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Big U.S. publishers are now reporting that e-books now make up between 15 and 20 percent of their sales-a dramatic and quick rise since 2010. But in the rest of the world, it’s a very different story. In the UK, e-books make up about six percent of sales, but that’s as close it gets to U.S. levels. In Germany, Spain, France, and Sweden, e-books account for only 1 percent of book sales; e-book sales in most of Latin America, Asia and Africa are negligible.
European e-book markets are still nascent for several reasons, including a lack of affordable e-readers, high e-book prices, and a scarcity of books in digital formats. Some say it’s just a matter of time before other countries catch up to the U.S. But a new report from O’Reilly Media, “The Global eBook Market: Current Conditions & Future Projections” and discussions at the Frankfurt Book Fair last week suggest that foreign countries won’t necessarily follow an identical but delayed path to widespread e-book adoption.
The fact that the e-book business has been slow to develop in Europe and other international markets has important ramifications for publishers there. In the U.S., the quick growth of e-book sales has been something of a lifeline for publishers facing a declining print book business. E-books have allowed publishers to reach new readers, and studies show that owners of e-readers buy and read more books overall. The absence of a vibrant e-book business in most foreign countries is depriving publishers there of the same advantages.
In Europe, Amazon (NSDQ: AMZN) will clearly be key in helping e-book markets to develop, but for some people there, that’s a mixed bag. Kindle’s recent entry into Europe has been welcomed by many publishers and readers who are looking for easy ways to sell and buy e-books, and yet some European publishers are wary about Amazon’s deep impact in shaping e-book emergence there, Ruediger Wischenbart, the author of the O’Reilly report, “The Global eBook Market,” told me. Those publishers fear that Amazon might bypass or override “traditional practices like price regulation.” We saw a bit of this when European publishers filed lawsuits against Google’s book-scanning project, and Wischenbart thinks it will be “an issue for some time.”
In terms of a timeline for growth in Europe, big European publishers believe it will take at least three years before e-books are close to 10 percent of sales there, and it may take even longer in other parts of the world. Here’s why:
Relatively Few Affordable E-Readers
Affordable e-readers are one of the main drivers of e-book growth, and until recently they’ve been non existent in much of Europe. Amazon finally brought the Kindle to Germany in April and to France just a week ago; Spain and Italy aren’t expected to get the device until at least the end of 2011.
The experience of the Kindle in the UK shows the pent-up demand for affordable devices and a streamlined e-book buying process. The Kindle launched in the UK in August 2010, and within nine months, Amazon was selling more e-books than hardcover print books.
It’s not just Amazon that has gotten a taste of the potential for e-books to take off. At the Publishers Launch Conference in Frankfurt last week, Italian publisher Mondadori said that when it started selling e-books in the Italian Apple (NSDQ: AAPL) iBookstore, sales “exploded” in the first four days, jumping from 150 to 1,000 copies sold per day.
The market will develop as more big U.S. players put down international stakes. Google (NSDQ: GOOG) launched its e-bookstore in the UK about a week ago and is expected to expand to non-English-speaking countries sometime in 2012. Sony (NYSE: SNE) launched its e-bookstore in Europe in September. And Kobo recently opened local-language stores in Germany and France, as well as a German-language e-reader-primarily choosing the strategy of partnering with local retailers like Redcoon and FNAC.
What about the local players? Some local book retailers and companies have tried to sell their own e-readers, but with mixed success. Dutch company iRex Technologies, for example, sold about 50,000 e-readers between 2008 and 2010, but the company filed for bankruptcy in June 2010. UK bookseller Waterstones said in September that it plans to release its own e-reader, but competitor WH Smith just teamed up with Kobo, hoping to “unlock the e-book reading market for the 90% of British consumers yet to use a device.”
Not Enough E-Books
The lack of e-book titles is also keeping the digital book business from growing faster in Europe. Publishers in many markets have only recently begun releasing new local-language e-books simultaneously with print books, and they are in the very early stages of digitizing their backlists. At the same time, there is also a dearth of foreign-language titles in digital form. Geographic restrictions limit where e-books from other countries can be sold, and copyright law for e-books creates complicated relationships between authors, agents, publishers and distributors.
The foreign-language e-books that are available tend to sell well. As of this spring, Barnes & Noble’s Nook store was selling foreign-language e-books faster than English-language e-books. And Spanish publisher Santillana, which released its backlist of e-books to the U.S. Kindle store in September, reported it’s selling twice as many e-books here as it is in Spain and Latin America combined. “Global is…an opportunity for non-English publishers awaiting their own markets to develop,” writes Philip Jones at FutureBook, a European digital publishing blog in association with UK publishing magazine The Bookseller.
David Naggar, VP of Global Kindle Content, said Amazon has now sold millions of English-language e-books in foreign countries-twice as many it sold in 2010. And Kobo’s Michael Tamblyn, VP of content, sales and merchandising, said Kobo’s English language e-book sales to non-English-speaking countries are up 300 percent this year compared to last year.
E-Books Are Expensive
E-books cost more in foreign countries than in the U.S., even without taking the VAT (see below) into account. Research by Italy’s Bookrepublic and AT Kearney, presented at Publishers Launch Frankfurt last week, found that the average price for a newly published e-book around the world was €10.50, ($14.5/£9.19) not including taxes. The average price in the UK was €10.80, ($14.91/£9.45) and the average in the U.S. was €9.30. ($12.84/£8.14) (Recent research from BookStats pegs the average e-book price in the United States at $7.72 (£4.89) in 2010, down $8.09 (£5.13) from 2009.)
Foreign publishers, like their U.S. counterparts, fear that pricing e-books too low will cut into their print book sales. But “if we are scared about e-book prices, we will not survive,” Riccardo Cavallero, CEO of Italian publisher Mondadori, says. “Of course we will have cannibalization. That’s our problem to manage as we restructure our companies. E-book prices will have to be very low.” In some parts of Europe (
the UK, Germany, France, Spain and Austria) print book prices are fixed; in France and Spain, all book prices, both print and digital, are fixed. Publishers are doing all they can to keep book prices high, Wischenbart told me.
The Pesky VAT
Most countries in the European Union and Scandinavia have a value-added tax (VAT) on print books and e-books — but that tax is much higher on e-books than on print books. That’s because under the definition of the European Commission, books are considered products, while e-books are considered licensed services. The VAT on e-books in Italy, for example, is 25 percent, compared to 4 percent for print books there. That certainly contributes to the higher e-book prices.
The Federation of European Publishers and the International Publishers Association see the reduction of the VAT on e-books as essential to fostering the growth of digital publishing. This May, the FEP wrote, “In the U.S., a moratorium on the taxation of electronic services has contributed immensely to the impressive growth of the sector in recent years; the EU should follow this example for professionally published content within its market in order to compete effectively on a global scale.” France is already set to reduce its VAT on e-books to 5.5 percent (the VAT for print books), down from 19.6 percent, in January 2012.
Not surprisingly, developing countries–like South Africa, where Random House Struik launched an e-book-only imprint this summer–are well behind Europe, as e-readers remain unaffordable for the majority of the population. Arthur Attwell, CEO of South African digital publishing company Electric Book Works, spoke to me in July about the state of e-book publishing in the country and the challenges that developing countries face when it comes to e-books.
E-book discussions in South Africa tend to center around the country’s consumer book buying market, “which is very small and wealthy relative to most of the country,” Attwell said. “Maybe two out of 50 million people. While there have been some exciting pilot projects using mobile phones to distribute content to a broader market, nothing has scaled yet as a business. Delivering and selling books on mobile phones is incredibly difficult, despite everyone’s enthusiasm about it. I think it’s much more likely phones will be used as sales and marketing tools-book sampling, for instance-but real reading will happen in other places: state-sponsored e-readers for school children, hyper-localized print-on-demand, low-cost netbook and tablet computing in business or institutional settings, such as hospitals.”
As for the BRIC countries–Brazil, Russia, India and China–the e-book markets there are developing differently from those in Europe, and can’t be measured in the same ways. Promising initiatives are underway. For example, in China, the O’Reilly report notes the popularity of reading on mobile phones and “online literature” platforms like Cloudary, where most of the content is user-generated. (The Chinese digital publishing industry is also firmly overseen by the government.) Meanwhile, Brazil and Russia have seen advances in digital educational publishing, but trade e-book publishing is far behind.
E-book adoption is not going to follow the same path in every country. It relies on the actions of governments, publishers, and readers–and, of course, on both local and global companies. One thing is for certain: We are going to see more data about international e-book publishing. Bowker announced this week that it’s launching a ten-country e-book growth and consumer attitude study. Beginning in 2012, it will collect data from the U.S., UK, Germany, France, Spain, India, Australia, Brazil, South Korea and Japan. And if most foreign countries are at 1 percent e-book adoption, there’s nowhere to go but up.