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Pottermore’s Declining eBook Revenues Explain Its Decision to Drop Exclusivity

harry potterWhen I broke the news a few weeks ago that Harry Potter ebooks were now available everywhere, I cited a snippet of a post from The Bookseller which detailed how Pottermore’s finances had declined.

That post was behind a paywall, and so it was of little use to my readers, but today I have some good news for you. Teleread has tipped me to the fact that yesterday The Scotsman rehashed many of the points in that older post in The Bookseller before going on to add some additional detail which reinforces the conclusion that no publisher is an island.

I had already reported that Pottermore’s revenues had declined when its marketing deal with Sony ended, costing the company over 70% of its revenues, and now thanks to The Scotsman we also know that ebooks had been on a gradual decline as well.

Up until late last year, Pottermore was the only place to buy Harry Potter audiobooks ebooks (even Amazon referred shoppers to the site). But in spite of that exclusivity, Pottermore’s ebook sales had continued to decline over the past few years:

But paperwork filed with Companies House suggest that assessment was premature. Its annual report for the year ended 31 March, 2015, shows the dramatic downturn in royalties impacting on Pottermore’s balance sheet.

Online sales generated by fans buying digital copies are also on the wane, down from £4.7m to £3.9m over the same period. Given that sales stood at £5.9m back in 2013, it indicates that Pottermore is struggling to attract new converts to a franchise that has sold around 450 million print copies worldwide.

The article goes on to mention that Neil Blair, who is both Rowling’s agent and one of the directors of Pottermore, said that between 7,000 and 9,000 new users sign up to Pottermore every day. They’re just not there to buy ebooks.

The decline in ebook revenues adds more explanation to why Pottermore embarked on a major strategy shift, both overhauling the site and in distributing ebooks to other retailers.

Apple was the first to get the ebooks when enhanced editions were released in iBooks in October. This was followed a couple months later by Harry Potter audiobooks turning up in Audible and B&N Nook Audio, and then in December the unannounced release of Harry Potter ebooks in the Kindle Store and at other ebook retailers.

harry potter

Pottermore distributing ebooks to other retailers puts a stake through the heart of publisher exclusivity, but it says little about the idea that publishers should maintain their own storefront and deal direct.

Chris Meadows reached that conclusion over at Teleread, and I think he went a step too far:

Another potential cause, the Scotsman suggests, is the overall decline in e-book sales, but I don’t think you can really pin a specific effect on a cause that general. And you really don’t need to—the gradual die-off in new interest is really cause enough, coupled with the way Pottermore makes it more difficult than usual for most e-book customers to obtain the e-books by dint of not being Amazon.

And, well, there you go, really. If even Harry Potter, the crown jewels of long-desired e-books, have lost their luster sufficiently that even Pottermore realized throwing in the towel and permitting retailer sales was a good idea, that seems to be the last nail in the coffin of independent single-author or single-publisher e-book stores, like Pottermore or Baen’s Webscriptions. Or at least of big ones.

That is a stretch, if you ask me.

The only idea that died here was that of a publisher retaining exclusive control, and not the idea that publishers should deal direct.

Publishers can still sell direct, but they should not pin their hopes on their store vanquishing Amazon. Instead, direct sales are just one channel among many.

Of course, with Baen continuing to sell direct via Baen eBooks while at the same time distributing to other stores, we already knew that.

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Chris Meadows, Editor of Teleread January 18, 2016 um 4:44 pm

So, what good are direct sales going to do if everyone who owns a Kindle would rather buy your book through Amazon because it’s easy that way? It doesn’t seem to me that direct sales without exclusivity will be any more help than direct sales with exclusivity, if the same people won’t buy from anywhere other than Amazon either way. Without exclusivity, they’ll be on Amazon to buy from, with it they won’t, but either way, the same people aren’t going to buy your stuff directly from you.

Nate Hoffelder January 18, 2016 um 4:52 pm

Direct sales is not for everyone, but Baen is still making it work. Don’t you buy your ebooks there?

So it is good for something.

Chris Meadows, Editor of Teleread January 18, 2016 um 4:50 pm

Now it may be that I was unclear and should have called it the last nail in the coffin of such stores being able to snub external retailers like Amazon—but it seems to be six of one, half a dozen of the other, because if Baen and Pottermore both had to permit, and are subsequently being kept afloat by, sales via Amazon, it suggests that they simply weren’t making enough money to survive on their own.

Nate Hoffelder January 18, 2016 um 4:59 pm

(in reply to your second comment)

I think you should go get more evidence before concluding that Baen is "being kept afloat by sales via Amazon". We don’t actually know Baen’s print to digital ratio, much less the ratio of direct ebooks sales to distributed.

Chris Meadows, Editor of Teleread January 18, 2016 um 4:57 pm

Sure, Baen’s direct sales are good enough for the relatively small cluster of die-hard fans Baen has. Back in the days when e-books were just viewed as a promotional medium for selling more paper books because that was where the real money was, that was fine for them. But when people actually got serious about e-books, and were mostly using Kindles, and mostly didn’t want to do something even as simple as sideloading by email from an external retailer, it didn’t take long at all before Baen changed the entire way its store worked, after doing it the other way for more than ten years, in order to be able to get its e-books into Amazon. That they were so willing to make such a drastic change suggests that the number of e-book sales being left on the table weren’t chickenfeed. And Pottermore just provides further proof. They can’t get along on just direct sales, they need Amazon.

Mike Hall January 18, 2016 um 5:59 pm

A consumer’s comment.

I wonder if we are really learning anything more than that most of the people who are going to buy Harry Potter e-books have already bought Harry Potter e-books? Does such a store not need a steady supply of compelling new product? I bought a set for my wife from Pottermore (via Amazon UK) years ago and thoroughly resented the extra effort compared with one click purchases from Amazon. I’ve not been back to Pottermore since then. I doubt I would bother doing something similar for most other titles.

It’s not as if I gained anything from the extra time and trouble they put me to: the only real extra is that the books also appeared as digital content on my account, and this has no real value to me. Had they given me the USA versions I could have at least compared the texts and found out exactly what changes they made for the US market (something I’ve wondered about since I found that some idiot thinks "Sorcerer’s Stone" has the same meaning as "Philosopher’s Stone".)

At least Pottermore could push the titles to my kindles so there was no fiddling around with downloads and USB cables which I’ve had from other publishers/authors. I know it’s easy – these days I tend to download to my tablet and email the file to a kindle, which works well from my armchair, but Amazon is still much quicker and slicker – and I don’t want the trouble or worries about security of payment details so mostly only do this if the books are free.

fjtorres January 18, 2016 um 6:42 pm

The Potter ebook story probably isn’t too relevant because:

1- When interest was highest, Rowling refused to do book editions.
2- This led the OCR "pirates" to focus special attention on the books, organizing to release their ebook editions within hours of the print release and going as far as producing pixel by pixel replicas of the print editions… and then fixing typos. And the things were everywhere. Might still be.
3- Years later, when she finally relented, she cooked up a deal with Sony to wrap the ebookstore in a gamey website aimed at kids that used a convoluted purchasing and delivery system. One-click it wasn’t.

Baen on the other hand sells the ebooks in bundles unavailable anywhere else, lets retailers discount, and made it clear that unbundled sales at their store deliver somewhat higher returns to authors. The reader can choose.

Very different story hetween an ebook pioneer and an author dragged kicking and screaming into digital 😉

Syn January 18, 2016 um 8:10 pm

I had Mike’s reaction. I resented Pottermore, and didn’t buy from them. If it’s not on Amazon, I don’t buy it. My collections is all together.

Amber January 18, 2016 um 9:34 pm

It isn’t really surprising. If you have bought the books once you’re going to buy them again. Without new content there was no way the store would ever be viable long term. All the devout fans have got their copies and the rest couldn’t be bothered to go through the extra hoops. It doesn’t help that Pottermore didn’t offer anything for people to WANT to go to their site to buy the books. Not a discount, exclusive content with the purchase, or anything you wouldn’t get if the books were available in other places.

Mackay Bell January 19, 2016 um 1:35 am

I’m not really sure this proves much other than that Pottermore wasn’t run very well and Sony didn’t do a particularly good job capitalizing on their deal with it.

If everyone was raving about how good Pottermore was, and what a shame it was that it didn’t work, then maybe. But it seems most people weren’t too amazed by it. Likewise, Sony’s ereaders and tablets haven’t exactly taken off.

I suppose it proves that Amazon sells a lot of ebooks, but we kind of knew that already. The fact that the books were released first on Apple, even for a very short time before going to Amazon, seems to indicate that Amazon isn’t quite so powerful, or the release would have been simultaneous (or they would have skipped Apple all together). Apple clearly paid something huge to get a first bite, which indicates there is still money for authors to make by playing distributors off of Amazon.

Obviously, Amazon is the big gorilla, but I wouldn’t assume that this is a nail in the coffin of authors trying exclusive alternatives. This reminds me of the computer wars, where everyone assumed that because IBM is big, it would eventually rule the world. Or because Microsoft Windows is the standard, all computers will eventually become Windows. Or that Blackberry will always dominate business smartphones. Or that in the future everyone will wear white jumpsuits. Things change, the more people flock to one thing, the more some people will flock to an alternative. Maybe out of stubbornness or maybe seeing an opportunity no one else sees.

In the gaming world, there has been a lot of back and forth between Nintendo, Playstation and XBox. All of those companies see having some exclusive titles as critical to their winning the war, or even just staying alive (like Nintendo). Lots of money, or special promotions, have been paid to smaller game companies to make their games exclusive.

Even back in the days before Steve Jobs returned to Apple, there were some small companies that carved out a niche making games exclusive to the Macintosh, which had less than 5% market share compared to Windows. But those companies had loyal customers and were very well positioned when iOS took off and the App Store became a huge market. To this day, there are apps that are exclusive to Apple and apps exclusive to Android, even though most popular games are available on both. (And yes, I understand games are different then ebooks.)

Look also at the wars between Hulu, HBO, Showtime, Netflix and Amazon Video. Any of those companies could simply offer up old Hollywood movies and series (and some tried that for a while) but being able to offer exclusive creative content is absolutely critical. A small amount of exclusive content can be enough to make a difference even if the bulk of the content is available elsewhere.

Harry Potter is in a world of it’s own and Rowling’s is in a position, like the Beatles, of being able to make a lot of bad decisions about distribution and still make millions. And she’s in a position where she can resell and resell over and over. So in the long run, she might have made a bundle by giving Sony an exclusive window, then Apple a short exclusive window, and then selling big on Amazon. And don’t forget, in a year or two she could threaten to cut Amazon off, say if her musical is huge or the new spinoff movies are big. Or she could ask for a big check or special promotion. Who knows, she could make an exclusive deal in five years with Google Books after her Kindle sales slow.

Authors without her kind of clout, which is just about everyone else, can’t learn much from her experiences. Obviously, for now, Amazon is the place most authors want to be. But I suspect that in the short term, there will be smaller selling authors that will find advantages to going exclusive to iBooks and long term, another company will eventually challenge Amazon in ebooks, and the way they will do it will be by offering exclusive content.

For example, let’s say Wattpad goes and gets some big investment money, or gets bought up by a player with a ton of cash. Here, I’ll toss out something specific: Alibaba Group develops a new super cheap tablet with cool flexible screens that takes off and sell like hotcakes in China. Nate Hoffelder gives it a great review. Now they want to conquer the US market. They buy Wattpad for peanuts. Wattpad hires a bunch of editors who dig through their romance writers and find talented and cheap romance writers. They sign them to exclusive deals and promote the heck out of their new novels. Everyone wins.

So, what, no one will buy these new ereaders with exclusive romance novels because everyone is locked into Kindles? No, it’s quite possible millions of teenage girls will buy up the tablets BECAUSE they aren’t Kindles and BECAUSE “other” kids can’t read the novels unless they join the new club and get the new devices and dump their old tablets.

This is the way the market works. Everyone wants to buy a Pontiac or an Mercury, until they don’t anymore. Amazon’s a pretty smart company, and it’s positioned very well for the next decade or so, but don’t assume there will never be alternatives. And when an alternative materializes, it will be all about either creating or acquiring exclusive content.

Nate Hoffelder January 19, 2016 um 7:07 am

"If everyone was raving about how good Pottermore was, and what a shame it was that it didn’t work, then maybe."

People were raving about Pottermore when it launched. It was the wave of the future. It was the Amazon slayer du jour. It was publishing’s savior. (You can find links to stories in this post.)

People stopped talking about Pottermore after it stopped being a hot topic, but that doesn’t change the fact that they made all these wild assertions that never came to pass. And that is why I am now covering how Pottermore didn’t work.

Feda January 19, 2016 um 8:02 am

For me it’s different. I find that having to buy an e-book from Amazon is an inconvenience because I have to convert the book to e-pub in order to use it.
I’m assuming that the Pottermore books are infested with DRM and I can see how it would be easier to go through Amazon instead of dealing with another set of DRM requirements.
Baen is great and I buy books from them on a regular basis. If Baen has a book I want I don’t go to Amazon. I mostly use Amazon to "window shop" for books in various bundles that I’m considering for purchase.
Phoenix Pick is another direct store I like to use due to it being DRM free and convenient to use.
None of these have the selection that Amazon has but you can only read so many books anyway.

Nate Hoffelder January 19, 2016 um 8:16 am

Infested? No.

Pottermore uses digital watermark DRM, but it is literally imperceptible.

Feda January 19, 2016 um 3:28 pm

I could live with that. I see no other reason why Amazon or any other 3rd party vendor would be more convenient.

Cory Doctorow Launches a Bookstore Where Authors Sell on Behalf of Publishers – Wait, What? | The Digital Reader July 25, 2017 um 10:12 am

[…] find much less buy ebooks in niche 3rd-party ebookstores (hence why Harry Potter ebooks are available everywhere, why Baen Books moved into the Kindle Store – not away, and why Hachette never launched its Kindle […]

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