Has the (US) eBook Market Hit the Inflection Point?
There’s no activity more popular among industry analysts than predicting the future, and the ebook market is no exception. Whether it’s Price Waterhouse Cooper, GigaOm, or what have you, there’s endless speculation on the endlessly rising ebook market.
One thing that a lot of the predictions assume is a market that continues to increase, but what if the ebook market is not going to keep going up? According to Matt Blind, that’s what could happen, and the all the market stats so far suggest that he could be correct.
At the very least, he has the best model I have seen so far.
Back in June of 2011 Matt, a bookseller with one of the major US chains, proposed a new model to chart the growing US ebook market. He took the then current data, plotted it, and then started looking for an equation which best fit the current data. After some work, he came up with this chart:
That’s the early part of a sigmoid function, and if you extend the graph to include more of the function, you get a brief period of increase followed by a flattening out in the not too distant future.
Matt has been continuing to plot the sales data as it was released by the AAP, and this is what he has now:
He posted that graph a few days ago, and it includes the latest stats from the AAP. The growth seems to have slowed down, does it not?
I think so; at the very least we’re no longer seeing the triple digit increases from 2008 to 2010. The 2012 ebook market also looks nothing like what PWC predicted in 2009 based on the stats they had then; it’s much smaller.
I’m not saying that this chart is the word of Ayn Rand, but it does present some interesting possibilities. What if the growth of the ebook market really has slowed down?
The thing is, that might have happened already. If the current model is correct, the US ebook market hit the inflection point back in May of 2012. If that’s true then all these charts on Pinterest predicting the infinite growth of the ebook market are wrong, not that I ever took them seriously. What’s more, this prediction suggests that the current players and any newcomers in the ebook market are going to have to fight for a slice of the pie which might not be getting a whole lot bigger.
I believe that is what is called a mature market, and it could happen in as little as 5 to 6 years.
KarlB December 18, 2012 um 3:19 pm
"Thoughts?" My first thoughts are unprintable.
It’s obvious at a glance that the scary, "leveling off" part of Blind’s second graph exists almost entirely in the "projected" part of the curve. That is, in the part that is entirely made up, based on nothing more than the fact that the rest of the graph supposedly fits the early part of a pretty curve.
And we all know that predictions having to do with human behavior in the economy ALWAYS follow simplistic mathematical formulas, and therefor are easily predictable, right?
Eric Welch December 18, 2012 um 3:31 pm
From a statistical standpoint, the "rate of growth" MUST decrease over time as actual numbers increase. For example, if the rate of growth for the first year was 100% (i.e. doubling) (from 1 book to 2 books) by the 25th year is 16,777,216 soon becoming impossible numbers. So when the pundits talk about the rate of growth decreasing, they are simply recognizing inevitability that has nothing to do with the health of the ebook market. A much more revealing number would be %increase/decrease of sales and/or revenue (net income would be even better) as measured against % increase/decrease in the hard cover market.
carmen webster buxton December 18, 2012 um 4:13 pm
I would want to know what the chart for print books looks like in the same time period. Some (but not all) of ebooks' phenomenal growth was because people with eareaders (often voracious readers to begin with) tend to read more books once they have access to the convenience of digital reading. Some growth was from new ereader/tablet owners– people switching from buying print to buying ebooks. I would think that ebook growth would continue but go slower as folks switch over to reading more digitally than in print, but whether or not those who switch will continue to read more books when they do so is debatable.
Fbone December 18, 2012 um 4:34 pm
With Amazon’s KDP, Overdrive penetration and huge numbers of free titles there may be no need for many to purchase an ebook. Sales will be affected. Add in promos, discounts, coupon codes and sales dollars are even lower.
fjtorres December 18, 2012 um 4:54 pm
I fully expect that the we are hitting the inflexion point right about… now. 😉
I am not in any way surprised; I have spent the bulk of the year looking for this, ever since B&N reported their STR shortfall last XMAS and eink started reporting slowing screen sales.
The effect is perfectly logical: avid readers are the people who most benefit from ebook readers and ebooks in general, they they only consume about a third of all (recreational reading) books. The rest are consumed by casual readers.
The dirty little secret of ebooks is that while they constitute 25% of all book sales (and may grow to 30-35% within a coupple more years) , ebooks already constitute well-over 50% of sales in certain segments (may as high as 70% in some genres) and near *zero* in others. This is because current tech for both dedicated readers and mutipurpose devices is great for narrative text but not a particularly good fit for other types of books. Which means those categories will either stay in the treeware domain or migrate to *other* technologies. (Think of atlases and road map boks.)
Until a new technology disrupption arrives and takes hold, the plateauing in hardware we’ve seen this year will spread to ebooks. Now this does *not* mean *flat* sales, just much lower year-to-year growth.
fjtorres December 18, 2012 um 4:55 pm
uh… make that: " that we are hitting…"
fjtorres December 18, 2012 um 4:58 pm
I need to clean the keyboard. 🙁
Nate Hoffelder December 18, 2012 um 6:53 pm
I just added a plugin which is supposed to let you edit your comments. It doesn’t seem to work.
SteveH December 18, 2012 um 8:59 pm
I still think we have quite a ways to go here folks..especially if you think of it as a hardware market penetration thing. Like PCs, and then cell phones as the low-end device price point drops and drops to very low costs we will see bigger and bigger adoption into areas of the second and third world. Amazon is already pioneering this now with Kindle into India & Brazil.
Everywhere in the world now cell phones are cheap and affordable even in the poorest of many remote asian & african villages. So they same will happen with ereaders. They are already at the sub$50 point, and dropping. I expect rugged-ized/self-charging solar model to be just a few years away.
There are still some very big segments of the population to yet be tapped content consumers, be it english and or localized books. Especially as tools to make self-publishing easier keep rolling out. The growth curve will change and morph but has quite a way up to go I’d say, thinking globally that is.
fjtorres December 18, 2012 um 9:17 pm
First, the issue is about the US market plateauing. And the evidence there is getting pretty strong. The ebook business in the rest of the world is in various states of development ranging from growing to non-existent.
Second, the question isn’t about penetration into the general population but rather penetration into the reading-for-entertainment population that constitutes the natural market for ebooks. Gadget pricing isn’t going to suddenly induce a non-reader to suddenly start buying ebooks if they don’t already have the habit.
Ebooks : toujours en augmentation mais plus pour longtemps ? December 19, 2012 um 6:01 am
[…] Source : The Digital Reader. […]
David Gaughran December 19, 2012 um 9:27 am
There needs to be a major caveat to all the above, namely, the above graphs are based on AAP figures, which don’t count all smaller publishers (many of whom are digital-only or have predominantly digital sales) or any self-publishers (who also sell mostly e-books).
Given that KDP-published books regularly make up at least a quarter of the top-selling books on Amazon – the biggest retailer of e-books by some distance – these figures are conservative at best, and probably unreliable for basing any market predictions on other than very rough guesstimates.
DavidW December 19, 2012 um 10:23 am
I’m at a loss as to why the market maturing in a few years is supposedly bad news. It’s common sense.
Nate Hoffelder December 19, 2012 um 10:47 am
It’s not bad news, per se, but it does suggest that the ebookstores have a finite amount of time before they need to think of how they will operate in a stable market, one which behaves differently from a growing market.
fjtorres December 19, 2012 um 11:24 am
Competition has been relatively light in the boom years because there was plenty of growth to be had from the uncommitted.
Once growth gets tight, it might make more sense to try to cannibalize other ebookstores' customers. Lock-in is going to matter more. Creative marketting. More focus on the ebookstore than the reader devices.
We might see book clubs arrive at last.
First target: the generic ADEPT vendors, no? They’re the most vulnerable.
Next, we might even see Amazon add generic Adept books.
(But not to Kindle.)
"What’s mine is mine, what’s yours is negotiable."
Think Adobe might be willing to sell the Adept business outright? It’s certainly not generating much revenue by their standards…
Nate Hoffelder December 19, 2012 um 12:15 pm
Amazon would not be allowed to buy the Epub DRM business from Adobe. It would arguably be an antitrust violation because iy ==t would let Amazon control the entire market.
Matt Blind December 19, 2012 um 6:10 pm
Amazon can use whatever file format it damn well pleases; to claim an 'anti-trust' barrier on this issue is disingenuous: hell, amazon could use a proprietary DRM of its own devising, as Adobe DRM is neither ideal nor required by law, or could in fact sell files DRM-free, as DRM is neither ideal nor required [by law or otherwise] in the sales of any digital format.
Amazon can *try* to monopolize the market in any way they’d care to invest in: Adobe and DRM do not figure into any of it.
Nate Hoffelder December 19, 2012 um 6:59 pm
Except that currently Adobe is the chokepoint for most of the Epub ebook market (aside from Apple).
No one is required to use Adobe DRM, no, but giving Amazon the ability to affect another 15% to 20% or so of the ebook market would arguably put them in a monopolistic position. That would not sit well with the DOJ.
fjtorres December 19, 2012 um 9:28 pm
Actually I was thinking B&N using MS money to keep Amazon from selling ADEPT epubs.
fjtorres December 19, 2012 um 9:35 pm
…and "coincidentally" putting the ADOBE tax squeeze on the non-apple epub vendors… 🙂
Matt Blind December 19, 2012 um 7:09 pm
@ Nate Hoffelder
No one has to use Adobe DRM. Sure, lots of folks use Adobe for whatever damn reason. But Adobe is not e-
ANYONE can release ANYTHING. Adobe is not only tangental to that, they are increasingly irrelevant. DRM is a dead end, not a solution.
Nate Hoffelder December 19, 2012 um 7:15 pm
While you are technically correct I would still bet that the DOJ will not sign off on that deal.
Matt Blind December 19, 2012 um 7:38 pm
The point is not the opinion of the Dept. of Justice, but in the futility of DRM:
DRM is not content. Content can, quite easily, be distributed without DRM. Any one company that claims a monopoly on DRM soon finds they own… nothing.
Any company that attempts to exert 'control' over the market because they 'own' 'DRM' soon discovers that as well. It is not a monopoly over any particular rights scheme that is important. Hell, Amazon doesn’t actually own any content, or at least economically important content as we all still want the bestsellers from major publishers, not the direct-to-ebook crap that is currently available. Amazon can’t even exercise exclusive control over Amazon-only content. The DOJ ABSOLUTELY SHOULD be looking at Amazon, but not on the current state of ebooks.
David December 20, 2012 um 9:07 am
I suppose lots of people have thought this already. But…no games with math are going to provably predict much of anything. Math’s great for curve-fitting after the fact, but in any complex system it’s just another way to guess. It often produces guesses that aren’t particularly clever, too.
(1) I kinda doubt we know all, or even most, of the relevant factors. Who says there won’t be innovation in this space that completely changes the way ebooks (or e-fiction anyway) works? I think that’d be a lousy bet. I won’t make it, myself.
(2) New people will use new stuff, not the stuff they didn’t grow up with. In the long run, print books are just too damned inconvenient to last. (Too bad…my wife and I have spent several years building up our collection of first editions.) Playing games with numbers won’t change that. So I’m expecting 95% + of the various markets for fiction to become e. The only question, for me, is how long it’ll take.
Annelie December 21, 2012 um 5:22 am
The sales only appear to decrease because of the sigmoidal curve that has been fitted into the real data. If you would cut off the prediction where the real data ends, you will see that it is still on a linear increase.
The sigmoid curve fitting is only an assumption based on the initial data. One could also fit a log curve into the data, but I dont think that’ll realistic. There is not an infinite number of readers with an infinite amount of time to read a book.
The question is, when the "saturation" point will be reached, and that can only be calculated with a sophisticated model.
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