The future of publishing

Go Read This | Ugly rumours | theBookseller.com

Sara Lloyd is great and to an extent, she is on the money with this column.  The problem is that she’s only right to the degree that we accept the current model is permanent.

We still have an eye to the future, of course. We still ask each other: “So . . . what do you think is the Next Big Thing?” We still geek out and ponder the impact of HTML5 on epub. We feel the need to prepare for that, but we’re feeling better and better equipped to do so.

The fear factor is abating. A sense of “business as usual, but different” is descending. Books are not being killed off. We’re simply adjusting to an additional format. Of course, this is exactly the time that we should all give ourselves a great big poke in the ribs, sit up straight and pay attention.

I tend to think it isn’t and while the book is in no danger (although it will certainly change and adapt and morph), publishers very much are. Which is why it’s nice to see here last lines:

Necessity is the mother of invention, but relaxation is the mother of a short sharp shock, so let’s not rest on our laurels. Not yet. Not for a long time

via Ugly rumours | theBookseller.com.

Go Read This | Publishers should set e-book prices, says FutureBook survey | theBookseller.com

I’m a fan of publishers taking charge of their own destiny, especially when the future is so uncertain.

That said, I just don’t think publishers have the right skill sets right now to actually set prices for consumer facing products.

They need to work very hard to get those skills though, because, as long as they are setting prices without knowing what they are doing, the longer they’ll make bad decisions and probably hurt themselves in the long term.

More than three-quarters of people working in the book trade believe e-books should be priced at current street prices or less, according to early results of a FutureBook survey into digital thinking. The majority of respondents indicated that publishers are best placed to set this price, even though they don’t believe the agency model has a long-term future.

via Publishers should set e-book prices, says FutureBook survey | theBookseller.com.

Go Read This | The Evolution of the E-book: When is a Book Not a Book?: Tech News «

GigaOm has, I feel, a very simplistic sense of the ebook space. However, at times, that can be a very useful thing, because it sweeps away many of the assumptions that industry folks can make almost unconsciously. In this article, I think they do that pretty well.

The advent of tablets and e-bookstores dramatically lowers the barrier to entry for these kinds of writers, who would previously have had to find an agent and a publisher willing to take them on or self-publish via the web or a blog, and would have had to pay them a handsome share of any revenue as well. Now, through services like Bookbrewer and Kindle Singles, they can reach what is potentially a much larger audience, and maybe even make some money. Amazon and other e-book publishers pay authors as much as 70 percent of the revenue their books make. The e-book market as a whole continues to grow rapidly; the latest figures from the Association of American Publishers show that sales climbed 172 percent in August.

via The Evolution of the E-book: When is a Book Not a Book?: Tech News «.

A Problem: Ebook Rights, Small Markets & Divergent Digital Growth Rates

The Frankfurt Book Fair this year was an interesting one for me. It crystalized a few of the many ideas that have been bouncing around in my head. Publishing Perspectives in particular touched on one of the MAJOR issues for smaller market publishers and I wanted to hammer home the point in this post.


I have bad news for publishers of English language books in smaller markets and by that I mean English language markets outside of the UK and US:

Being a small market english language publisher is going to get harder as digital grows

Put simply I believe that US and (initially less aggressively but shortly with the same fervour) UK Publishers will seek to control world english language rights for digital and with it any rights (enhanced/video/audio etc.) they may need in order to sell ebooks and enhanced ebooks on a global basis. This may spread to an all out claim on world English language right including print, somehow I suspect that’s a ways off for now and the emphasis will be on ebook rights.

Why is this?
The reason is that US & UK publishers a compelling economic case for holding those rights while smaller English language markets have less of a business case for retaining those rights.

As Kindle sales, and B&N’s Nook and Apple’s iBookstore and sales through the multiplying ebook retail outlets grow to 10% of group revenue US and UK publishers can begin to plausible include revenue projections for digital editions of new titles.

And some of the growth in ebooks is global. Kobo talks about serving over 200 countries with their ebooks:

Meanwhile, our direct business at Kobobooks.com is rocking and we’ve delivered ebooks into 200 countries from Azerbaijan to Vanuatu – we’re making books available in more places to more people than ever before.

What’s more, they know that the markets that are currently buying ebooks globally are likely to grow rapidly if they even partially reflect

So we have large publishers seeing sales internationally that they can EASILY service at little marginal cost. Acquiring the right to sell to those markets is a sensible strategy that hedges against future global digital sales while delivering real if small sales now.

But the impact on smaller markets is large
Take for example Ireland (I could as easily choose the English language markets in Spain, Slovenia or San Marino), where ebook sales are lower than 1% right now. From that perspective any Irish publisher approached to do a deal for a title they have published in Ireland would be fools to let that deal flounder over digital rights.

And yet, at what point would a publisher be crazy TO do a deal that required them to cede global digital rights; 5%, 10%, 20%, 25%, 50%? What’s more, if a publisher agrees the principle now at sub-1%, how can they hope to grab back that principle at 5%, 10% or 75%?

And it’s not just English
This will be a problem for smaller markets in all languages as larger publishers realise they can reach markets profitably in a digital world that they once could only do expensively and perhaps unprofitably in print.

And it works both ways
US and UK publishers may sell print rights to smaller markets, but they will become increasingly reluctant to sell ebook rights. How would a print only publisher hope to make a run viable in a small market served 10% or 15% or 20% by digital sales from the UK or US based publisher?

Be prepared
So, publishers, what will you answer when US and UK publishers demand your ebook rights? And whatever way you answer, are you prepared for the implications?

There’s more on Frankfurt, but this is the top priority I think.
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 | Ebooks Don’t Cannibalize Print, People Do « Black Plastic Glasses

I disagree with some of this, in fact with a lot of it, though it does seem that when Evan describes the mechanics of those who have moved to digital reading, he is on the money!

While I see the logic behind this understanding – I posit a slightly more nuanced definition of what is happening: Ebooks aren’t cannibalizing print books — consumers with ebook reading devices are, as a rule, no longer buying print books. Subtle? Yes, but from a commercial publishing point of view this is a crucial difference between seeing a direct correlation between ebooks and print books and understanding what happens to a customer when they make the switch to reading devices.

via Ebooks Don’t Cannibalize Print, People Do « Black Plastic Glasses.

Go Read This | E-book sales begin to cannibalise print | theBookseller.com

This was, in some senses, bound to happen. If it proves to be true it is the start of the erosion of the print business model, the one that sees publishers forced to cut print runs, reduce their benefits of scale in print and perhaps encourage them to begin converting print readers to digital ones.

The growth in e-book sales in genres such as romance and science-fiction is leading to a cannibalisation in sales of printed books, according to Nielsen BookScan data.

Sales of printed romance books have fallen for the first time since records began at a time when e-book sales have more than doubled.

The data, released as part of a seminar held yesterday with Enders Analysis, ‘Digital Seminar: e-books and their impact on the market’, showed genres such as science fiction and romance are “overperforming” thanks to the tastes of early adopters of e-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.

via E-book sales begin to cannibalise print | theBookseller.com.