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.
Marginal cost of ebooks is only near-zero if they don’t have DRM. Adobe Adept DRM costs $0.22 per ebook (neglecting capital costs). Less than the $0.50-$1.00 for a mass market paperback, but not insignificant either.
Greeting to you from Killiney, Eoin!
When I read the first para I started to groan, thinking here we go again …. but ….
This is actually quite an interesting slant on this subject – distinct from most (but not all) of the previous discussions we have had on the business models of print vs epublish.
Yes I do see your point Eoin. We already know that profits on eBooks are as good or better than on paper books so that is not a problem. The problem is not the return on eBooks. But there is definitely a cost issue when dealing with small print runs.
The first thing I would say here is that this is the inevitable march of progress from paper to electronic reading. So the issue is not how to stop it but how to adapt. Secondly these publishers have had ten years to figure this out – so I have very little sympathy for them in this issue.
I am not sure I accept your point about the wrong end of the lense. This subject has been tossed around here on Teleread many times and this angle has arisen on other fora I have contributed to.
Publishers who’s business is solely small print runs, or who’s business includes a sector that involves small print runs, and who are influenced by the changeover to digital, will definitely have to make a decision on how they will change their pricing or delivery model.
I see the strategy of a complete conversion to digital as a very high risk and high cost move. Imho the market is just not there yet. Early adopters are still the drivers of the market and I don’t see mainstream readers really coming on board for another year or two. Not until eReaders drop below 50euros and/or eReaders are sold in subsidised packages like mobile phones.
So imho the only workable alternative is to strive for printing/distribution efficiency and also increase cover prices. This will definitely influence sales because books are already quite an expensive product, especially in this recession. So small/medium book shops are on a slippery slope to and end game. The Print on demand option is also something I think they need to look at seriously. We had a very interesting discussion of this here a few weeks back and I see the major company producing this machine is expanding quite fast now Espresso)
The parallel strategy for these publishers with this kind of print run profile should be to band together and do everything they can to make the transition to digital happen as quickly as possible. It is clear their transition period is full of pain for the above reason, so the shorter the period lasts the better.
Unfortunately I don’t see this happening. Publishers have consistently failed to face up to the digital world and I don’t see them starting now. I believe they will try to fight the change for as long as they can. They will whinge at the government to try to change taxes, copyright issues, subsidise book shops… ANYthing except face up to the change.
One should consider that eBooks are not entirely to blame; thanks to websites like fictionpress.com, freeonlinenovels.net and writerscafe.org free romance fiction and science fiction stories, even full length novels, are readily available. Sooner or later, such a glut of ‘freebies’ will impact even the imposing face of rom fic paperbacks.
@Howard,
Completely agree that the strategy carries risk, but then as the market changes, the option of doing nothing remains risky too, especially if costs on the print side continue to rise in the absence of retail price increases. I just worry that most people look at these things as black or white, that 20% isn’t that big a shift but in reality for most publishers, 20% is as damaging as 80%.
@Meredith,
Free is definitely having an impact. My sense is that the market will change radically and result in an even smaller head of BIG winners and then a huge tail of writers earning little to nothing for their work. In terms of escape that, I see the only viable solution as digging deep roots in a community and providing value of some kind that way.
Eoin
I wouldn’t take the research that says 80% of the market say they’ll never use an ebook to seriously. I believe the that about 6% of the market said they’d use a cash machine.
People responses to technology that aren’t really familiar — tried, experienced — is always low. Further, when people do use reading devices, research shows they like them — even if they don’t tend to use them exclusively.
Thirdly, the growth of tablets for other reasons will probably introduce to people to Ebooks.
The real question is “what will the publishing industry look like” when it’s dominated by Ebooks — which I think is inevitable.
Eoin: I agree that “most” people are much more clued in to the issue of one book vs one ebook costs. I guess it is up to the publishers to make them more aware, if they feel that is important. I am not sure there is much to be gained.
What do you think about the Espresso route ? I know it does not give the coverage that local book shops offer, but it does have the advantage of pretty low cost and the cost of the espresso unit should be coming down significantly in the coming year.
I think your vision of the future for writers is a tad gloomy 🙂 The new models for marketing eBook are not really off the ground yet. At the moment the publishers are slow to the game and Amazon has stolen a huge march with Apple following up. I see a rich collection of ePublishers arriving in 2011/2012 when a new breed of ePublishers and eRetailers will develop better and more interactive eBook stores leaning on lesser known and new writers.
I do agree that during this transition period, the lesser known writers will suffer. The Publishers are not spending on marketing like they were and there is no alternative marketing effort. But this will change within two or three years imjo.
One obvious move to increase uptake is for the publishers to ‘give away’ eBook readers as part of a contract to purchase ebooks from them for, say, 24 months, like a mobile phone contract. Give away the razor, sell the blades. Give away the printer, sell the ink. It’s already working elsewhere.