What the book industry can teach retail about digital

The Conversation

12th May 2017

While just a few years ago, headlines predicted e-book supremacy and the demise of the paper book, that’s now reversed. They’re now saying the Kindle is clunky and unhip and paper books are cool and selling well as e-book sales crash.

But are today’s claims any more accurate than those of 2012?

The latest round of headlines was triggered by UK Publishers’ Association figures noting a fall in consumer e-book sales of 17 per cent in 2016, while physical book sales rose 8 per cent. This statistic seems straightforward enough on the surface, but it pays to go deeper.

Mainstream media have long been in the habit of relying on figures from publishers’ associations, retailers’ groups and Nielsen data, but the industry has changed. While these measures are accurate, they are only accurate in terms of what they measure, and they represent far less of the industry than they once did. They are no longer a proxy for the industry.

A recent history of e-books

Amazon’s Kindle was launched in November 2007. Barnes & Noble followed with their Nook in October 2009 and Kobo with their eReader in May 2010. Apple’s launch of the iPad in January 2010, meanwhile, introduced a non-specialist device that gave a pleasing e-reading experience.

US e-book sales rose 1260 per cent between 2008 and 2010. By early 2011, US advisory group Gartner reported that industry researchers were predicting a 70 per cent annual growth rate for e-reader sales globally.

In February that year, the REDgroup, the parent company of Angus&Robertson and Borders in Australia – chains responsible for 20 per cent of the country’s book sales – went into receivership.

Retailers across the industry in Australia were noticing a downturn. After 5 per cent growth in 2009, Australian book sales contracted slightly in 2010, then dramatically in 2011, with falls of 13 per cent in volume and 18 per cent in value, and significant falls continuing into 2012.

In January 2011, Amazon announced that, for the first time, it was selling more e-books than paperbacks. According to Nielsen figures, US e-book sales went from US$69m in 2010 to US$165m in 2011, a 139 per cent increase. They increased a further 30 per cent in 2012 and 13 per cent in 2013.

Nielsen figures, though, only record sales of books with ISBNs, something many independently published e-books do not have. Despite not counting many e-books, Nielsen still recorded sales as increasing, albeit probably at diminishing growth rates each year.

With increases in both average smartphone screen size and smartphone use, the 2014 to 2015 period marked another shift – the phone was becoming a significant reading tool.

According to US Nielsen surveys, while the percentage of the e-reading population reading primarily on tablets had increased from 30 per cent in 2012 to 41 per cent in 2015, the number of e-book buyers who used their phones to read at least some of the time increased from 24 per cent to 54 per cent in the same period.

Judith Curr, publisher of Atria Books, stated in 2015 that, “The future of digital reading is on the phone. It’s going to be on the phone and it’s going to be on paper”.

Peak e-book?

E-book sales in the US, though, appeared to plateau at 2013 levels, according to Association of American Publishers figures, and then dipped early in 2015. In the UK, the Publishers’ Association reported digital sales for the year 2015 falling slightly and print sales growing minimally.

“Readers take a pleasure in a physical book that does not translate well on to digital,” the Publishers’ Association stated, and declarations of “peak e-book” became commonplace. Those figures, though, do not tell the whole story.

As Simon Jenkins admitted in The Guardian last year when declaring that peak digital was at hand, the adult colouring book fad made a contribution to print sales in 2015. Unlike fiction blockbusters, sales of colouring books are almost entirely in print format.

In the case of the UK market, the £20.3 million generated by adult colouring books in 2015 matched the growth in the overall print market. Without it, the pattern of zero or negative growth seen in the preceding seven years would have continued.

In the US, Nielsen reported that sales of adult colouring books surged from one million units in 2014 to 12 million in 2015.

Australia was also part of the adult-colouring craze. Nielsen BookScan’s November 2015 Australian top 20 featured eight colouring books, each one of them outselling the most successful Australian novel.

Other factors were at work as well. Following the renegotiation of pricing between major American publishers and Amazon, e-book prices rose in the US Kindle Store in late 2014 and 2015.

Until then, Amazon had pushed publishers to keep prices no greater than $9.99, and buyers had become conditioned to paying less than $10 for e-books.

Publishers that increased prices above that mark subsequently recorded a fall in e-book receipts, and some identified higher prices as a factor. According to journalist Jeffery Trachtenberg, publishers viewed this pricing change as involving “some sacrifice, but they felt it was worth it to keep Amazon in check”.

The specific books published from one year to the next had an impact too. Some publishers noted that 2015 saw fewer “hot” titles. With nothing to match Frozen and the Divergent series, children’s and young-adult e-book sales fell 45.5 per cent in 2015 in the US.

E-reading growth not counted

While the Association of American Publishers’s figures are based on a survey of 1200 publishers and often seen as authoritative, the Amazon Kindle Store stocks many independently published titles and titles published by small and micro-publishers not captured by the survey.

At the same time as the association was reporting a drop in overall e-book sales, Amazon, the retailer with the majority of the US e-book market, reported increases in sales in terms of both units and revenue.

And other avenues were opening up that facilitated continued growth in e-reading that was not feeding into the statistics.

Public libraries were lending e-books and subscription e-book libraries were opening for business – Oyster in September 2013, Scribd the following month and Amazon’s Kindle Unlimited in July 2014.

While subscriber downloads earned an author readers and, in the case of subscription libraries, revenue, they did not count towards sales.

David Montgomery, CEO of publishing services company Ingenta, drew on these factors to declare last year that publishing had split into two markets, with a widening gap between them.

Self-published and micro-published authors, particularly those writing genre fiction, were pricing their e-books much lower and claiming an increasing share of the market, particularly through Amazon, while large publishers were increasing e-book prices in a way that reduced e-book sales.

This pattern has continued, and the rhetoric that pits one format against another appears to be continuing too. At the Digital Book World conference in January 2017, Nielsen presented 2016 data from more than 30 traditional US publishers showing a fall in e-book sales from 2015 to 2016 and hardback unit sales overtaking e-books for the first time since 2012.

Despite their data being an estimate and covering relatively few publishers, Publishers Weekly ran its story on the presentation with the headline “The Bad News About Ebooks”. The week after the conference, the Sydney Morning Herald published a Bloomberg-sourced piece headed “How Print Beat Digital in the Book World”.

Association of American Publishers (AAP) data released in February 2017 appeared to confirm the decline of e-books, with e-book sales for the first nine months of 2016 down 18.7% on the year before.

However, at the Digital Book World conference in January, other evidence was presented that attracted less media attention.

An analysis by the Author Earnings website (an aggregator and analyser of e-book sales data) identified that, outside the world of traditional publishing, authors who were self-published, independently published or published directly by Amazon imprints, had sold more than 260 million e-books worth more than US$850 million in the US in 2016.

Total e-book sales by Amazon – which makes up 83 per cent of the US e-book market by volume and 80 per cent by value – rose by 4 per cent from early 2015 to early 2016, at the same time as e-book sales recorded by the AAP were falling.

While no direct comparison exists for the UK market – where the Publishers’ Association reported a 17 per cent fall in consumer e-book sales from 2015 to 2016 – 42 per cent of e-book sales in that market are by self, indie or Amazon-published authors.

This added up to 40 million of the 95 million units sold in the UK in 2016 – a percentage that is growing as the e-book market share held by the larger members of the Publishers’ Association falls.

The publishing industry has changed. It is no longer solely the domain of members of publishers’ associations and books with ISBNs that allow easy tracking and accumulation of data that appears robust but tells much less of the story than it once did.

Moving beyond the ‘format wars’

It is too easy to have our attention grabbed, and sometimes our biases or hopes confirmed, by an appealing set of statistics from an authoritative source, and to misunderstand what those statistics are measuring.

It is also too easy to fall into viewing the evolution in e-book and print sales solely through the prism of Amazon and its often public power struggle with publishers, and to be drawn too deeply into seeing the future of publishing as one format versus another.

While it is possible to speculate about the future trajectories of the e-book and paper book markets, many confident pundits have been wrong before, as new factors have emerged that have significantly impacted reader behaviour and sales patterns.

From the practical perspective of writers wishing to connect their work with readers, it is prudent to see both paper and e-books as significant for any book-publishing project in the present and near future, and to develop strategies to meet both of them.

It is also prudent to look beyond both platforms to another, one that had long been regarded as a peripheral player: audiobooks.

All we can be sure of is that the digital platform is still evolving. What will an e-book be 20 years from now? What will a book be?

Nick Earls is a PhD Candidate in Creative Writing at The University of Queensland.

This story first appeared on The Conversation.