I wrote earlier this week that publishers need to prepare for a decline in print-book sales that’s much steeper than what we have seen thus far, and that is likely to accelerate the reshaping of the industry. The reasons why this seems inevitable derive not from any intrinsic superiority of e-books, nor any growing technophilia or screen-tropism of readers, but rather from the structure of the market.
For one thing, e-book sales don’t replace p-book sales on a one to one basis, as my colleague Evan Schnittman points out in his post “E-Books Don’t Cannibalize Print, People Do.” Evan argues that once you have adopted an e-reader–whether it’s Kindle, Nook, or your iPhone–you soon give up buying print books. You become so happy with the convenience of instant purchase and the bookshelf-in-your-briefcase that you virtually give up purchasing hardcovers–in fact, he argues, you’ll simply forgo a title that’s not available in e-format.
I don’t think this holds true 100% for all readers–I read e-books aplenty but still buy p-books. But my hunch is that Evan is pretty much on the money: the graph of p-books purchased by an e-reader owner is a step-function. It doesn’t slope down gradually, it drops almost straight down once someone becomes an e-book convert. (The good news for publishers is that (a) those e-book sales can be more profitable than print and (b) the graph of e-books purchased by the new e-thusiast is of course also an upward step function, from zero to lots. Lots of evidence suggests these e-thusiasts buy more books than ever, partly because it’s so easy to do. But right now I’m focusing on print, which is a less happy story. Keep in mind that those e-reader owners are usually avid readers, i.e. they are our best customers for print books.)
So at the level of individual consumers we’re losing not just one print-book purchase at a time, but potentially scores, or hundreds, as that person adopts e-reading. Now look at this at the level of bookstores. Right now e-book sales constitute, at a rough guess, 10 percent of the market and their share is growing rapidly. For many small businesses, especially in a low-margin industry like ours, losing 10 percent of your sales volume is the difference between profit and loss. Even a 5 percent dip is a challenge; imagine looking at a 10 percent dip and thinking, next year it’ll be 15, and the year after, who knows? Yesterday I linked to an NPR story about a couple of independent booksellers who have prospered despite the difficult market, and hats off to them. But over the past several months, stories of bookstore closings have, alas, been more common. This week, two beloved indies in Minnesota announced closures, explicitly pointing out that they have lost customers and sales to the e-book revolution. One store owner made the complaint, common among booksellers, that customers browse her shelves to decide which books to download at home. ” We’re really now a showroom for books.” You can see why these folks may decide it’s time to call it quits.
This, too, is a step function. When a bookstore closes, the sales at that location don’t slope down, they drop to zero. Multiply this across many bookstore closings–including locations now being closed by the chains. Furthermore, many surviving stores, in self-defense, are devoting more shelf space to nonbook items, which means fewer print books stocked, and fewer sold. With all this, it seems clear to me that print sales are going to fall, if not off a cliff, down a teeth-rattling escarpment. Just to tighten the spiral, we’re also going to see smaller print runs, thus higher per-copy costs, thus higher prices for printed books–which is only going to push more consumers toward e-books!
What all this means is: up to now, e-book sales have been growing faster than hardcover sales have been declining, so overall big publishers have been seeing growth. But we may soon reach a tipping point where because of the loss of sales outlets, print sales drop off much faster than e-books replace them. I remember the wailing and gnashing of teeth–and the austerity programs and downsizing– among publishers back in the 90s, when the chains’ great expansion of superstores leveled off (that is, when sales merely stopped growing, never mind declining).
I’m not predicting apocalypse here, or even calamity. As I said in yesterday’s post, I expect hardcover books, bookstores, and publishers to survive, and some even to prosper. But I am predicting major disruption.
Editor’s Note: this is reprinted, with permission, from Peter Ginna’s Dr. Syntax blog. Peter is publisher and editorial director of Bloomsbury Press. PB
I have to wonder if the “drop to zero” mentality of e-reader owners is true for everyone, or just the early adopters.
I’m sure that if I had plopped down $400 for an early Kindle, I would probably be looking to “make back” my investment by preferentially purchasing e-books.
But I got into e-reading by downloading free software. Since I have no upfront investment that I’m trying to recoup, I have no opposition to purchasing a p-book from time to time- it actually increased my p-book consumption. From 0 to about a dozen a year. (I use the money I used to spend on video games)
Similarly, after I gave my mom an e-reader for her birthday, she kept buying regular books. She buys e-books too, just not preferentially.
I think the only reason e-books impact p-books at all is because the reading device itself eats up part of your book-buying budget.
So will p-book purchases drop off? That depends on how inexpensive e-readers can get.
I was an early e-book adopter. Until I owned my first K in 2007, I had been purchasing about 2 p-books/week at an average cost of $18.00/book. With my K, I bought the same number of books, (I wasn’t one who loaded her K with every book she could find), but at an average cost of $7.00/book. My K paid for itself in less than a year.
In the end though, while the savings were nice–no, make that VERY nice–it was the convenience and instant availability that kept me away from pbooks and has continued to keep me away since then.
I love the ambiance of a bookstore, but ambiance will only buy you so much loyalty. I read for the stories. I don’t care how it smells or how it feels. (Honestly, I thought I would–one reason I chose the K for my first e-reader was their 30 day, no fault return policy–but one day with an e-reader and smelling/touching became non-issues.)
I DO care that I have to drive 30 minutes to get to the closest bookstore, not something I can do at 3:00AM when I finish one book and I’m looking for a new one. I DO care that the average hardback is approaching the $30 mark while I can purchase the same e-book for $10-12. I DO care that I can travel with one small device instead of an extra suitcase for my books.
None of these things is the fault of the booksellers or the publishers, (though maybe the publishers could give some thought to their hard cover pricing); but, fault or no, these conveniences are what feeds the e-reader market. Driving further, paying more and packing heavier are not things you go back to once you’ve found a better way.
I feel sad every time I see or hear about another bookstore closing and I hope they find a way to survive. I just don’t have a clue how.
Right now, ebooks are only a tiny part of the market for the major authors and publishers in the bookstores.
The disappearance of the brick and mortar bookstores and the increasingly small shelf space for books which aren’t by “name” authors and by a few big publishers is a greater culprit than ebooks.
If you’ve got to blame something, blame the increasing cost of doing business as a bookstore and the small profit margins in the publishing industry.
I’ve bought ebooks since 2001 and until I bought my first Kindle I was still purchasing the occasional pbook because the title wasn’t available electronically. In the last few years I’ve stopped purchasing pbooks entirely because of the widespread availability of electronic books. I simply don’t read the book if the only version available is the pbook. There are too many excellent ebooks in my TBR pile to bother with those that aren’t available.
Firstly I don’t understand this blinkered view about buying books from book stores… I haven’t bought a paper book from a bookstore for years ! Why would I ?? I buy all my paper books from Amazon or other online stores where I can browse a wonderful wide range of books. So the issues with bookstores only stocking big names is irrelevant to me … and I suggest the many people like me.
Personally I don’t see this plunge happening in the next couple of years. I DO see a plunge in bookstores however, for the good margin reasons mentioned above. And by the way bookstores are not unusual in operating on low margins. That applies to most businesses.
What I don’t see is much analysis, by people who are writing from a position of expertise, on the demographics of paper book readers versus early adopter readers of eBooks. Because that, imho, is the important issue. There doe these groups intersect and where do they diverge.
When I look around me at the people I witness as big steady readers, I see people who are the antithesis of early adopters of eDevices. I see people who will take quite a while to convert and who will wait until all the convoluted techy knowledge is not required any more.
I like ebooks, and I’d really like to buy an ebook reader, but I have real problems with the economics of the ebook. These blog posts proclaiming the imminent replacement of the print book by the ebook base their analyses on a comparison between sales of ebooks and hardback books. It’s a false comparison; few people buy hardcover editions anymore, they buy paperbacks — indeed, hardback sales have been declining for years. And, from a consumer’s perspective, there simply is no economic case to be made for ebooks over paperbacks — ebooks cost more for the same content and, due to DRM restrictions and geographic limitations, provide less value than a paperback. Moreover, ebooks cannot compete with print editions for sheer longevity. I still have paperbacks that I bought twenty and thirty years ago. No ebook vendor can promise that their editions will have a similar lifespan — economic reality (vendors going out of business) and new technology will probably make “orphans” out of most ebooks sold today (remember the Rocket ereader?). It is true that brick-and-mortar stores are closing: small, independent booksellers were displaced by large “big box” chains which, in turn, are being displaced by online vendors. However, even there, ebooks acount for only a small percentage of total online book sales. So, although I love the idea of “ereading,” (the new color Nook looks especially nice), I’m just not persuaded that it’s worth the investment. Until I am. I suppose I’ll continue to buy used copies of paperback editions at Alibris.
The bookstore owner complained: ”We’re really now a showroom for books.”
They should pay more attention to their own words: Yes, their business model is changing. But instead of throwing in the towel, maybe they should be working on reinventing themselves as Showrooms for Books.
Bookstore owners need to deal specifically with customers who browse, then buy somewhere else, by making sure they buy right there… and that the bookstore gets a cut. If the bookstore had its own website and portal, accessible at the store, they could arrange purchases and get a cut of the online purchase, and customers could get their ebook downloaded to them in the store, or emailed to them wherever they are. Creating a showroom space where customers can browse, speak to store saleshelp to assist in searching and browsing, and helping them to purchase through the store portal, would be a viable new model for bookstores.
I feel for any bookstore that is having trouble surviving the change in the business. But many of them can take steps to reinvent themselves, instead of whining about the loss of their old model. They should get to it.
Once I got my Kindle (April 2009), I haven’t purchased a p-book- even at library book sales (for no more than $1 each), and have only read a tiny handful. It is just too convenient (and cool) to read on my DX. My wife loves her (bought earlier this year) as well, though she sti;l takes books out of the library.
Good comment Jonathan – I believe you state exactly how mainstream readers will feel about converting to eReading.
The reason the e- vs p- comparisons are made based on hardcovers instead of paperbacks is because it is hardcovers that are the high-margin darlings of the big publishing houses. The most profitable customers are those that buy hardcovers right after release at minimal discount; in other words, the B&M loyalists.
Hardcovers tend to sell to hardcore readers (;)) and libraries. On a per-customer basis, these hardcore buyers are easily 2-3x more profitable than their more numerous paperback brethren. And that is assuming you’re comparing customers buying the same amount of books per year. In other words, it takes less sales of hardcovers to produce the same profit. Given the monster advances the BPHs dish out to acquire those “surefire” bestsellers, their survival is directly tied to those hardcover sales. Their glasshouse towers can’t survive just on paperback sales.
The reality is the ebook is seducing away the most active readers, the 2-3 books a month hardcover buyers, who can easily rationalize away the upfront investment in the reader hardware. And the profits from those readers are the only thing propping up the BPH’s “empires”.
Which is where the point about the p-book business losing buyers, not just sales, comes in. eBooks aren’t erroding print book sales, they are erroding the *market* for high-margin print books. Lost sales can be made up for through better marketting, promotional pricing, tie-ins, even better offerings. Lost customers, however, can’t be lured back. In this particular calculus, low-margin paperbacks simply don’t generate enough profit to satisfy the hungry maw of the BPHs infrastructure and overhead.
The best parallel to what is coming is likely going to be the transition from LPs to CDs; even though early CD adopters still had their old turntables handy, they totally stopped buying LPs in favor of CDs and because these early adopters were heavy buyers this defection took just enough profitability out of the LP business model (which included allowing returns of defectives) that the entire business collapsed long before LP demand did.
And this is what the “bestseller”-dependent publishers have staring them in the face; ebooks are cherry-picking the reader market, drawing away the cornerstone heavy readers and leaving behind the low-volume and/or price-conscious buyers. Take away enough of those premium customers and their whole business model collapses, long before overall print book demand even close to fading.
It’s coming.
And sooner than most of us could possibly guess.
@fjtorres
I love the analogy to LP’s (which were actually replaced by cassettes, not CDs), but here’s the difference:
LPs (and cassetes and CDs, for that matter) were a fairly complex technology with a centralized supply chain. Knocking it over was easy.
How many companies made record players/ cd players/ dvd players? A handful at most, and few people outside of those companies had the know-how to step up and start a competing business. To make a music player obsolete all you had to do was convince a few executives at the Sony’s and the RCA’s of the world started to switch over their production lines to the new technology. Then, even people that preferred the old media format were forced to switch because they could no longer easily buy an edison cylinder/record/cassette/cd/vhs/betamax/dvd player.
Now look at books. Their are hundreds and thousands of booksellers, and pretty much anyone can get into the game. If your neighborhood bookshop closes up, but you still prefer print books, you just go to Barnes and Noble. If Barnes and Noble closes up, you just mosey on down to Borders. If Border’s closes up, you head over to the new neighborhood bookshop that just opened. And I haven’t even mentioned online p-book booksellers (although I think they’ll be more likely to go under due to e-books). With publisher’s it’s the same story. One stops printing, another takes it’s place.
Due to the simplicity of the technology no part of the supply chain for books is even remotely centralized. That downward spiral that disruptive technologies bring becomes heavily muted. The 80% of the poplulation who say they will never buy an e-reader are right – they won’t ever need to.
Now the E-book supply chain, on the other hand… Rocketbook, anyone?
The modern publishing business is not exactly a cottage industry and it is hardly low tech or simple. And at a time independent bookstores are dropping like flies I would not expect anybody to be rushing in the fill the needs of the low-margin end of the print book industry.
More importantly, what collapsed in the LP-to-CD transition wasn’t the supply chain; the supply chain remained intact, as a matter of fact. What collapsed was the profitability of the LP business because the volume of sales could no longer support accepting the return of product from retailers. Once returns were dropped, retailers dropped LPs because *they* couldn’t make a profit either. And, of note, LPs didn’t vanish off the face of the Earth; they just stopped being a mainstream product and became a niche product.
Of course, p-book publishing also involves returns…
Finally, if/when the current business model collapses, it doesn’t mean p-books will disappear any more than LPs disappeared. But the way they are made and the way they are sold *will* change.
It’s not the p-book that is at risk, it is the p-book publishing and retailing business as it exists today that is likely to vanish.
I agree that the turnover in bricks and mortar is minor contrasted with the turn-over in reading device technologies and e-book retailing. So the volatility factor depends on your perspective. I also believe that the Amazon model was founded on print sales and a delivery system paced to print reading. That model is “convenient” enough. The last time I looked the Amazon sales were expanding to wider categories of physical objects compared to categories of e-format sales.
I also like the comment on ever wider distribution of the means of physical book production. I make my own books with a fuser based copier and laptop. Such publishing fits into a new, emerging economy that is augmented, but not dependent on internet connectivity.
Finally, there is also a strategic future for print books. This emerges from interplay and interdependence of print and screen. I spent the afternoon with a team of print on demand specialists. librarians and book artists planning another conference on future print products motivated by expanding e-book readership. Basically we don’t care what mode, codex or phone, encourages or expands text reading.
I do like the short-term of projections favored by screen advocates; the paper book is supposed to die-off a half dozen times in a single lifetime and so we can simply wait and see. So far we have learned that it is a false correlate to assume that print and screen delivery share a single market. Early on, yes, when e-book readers were also print readers, but not from this point onward. If print and screen book production continues to grow together, as has been the trend, the print book will flourish.
I totally agree with Jonathan K.: “ebooks cost more for the same content and, due to DRM restrictions and geographic limitations, provide less value than a paperback.”
I am a “heavy reader” but cannot afford to buy new all that I read, even in paperback. I get most of what I want at the library, or used book store where like-new bestseller hardbacks appear within days of release and I can purchase them for $5 or less and then take them right back when I’m done, as I can with the paperbacks I buy. Ebooks have no such method for recouping some of their cost.
I downloaded the Kindle for PC app on my laptop and really enjoy reading the free ebooks I’ve found on Amazon and Project Gutenberg, but with the high cost of many popular ebooks I can even *less* afford all the ebooks I want than I can all the pbooks I want. So while I have come to prefer ereading, I don’t see myself buying an ereader and switching over to ebooks any time soon.
In an episode of Yes, Minister (or maybe its sequel), Sir Humphrey Appleby protested a cut in arts funding for ballet (I think). When asked by his boss if he actually went to the ballet, Humphrey answered that of course he didn’t, but he liked to know it was there. I feel similar towards book stores. I haven’t been in one in a decade, so in practice wouldn’t care if they all vanished, but I still like to know they’re there.
E-readers are likely to become so cheap, e-book sellers will
give them away…if they are for reading and very few
associated functions, such as underlining, marginal notes,
etc. Lots of those will appeal to students, seniors, and
many others who want convenient and inexpensive reading.
Power readers, writers, researchers, are more likely to go to
an iPad level of interaction with e-book distributors and publishers.
There will probably be medium-tech devices too, so a tiered
approached to ‘readers’, including phones, will evolve to suit
a wide range of purposes and pocketbooks. Then too,
there’s no rule against readers owning a mix of devices for
car, travel, vacations, meetings, beach,………..
Collectors: Hold onto your pbooks; they are likely to
become more rare and desirable.
John Gant
===========
Right now, a new mass market paperback from Barnes & Noble’s website costs 10% less than the ebook edition for Agency 5 publishers, because B&N can and does discount the MMPBs, but the Agency 5 publishers don’t discount the ebooks. I’ve basically stopped buying Agency 5 ebooks just for that reason. I used to buy hundreds of Agency 5 ebooks, back when I could get them on sale at Fictionwise on sale for at least 20% off, and sometimes at used book prices.
There are a lot of people like Phillip B. who are predominately used book buyers, won’t buy new print books, and won’t buy ereaders because ebooks are too expensive (i.e., at least double used book prices). I think if the publishers were willing to price their backlist down towards the used book prices, more of these used book buyers would buy ereaders and ebooks instead of turning to the used market, and it would enable the publishers and authors to continue to get a revenue stream far longer than they do with the current model. I don’t think the publishers will be willing to do this, however, because it pits lower priced backlist against new works by authors when competing for limited entertainment dollars.
There is quite a list of eBooks I would like to buy for reading on my iPhone and iPad, but I refuse to pay the ridiculous prices so I have a line into a group of friends who lend me theirs when they finish reading them. I would much prefer to have them as my own and to read them when I chose.
I’d like to thank everyone for the thoughtful and spirited comments on my post. Anyone who wants to know why it’s so confusing to predict The Future of Books can start on this page. We have readers who say they’ve given up print books entirely, readers who buy both p- and e-books, and readers who buy nothing but print. Which of these groups are growing or shrinking, and at what pace? Hard to know–but my money is on the e-book lovers.
Further making it challenging for us publishers, a couple of the print die-hards only read used or library books–meaning they are just as lost to us, as customers, as the e-book converts. If time permits I’ll try to respond to some of these comments in a future post.
For now I would just say to Howard that we’re still in the early stages of gathering information on the demographics of e-book readers. One useful handful of surveys appears (a little dated) here: http://floridaresearchgroup.wordpress.com/2010/02/16/demographics-of-kindle-and-other-ereader-users/
What we do know is that the Kindle–still the most popular dedicated e-reader–is quite unusual among electronic gadgets in that its buyers are predominantly older, also predominantly female, and highly educated. Those characteristics sound to me a lot like those of the people who have traditionally been the heaviest buyers of print books. That’s not to say that all avid readers are likely to become e-book users–but to me it suggests that for a lot of these readers, the “techy” barrier has already been breached: the Kindle and other devices have made e-book buying and reading a simple enough process to attract even non-techy types.
I would suggest that basing business decisions on surveys of <5,000 US buyers is a dangerous game. The transition from pBook to eBook reading is in it's infancy and there is an inevitability in it that is evident. However the early adopters are not representative of the mainstream public and the recession is further skewing the demographics.
In my personal view the future is in the hands of the Big Publishers. They have control over how well this transition will go for them or how costly it could be for them. I believe the way they are progressing right now is very mixed. The availability is progressing well. The eReader development is also progressing well. But the marketing and customer focus is threatening to derail the process. Myopically clinging to old pricing and copyright restrictions and models. DRM delusions. Type problems. The combination of these mistakes could, in my view, very seriously slow the transition when the mainstream public are concerned and the result could be a far more costly process for the Publishers and eRetailers than it might be, as they will be forced to ride both horses for far longer than they need to.
Commercially I believe a faster transition would benefit the Publishers and eRetailers a lot more than a slow one. Clarity and simplicity is a lot cheaper than confusion and uncertainly. Some predict that eBooks will grow to dominate within 10 years. I suggest that as the mainstream public start to feel out this new medium, in 2011-2013, the negative issues I mention (and others) will become far more widely known about through the mainstream media and this will slow down the transition markedly.
If these negative issues are not dealt with, they will delay the transition to domination by eBooks to more like 20 – 25 years.
I agree with Howard — the transition from pbooks to ebooks is unlikely to happen as rapidly or as smoothly as contemplated by the publishing industry. A additional hurdle (which I was not aware of when I posted my original comment) is the investigation by the Attorneys General of Texas and Connecticut into the possible antitrust implications of current ebook pricing agreements. The results of such investigations may cast further doubts on the viability of existing ebook price structures, especially if other States, or the federal government, follow suit.