Yesterday I was a little unfair to Easons for the pronouncements of the company’s spokesperson and the tone of the article on its ebook strategy which suggested the company was about to embark on a mission to build a rival platform to B&N and Amazon, something that would surely have been a valiant, if doomed, effort.
When I thought about it for the rest of the day though it got me thinking about just how much ebooks are changing the profile of book publishing and bookselling and how quickly that is happening. For instance I am almost certain of two things about the Irish ebook market:
1) That foreign based platforms and retailers account for the majority of sales (Amazon, Apple, Kobo, Sony etc)
2) That like in the print world UK publishers (and their local imprints) publish the majority of ebooks bought in Ireland both in terms of units and revenue
I’m also close to certain about a third item, but without evidence I cannot prove it, here it goes anyway:
3) That US-based publishers sell more units (and I don’t doubt generate more revenue) from ebooks in Ireland than domestic Irish publishers do and are perhaps second only to the UK publishers (and their Irish imprints)
The first and the last points there are pretty radical statements. The first represents a huge change to the Irish experience of the book industry. Right now in print terms, most books bought by Irish consumers are sold to them by Irish retailers, Easons the principle one but others like Dubray, The Book Centres, Kenny’s, O’Mahony’s, Hughes & Hughes and many many others. That is despite the growth of physical sales through Amazon and the internationally owned (except for Dunnes Stores) supermarket chains. The wholesale and distribution businesses are also heavily Irish owned (with some British presence, increasingly on the Library supply side of things).
The Difference Digital Makes
But the situation is dramatically different on the ebook side of the house. Easons is the only ebook retailer of note in the Irish context (others should shout out if I’ve unfairly missed them out). On the ebook distribution side, EpubDirect are the only (and admittedly impressive) crew actually making a go of that business and even they don’t make up for the fact that the majority of ebooks sold in Ireland will have been distributed through other channels.
You can argue the toss over why this is the case but several factors loom large:
1) Irish publishers have been slow to digitize their content (though they are getting there now)
2) Irish retailers have been slow to embrace the web (except for a few notable exceptions) and slower to embrace eCommerce (again a few notable exceptions aside) and, finally, even slower again to embrace ebook retailing
3) The costs of developing ebook platforms, ebook retailing sites and ebook distribution systems are high, the Irish market is small, while it might have been possible to forecast the potential to gain customers outside of the island, it is a difficult result to actually achieve (which makes EpubDirect’s success all the more impressive) which mitigates against anyone investing in them
In terms of sales, while UK publishers and their Irish based imprints have come to dominate the book trade, significant numbers of books published by Irish houses continue to sell in print form and account for anything between 15-25% of the trade. With ebooks however, sales from publishers whose books would not traditionally have been made available in Irish territory is increasingly likely. For instance a US published book that does well but might not get a print deal outside of the US has as much (if not more) opportunity to sell in Ireland as any other ebook, the key is whether it is high in bestseller/popular lists or promoted by the retailer for some reason
The only ebook store that really seems to cater specifically for the Irish ebook market is Apple’s iTunes so when Irish publishers do start to make content available they have to fight against ALL the published content there is, not just all the domestically published content and all the UK published content as they do in the print world. Further the people making decisions about ebook merchandising are rarely based in Ireland as once they were (or indeed still are in the print world) and therefore open to some discussion or indeed charm (not inconsiderable amounts of which the Irish are possessed). You see the problem.
The Outside Context Problem
The Irish publishing industry is fast running into what might be described as some fashion of an ‘Outside Context Problem‘ wherein the new arrivals on the scene are vastly superior in terms of abilities, vastly superior in terms of resources and possessed of superior technology. While some of the participants in the market might grasp the nature of the problem and respond as effectively as they can, the truth is that the disparity in attributes makes success unlikely and the new threat is very much an existential one.
Which sounds very dramatic but think of it this way. The Irish consumer market for trade books is around €150 million a year and 15 million units all in. Suppose only 30% shifts digital over time or €45 million and 4.5 million units. That would leave only €105 million up for grabs for Irish retailers in print form and 10.5 million units. The impact on stores, book publishers and other market participants would be pretty dramatic. There would be closures and job losses and the industry would be considerably weaker. And that’s just the impact on the retail side of the trade. The impact on the publishing side of the trade is unknowable, but there is little doubt that it would be significant and would probably be negative for the domestic publishers (see my earlier paragraph on why). The UK publishers will probably cede sales to US-based publishers, especially if US publishers seek to enforce global ebook rights deals on authors.
We are probably headed in the direction of 30% digital pretty quickly. If we even approach the kind of conversion to digital sales that seems to be happening in the US or even the UK, we can expect that 30% figure to be a reality by 2015. By then the Irish industry will have changed radically and will become almost unstoppably more international not just in terms of the books that sell her, but also in terms of those who sell them. US publishers will probably be the second biggest publishers of ebooks bought by Irish readers (if not the first having overtaken the UK).
There’s interesting evidence of this too from the other side of the fence. The AAP reported that ‘total eBook net sales revenue [for US publisher] for 2011 was $21.5 million, a gain of 332.6% over 2010; this represents 3.4 million eBook units sold in 2011, up 303.3%.’
Frustratingly the APP did not share details for Ireland (those were contained in the full report but not as a single territory, rather as part of a larger group of English language territories) so we don’t know how well those publishers are doing here. Still, we can assume that they did well relative to the size of the market.
What’s more, Ireland and the story of change in the publishing industry really acts as a microcosm for the rest of the English language publishing industry (indeed it acts as a microcosm for any small market which shares a language with a much larger market be it French or German or Spanish or Chinese).
In some ways the whole industry is encountering the ‘Outside Context Problem’ I mentioned earlier as software and technology firms move into a traditionally physical business, but for larger companies, responding can be easier because of their scale and their resources make for a wider context as it were. It’s the small markets where the combination of these larger players and the changes in technology make for such a difficult problem.
Beautiful day here in Dublin!
Eoin
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Interestingly (or maybe just interesting for me) I wrote some time ago about the impact of divergent rates of digital growth on small markets, and in many ways this post is all about that impact. The increasing internationalization of the Irish publishing industry is driven by the very issue I highlighted: Divergent Growth Rates In Digital.
Eoin Purcell's Blog 
Ireland really is a tiny market and has always been the runt of the UK market in most things. Publishing has been no different. Sadly the transition to digital has offered an opportunity for us to take back the power and we have failed to grasp that opportunity.
In the world of paper, big capital mattered, production runs mattered, mass production mattered. This placed us at an immediate and inevitable disadvantage. Printing books here made no sense, going to an Irish agent made some sense but being in the periphery of a large market was always a risk. Publishing with an Irish publishers carried the obvious risks of provinciality and missing out on potential.
One small compensation was that the Irish economy still earned some income from publishing through selling paper books here in large numbers. That is about to change drastically because paper is on the way out the door. How long it takes is the only issue. Jobs in the paper book retailing sector are doomed whichever way you look at it. It is up to Ireland whether we can replace those with digital jobs.
Having worked on web projects and been involved in a web design business for several years not so long ago I take direct issue with the assertion that “The costs of developing ebook platforms, ebook retailing sites and ebook distribution systems are high”. What does ‘high’ mean exactly ? The cost is a tiny fraction of building any kind of real world platform and it is well within the budget of Irish business and Irish entrepreneurial capacity. Of that I have absolutely no doubt.
What is lacking in Ireland right now is the following. The economy tanked four years ago and there’s little money for risk projects. Spending has tanked. Ambition is running very low. Imagination and ambition are wounded and the media is exploiting our predicament by talking down the economy for commercial reasons. Publishers here have on the whole maintained the bunker attitude, hoping to god that digital goes away or a miracle happens to save them before they have to take any actual action to embrace the heathen computer world.
All of these things combined has created an unfortunate swamp in the whole publishing business, and most businesses here.
Having taken a big interest in the ePublishing industry over the last 3 years I see huge opportunities in the country for innovative exploitation of this transition to digital. I can see at least three significant opportunities and have been searching for entrepreneurial interest for a while now without luck as yet.
Every downside of the transition to digital brings an even more massive upside in terms of opportunity. We in Ireland now have a window on the whole world as a potential market. For what is, incontrovertibly, a relatively small capital investment we can reach out and offer our unique writing talent to the world.
Unfortunately timing has not been our friend.
Howard,
I’m not sure I agree that the cost of a platform is tiny. Sure, you CAN do things innovatively and for a limited cost but fairly soon, as you scale the cost becomes considerably larger than you would like.
This is especially true when your market is a global one and your marketing costs become global. It’s hard to see how a business, rooted in the Irish economy and supported by domestic revenue could grow a global business. it would need (as those who have successfully done it have needed) venture capital.
As for entrepreneurial spirit, I find there’s quite a bit of it in Ireland, just not focussed on digital maybe!
Eoin
“It’s hard to see how a business, rooted in the Irish economy and supported by domestic revenue could grow a global business.”
No offence intended Eoin, but I regret to say that this is the blinkered view that persists here and causes us to fall further and further behind in the Internet world. Lack of vision, lack of ambition, lack of imagination. Always seeing the problems and not the opportunity. Always looking back at the old economy and not at the new online economy.
On the contrary it’s not blinkered, it’s reality. My key point was that the way to do it was vc funding, and that EpubDirect had achieved the result through that very route. The reality is though that if you have a legacy business to run, then it’s considerably harder to cut that loose and pursue an international business because the only revenue you have is from the domestic business.
I don’t think there’s a dearth of entrepreneurial spirit here, as the vibrant tech start culture here would suggest not to mention the pretty impressive effort by folks in the literary space to take advantage of what digital offers too.
Eoin
The key point of my second comment was the quote. Your inclusion of VC is valid, but that is only a technical issue, and one that is easily dealt with. A business has to be started somewhere. No one will start a business when they think it’s all impossible. And I regret to say Eoin, that is the tenor of your whole writing, whether intended or not.
Another thing missing here is collaboration. A legacy publisher or industry outsider does not have only one choice – go it alone. The building of an online platform is a perfect basis for collaboration with others of like mind for numerous obvious reasons.
And I reiterate, building a platform like this would not even cost enough, in it’s initial phases, to qualify for most VC entities in this country. I really do not understand where this massive cost is envisioned. Growth and expansion based on success would then generate a case for VC based on success. We have to walk before we run, but that is not an argument for not trying.
Ireland has a global reputation for writing. The fact that no one here is leveraging this is a travesty.
A few things,
1) So build it.
2) I contest your assertion that the tenor of my writing is as you say. Indeed in this post, I wasn’t even setting out to look at the how or the why, simply the reality of the market. I DO think Irish businesses can create global enterprises, I suspect doing it in the book space would be difficult, not impossible, for example StoryToys is an Irish company doing global level stuff. But again, not a legacy business. The list is long of impressive folks doing impressive stuff, but that wasn’t the point of this post.
3) When it comes to the cost, it isn’t per say the actual platform (though that has costs, even when using the very good open source software that exists), but in marketing, community building, advertising, recruiting the right staff and all the other things that a good solid and scalable business needs. Yes many of these can be bootstrapped and for the right ideas, many don’t matter, but most ideas aren’t the one idea and need good solid structures to make them go from idea to actuality. Otherwise everyone would do it.
So yeah, I do think the Irish industry has to date done a bad job of dealing with the innovative landscape, I also think that most Irish business are ill-equipped to NOW change and that new companies without legacies would be better at it. But no I do not think that it is impossible to start a business that has global reach from here.
Eoin
An excellent post. As I read it I kept substituting “Canada” for “Ireland”, and found that it reads about the same. The issue is the internationalization of all digital media: any borders imposed by nations or distributors are artificial, designed to protect existing business practices, and not to benefit the consumer, in this case the reader.
The defensive position is to seek to continue to artificially impose national boundaries on the pretense of protecting local cultural industries, whether for Ireland or for Canada. But consumers can always work around these artificial boundaries, and as “The Game of Thrones” has demonstrated, artificial boundaries mainly serve to encourage pirating (http://www.techradar.com/news/web/internet/game-of-thrones-tops-torrent-charts-in-2012-1080138).
What I find encouraging in startups like ePubDirect is seeing that the same porous border that allows the foreign invaders inside the walls allow innovate startup to counter-attack.
While “US publishers will probably be the second biggest publishers of ebooks bought by Irish readers (if not the first having overtaken the UK)”, US and UK readers can become the largest audience for Irish (and Canadian) writers if, and only if, the publishers in each country give up on the now obsolete practice of leasing rights to US and UK publishers, who will never do as good a job digitally as the home author and the home publisher.
Eoin, of course you recall that a year ago in London my theory, at least, was that small publishers in Ireland would benefit from digital change because they’d be able to sell to the Irish diaspora, particularly in the US. I am struck that you left the export side entirely out of this equation. Certainly, the retailers are challenged in the ways you say (the same as book retailers everywhere; it isn’t a “country thing”) but what about the opportunities for publishers to reach well beyond their market riding the back of that international infrastructure. Not worth mentioning? Or a post for another day?
A post for another day for sure. I think it’s showing real signs of actually happening. Slowly but surely. The opportunity certainly exists! Finding a way to measure that is the tricky part!
Eoin
A point very well made and a critical element in underpinning the potential for success by new Irish ventures in this sector.