In search of a happy ending

Recent news and analysis of publishing has made me wonder if the book business is hoping for its own ‘happy ending’. This happy ending looks something like this: Whilst a few die-hard geeks use their Kindles and iPads to read ebooks, ‘proper’ readers wander around bookshops and libraries sniffing the pages as their children sit outside under a tree reading a book of poetry (printed book obviously). 

In the face of all the evidence, some in the industry seem to be pursuing their own narrative, namely ebook sales are declining or at best ‘plateauing’, people still love print books (which will ensure their survival for many years) and that we’ve got digital licked. Nothing to see here, please move along.

In an Amazon/iTunes world - where the digital gatekeepers deny us access to the actual sales data - as an industry we seem to be allowing wishful thinking and some (at best) dodgy maths to write the ending ‘we’ seem to want. An ending that is an emotional response to changing times rather than based on the stark light of commercial reality.

This piece in USA Today is a great example. E-book sales are up 43%, but that's still a 'slowdown’.

Industry experts have come to the following conclusions:

• "We've just reached a point of natural resistance — there are people who really prefer to read on paper even if it is cheaper, faster and easier to read on a device," says Mike Shatzkin, a publishing consultant and organizer of the annual Digital Book World conference. 

• "Consumers have settled into their book formats of choice," says Barnes & Noble CEO William Lynch. "Physical book sales will have a longer tail than previously anticipated."

Of course either of these statements may be true but, the numbers we have don’t actually statistically prove either of them with certainty. 

Let’s look a little deeper. As always it’s as much about what we don’t know as it is as much as we do know.

From Publishers Weekly, 'Total e-book sales rose 44.2% in 2012, to $3.04 billion. The gain in e-book sales offset a flat performance by print sales which held virtually even at $12 billion between 2011 and 2012.'

So, this is 43/44% growth is in $$ revenue increase as opposed to unit sales.

 1.     Can we tell how $$ revenue relates to units of ebooks? 

Yes, we can. We know that unit  $$ for ebooks has been decreasing year on year. If we look at these particular stats from Publishers Weekly, for this segment, sales of e-books rose to $2.07 billion from $869 million as units increased 210% to 388 million.

Based on these figures we can see that the average ebook unit price has fallen from $5.34 to $4.72. With the unit $$ for each ebook decreasing then an increase in revenue represents significant larger increases in units sold.

2.     An incomplete picture

The AAP BookStats data is voluntarily provided by 1,953 traditional publishers.

These figures contain no e-book sales figures from self-published authors, other types of ‘publishers’ or indeed a complete set of traditional publishers.

3.     Can we get to an educated guess of the impact on sales these other parties add? 

Yes, I think we can. In these various articles, Barnes & Noble have revealed that 25% of their unit ebook sales are for self-pubbed books. Kobo’s CEO Mike Serbinis revealed the following; 'In some countries, our ebook units sold from Writing Life are on par with one of the big-six publishers. In one of our countries, self-published books [as a category] is beating the largest publishers.' 

With Amazon taking by far the largest chunk of the market and being the strongest performing ebook sales channel for self-pubbed authors. (Anecdotally taking between 30 & 40% of sales). 

We could conservatively say that 30% of ebooks sold across the major platforms are to self-pubbed authors.

4.     What does that do to the numbers? 

Our starting point comes from unit sales in the AAP report, widely reported at 457m units sold in 2012 (declared numbers from 1953 publishers).

As well as the large chunk of sales going to self-published authors, there is another 'anon' group of ebooks – that don’t fall into self-pubbed or traditional published (from out of copyright titles, entertainment companies, newspapers, organisations, blogs, others). So let’s conservatively say these 'anon publishers' account for 5% of unit sales.

Using these AAP numbers and saying traditional publishers account for 65% of the ebook sales, the bigger picture looks something like this: 

Trad published ebooks: 65% (457m units)

Self-pub: 30% (211m units)

Anon publishers: 5% (38m units)

This totals = 706m ebooks through the major channels (again conservative as the scaling up is based on incomplete traditional ebook sales figures from AAP and in addition we are not accounting for sales from other platforms like Lulu, Smashwords et al

5.     What does that all mean? 

i)              A market that has gone from zero to conservatively 706m ebooks in 5 years in the US is not plateauing.

ii)             The area that has seen revenue growth rates reduce (again, not the same as plateauing at all) comes from data provided by 1953 traditional publishers. (A subset of the entire market).

iii)            The fact that print book sales have remained strong (actual plateauing) tells us very little about whether readers prefer e, p or e+p (absolutely no stats to back purchasing behaviour)

iv)            No consumer market has exponential growth year on year in a maturing market (including ebooks). BUT the growth year on year is still mind-blowingly HUGE.

v)             There is a growth in the number of books bought across e & p. Print books $ and units have plateaued whilst ebook units have grown rapidly. More books.

vi)  The number of self-published authors will continue to grow, in general their ebooks are cheaper; we will see more rapid growth in unit sales here.

Going forward 

We know that publishing is an industry full of people who love books. Many of us have fetishised them as objects and have had the occasional sniff of an old book. However, we need to separate our emotions and hopes from the facts.

The expanding use of the phrases “ebook plateauing” or “ebook slowdown” are signs of a negative narrative that many in the industry seem to be pursuing – a narrative that is simply not backed up by the data.

Show me any other area of publishing that has seen 43% revenue growth year on year. In fact, show me any area of any industry that has.

Growth is good. We are in a booming market. Exciting? Positive? I’d say unequivocally YES.

We need to keep our eye on the prize and celebrate the continuing evolution of our industry.

We should take some pleasure in the continuing growth of ebooks and the positive ways our industry is embracing changing technology and consumer desires.

We should be building a new narrative, one built on big sales numbers and which celebrates the huge successes we are achieving.

If we can do that then maybe we’ll be one step closer to getting that happy ending we all want but one that’s built on actual numbers not nostalgia for things past. 

Comments

Great Analysis

Thanks for taking the time to drill down into the figures, Sam. Great to have some rational thinking on this. The magic is in the words, surely, not the format?

Agree

I love how the fact that once you start getting a larger share of the market, "growth slows" means that it's plateuaing.  Many of these same people were laughing at the 3% share of the market eBooks had way back, centuries ago in 2010.

Interpreting data is tricky

" A market that has gone from zero to conservatively 706m ebooks in 5 years in the US is not plateauing."  Your frame of 5 years is worthy, but if we instead used a ten year frame, with regression analysis, you'd get a predictive line r^2 = (SST/SSR) that was closer to a 40 degree angle than what you seem to be suggesting -- as if the predictive line was still going straight up.

I don't think that "e-book plateauing" is a negative narrative, its describing the rate of sales increase for e-books...like the rate of increase isn't growing, the rate of increase has leveled off a bit, the segment of the sales pie owned by e-books will continue to grow but not at an increasing and hard to predict rate, it is settling into a more predictable rate of increase for the next year.

Also, sales are ultimately about revenue. Its all well and good to speculate on self-published unit sales, but what revenue is being generated (on average) per unit? A corallary to that is: how is the low-cost self-published e-book being consumed? Is it percieved as so inexpensive as to be disposible?There is qualitative information that indicates low low price e-books are "try 'em trash 'em" to the consumer.(NYTimes article Monday)  Is it fair to align those sales to books produced by legacy publishers with equal weight? To me its the equivalent of counting used mass market paperbacks as new sales. No comment on the author's work value, but price does change the risk associated with the unknown for many.

The "plateauing"

Sam, I really think the "plateauing" people refer to, including when they asked me the question to which you quoted my answer, refers to "compared to the prior rise in ebook sales" rather than "compared to what's going on in other channels." And, by that measure, I think it is hard to say there hasn't been a slowdown, or plateauing, or whatever.

What is being elided here is that the business is segmenting. If we knew the facts, we'd probably find out that sales of narrative reading, led by fiction, have a very different profile of ebook switchover than everything else: instructional, art books, reference. And the slowdown has partly to do with the fact that fiction has already gone over 50%, maybe up to 60% or 70% in some genres, and it is pretty hard for year-on-year growth to be dramatic when you reach those levels. So the overall ebook growth now depends on the books that don't migrate, or haven't so far.

The hidden "story within the story" is that the book business is bifurcating. Chances seem good to me that the continuing robust sales in stores are shifting more to the books that don't sell in digital form, but we'd need more granular data than is routinely reported to confirm that.

excellent points

Marcello Vena's picture

As long as book reading is alive and kicking, as it is, there shouldn't be major concerns. Sure not everybody gets the same share of success as he/she was used to get before... but this raises other (legitimate) questions. 

Is the publishing industry better off than it was yesterday? Is the publishing industry in the best possible position it could be given all changes in the society (not just technology)? Is the reader better off with ebook + pbook + whatever? These are some of the questions that matter.

Formats don't matter too much. Readers, relevant content and services are fundamental.

Plateaus often are the springboards to new disruption waves... so yes let's celebrate today's success. Tomorrow we will have to celebrate something else.

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