PUBLISHED JUNE 2016

by Thad McIlroy, author, Mobile Strategies for Digital Publishing

Thad McIlroy

1. Innovation is still in its infancy

• E-book pricing is now starting to be understood, as authors and publishers seek the right balance between maximizing unit sales and maximizing profitability.
• E-book formatting has stalled at the intersection of EPUB and MOBI. The existing formats have worked well for text-only books but are still sadly lacking both for illustrated books and for interactive books.
• Subscriptions had a moment in the sun, but collapsed in a struggle to find a business model that worked.
• Data mining and digital marketing are still works in progress.
• Some publishers have made the move to single-source manufacturing, warehousing, and fulfillment but the benefits have not been fully articulated.
• Publishers wisely look to startups for innovative ideas. Startups succeed by changing the rules of the game. Their success is forged either by introducing dramatically more productive ways to run existing businesses (think cloud storage) or by introducing new business models that change the rules of play (think Airbnb and Uber).

2. E-books will continue to open up new, greater audiences for publishers

• The publishing industry is caught between its still-profitable print business and a new digital business that produces better profits per unit but lower overall revenue.
• Many publishers view e-book sales as cannibalizing print sales. Their retail e-book pricing is, arguably, set high enough to help print remain attractive to many readers.
• For the foreseeable future, experts agree we will operate in a hybrid print and digital world.
• PwC predicts in its global entertainment and medial outlook report for 2014–2018 that declines in print revenues will slow down over the next five years and eventually, plateau, with printed books still seen as desirable to own.
• PwC also predicts that consumer book electronic revenue will rise by a compound annual growth rate of 13.9 percent to $9.2 billion (U.S. dollars). By 2018, a tipping point will be reached: 52 percent of consumer book publishing revenues will be generated by the sale of e-books.
• With data so much at odds for the purpose of market planning, the prudent path for publishers may be to assume that e-book numbers won’t change any time soon (without significant changes in price), but to prepare for longer-term future growth and maximize their online audience reach.

3. Pursuit of international markets may boost e-book sales

• English is spoken as a first language by about 375 million and as a second language by an additional 375 million speakers in the world.
• An estimated 750 million people speak English as a foreign language (where English is not spoken as a first or second language).
• One out of four of the world’s population speaks English to some level of competence, and demand from the other three-quarters is increasing.
• Amazon, Apple, Kobo, and Google now sell English-language e-books in more than 200 countries, and have localized stores in the largest markets.
• The raw data indicates that publishers could more than double existing e-book sales with a more aggressive pursuit of international markets.

4. Publishers that embrace data will be best poised for growth

• There are three phases of becoming competitive with data: technological infrastructure, the skills to understand how data can be used, and a cultural change within an organization on how to use data.
• All three aspects are challenges for the book publishing business. Publishers need to urgently revitalize their IT infrastructure before they can move into a culture of data.
• There are enormous opportunities for publishers to improve their data-gathering technology and then to embrace new systems and processes for data analysis. This is the future of publishing.
• The most profitable and powerful publishers will have internalized the technology, skills, and mindset to be fully data driven.

5. Digital publishers need to learn a new set of skills to master mobile

• It’s all but impossible to overestimate the mobile opportunity for book publishers today.
• The first challenge of the opportunity is to focus on delivering the widest variety of attractively designed and priced e-books. With the proliferation of file formats, reading software, and reading devices, this is still hard work.
• Though new device sales are now in decline, there remains a large installed base of dedicated e-readers (estimated at roughly 50 million in the United States; perhaps double that number worldwide).
• In tablets, Apple continues to dominate the U.S. market (of about 120 million installed). Tablets displaced e-readers and in turn are now being displaced by smartphones.
• Pew Research Center data shows that 12 percent of cellphone owners use them for reading. The number seems small compared to e-readers and tablets until measured against the installed base of 175 million. That’s 21 million people reading books on cellphones. They account for about 7 percent of e-book purchases.

Thad McIlroy (thefutureofpublishing.com) is an electronic publishing analyst and author based in San Francisco, California, who provides consulting services to the publishing industry. His latest books are Mobile Strategies for Digital Publishing: A Practical Guide to the Evolving Landscape and the second edition of The Metadata Handbook: A Book Publisher’s Guide to Creating and Distributing Metadata for Print and Ebooks (co-authored with Renée Register). The insights from this article were originally published in a standalone report titled “11 Topmost Digital Book Publishing Trends & Opportunities,” presented by Digital Book World.