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Why The Book Business May Soon Be The Most Digital Of All Media Industries

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Consider it an inauguration of sorts, a celebration of the e-book industry becoming a member of the major media club just as digital music and online video have before them. When you influence a billion dollars, people have to take you seriously. In the book business, it means that traditional publishers can no longer live in deny-and-delay mode; meanwhile, digital publishers get invited to better parties and people in other media businesses like TV and magazines look over and wonder if they could cut a slice of this new pie just for them.

To honor the occasion, we have just published our five-year forecast for eBooks in the U.S. The punchline is this: 2010 will end with $966 million in e-books sold to consumers. By 2015, the industry will have nearly tripled to almost $3 billion, a point at which the industry will be forever altered.

Right now, the number to track – and the one that determines how many e-books will sell – is the percent of a consumer’s books that are bought and consumed digitally. To get at this number, we have to understand how people get books today. Did you know that the two most common ways people get books today is borrowing them from a friend or getting them from the library? Evidently content – at least in the book business – is already quite free, even without the help of digital.

e-book buying falls very low down on this list of how people acquire books. Just 7% of online adults who read books read e-books. But that 7% happens to be a very attractive bunch: they read the most books and spend the most money on books. And here’s the kicker – the average e-book reader already consumes 41% of books in digital form. Oh, and that includes the people who don’t have an e-reader yet, which is nearly half of them. For those that have a Kindle or other e-reader, they read 66% of their books digitally.

I’m sure you’re ahead of me on this one, but let’s just spell it out. We have plenty of room to grow beyond the 7% that read e-books today and, once they get the hang of it, e-book readers quickly shift a majority of their book reading to a digital form. More e-book readers reading a greater percentage of their books in digital form means our nearly $3 billion figure in 2015 will be easy to hit, even if nothing else changes in the industry. Meaning even if we never get color e-Ink screens, if publishers never experiment with e-book subscriptions, and interactive e-book formats never succeed, we will still see digital get close to $3 billion in size by the middle of the decade.

At that size and higher, not only do publishers need to take digital seriously — they must make it the new default for publishing, preparing for a day in which physical book publishing is an adjunct activity that supports the digital publishing business. And this dramatic reversal will have happened faster in book publishing than in any other media business. Not just because publishers have had years to watch other media industries face the digital transition, but also because book publishing is a single-revenue business.

Music used to generate revenue from the radio, from CD sales, and from concert tickets. Changing that business required upsetting several apple carts at once. TV is similarly complex, revenue is derived from advertising, cable carriage or retransmission fees, and direct sales of DVDs. You can’t go digital without first rethinking the entire business (and not every player in the ecosystem takes that lying down). But not publishing. Books are published and sold at retail. In the end, once the only channel from which revenue is derived starts to get remodeled, it’s not long before the whole structure gets torn down and rebuilt to accommodate the new dominant distribution model.

That’s why we pause to commemorate the crossing of the billion-dollar threshold, because from here things will move so quickly that by the time the dust settles, the book business may actually be the most digital of all media industries, even if it got the latest start.

James McQuivey is an analyst at Forrester Research, where he serves Consumer Product Strategy professionals. James blogs here.

This article originally appeared in Forrester Research.

12 Responses to “Why The Book Business May Soon Be The Most Digital Of All Media Industries”

  1. John J Conley

    Looking at all the statistics that are being released on e-books is a little like all those folks who told Noah that the water is rising but this is not yet a flood. There is no doubt that e-books is changing the busness model for physical books. The data that we have yet to see in any detail is rate of migration from digital to physical as well as the number of acutal net new readers or sales due to e-books. With two solid year of sales the Publsihers should now be able to begin drawing some conclusions that will allow them to make changes to thier models and move forward. The physical books is not going away and as we have seen back list and soft cover are not as impacted yet by e-books as front list and best sellars. The demand for older titles in physical form may be a function of the end users purpose combined with the actual nature of these books. (ie scholarly versus entertainment) The vast majority of books every published are not trade titles and here in may be the reason those books are not attractive candidates for e-readers. This is where innovative distribution solutions like the Espresso Book Machine will play a key role in the new Book Retail and Distribution world. This solution enables the acquisition of any title in the EBM catalog in physical form at the point of sale as well as helping out the Self Publishing Author who can now publish his or her book at thier local books store. If the end user wants a physical copy of the book they can always have it and the Tradtional Publisher or Self Publishing Author can do this without holding or investing in any inventory. Take a look at how the Harvard Book Store is taking advantage of this and all the content that is now made avaliable from Google Library to reinvent its retail and distribution model with the EBM.

    John Conley

  2. Hi James,
    Interesting and informative article. As an Aussie author with books published in e-book and print formats, it is a little disappointing that the phenomenon hasn’t really caught on in Australia as yet, but it is coming, and the sooner the better in my opinion.



  3. As a Canadian author with half a dozen ebooks out (and more coming), I find this article to be very exciting. In the past 8 months I’ve seen my ebook sales steadily go up and my print sales drastically go down. I now earn more as a writer from my ebook sales.

    Regarding how people get their books, I would guess that buying online must be up there, whether consumers are purchasing ebooks or print books. As much as I enjoy my local bookstores, it’s just too easy to order online. And libraries are slowly getting into ebooks in Canada and the US.

    Regarding the tactile experience of print books that one commenter mentioned, I felt that way too–at first. Then I tested out a Kobo ereader, Kindle and iPad. Believe me, once you start reading ebooks via a dedicated ereader, you’ll forget about the feel of paper because the benefits outweigh those old feelings. I love that I can store thousands of books on one small lightweight device, and that I can download a book in 60 seconds or less.

    I look forward to a near future where authors are properly rewarded for their creations.

    Cheryl Kaye Tardif,
    bestselling author

  4. Hi James,

    This: “Did you know that the two most common ways people get books today is borrowing them from a friend or getting them from the library?” is quite interesting.
    Did you have any numbers for this – how many books are borrowed vs. bought?

  5. jamesmcnally

    Thanks for the clarification in the comments. This report/story is really about “the numbers,” so that helps.

    I know I’m not the only one getting a bit sick of the music industry’s experience as an analogy for publishing, but I think it pretty much works in this case, and the comparison between breadth of revenue streams is apt.

    Thanks for making this available.

  6. Jussi Keinonen

    BTW Amazon data is used to spin the media and make headlines. Selling more eBooks than hardbacks was an example. There was no information about the free eBooks “sold” and downloaded, and no information about the huge amount of titles sold for 0.99 and 1.99. The amount of titles is not important, it’s the dollars that count.

    (Exactly like you did in the article, mind you. My personal guess is that eBooks have a good chance of reaching 15-25 percent of the total market.)

  7. You’re right about that, Benedict, some of my publisher clients are seeing higher percentages than we’re implying here, especially on new books published recently, but not so much on backlist titles, which account for a big chunk of sales each month in physical. I suspect that distinction will persist — Amazon recently reported that they sell more eBooks then hardbacks and paperback for the top 100 books sold (usually newer titles) but not more than paperback overall, which is where your backlist is cropping up. Anyway, thanks for the dialogue, very helpful.

  8. Hi James.

    Sorry I missed the US mention. AAP stats need a MASSIVE health-warning – sum of their monthly ebooks stats for 2009 adds up to $168m, but their annual number was $313m. Annual and monthly are ‘calculated differently’.

    So stats are very problematic… but the big publishers do seem to be seeing sales more in the 5-10% range this year…

  9. Thanks for mentioning that, Benedict. In fact, one of the issues we have to deal with is that according to the AAP, eBook sales in 2010 through August were just $263 million. At best, they should end the year around $500 million. So my numbers sound high in comparison, though theirs are only from fewer than 15 publishers and only record wholesale revenues (not retail). My numbers, based on consumer surveys, can’t get us above $1 billion because to do so, all the people who read eBook would have to spend more than $70 on eBooks, something people who have been eBook reading all year will absolutely do, but the millions of people who got an eReader in the run up to the holidays will not just because they won’t have been in market long enough.

    Overall you’re right, we’re not aggressive here, we’re just reporting what our data show. Oh, and I did specify US, it’s in the second paragraph, first sentence.

  10. A litte maths:
    In the US (I presume we’re talking about the US market here, though it’s never made explicit), annual book sales are around $23bn a year, as per the AAP.
    $966m is just 4.2% of that market. Most people in the industry are saying that this year ebook sales will be more like 10% of the market – which would be $2.3bn.

    Of course, it is quite possible Forester is right, but these are actually very bearish forecasts, not aggressive ones.