Wednesday, September 23, 2015

The plot twist continues, eBooks sales aren't really slipping, but traditional publishers might be

2013.07.25-IMG_4847The New York Times (22 September 2015) once again ran an article loaded with dubious data and anecdotes about the relative market share of print and electronic books. As you know, I'm a fan of BOOKS, eBooks or pBooks, not just the sacrosanct CODEX format that so many equate as the ONLY form for books. The article in question, "The Plot Twist: E-Book Sales Slip, and Print Is Far From Dead" by Alexandra Alter relies heavily on a January 2015 Nielsen report (see here) that purported to show a dramatic decrease in the ebook market. This report has been analyzed in a number of places and found to have dubious methodology (see, for instance "Did Nielsen Report US eBook Sales Were Down in 2014, or Volume?"  and "Reports of a Shrinking US eBook Market Have Been Greatly Exaggerated (Nielsen Pubtrack)"). These analyses (from June 2015) as well as an earlier article in The Guardian ("The ebook is dead. Long live the ebook" from February 2015) seem to have escaped the reportorial eye of The Times writer. One might also wonder why the Nielsen report (nearly 9 months old) is news for The Times Media desk.

The Times article also calls into question such new services as Kindle Unlimited (an all you can read subscription model which is both more successful than Alter implies and, as author Hugh Howey has shown, is a financial boon to authors). See for instance Howey's "Kindle Unlimited Scores a Knockout" (15 August 2015). A sneaking suspicion is that the disdain show for "all you can eat books" comes from the genres most heavily represented, Romance and Scifi. Too many pundits don't consider them "literature" or their consumers "readers" and can then righteously ignore the market impact they have on the overall "book" industry and focus on the Big 5 with their trendy Manhattan offices and stylish editorial staff.

Alter, in The Times article, also notes the rise of Indie bookstores and here she's correct, Indies are on the rise (a good thing for both authors and readers), but they will always remain niche business; when Borders went out of business and Barnes and Noble shut large number of stores, the total sales from those big stores was not made up for in the growth of Indies. See "Why Indie Bookstores Are on the Rise Again" in Slate  (September 2014) for a good analysis of this phenomenon. The article also makes pains to describe new warehouses the Big 5 are building to get books faster to Indies (and other outlets). It's about time, Amazon has been doing that for year (taking grief from publishers when start to whine when previously privileged access to those warehouses (as well as prime real estate on the Amazon website) are used as an Amazon negotiation tool, ahem, Hachette; see here for some interesting information).

Lastly, Alter drags out the old "ereader sales are declining" saw. In some fancy, confusing footwork, she notes that ereaders sales are crashing, while at the same time noting more reading is occurring on phones and tablets. Yes, dedicated e-ink ereader sales are slowing. In addition to fact that you can read on any device, we can thrown in that ereaders, such as the Kindle, are pretty robust devices. They don't screencrack like iPhones and are so basic, you don't need to upgrade with every new model. For hardcore readers, the e-ink screen is to ebooks what the fine leather binding is to print books. Single use devices are a luxury that are just that, a luxury. Here's an analogy in story form:
"Digital photography is dead!" says the Newspaper of Record. "People are obviously not taking digital pictures anymore. Look at the sales of digital cameras. The market is collapsing, there are fewer models on the market and for entry level models, the cost is a race to zero. A spokesman from Kodak crowed, 'People are tired of the convenience and value of digital photographs and appreciate the feel and beauty of 35mm analog cameras and photographic prints.'"
Indeed, digital camera sales have plummeted, but the number of digital photographs have exploded, probably beyond measure. That's because there's a camera in almost everybody's pocket -- it's called a "phone". There's a market for single purpose digital cameras, but it's a niche market. When everyone has an ereader in their pocket (it's called a "phone") the single purpose ereader is a niche product and annual sales will show a downward trend.
In short, what is occurring, in my humble analysis, is that ebook sales are down for the Big 5 (and their kindred) since they can set the prices for both print and ebooks on Amazon (the Agency Model). Readers who want ebooks can find a wealth of material (much unsurprisingly good). Those who want Donna Tartt's The Goldfinch (an example used in a couple of places) will have to pay whatever the publisher decides is the price. Publishers are (temporarily) in an enviable position of being able to make high margins on in-demand content. There's no incentive to increase the NUMBER of sales when you can control your profit by artificially keeping prices high. As Alter opines: "Higher e-book prices may also be driving readers back to paper."

Publishers get a double win here (low cost for ebook storage and delivery and a higher unit cost) and sometimes firesale prices on print books (storage and delivery often the courtesy of Amazon). Authors still get a fixed percentage of list price, but publishers, by limiting the discounts, keep a higher percentage of each unit sale; more unit sales are always better (though for print that are those pesky warehouse costs as well as bookstore returns, etc). At a certain point, profit as a percentage of sales decreases. At the extreme level (as mastered by the for-profit scholarly publishing industry) it's more profit effective to distribute ("sell") fewer copies of a publication at a higher price than to sell many copies cheap.

What we're hearing is not the death rattle of ebooks or print books, but the nagging, gnawing, rattling cough that foretells a painful restructuring of the publishing industry that will, in the long run, benefit both authors and readers. There will be winners and losers and I believe books (pBooks and eBooks) will be the winners.

Suggested reading (with more sources and data):

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