Business

Making Things Happen: The IPN Premium Annual Report On Irish Publishing

This series is designed to talk about some of the things I’ve been lucky/crazy/happy to get shipped (as Seth Godin might put it) in the last few months. The first post talked about The Irish Story’s first five Apps. This post is going to talk about the IPN Premium Annual Report On Irish Publishing. It might be a little long.

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Where it came from
I suppose I should say that IPN Premium is the paid for imprint of Irish Publishing News, the industry website I run that covers Irish publishing news, features and stories. The idea behind the site was to create a resource for the Irish publishing community. I have another post coming about the site itself, so I’ll leave it at that for now.

IPN Premium then comes from a realisation that Irish publishing, as distinct from other industries, is poorly served by business intelligence and business advice. There is little in the way of market resources with the exception of Nieslen’s impressive but flawed Bookscan service for the Irish Consumer Market. I say flawed because while the most comprehensive analysis available, it covers a debatable portion of the market from 60-75% depending on whose figures you accept. I wanted to change that.

The Irish bookselling industry is worth somewhere in the region of €200 million and has sales of around 18-20 million units a year. That’s not small beer, the industry shouldn’t be relying on guesses, educated or not, about industry information.

What’s more, with the approach of digital publishing and the likelihood that a portion of those sales will shift online into purely digital form over the next five years, it would be crazy not to have a dedicated source of professional information for publishers, booksellers and authors to work from.

The Report itself
So I set to creating the first product, the IPN Premium Annual Report on Irish Publishing which is, at over 30 pages, longer than I intended and filled with more information than I realised it could possibly hold.

It is also reasonably priced because while all that I’ve said above remains true, many smaller publishers don’t have large resources available to them to buy reports.

If you haven’t bought it, and you find publishing interesting you can do so by clicking here.

Over the next few years, the report will gain features, and several aspects of it will change, but I’m very pleased with the first iteration and I hope those who have bought it are too.

There is much more to come from IPN Premium and indeed from Irish Publishing News itself, but for now, I’m just enjoying the sales as they come and hoping that those who buy it, find it as useful as I intend.
Eoin

On Publishing Economics & Cannibalism


UPDATE: The Sunday Times (Ireland) has picked the post up in an edited version for their Think Tank column today.


There has been some debate over whether cannibalisation of print sales by digital sales is actually occurring and what’s more some debate about whether, if it is occurring, it matters a great deal, all mostly prompted by The Bookseller’s recent piece on ebook sales beginning to impact sales of print books:

For example, the e-book market share of the science fiction and fantasy sector globally for the 10 weeks since June was 10%, more than treble the genre’s market share of print book sales. The share taken by romance and saga books was 14%, seven times its print market share.

Julie Meynink, business development director of Nielsen BookScan, said though it was early days, data from Nielsen BookScan US, which globally represents the biggest share of e-book sales, showed a decline in print sales within these two sectors. In the year to date sales of romance books in the US are down 7.5%, while science-fiction and fantasy sales are down, even when the effect of Stephenie Meyer is stripped out. Estimated e-book sales from the Association of American Publishers show that the e-book market has risen 10-times since 2008, with sales accelerating this year with sales over the first two quarters up 180% on 2009.

Ahead of the seminar, Meynink said: “There has been over-performance in the growth in e-book sales in the romance and science fiction categories, when compared to the market share of print book sales, and this correlates with a fall in print book sales in those sectors.

Sorry for the long quote, you should read the whole piece. The highlighting is mine. I want you think through that bit as you read this. Meynink is telling us that ebooks are pushing aside print sales in specific genres that are at the forefront of digital adoption. No messing there, no room for shifting the territory or fluffing the message – the rise correlates with the fall.

Evan Schnittman has an interesting analysis in which he posits that ebooks are not the issue, it is the changing way people interact with books when they shift towards digital and that it’s not such a problem in the medium to long run:

The good news is that the same Nielsen study shows a significant portion of the ereading market buys more ebooks than they did print books. Furthermore, the study also shows that 80% surveyed would never consider buying a dedicated ebook reading device. So in the end, the book-selling world may lose 25% or so of its print customers to ebooks, but those customers will likely buy more product than they would have if they didn’t use an ereader.

Publishers must face the vibrant and growing market of ebooks with a view that their print runs and print sell-through have been and will continue to be downwardly affected by the loss of consumers to ebook reading devices. However, this isn’t cannibalization, it’s an opportunity for market expansion by feeding ereading consumers more of what they want to find.

I Think People Are Misunderstanding The Issue Here
I’m not sold on this market expansion argument. And I’m not sold on it for a specific reason. We are looking at the problem through the wrong end of the lens. The customer isn’t the issue, the publisher is. Simply put, for most publishers and on most titles a 10-20% shift to from print to digital undermines their economic model. Costs per unit will rise and revenue per title will drop if that kind of shift happens, and coping with it won’t be easy.

A loss of 10% or even 20% of print sales when the print run is over 10,000 isn’t catastrophic, especially if ebook revenues bring in some of that lost revenue. It won’t help the economics of a title, but it won’t kill them either. The more you print the less and less it costs per unit and the more and more room for manoeuvre you have regarding price and discounts. Sure, you’ll feel some profit pinch, and your revenue per title will dip, but overall if most of your books sell in excess of 10,000, you will be able to cope with a reduction in the region of 10-20% (though if the digital share grows beyond that it MIGHT become an issue).

But most books are not printed in quantities in excess of 10,000. In fact, in Ireland, I’d warrant that the average print run is circa 3,000 if not a little bit lower. From what I know of the US and the UK, this figure might be slightly higher, perhaps 4-5,000.

Those kind of books (hardback or paperback) are only just viable at current price levels. It’s one of the major issues publishers face. Paper prices have risen dramatically this year, but book prices haven’t risen to reflect that. If publishers are forced to cut print runs on top of absorbing cost increases, the profit per book sold will decrease dramatically.

Looking At It Clinically
If ebook starts to take 20% of a books sales, the print run becomes increasingly non-viable. Only two decisions really remain at that point, reduce costs or increase price.

Suppose a publisher looked to reduce costs, they might cut the print run even more, but each unit would then be more expensive and printers don’t really like doing runs below 3000 so the price might end up being pretty much the same. They could use cheaper materials and thus reduce the attractiveness of the product. They might squeeze the author’s percentage, but authors could self-publish when the deal gets bad enough and if an agent’s involved that’ll probably not happen.

So the other option is to increase the price. This is likely to reduce the demand from readers in the bookstore, and make it harder to get shelf space in physical stores. Even independent bookstores are wary of taking books that they know are more expensive than readers expect and readers have come to expect good prices.

On top of which the higher prices could shift more readers towards digital editions exacerbating the problem that kicked this all off to begin with!

I suspect that leaves the publisher in a pretty tough spot, they are pushed on costs and they have no flexibility on price. They can’t really dramatically increase the price and they cannot dramatically reduce their costs. UNLESS…

They Go Digital
The left-field option is to cut the print cost out of the equation and with it the cost of distribution and go digital only (perhaps with a print-on-demand option) with a title. That changes the economics of the project and is scary as hell for traditional publishers, because then pricing is weird for them, involving only fixed costs and very little in marginal costs per unit sold.

But, and this is the crucial point, if they follow this route, they have the prospect of profitable sales whereas if they stick with a mixed print and digital set up they will lose money.

What would you do?
I suspect that many publishers, those at least who fit squarely into this bracket I’ve described here, will start to see this logic. They will begin to adapt their model to reflect the changes they need to make. They will pull physical books and release ebook editions, at first they’ll also do print on demand or short run digital editions. Over time, they will actively recruit their readers to digital, because they know they have to do these things to survive and profit from the changed realities. It may or may not be enough.

Those that don’t, unless they actually are lucky or good enough to move from titles that routinely sell around 3,000 to titles that sell in excess of 10,000 units, will definitely perish. That’s not fair you might say, but they have the option to change. If they just think it through and start making those changes now or VERY soon.

Of course you see now why we were looking at the problem through the wrong end of the lens, if publishers shift to digital to enable profitable publishing, that may very well mean readers don’t get to choose if they shift to digital because for certain books they may very well be forced to.


Related:
I’ve talked about how this reduction in print runs will affect physical bookshops

Go Read This | The Independent Bookseller : Alexia Golez

Nice post over on Alexia Golez’ blog today about her mother’s bookselling:

The shop was a mix of old books and new. Customers were regulars, people who’d pop in for a chat as much as a book. Books were laid away for people. Facebook a social network? Your independent bookseller is ultimate social network. All walks of life come in. Everything in every shape and size.

I dare anyone to spend a day in your local independent bookseller that sells new and *old* books and not be impressed. The old part is important. Second-hand booksellers are social treasure troves. Beat the joy of helping three generations of the same family buy books and leave the shop happy and enthused.

via The Independent Bookseller : Alexia Golez.

Go Read This | Personanondata: The Baked Beans Are Off: Michael Cairns – Content to Strategy

Very thoughtfully put together piece:

Fast forward 20 years and the scale economic model is falling apart for trade publishing. So effective at applying scale to accounting, manufacturing, management, production and other overhead, it is ironic that in the internet world everyone now has access to similar scale benefits. Publishing companies now realize they have achieved scale advantages in the wrong functions. Scale advantage in editorial, marketing, promotion, and content management is almost non-existent to the degree that will ensure competitive advantage, yet these are the functions important to future success. (As an isolated example, I would argue that authonomy.com by Harpercollins represents an attempt to build scale into the editorial process).

via Personanondata: The Baked Beans Are Off: Michael Cairns – Content to Strategy.

Stanford Ushers In The Age Of Bookless Libraries : NPR

The second article today that reinforces the thinking that the slide towards ebooks is starting to become unstoppable!

The new library is set to open in August with 10,000 engineering books on the shelves — a decrease of more than 85 percent from the old library. Stanford library director Michael Keller says the librarians determined which books to keep on the shelf by looking at how frequently a book was checked out. They found that the vast majority of the collection hadn’t been taken off the shelf in five years.

via Stanford Ushers In The Age Of Bookless Libraries : NPR.
And via Teleread!