Friends
-
As
someone who is involved in the publishing industry on a daily basis, and has so
far accrued five Amazon Bestsellers over the last two years, I perform market
research and consume market research of other suppliers. This article by Alex
Newton answers questions I've discussed with my wife, Andre Brown, President of
one of the most prestigious and successful literary agencie. My contention has
been that the NY Times article on ebook sales slowing was based on a small
sample that failed to include Amazon, and that Amazon is the majority seller of
published books.
Please
read on to see what has actually happened. Looks to me like the market is
larger in total real estate, more competitive and more price sensitive. Trad
pubs have located their real estate to the very high-end, where there are fewer
purchasers. Lower unit sales therefore are a self fulfilling prophecy. This means
that self publishers and small indies who price within the band of largest unit
sales are growing. And, right now, that's where I live. I can sell 5k to 7k in
unit sales a month, up by nearly 1,000% over last year. My feeling is that the
NY Times article was based on selective and inadequate research. If your
opinion differs after reading this article, please let me know, at dskane@dskane.com. Here's the text of the
article, which I have permission to reprint:
eBook
Sales 2015 – Up Or Down?
December 2015 — It was just another case of “don’t
believe everything you read.” It all began with a New York Times front page
article in late September detailing how ebook sales are declining, and print
books are far from dead. NYT reported that “Ebook
sales fell by 10 percent in the first five months of this year,” based on a
report by the Association of American Publishers.” Read how
misinterpretation by mainstream media led to a totally misleading picture
of the ebook market.
Before we go any further, let me ask one question: Who could
have a vested interest in making people believe that ebook sales are falling,
and print books are seeing a renaissance? – Right. The big publishing houses.
This post here makes no claim whatsoever that the NYT article
was in instigated by the traditional publishers’ lobby. The author, Alexandra
Alter, is a renowned author of the New York Times and has covered the
publishing industry for both the NYT and the Wall Street Journal for years. The
NYT’s point of view should be as independent as mainstream media can get.
Still, it is ironic that the Big Five book publishers have their U.S.
headquarters in New York City, where the “media snowball effect” started.
Other mainstream media picked up the NYT story and spread it.
Soon, many Facebook groups and bloggers joined in the general doom and gloom
mood for ebooks. All of a sudden, there were blog posts and commentaries that
discussed “The End of An Era” in the ebook market.
There is only one problem: The original New York Times article
that got the snowball rolling relied on insufficient and misinterpreted data.
AAP
eBook Sales Data Questionable
The “market data” was based on a sample of 1,200 publishing
companies, all members of the Association of American Publishers (AAP). The
bulk of the revenues in this sample come from the “Big Five” publishing houses.
The point is, the reported sample is simply not representative
of the U.S. ebook market. The most dominant player, Amazon Kindle, which
arguably controls about 67% of the U.S. ebook distribution, is not entirely
reflected in the sample.
The website Author Earnings did a terrific job at dissecting the
ebook sales numbers for the U.S.
market: The AAP’s 1,200 publishers account for no more than 50%
of Kindle revenues and around 32% of ebook unit sales on Kindle. Their share
represents a rapidly declining portion of the ebooks that are sold through the
market-dominant Kindle platform.
By contrast, self- and indie-published ebooks, as well as
Amazon’s own-published ebooks, continue to gain share on Kindle.
And as for the Kindle store as a whole, Amazon told the Wall Street Journal that sales “are up in
2015 in both units and revenue.”
eBook
Sales Are Declining For The Big Five – Not For Amazon
Thus, when the AAP reports “declining ebook sales,” they are, in
essence, reporting the eroding ebook market share of the Big Five. Specifically,
Simon & Schuster (CBS Corporation), HarperCollins (NewsCorp), Penguin
Random House (a subsidiary of Bertelsmann and Pearson), Macmillan U.S and
Hachette Livre.
Their declining share in the ebook market does not come as a
surprise. In fact, it has largely been self-inflicted. Over the last one and a
half years or so, the Big Five struck new ebook distribution deals with Amazon.
They seemed to get what they desired: the right to set the prices of their
ebooks and avoid the substantial discounts the online retail giant often
applies. Since then, the major publishers have been raising their ebook prices
so they can keep their print sales up and reduce “cannibalization” by their
corresponding ebook editions. The bullet backfired, though, because ebook
readers are price sensitive. The new agreements resulted in higher ebook prices
and a decline in units sold.
There may be root causes other than pricing, too, but the net
result of all these developments is reflected in the latest ebook sales figures
announced by these large publishing companies:
- Publishers
Weekly recently reported on the decline in digital sales at HarperCollins (11.8%
drop in digital sales, mainly ebook-driven) and Simon &
Schuster (where E-book sales are estimated to have
declined about 17% in the quarter.)
- Pearson
reported “weaker ebook sales” at Penguin
Random House in the press release on their recent quarterly
results.
- Hachette has just
reported that their overall sales in the United States have decreased by
4.2% in the third quarter ended September 30 vs prior year. Ebooks
accounted for 24% of total book sales in the first nine months of 2015,
down from 28% for the same period in 2014. If you do the maths on this, we
are talking about an 18% decline in their ebook sales
The facts speak for themselves. It is mainly the big traditional
publishers that have problems with their ebook sales. Amazon, self-publishers
and indie-publishers continue to gain share.
Total
eBook Demand – Up or Down?
The analysis above makes it clear how the market shares are
shifting in the U.S. ebook market. This leaves the question, though, whether
the size of the cake, i.e. the total ebook market, is growing or
shrinking.
Weighing the reports on the (unrepresentative) AAP numbers
against Amazon’s statements on its ebook business, it is highly likely that the
ebook market has continued to grow in 2015.
Unfortunately, there are no reliable sources for this. We
already discussed the issues in the AAP numbers. The market research firm
Nielsen also offers an ebook market panel called Pubtrack Digital. Yet, the
numbers from this group seem even more “unrepresentative” than the AAP data;
Pubtrack follows unit sales data supplied by only 30 US publishers – excluding
Amazon.
Whatever the case may be, it is highly unlikely that total ebook
sales growth was anywhere near the growth of ebook supply. Therefore, proper
niche selection (and creation) is more important than ever before.
Of course, the ebook market has matured. It has become tougher.
That has been the case for at least two years, if not longer. It does not come
as a surprise to any publishing industry professional.
Let us look at some facts:
Unrestrained
eBook Supply
The number of English-language ebooks available on Kinde as
of December 1, 2015 was 3,259,072. Exactly one year ago, that number
was 2,489,639. In other words, the supply of books has been growing by
approximately 64,000 titles per month or 31% in one year’s time. This rate of
new titles has been relatively constant over the last 24 months, fluctuating
between 55,000 and 75,000 new English titles every month. If this rate
continues like this for the next 12 months, we will be looking at a growth of
the supply of ebooks of 20-25% for 2016.
Five of the 30 main book genres have seen above-average growth
in ebook supply:
- LGBT
eBooks +200%
- Comics
& Graphic Novels +119%
- Teen
& Young Adult +63%
- Romance
+42%
- Children’s
eBooks +41%
No wonder that competition is reported being tougher than it
used to be, especially in these genres. As a result, prices have shown an
almost continues decline in Romance and LGBT to price points around and below
$2.99 even for the Top 100 bestsellers on Kindle.
eBook
Prices – Mixed Developments Based On Genre
I believe there has never been any significant pricing power for
ebooks on the supply side, except for highly technical genres (medical, law,
etc.) where books can command anything between $9.99 and $200.00 and up.
The fact is that the average price of the Top 100 titles across
27 of the main Kindle genres was $6.17 per November 1, 2014. Twelve months
later, the same average is $6.74. In other words, ebook prices, at least in the
indicator Top 100 increased by 10% across the board.
Of course, there were winners and losers. Given the
over-proportional rise in the supply of books described earlier, three genres
saw a significant drop in price levels compared to a year ago:
- LGBT
eBooks -22%
- Romance
-20%
- Comics
& Graphic Novels -12%
eBook
Market Saturating
The ebook market is a mature market, no doubt. Let’s look at the
following ratios:
On the supply side, Amazon displays close to 15 million English
language paperback and hardcover titles per November 29, 2015. This is 4.6
times the number of available Kindle ebooks.
Probably coincidentally, on the demand side, the total U.S.
publishing trade revenue is also about 4.5 times value of the ebook market
(within the AAP sample).
Most authors and publishers will confirm: the ebook market has
matured and become increasingly saturated. Growth in supply is outpacing the
growth in demand.
The result is a highly market competitive environment. At
K-lytics, we track the sales performance of more than 2,800 book genres and
sub-markets. Then we compare the level of sales with the degree of competition
as measured by the number of available titles in each sub-market.
The result? Out of more than 2,800 Kindle categories analyzed
the K-lytics ELITE
database, some 15% show an attractive “sales-to-competition” ratio.
These are the profitable niches you should go after if you are an author or
publisher who is in the game for profits and wants increase the odds of success
(see exhibit below.)
Ebook publishing has become like drilling for oil: lucrative for
those who have the right technology and know “where to dig”, less fruitful for
those who do not.
Self-publishing and platforms such as Kindle have torn down any
barriers to entry in the ebook market. Unfortunately, this has also torn down
any barriers to low quality and junk books that keep flooding the market.
Although Amazon has shown some signs of fighting at least fraudulent ebook
uploads in KDP, the amount of “ghostwritten crap” that gets uploaded as “books”
is still staggering. Consumers and the whole industry would hugely benefit from
an introduction of a quality stage gate in the Kindle Direct Publishing
process—but this is another topic for another day.
The
Show Will Go On
So do I believe in “doom and gloom” for ebooks? – No.
Whatever the macro-picture is, the answer for the individual
indie author will remain what it always has been:
- Write
good quality books
- Do
so in quantity
- Select
your niches carefully (i.e. write for markets where demand is high and
competition as low as possible)
- Market
the books aggressively
- And
hope for a bit of luck
Happy publishing!
