E-books: A Big, Broad Overview

Davida G. Breier

In Jasper Fforde’s novel The Well of Lost Plots, he envisions a world where Book Version 8.3 (the lovely paper kind of book we are accustomed to) is to be replaced with Version 9.0, a new book-delivery system known as UltraWord. Although the novel is satirical, it predicts many aspects of digital publishing that have become realities in the last couple of years. For the characters in the book and many of us out here in the “real” world, changes to our beloved books are unnerving.

Some of us remember a time when publishing houses were defined by the physical format of their books; there were hardcover publishers, trade paperback publishers, and mass-market publishers, and each physical format had its own sales channels. Then books in different physical formats began being offered side by side in a variety of sales channels. Now, thanks in large part to new technology, the watchword in the book business is content, and readers can choose not only among physical formats but between formats that are physical and formats that are digital.

Numbers to Consider in Context

Early speculation was that e-books would account for 10 percent of book sales by 2010, but so far the big trade publishers are reporting 3 percent for 2009. And it is very difficult at this point to interpret any e-book numbers. To date, reading-device limitations mean that children’s books are largely excluded from the e-book market. Many publishers, large and small, are still trying to come up with a strategy for making backlist available electronically, while some are reporting that 20 to 30 percent of their revenues are now coming from e-book versions of frontlist titles, especially in fiction, biography, reference, and erotica. And most publishers do not report their sales of e-books (or anything else) to organizations that compile industry statistics.

Reports from the Association of American Publishers (AAP) this summer presented e-book sales as up 150 percent in 2009, having nearly doubled from $67 million in 2007 to $117 million in 2008, while most estimates for total trade sales showed low growth or no growth. Granted, it is easy to rack up huge percentage increases from a small base.

Figures for various formats in Book Industry TRENDS 2009 are shown in the table below.

Reprinted from Book Industry TRENDS 2009 by permission from the Book Industry Study Group. To learn more or to order TRENDS, visit bisg.org

The figures and comments that follow will help you assess potential for the e-book segment.

Based on reports from 13 publishers, AAP estimates for June 2009 were:

• e-books: $14 million

• university press paperbacks: $3.4 million

• university press hardcovers: $3.3 million

• audiobooks: $12.9 million (down 35 percent for 2009)

Bear in mind, though, that Amazon does not report sales of Kindle books, so $14 million is a gross underestimate of the total.

Amazon does not release sales figures for the Kindle device either, but observers estimate that it has sold 600,000 units of Kindle 1.0, 2.0, and DX combined, and 300,000 units of Kindle 2.0 alone. According to Barron’s, Kindle—the device and the content—could generate $2 billion in revenue by 2012.

Be that as it may, Amazon reports that roughly 345,000 books are available for the Kindle now, and B&N has declared that it is making approximately 700,000 titles available electronically.

Other figures that shed light on current and future e-book sales include these:

• Approximately 3.8 billion people use mobile phones worldwide.

• There are an estimated 3 million U.S. iPhone users, and half of them say they

occasionally read e-books.

• Roughly 12 million books have been downloaded with the Stanza electronic

book-reader and book-sharing software, which both iPhone and iTouch use. Many

of these were free.

• Furthermore, e-book usage on smartphones increased 300 percent between April

and July 2009.

Demographics

Information from a variety of sources indicates that people who read e-books read more than the average American, and they buy books in multiple formats.

Because readers have begun to think about whether they want their reading experiences to be interactive or pure text, modern e-readers offer both. Gen-Y members regularly use their phones for many purposes, including reading, but gen-X members and baby-boomers tend to favor dedicated readers.

Seniors are the largest users of Kindle; digital book purchases by that demographic rose 183 percent last year. This makes sense, since devices like Kindle and the Sony Reader let readers use large fonts and also allow for one-handed reading and easy page-turning, which can be important for older readers (and great for those of us who like to read at meals).

Devices

E-books are read using a few dedicated devices or with software, which can be used on a variety of machines—mostly computers and phones. As Shelf Awareness reported re BISG’s 2009 Making Information Pay conference, “48% of e-books are still being read on computers; Kindles have a 22% market share; and the iPhone has 20% of the market ‘with less than a year of having a good e-book app.’”

The major e-book-dedicated devices include Amazon’s Kindle and Sony’s e-Reader. Multiuse devices that can function as e-book readers include iPhone, Palm Pilot, Blackberry, and other smartphones. The widespread use of the iPhone and smartphones has allowed average consumers to sample the digital reading experience, and the rise in popularity of small, lightweight netbook laptops is likely to help bridge the gap between devices like Kindle and traditional laptops for on-the-go reading.

But there’s more. Free ePub readers on the Web, such as Bookworm, let people without an iPhone, Kindle, or Sony Reader test the feel of reading digitally. Scribd.com, essentially a social-publishing Web site, makes books available in a variety of formats for use on phones, devices, or PCs. And plenty of free public domain and publisher-provided books are available on the Web, via Google Books and otherwise.

Impact on Print Sales

So far, no major sources are reporting a direct loss of print sales due to digital editions. A two-year study of e-textbooks in the U.K. by the Joint Information Systems Committee (JISC) showed no impact on print sales. O’Reilly, which offers books for download on its Web site in three formats (the most popular being PDF, followed by ePub and then Mobi), notes that its market share of print books in retail has not dropped since it began selling e-books. Maybe we will see a paradigm shift instead of cannibalization. Time will tell.

Pricing

As the industry struggles with e-book pricing, the average Stanza e-book sale is $10.25, and the marquee price for an e-book at Amazon, Sony, and B&N is $9.99. Amazon is reportedly losing money at that price point, and it is not clear that this pricing structure is sustainable. The average e-book list price for publishers that NBN represents is $16.95.

Overall, for trade the standard seems to be the paperback list price or lower. Pricing within the institutional and library markets leans toward the list price of the hardcover edition.

File Standards

So far, there is no one file type for digital books, but it appears that ePub is in the lead to become the standard. Some vendors accept PDF files, and almost all take ePub files.

Once there is a common file type, mainstream adoption of the technology and devices will become more likely. Additionally, the cost of the devices will come down once there is a common standard. Current projections estimate reader costs of $199 in 2010 and $99 by 2012 (to learn more, see wiki.mobileread.com/wiki/E-book_formats).

Looking Ahead

E-books have taken root and appear to be here to stay—at least until the next big technology shift. At NBN, we partnered with Kindle early on, and we are seeing the viability of this market channel for trade books on religion and spirituality, business, self-help, health, history, biography, other nonfiction titles, and fiction.

Without a doubt, sales of e-books are growing, and for publishers suffering declining sales in other channels, they may provide a way to generate additional revenue. Current spurs to e-book growth include e-retailers, many of whom are so keen for content that they are willing to help publishers experiment; and the prices for conversion, which are coming down.

Interestingly, smaller, niche presses stand a chance of dominating their categories within e-books, something that can be much harder to do in the paper world. Because they are nimble and often already offer vertical content, they may get into the marketplace faster than big houses that are dealing with old files and rights issues.

Some publishers fear digital books will be the death of publishing, while others feel they are its future. I see the e-book phenomenon as just another change in format to meet changing needs. From hardcover to paperback to audio to digital books, it was, is, and always will be about the content, not the media. People want good books, and good books are good books, no matter how they are read.

Davida G. Breier oversees NBN Fusion, National Book Network’s digital program. You can reach her at dbreier@nbnbooks.com.