Thursday, March 31, 2011

Growth of Ebooks in 2011: Spectacular!

I cannot turn around without another article on someone selling ebooks outside of the AAP14 that report their ebook sales. So everything is pointing to a near 'gold rush' to get into the ebook market. This will pull customers to ebooks.

Note: This builds on a short discussion from the last comments section.

WSJ (subscription required) is predicting a little over $1billion (per graph) in US ebook sales in 2011 and $2.0 billion in 2012.

If growth in ebooks patterns 2010... we should have about $1.25 Billion in ebook sales in 2011. (Just by the formula: 2010 total ebook sales * 2011 January ebook/2010 January ebook sales>

I think ebook growth will be even faster.

Why faster ebook growth? Bookstores are closing and cellphones and tablets have explosive growth. This is going to be more analogous to Blockbuster than the music stores. As 'high intensity' readers loose their local bookstores (which is sad), they are seriously looking at ebooks as the option.

But there are more factors that will drive customers at an accelerated pace to ebooks in 2011:
1. Indie/small publisher market share is growing and growing fast. New authors have always excited readers.
2. One big6 is at 23% 'volume' ebook or already past the tipping point.
3. Authors can earn a living writing, so this means more 'follow on' books at a pace that keeps readers engaged. (How did authors survive on 1 book a year?)
4. Backlists pulling new readers to ebooks to rediscover old favorites (one of my old favorite 'pulp fiction' books is too expensive used but will be out in ebook form. Hopefully soon!
5. Heavy ebook readers are 'losing the habit' of sharing books. (Ebooks are cheap enough to just buy.)
6. Infinite shelf life of ebooks will help 'word of mouth' marketing. This really helps smaller authors.
7. More press on ebooks.

The above were the 'positive pull' factors to ebooks. There will also be some 'push' factors that are less joyous to discuss:
8. Bookstores are closing. Kobo sees a 30% growth from the Borders BK. I know of quite a few people that bought an ereader when they found their favorite bookstore was closing.
9. Plummeting paperback sales (to wholesale). For those who mostly read paperback (like myself), the reduced selection will 'push' readers to seek alternate sources.
10. People have run out of space for 'stuff.' This includes books. Seriously, do you know anyone who isn't trying to de-clutter?

Ebooks are no longer a 'prove it to me' technology. Coworkers today were talking decorating and bookcases are now considered 'art shelves.' How quickly impressions change...

I'm not sure how big ebooks will be in 2011. Easily over $1.25billion in the US. I see the positives of ebooks growing the book revenue (at a lower unit cost). The upper bound of ebooks in 2011 would be about $2.5billion (about half the US book market). So ebook sales will be, roughly, 2.25X 2010 to 5X 2010. If I were to bet, I'd pick the middle of the range. But... why bet? I'll observe to see where we end up. :)

This was build on my comment that Forrester research predicting a $3billion ebook market in 2015 was pro-print. While I see the book market growing (in dollars and volume when ebooks are included), I see pbooks shrinking by more than a billion USD (in the US) in 2011. :( Sadly, while I think ebooks will grow the dollars in the book market *long term*, in 2011 the total book dollars could shrink. (I hope not... but that could happen.) :(

What's your prediction for ebooks and pbooks in 2011? Oh... I'm including all ebooks, not just the AAP14. ;) But when I talk pbooks, I'll use the AAP88 numbers.

Again, I'm predicting ebooks will over double sales in 2011 (in dollars) and possibly grow so fast to quintuple 2010 sales.

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Sunday, March 27, 2011

Peak ebook market share and indie authors

Has anyone found a good link on non-AAP14 ebook sales? I've done my estimates; but it has become too obvious I am underestimating indie/small publisher market share. In bookstores, the top AAP14 (of 88) had a huge advantage with coop and other schemes to push everyone off the bookshelves. Now it is the big6/AAP14 vs. 400 publishers and DTP authors.

I see no way that I'm not underestimating the sales of that horde that were pushed into less desirable corners of the bookstores or even out of the bookstores. But I'll keep blogging my estimate as I would rather not over-estimate indie-author sales. Let's face it, Barry Eisler would never have turned down $500k (yes, half a million bucks) if the old system were working for authors.

Peak ebook market share:

I keep hearing that ebooks will top out at some absurdly low market share. With my underestimation of indie/small publisher market share, it was just under 28% in January. Since the market is still accelerating, old technology diffusion theory tells us that we're at most at the half way point.

Worst case ebooks will hit 56% of the book market market share.

But there is nothing to say we've hit the half way point. So the potential final market share could be much higher. I've watched a number of co-workers who swore they'd never adopt ebooks buy Kindles and Nooks when they found out their favorite bookstore was destined to close; but a few will read paper to their grave.

My estimate is that ebooks will peak at 75% to 85% of the book market share. It is nothing more than a hunch. A hunch supported by current ebook market share and growth.

Any links or opinions are appreciated in the comment section.

Got Popcorn?

ps, About as soon as I posted Moses Siregar III posted a good link in the comments of JA Konrath's blog: Ebooks to dominate by March 2013.

I disagree with that post in one detail. The *latest* ebooks will have 50% market share is January 2013. ;) That has been my main prediction for a bit. There is now a greater probability that the threshold will be crossed earlier than later! I'm still floored as to how well ebooks did this January.

Thursday, March 17, 2011

January 2011 Ebook Sales

The graphs are back and they have one thing to say: January 2011 was a great month to sell ebooks and a really bad one to sell print books (pbooks). In particular, the sharp drop in paperback sales point to an industry disproportionately hit by the Borders bankruptcy. It was the first month that kid's pbooks were down (albeit, mostly paperback).

Why disproportionate? Borders was suppose to be 10% of book sales and we see paperback books hit far more than 10%. It could be that Borders was that dominate in the mmpb, adult paperback, and children's paperback... Or that ebooks are decimating that category.

I could post this image and call it a good blog post.

I've added red lines to show the prior year trends in ebook sales. Also note I try to estimate indie/small publisher sales. I'm certain I'm underestimating indie/small publisher sales, but we have to start somewhere! :)

Notice how the slopes are accelerating? That implies we *are not* at the half way point of ebook adoption. I know... obvious. But some still try to argue ebooks will end at 25% of the market... Which is my segway to the next chart. Since pbooks had such a bad month in January, its possible we won't just hit the tipping point in 2011 but that we did it in January! (Oops, talk about being off and predicting it in 2012...) If this isn't a one or two month blip due to the Borders bankruptcy (which it could be), this implies a fast acceleration from pbooks to ebooks!

FWIW, the 20% market share as the 'tipping point' is based on moving enough vendors and customers to ebooks (or any emerging technology) to shift which product is easiest to either buy or sell. I'm very curious to see if by screaming past 20% we haven't done a 'step change' in the book industry; a step change the Borders bankruptcy and its 275 store closings might be forcing.

So let us start by putting ebook sales in perspective of their scope of the *total* trade sales. If we use my estimate of indie/small publisher sales, it is $88 million (ebook) versus $228 million. Suddenly ebooks are showing up on the chart! I calculate 27.89% of the market was ebooks (when we include indie/small pub ebooks). No... I'm not going to talk about only the sales of 14 AAP publishers versus 400+ publishers (of which 88 are in the AAP) and all of the DTP authors.

Do note the dive in trade sales was mostly paperback. Paperback as in mmpb, adult paperback, and children's paperback. The hardcover sales did better... so more graphs to show that. Show that ebook sales, for the first month ever, exceeded hardcover sales!

You might note that I should compare ebooks with hardcover plus other sales... yep. That is why I posted versus trade ebooks. But look at the comparison versus mmpb. Or... there is no longer a comparison. I'll keep publishing this graph. But don't ever expect to see mmpb selling better than ebooks ever again. Ebooks in January sold as well as a good month of mmpb. With all those bookstore closings and all those smartphones being sold, the tipping point for mmpb has arrived. In a negative way... :( (I love mmpb... I just prefer my Kindle over mmpb.)

Take a good look at the above graph. If mmpb does not recover within a few months, the business of making the books will have to consolidate quickly and in a drastic manner. I've blogged before about the tipping point. If mmpb does not recover quickly, the 'old technology' will lose economy of scale. It is absolutely the wrong time of year for mmpb sales to recover too...

Adult paperback sales (to wholesale) were weak in January too. Almost dead. Almost as if a major seller of paperbacks went bankrupt. However, the story is not as ugly as mmpb. Adult paperback sales can limp along at this pace for a while before suffering economy of scale issues.

For the first time since I started these graphs, Children's pbooks are taking a hit. It was all on the paperback side. I wonder if families buying tablet/phone apps (like us) had any impact?

Due to the amount of hand waving I see on these data releases, I like to publish seasonal graphs that show how each type of book did versus sales in prior years. Now... January doesn't produce an exciting graph, so I'll just post without comment. Except to say, look how ebooks is the only format showing growth!


mmpb takes a dive:



The quick summary is that print book sales are hurting and ebook sales are doing well. In particular, I was amazed to see how spanked paperback sales were. I'm not certain if January was more due to ebooks or Borders. We might have a false indication we've hit the tipping point.... Or we might have blown past the tipping point.

Either way, there was a substantial shift in spending on ebooks! How I wish I could know the Amazon DTP numbers...

Got Popcorn?

Tuesday, March 15, 2011

Borders now closing 275 Bookstores

Borders will close further bookstores.

"It said its recent job cuts and debt restructuring couldn’t make up for lost market share against online competitors.

Read more: Report: Borders will close 75 more stores | Charlotte Business Journal "

Maybe the NYTimes should wake up and realize how fast the change is coming down the pipeline and rank Indie authors? Naaa... They'll wait until buyers only look at the ebook sellers lists...

BTW, I'm very sad to see bookstores closing. I wonder if one of these additional 75 will be the other local Borders. At some point their distribution becomes un-economical and they lose a huge part of the advantage that allowed Borders to keep open bookstores far larger than the competition.

Intense readers, those that buy 70% of the books tend to like variety. Without Borders, the B&N business case becomes far weaker. I think bookstores will survive... but then again, I thought that POD machines would be far more common by now...

Got Popcorn?

Late edit: There are only 686 Borders stores! Or more precisely 511 'superstores' and 175 Waldenbooks. This means that Borders is closing 40% of their stores. Note: It will be far less than a 40% reduction in sales as they are obviously closing poor performing stores as well as preferentially closing the small Waldenbooks stores.

B&N has 1637 stores (711+637 college)

The Borders closing represent ~3% of US book sales. With ebooks at 10% of the book market, I suspect another 400 bookstores nees to close for economic reasons in 2011. :(

Borders now closing 275 Book2store

link text/image

Sunday, March 13, 2011

Mythical big6 Price War

I swear most authors must not play 'game theory.' Why? If they did, we wouldn't ever hear a variation of this in the comments of JA Konrath's blog:

" what will happen to indie authors when the big brand authors and publishers finally do wake up (which they surely will do eventually) and start pricing their books at $4.99, $3.99, $2.99 and so on? When readers can get Lee Child, Harlan Coben and Tess Gerritsen for those prices, will they be so willing to take a punt on an self-published writer? In other words, can indies still be successful when their books are no longer a bargain compared to the mainstream?"

By Tom H.

"Game Theory" is when a strategy is proposed and you play the opposite as effectively as you can. Try dozens, hundreds, even thousands of scenarios to see what marketing strategy works.

So let's pretend publishers started to drop prices. Not to one price, but to $4.99, $3.99, and $2.99.

First, let us list the advantages of the big publishers:
1. Shelf space in booksstores and big-box retailers
2. Name recognition
3. 'Aura of respectability.'
4. Processes that generally produce an excellent product

Their disadvantages:
1. Costs
2. Speed (too many meetings/decisions/revisions)
3. Dependence on shelf space in the bookstores
4. Limited variety in the product

So we're pretending the publishers do an extended price war. The consequences:
1. Bookstores are undercut on price. Just as e-readers/tablets/cell phones are becoming common place
2. Permanent devaluation of ebooks. If ebooks become common at $4.99, forget taking the price back up to $9.99. This will make the publishers pine for the days of the > $9.99 protests.
3. Indie authors seek refuge in the two areas they can:
A. $0.99 ebooks
B. Continuing to publish variety

I suspect one reason publishers do very well is that every time a potential customer sees a cover, they consider buying the pbook/ebook. Sharply discounted ebooks by the big6 will pull a large variety of readers out of the bookstores to the ereaders. Do publishers really want to give up the bookstore advantage sooner than they have to?

This also throws the publishers into a 'bazaar' environment. Note: I mean bazaar as in the chaotic marketplace:

Would they really want to compete without a storefront advantage? Their 25% of 70% (17.5%) wouldn't look very good to any established author. recall, a true long term price war would devastate the print book scene. If you doubt that, consider why the publishers *raised* ebook prices over the last year. Why would they have protected the print market at the expense of market share in the emerging market?

Now what happens to Indie authors if there is a long price war?

1. More customers of ebooks
2. News coverage of the ebook price war
3. Some sales to "support the under-dog."

1. Big name authors steal sales at $2.99+
2. Sales pushed down to $0.99
3. Less funds, thus likely slower ebook roll out.

But how many Indie authors are full time Indie authors? Their income wouldn't go to zero. Some would remain in the top 100 on Amazon... If the ebook market grew 6X, their income wouldn't go down a penny at $0.99 (as JA Konrath has already noted).

Some would see a drop in income. Perhaps 20% to 60%. :( But most indie authors could ride that out. They're not a corporation with high fixed expenses. Many would have to go back to full time 'at the 2nd job.' While frustrating... they wouldn't die off and they wouldn't stop producing new works.

Now take the big6. They would lose print revenue substantially. Perhaps 30% to 50% within 18 months! Suddenly print would lose 'economy of scale.' We would see a permanent increase in the price of print books as the efficiencies of ink on paper would plummet.

They would also be making less per ebook. Less than the print revenue. At some point their high fixed costs (leases, executive salaries/bonuses) would bury them.

I ignored a small number of big6 publishers participating in a price war. We've already seen discounting of individual books. It would take an across the board push to have any impact on Indie authors. So anything less than an extreme price war would just be noise.

Since the big6 publishers would lose a price war, they won't start it. I doubt we'll see the end of $2.99 to $9.99 ebook novels. They might not be in the top 100, but they'll bring in quite a bit of cash.

In my opinion, Indie authors and small publishers are far too established in ebooks to be kicked out of the market. There has been a permanent loss of market share to the 'little guys.'

So do the publishers choose:
1. Drop ebook prices to grow the ebook market at the expense of the print market.
2. Keep up prices to maintain their print book advantage?

Or put another ways:
1. Do Indie authors have their share growth slow of a fast growing market?
2. Do Indie authors have their share grow quickly of a mid-paced growth market?

#2 hasn't been bad so far.
#1 might be really nice for Indie authors.

Got Popcorn?

Sunday, March 6, 2011

Indie Ebook share Growing Fast!

Indie/small pub e-book market share is growing fast. An old business adage is "first gain market share and profits will follow."

I posted here :
1. Indie/small pub were 10% of ebooks in December 2009
2. My estimate of 20% of ebooks indie/small pub in December 2010

Robin Has posted a nice summary of March 2011 share of the top 100 on Amazon.

38% of the top 100 are now Indie. The distribution slightly favors the AAP14, but not by much:
"As of my analysis earlier today indies held the following spots:
#1, #4, #8, #12, #14, #17, #18, #19, #31, #34, #35, #38, #41, #43, #46, #50, #54, #56, #58, #59, #61, #67, #73, #75, #76, #77, #82, #93, #95"

I'm unable to give a 'hard number' on the dollars for indie/small publishers from these figures. But it leaves credence to continuing to linearly extrapolate the indie/small publisher market share. So I add this future data point:
3. Indie/small pub DOLLAR market share 30% in December 2011.

I feel that is conservative. Why? My previous post on sci-fi/romance showed that for two top e-book genre, indie/small pub have taken over! But I have this thing against revising predictions down...

At some point, by mid-2012, indie/small pub revenue gains will be biting the AAP14 revenue. That will further push the tipping point to ebooks as any 'consolidation' levels the playing field more for the small guy. :)