic audio production, nineteen actors, and the musical score was written by Sharon Farber, a Hollywood composer, who was nominated for a Grammy, was nominated for an Emmy, sits on the Grammy board, writes music for films, and she wrote the music for us. So again, it really, really depends on the nature of the production, but it starts at ten thousand, and can easily reach a hundred thousand dollars.

Eyal David: [29:58] So, I also see where you're taking me along the way. You're basically saying that the thing that's kind of your moat against AI, and we'll talk about it, is basically the part that's more... again, if we're talking about a big Harry Potter production, for that matter, then I probably want to hear all the real actors, or even, maybe there are substitutes for that, but I also want to hear, I don't know, the Cambridge choir or something like that, which is very, very authentic to that specific title. Let me ask you a question: I'm listening to you, and I'm thinking about the film industry, which is basically built the same way here, and AI basically came in there and improved efficiency, say, in action movies, the planes that used to fly, the drones, right?

Yael Yekutiel: [30:53] Right.

Eyal David: [30:53] All the action scenes that used to cost a lot of money. You probably also have areas you're surely thinking about, where it could come in, no?

Yael Yekutiel: [31:01] Look, already today some of the editing solutions we use, I mean the editing software we use, do have AI-based parts. There are solutions that let us catch mistakes in the recording much faster and more automatically. That same AI system, or that same system that has some AI parts, can report to the actor in real time and tell him: here you have a mistake, you pronounced the name Yael wrong, you need to re-record it. Or: in this sentence your voice is a bit lower, raise it by half an octave. I mean, there's a system that knows how to catch mistakes much faster, knows how to report these mistakes, and tell people: here, on page X, line Y, find it and fix it, get the corrected recording, and make sure it really works. So it's a process that really helps maybe speed things up, and make it a bit faster, but there's still no escaping going over everything manually, by humans.

Eyal David: [32:07] Yes, that's today, I agree. Well, it's very interesting where this will go.

Yael Yekutiel: [32:07] I'm sure it will improve, but today everything still needs a human pass.

What listener data can teach you

Eyal David: [32:15] OK, let's leave AI aside, but I will ask, because something else came up for me. With books like these, I really don't know, is there analytics behind this whole story? I'm sure Amazon has it, when I listen to a book, right?

Yael Yekutiel: [32:27] Yes, sure, sure, sure. Just like Amazon knows, say if you bought a digital book and read it on Kindle, Amazon knows exactly on which page you stopped, on which page you abandoned the book, how long it took you to read it, it can count the number of pages you read, and pay royalties to authors accordingly, it can do everything. Same thing in audio.

Eyal David: [32:46] And what does that look like for you? I'm curious, does this data reach you in the end? Can you do something with it?

Yael Yekutiel: [32:53] Yes, it reaches us, it really, really depends. If it's a book we published ourselves, and there are lots and lots of books we published ourselves, uploaded them to Audible, and Storytel and other places, then I see all the analytics, and I know how to analyze it. I know which books are more popular, which less, I know which books get abandoned earlier, which books were abandoned. There's always some level of drop-off, not a high level, but there's some kind of attrition. So it's easy for us to identify it and know how to improve the sample, because before buying a book, people listen to the sample, so we know how to produce the demos better, and we refine all of that. There are books that the publishing house actually publishes, and until it passes that information to me, I don't have it. I can see if it's a bestseller, I can understand what the sales were, but I depend on it to tell me: listen, in the opening we need to bring in much more gripping music much sooner, because we see that in these particular chapters there's more listening, less drop-off. And drop-off doesn't have to mean abandoning the whole book, but someone saying, OK, I'm putting this aside, and going to do something else. When the goal, of course, ours and the publisher's, is that you don't drop off the book, that you listen from beginning to end, finish it, and immediately buy the next book in the trilogy.

Eyal David: [34:13] Of course.

Yael Yekutiel: [34:13] So that's the information we get from them, and we can really improve.

Eyal David: [34:13] The second area where it could help you, right, I was actually thinking about this: that you basically work in a kind of storyboard format, because that's what it sounds like, right? And then maybe there are hypotheses, or maybe debates about what will work and what will work less, and then maybe with data like that you can look historically at what works and what doesn't.

Yael Yekutiel: [34:34] Right, and we pretty much... we always rely on historical knowledge, we know exactly what's happening with all our books, in all our books what worked and what didn't. And the moment books go live, they're immediately promoted on social media too, and on social media you get feedback from the field, and usually the feedback is either very, very positive, very excited, or harsher, because someone with a more chill opinion is less inclined to write a review. So we have the ability to really collect this data, and we're checking all day what people say and what they don't. That doesn't mean we act on it, because it's only a sample, people who write reviews, but we take all this information and always move forward based on it. But in the end, just like you treat every film as a completely new creation, the same is true of books. We sit with the author, we sit with the publishing house, and try to understand. Many times, with an author, I need to sit with him over a specific paragraph, and I want to understand what the poet meant, because when I read it, I can read it however I want, in my own head, I'll invent stories, I'll feel emotions, but when I produce it for a client, I have to make sure the emotions I convey are the ones he meant, and not the ones I wanted to feel. So there are lots of places where we'll sit with them and ask them: what did you mean here, and is she shouting here or crying, it's not clear to me, or here it seems to me she's really laughing out loud, and then the author will tell me, no, no, no, she's actually cynical, it should be said dryly. So we fine-tune all these things together with the author, and get all kinds of requests from them. Many times authors or publishing houses send me a few YouTube clips and say, I love this music, I love this ambience; they send me an actor's demo and say, I really, really love this actor, and the voices he does. So even if I can't manage to cast him, I'll take a similar voice from there. We do accept these instructions, because in the end they're commissioning the work, but I think most of the time they rely on us, and they trust us to know the work, to know what will work and what won't. Sometimes people want to shout, and I tell them, no, no, you can't shout, you need to convey the shout, but in the same voice you've been using until now, because if someone is sitting with headphones, I can't suddenly shout into their ear, they'll take off the headphones and put it aside. So there are lots and lots of things we know work in audio or not, and usually clients work with us on that.

Eyal David: [37:11] Excellent. Look, by the way, this whole thing with series is probably the most interesting thing to do, maybe like with everything. Tell me, so that I understand for a second how money moves in this world: tell us for a second where the different publishers come in, where actually... you mentioned Audible, you mentioned Spotify, maybe a few numbers.

How money moves in the audiobook market and what Spotify changed

Yael Yekutiel: [37:30] Yes, so I'll start with the bigger numbers. Today the audiobook market, I haven't mentioned this yet, is valued at about 11 billion dollars. The forecast is that by around 2033, something like that, there are estimates that the market will reach a value of between 20 and 60 billion dollars. This very big gap between 20 and 60 billion is because we see that every year very, very, very big players enter the market and change the entire market. For example, when Spotify entered the audiobook market about a year and a half ago, all at once it sold, or provided, audiobooks to 260 million users, who are premium users, meaning they have a paid subscription. Almost all of those users, those 260 million, started listening to audiobooks. What this created in the book world is that within two quarters, all of the Big Five publishers in the world reported a 17 percent increase in revenue, which is a lot, suddenly, within two quarters, and beyond that they reported a 7 percent increase in operating profit, which are huge numbers in themselves, and they knew how to look at these numbers and understand that it was because of Spotify's entry into the audiobook market. There was suddenly phenomenal distribution, to a huge group of people who until then maybe hadn't had access to audiobooks. Why did they go there? It was natural. First of all, today most of our digital media in the world, not only in Israel, we consume on our smartphone. Today most people already consume their podcasts while driving, while jogging and at the gym, in Spotify's podcast channel. It was only natural that in addition to the podcast and music channel, they added another column called audiobooks. And that's what they did. In Israel, unfortunately, this service still doesn't exist. We're in touch with Spotify, we're business partners of theirs, we talk every few months, we tell them, so, what's happening with Israel? "We're ready to support all access to the Israeli market, but building a Hebrew-language platform and user interface is an investment that isn't worth it for us right now."

Eyal David: [39:39] Don't you see... I don't know... don't you see Netflix or Apple, naturally, or players like that, where it's maybe natural that someone who finished a movie would flow into something like this? You don't see that, or are you doing some kind of collaboration with Spotify?

Yael Yekutiel: [39:57] Of course we see it, and more than that. Today we know that Netflix isn't just a distribution platform for movies and TV series; they also buy their own content, and produce their own movies and TV series. The moment they produce their original content, they probably also hold the copyright to make an audiobook out of it, or a podcast. It could be a narrative podcast, not necessarily a daily podcast. Today there are podcasts that are also produced like a cinematic audiobook, with actors, with music, with atmosphere and so on. Once a platform holds the copyright, it'll make every possible product to try to maximize its revenue. We know today that a cinematic audiobook doesn't cannibalize other products, like a movie or a book, so it's only natural that the same platform, or whoever owns the content, will do everything to create another product, develop another product. And a cinematic audiobook is natural.

Eyal David: [40:59] OK, 20% of book readers, I read, are actually listeners, right?

Yael Yekutiel: [40:59] Right.

Eyal David: [41:05] That's crazy. Which categories? Just give us a bit.

Yael Yekutiel: [41:05] Basically it's in all categories, and the categories that are most, most successful in audio, not necessarily cinematic audiobooks, but audio, are of course nonfiction, where there's no sentiment involved; people have no problem listening to them while washing dishes, at the gym, something like that. But also romance, fantasy and romantasy. Those are three genres, romantasy is more of a subgenre, that are very, very, very successful in audio. In cinematic audiobooks, we see that fantasy, science fiction, romance and romantasy are the most successful, and honestly it's natural. Fantasy: we want to hear the dragons, we want to hear gunshots, we want to hear screams, we want to hear a couple falling in love, and the sound of water, and listen to laughter in the background at sunset, we want to hear all these things, so...

Eyal David: [42:09] So it's rational that you'd go there, basically. So tell me, I'm trying to understand one more thing about the business. At some point you started looking outward, you looked at Israel, you started operating in Israel. What's the story there?

How Canarit came back to the Israeli market

Yael Yekutiel: [42:16] Right. We always wanted to work in Israel, because we're Israelis, we read in Hebrew, we love Israeli creators, it was always a dream, but again, the not-so... warm reception we got at the beginning made us realize that, OK, we'll invest our efforts somewhere else. And we were a small company, so... it was easy to say, fine, we'll keep working in the US, there they want us, they understand us, all good. What happened is that a young author named Roni London reached out to us; she'd heard our productions, and she said, I want one like this in Hebrew. She reached out to me and said, can you do one like this? I told her, of course, because I always say of course, because... that's what you say in startups. And then we started working, and we realized it's not so obvious, because finding actors who know how to act in an audiobook, who... you have to remember, with an audio book, I have no picture. If the actor said something not very clear, maybe swallowed the words or something like that, I have no visual context to understand what he really said. So I need to find very special actors, who know how to narrate, whose speech is very clear, whose Hebrew is very, very correct, without a diaspora accent, but who also know how to act.

Eyal David: [43:31] So I have to ask for a second, I kind of have to dig into this to understand. So you basically got into this by chance? Is that what you're saying? Not by choice, basically...

Yael Yekutiel: [43:38] By choice, but they reached out to us, and we jumped on the opportunity. We did 70 auditions until we found the actor who played the lead role, Ayalon. As soon as I heard him, I said, this is going to be Ayalon. I got in touch with him, and it turned out he was a 16-year-old boy, so I had to talk to his mother, and I promised her we'd work around the schedule of school and the gifted program and the scouts, and I promised lots and lots of things, and we really had to stick to it. And then we started working, and the book was published, and it's a fantasy book for young adults. And what's beautiful in Israel is that there are lots and lots and lots of communities of authors, a large share of whom self-publish, not through a publishing house, and they have very active communities, and they're very supportive of each other. And when we and Roni the author started teasing that the first cinematic book in Hebrew was coming out soon, we produced lots of demos to release, so people would know what it was about. The community really connected with us, and there was support at the level of people pre-ordering the book, and people writing reviews in advance, and people who wrote to me, we want to write a review. It was lovely, it was really, really beautiful, and it really was the first swallow, and since then lots and lots of Israeli authors have reached out to us, I want one like this too. But what happened next, very quickly, was October 7th. Everyone knows what happened. After the initial shock, we also started seeing more things, like the isolation of Israeli creators abroad, this cold shoulder toward Israeli businesses abroad, and it put us, as Israelis who decided to stay here by choice, because at that point we'd already started going back to the US but decided to stay here. And then both Gil and I talked about it a lot, and said, what do we do? Do we move back to the US, because that's where the main business is, and it'll be easier for us. They don't really know yet that we're an Israeli company, they know we're an American company, they treat me like an American, I'm one of them, totally. Every time I traveled to Manhattan to do all the meetings, I know all the best restaurants in the Village, I take them there, they treat me like one of them. And suddenly we had to make a decision. How do we present ourselves? Do we signal that we're also an Israeli company? Do we talk about the Israeli part of us, about the Israeli business? And then we said, I don't want to say the word because it's not polite, we'll succeed, everyone will know we're Israelis, and that's it, and it will happen despite our haters. Personally, if there's something that drives me, it's spite. I don't know how to say this word in Hebrew. In Hebrew it's "davka," but that doesn't really capture the meaning of spite. Spite also has a kind of vengeful feeling to it. And I said, no, our authors, their books, will be seen on the shelves of Barnes & Noble, like, that's how it's going to be.

Deciding to make being Israeli part of the story

Eyal David: [46:47] So basically you've now created a kind of bridge for Israeli authors to the big publishers in the US.

Yael Yekutiel: [46:47] Right. So what we did, because we'd already started working with lots of Israeli authors, and lots of others we hadn't worked with yet reached out to us, but we read their manuscripts, usually books that hadn't been published yet, we read their manuscripts, and there were lots of books where I said, wow, there's crazy talent here in Israel. I think that really, if you look at the concentration of talent in the field of books, its density per capita, its specific weight in Israel, is very, very, very high. Now it's true I haven't compared it to the number of people in other countries, but anyone working in the field here knows there are truly amazing amounts of talent here, producing things that aren't produced anywhere else, genres like Jewish mysticism, which combines the world of fantasy but with elements maybe from Kabbalah or mysticism, or just all kinds of characters.

Taking Israeli authors to the American market

Eyal David: [47:41] Wow, I have to stop you. Tell me, has anyone done the Bible in cinematic?

Yael Yekutiel: [47:47] Actually, we're about to launch a book right now, really, for an American Christian author, who loves Israel very, very much, calls me every two days to check everything's OK. But it's a book that tells a completely fantasy story, but it's based on the days of Jesus, the early days of Jesus. It's a book that's a quest, really an Indiana Jones-style quest, but some of the characters... Jesus is admittedly a secondary character in the book, a background character, but it's in that period. Not a religious book. The book, if you read it, it's like Indiana Jones, and our production too, you'll listen to it and say, wow, it's Indiana Jones, but there are characters from that period.

Eyal David: [48:33] I just can't wrap my head around how none of the big studios went for this book, which is the best-selling book ever, and has the biggest audience ever, and there's a series in there, and you could produce it in lots of languages.

Yael Yekutiel: [48:44] Right, there have been productions like that, not many. Mel Gibson, famously, released a few things like that. Today we see there's greater interest in literature in the genre called faith-based, meaning based on faith. In the US they mainly mean based on Christian faith, they won't say it, but that's the intention. But they also really embrace Jewish faith-based work. The books we work with that come from fantasy have touches of Jewish mysticism. The mysticism part, or the Jewish part, is a very, very non-central part, but it does give a special flavor that only an Israeli author can create. And when we saw all these things, we said, wait, we have access to all this amazing literature here. A large share of these books were never even published in Israel, because publishing houses didn't want them, and the author has no money to fund it themselves. Maybe the book came out, but I read the book and I say, no, this is a book that if it were by an American author living in New York, today it would be a blockbuster. So we said, let's take these books and connect them with our clients in the US, who really are the biggest publishers. I don't pass every book on; I know which book to connect to whom. And we simply started doing it: we traveled to New York and did a very organized roadshow. We had about twenty-five meetings with very, very big publishers, with publishers that are boutiques but very well known, they have New York Times Best Sellers. We met with lots of agencies, with production companies that specialize in what's called book to screen, meaning from a book straight to TV or film, and we started getting them interested. We started pitching to them, playing them demos of books we hadn't even produced yet. We took the book and produced a five-minute demo: come see what this could be. And we started, we simply set up an agency inside Canarit. And again, I'm not an agent, I didn't know what it means to be an agent, but I said, sales; we'll figure out everything else. And we simply started working as the agency for those authors, and bringing them to the American arena.

Eyal David: [50:49] So people can also reach out to you, so we'll put a link. I'll add to the Bible story: if someone also wants to reach out to you to produce the Bible story, there's no copyright on it, so it sounds great to me. As we wrap up, I want to ask you something I didn't get to, and it came up from the community. If someone came to you now and said, kind of, after you did this yourself and jumped into a new industry, so it's someone looking at an industry, and wants... why should I even go in there, or not, these questions: what do you tell them to check, basically, before they jump?

What to check before entering a new industry

Yael Yekutiel: [51:22] I think it also depends on how much experience they have in the job market, but I think if you come with some management background, or not even necessarily management, you've worked for many years, you're a professional, you know how to work with teams, with people, how to price, how to sell, you understand a bit about the challenges in marketing and sales, in setting up an operation, in everything to do with logistics and so on, it doesn't have to be in the field you want to enter. I think people like us bring a lot of experience and knowledge, and mainly knowledge of what we don't know, but a lot of understanding of how things should run in the world. And that's a more human understanding, it's less business, it's much more human in the end. But there are also correlations. I came from high-tech, from startups; many times I knew this whole due diligence topic from the big client's side. With the Americans, I knew it's easy to work with them; they have very, very, very orderly work procedures and protocols: first put a new vendor through due diligence, then an onboarding protocol, how to work with them, which projects to give them, at what scale, which teams need to work with them at first, monitoring that we do the work properly. There are big companies that have a protocol saying that if a startup or a relatively small, unknown company comes to you, they must be able to show two more clients of our size that they've already worked with. I mean, there are very orderly protocols here, and I think if you want to start a new business in a new field, you can also rely on the other side. They know what they want, they know what they're doing; learn. And at least in the American market, which is the main market we work in, in my view this market is very open, very, very pleasant, very decent, very human, it won't waste your time. You do need to understand the language, and know that if they tell you "very interesting," they probably mean no. If they told you "very interesting but we can't right now, but please reach out to me" in another six months, they mean in six months. So you can reach out to them in another four months, but they do mean it. Listen to them, they'll tell you exactly what they need, and feel comfortable asking and reaching out to people, courteously, politely, not with over-hype, not saying I can give you the whole world for free right now, but asking for information. If they can give it, they'll provide it, they do it gladly.

Eyal David: [53:42] Excellent. How many conversations like that did you have before you started selling?

Yael Yekutiel: [53:42] Very, very many. Wow, maybe not very many, but let's say that with a large share of the clients I work with today, in the past I approached maybe the wrong people, somewhat more junior people, had conversations that maybe took me somewhere else, they told me, OK, talk to legal. The moment I agreed to talk to legal, that's it, you'll stay there two years, you won't get out of there. At some point I said, forget legal, I went to the company's presidents.

Why it sometimes pays to start at the top

Eyal David: [54:22] So starting from the top is also a tip you're giving.

Yael Yekutiel: [54:22] Totally, start from the top. These are people who have a broad view of the organization, people who know which trends they want to experiment with now, and maybe which trends they aren't even aware of, and they need some small startup from the Middle East to come and tell them: listen, pay attention to this. They weren't born yesterday, they know that's how the world works. Usually they also don't have that ego of "not invented here, I didn't come up with the idea, so no." Usually they're very open in that respect, and they have the ability to give their team an instruction and say: we want you to evaluate Yael's company and do this with them, and allocate them, say, fifty thousand dollars. For them that's nothing, but for us it's a phase shift, and you need to seize it, and I think you can definitely grow and keep moving forward.

Eyal David: [55:15] Excellent. Well, Yael, it was fun, it was fun, it was interesting. An industry I don't know, so it was really interesting, so thank you very much.

Yael Yekutiel: [55:23] Thank you.