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If the eBook Market is Flattening Out Then Why Are eBook Sales Up at HarperCollins and Hachette?

Ask anyone 6674163381_f541b306f9[1]from DBW to Nick Carr to the BISG and they’ll insist that the ebook market is leveling out here in the US, but something tells me that the major publishers didn’t get the memo.

Two different major publishers have reported in the past couple days that their ebook revenues have increased in the past quarter, and I would say that tends to cast a lot of doubt on the idea that ebooks have leveled off.

Yesterday HarperCollins mentioned in their quarterly report that their ebook revenues for the first fiscal quarter increased significantly over that of the same period last year. They cited that ebooks now made up about 22% of revenue ($72 million, by my calculations) up from 15% last year ($53 million, again by my calculations).

I already have a reader who quite reasonably pointed out that a single point doesn’t make an argument; it’s merely anecdotal. This is true, but 3 points make a line. And that’s why I am pleased that Lagardère released a quarterly financial statement today.

Guess what they said about ebooks?

They’re still seeing strong growth.

Hachette, Lagardère’s US sub, saw a revenue increase of 11%. That’s a damned good report for a recession, and part of it was probably due to ebooks. According to Lagardère, ebooks represented 27% of adult book sales in the third quarter, up from 20% in Q3 of last year. They also reported that ebooks accounted for 30% of adult book sales in the UK, up from 20% last year.

Neither publisher released any info on the number of units sold, so we don’t know (for example) whether the end of agency may have affected ebook sales.We also don’t know for sure the actual increase in revenue, but I’m fine with that.

Two major publishers are still seeing excellent growth in ebook revenue year over year. I have 3 data points that suggest that we have yet to hit peak ebooks, so reports that the market has flattened should be taken with a large grain of salt.

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fjtorres November 12, 2013 um 12:54 pm

I think the "ebook sales are flattening" meme is wishful thinking based on incomplete data. A recent article by Shatzkin featured the throw away line that for some publishers the only channel showing sales growth in the US is Amazon. Which suggests that they may be extrapolating off other vendors' data and assuming that if, everybody else is seeing declines, the whole market is declining.
Alternately, they have be projecting of the sales of one of the remaining BPHs. I could easily believe that the Randy Penguin has seen a decline in sales due to the merger and being the last big player on agency.
Of course, they could have just made it up trying for a self-fulfilling prophecy. 😉

Alexander Inglis November 12, 2013 um 2:17 pm

There is no turning the page back on this story: ebooks are here to stay and will gradually surpass print books, in most markets. It’s no surprise that the largest publishers are first to benefit as they have the most popular authors and the best distribution and marketing channels. And, yes, while we all know Amazon is the guerrilla in the room, and while B&N reported slower digital sales, the last time Kobo made a formal statement (May), they were showing substantial year-over-year growth of ebooks. Nor has the tablet market slowed down which is an additional outlet for sales.

StevH November 12, 2013 um 2:34 pm

Yeah..Personal computers sales not only peaked, but then dropped in the 1990-93 timeframe. However just look at this chart to see what happened after that:
Ebooks are here to stay and adoption will grow exponently for a few years yet.

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flyingtoastr November 12, 2013 um 4:06 pm

You’re confusing "flattening" with "flat".

Flat – not growing or shrinking, remaining the same (proportionally)
Flattening – still growing, but at a slower rate than in the past

The eBook market is certainly flattening – the years of 150%+ YOY growth are over, replaced with more modest gains as the market matures. They certainly aren’t flat either, as they’re still increasing.

Nate Hoffelder November 12, 2013 um 4:14 pm

Except those more modest growth rates have been around for a couple years, and only now are people talking about flattening/flat. They are seeing something that they think wasn’t there last year, and my counter point is that we’re seeing the same growth as last year.

fjtorres November 12, 2013 um 4:27 pm

Don’t be so sure that lower growth percent is the same as slower growth.
The increase in unit sales could be the same or higher and still show up as a lower percentage because of the larger base for comparison.
Remember: "Lies, damn lies, and statistics…"
Absent actual unit sales numbers (or at least total dollars) all that is is bits and pieces of the whole picture. Kinda like the blind men and the elephant. Everybody thinks that what they feel is what they’re dealing with.

Paul November 12, 2013 um 4:37 pm

Maybe its because prices have gone up?

fjtorres November 12, 2013 um 5:55 pm

Could be, but all the reports coming out of the corporate publishing mouthpieces all year long have been of steadily declining average prices for BPH titles. Which is why I said that what is needed is comparative unit sales numbers, rather than raw dollar values.

Meanwhile, the average price of a best-selling ebook dipped down to $7.99 this week after successive increases that saw it get closer to $9.00 than $8.00 for the first time in months.

fjtorres November 12, 2013 um 6:11 pm

From DigitalBookWorld:

In the past few weeks there was a pricing spike due to a bunch of (expensive) name-brand author releases but the year long term has been towards a $7 average from the old $10 floor, pre-agency.

Will O’Neil November 12, 2013 um 8:28 pm

Looking at this as an economist (as well as author) I observe first that unit costs are far lower for e-books than for p-books, and so are fixed costs. That means that there’s money on the table to incentivize publishers, authors, sales channels, and/or buyers—quite a lot of money. It may be that the book market is one of those extremely rare instances in which volume is not sensitive to economic incentive, but that certainly is not the way the smart money would bet. It will take more time before we’ll all know what the elasticities really are, but I am convinced that they are far from zero.

The notion that growth is slowing in any meaningful sense because percentage increases are diminishing is pure flapdoodle. The greatest percentage increase came with the sale of the very first e-book, an infinite percentage increase in market share from zero. Percentagewise it’s all been downhill from there.

My prediction is that e-book sales will grow monotonically until the paper book will return to its pre-Gutenberg position—a status symbol for the wealthy. Because of the fixed costs involved in p-book production, unit costs will grow as volume declines, accelerating the conquest of the e-book. I like p-books as well as the next bibliophile, and have thousands of them, but I don’t see a future in the business, long-term.

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Elizabeth Lang November 15, 2013 um 12:28 am

Flattening out, growth slowing as the ebook market matures or reaches a saturation point, that was bound to happen. Tremendous sales growth before was when it was new and few people had ereaders or ebooks. It was the next, shiny new thing and everyone was jumping on the bandwagon to see what it was about. But as we all know, the lustre comes off at some point and people move onto the next shiny, new thing.

Oh, yes, there will still be the die hard readers, some of whom have moved over to ebooks entirely. Some will still prefer print, and some will straddle the fence and do both. But will there be significantly more readers than originally just because of the arrival of ebooks?

Let’s face it, the book industry was already a mature industry with a certain number of acolytes who love reading. The only difference now is that it is far easier for writers to enter the market, so likely, the only real change in terms of numbers is the number of writers now as opposed to before; they have grown exponentially.

The number of readers? I highly doubt there are far more now than there were originally just because the delivery medium is different. People don’t read books because of the delivery system or because there are way more books being published now, but because they love books, which is the one constant that will never change.

So why the big increase before? Some, like myself, have been busy building ebook libraries of old books in digital form. Or some trying out the mountain of new authors and the cheap books, and thus buying more in volume, but it is still the same coin. I don’t have loads more cash to plunk into books than I had before ebooks entered the market, especially not in this economic climate, and I suspect that’s the norm.

I’d like to see the numbers of book sales overall (ebook and print) in the last 10 years. Have they changed significantly since ebooks entered the fray, and if not, then why have HarperCollins and Hachette been seeing sales increases? Well, I would think the reason would be fairly obvious. They are slowly and steadily regaining a larger percentage of the market share. I know this because I’ve been regularly tracking the top 100 books on Amazon across several genres for almost 2 years. While self-published books are doing quite well, they seem to have hit a plateau in that they haven’t really gained in percentage of the top 100 list in the last 2 years, which is what you would expect if they are taking over and toppling the big-5. On the other hand, trad publishing has remained steady on the top 100 list across almost all genres, and in at least one has started populating more and more of that list on a consistent basis. Plus they tend to have books that have longer staying power on that list than self-publishers who appear on the list and then hours later have dropped off the top 100 map, which really makes you wonder what the composition of their initial sales comes from.

So why are HarperCollins and Hachette reporting increased sales? Perhaps because someone else is having lower sales? Perhaps the other ones of the big-5, indies or self-publishers? Doesn’t that make more sense?

Will O’Neil November 15, 2013 um 1:18 am

When Gutenberg invented movable metal matrix type, many people all over Europe erected presses and started out in the printing business. The market for manuscript copy had grown remarkably through the Middle Ages but nevertheless remained quite limited, and many predicted that the expensive new presses would soon fail for want of trade. But Gutenberg had made it possible to cut production costs for books dramatically, and it soon became apparent that the implicit assumptions of a highly inelastic market for written material were very far off the mark. As unit prices fell the market exploded.

The scribes did not simply all lay down their pens and brushes. Printed works might be all right for the hoi polloi, but people of quality would still want a proper manuscript, they told themselves. That proved to be right, to an extent and for a while, But the market for manuscript books shrank by 80% over the last four decades of the C15. By the mid-1500s it had all but vanished.

As publishers stop seeking to protect their sunk-cost investments (or are replaced by publishers who have none) e-book prices will decline. And as books grow cheaper, people will find them more attractive and buy more of them compared to other goods that yield less value relative to price. This is the story of virtually every market known to economic historians, and there’s every reason to expect it to hold true for e-books.

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