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What to watch for in 2013

3 January 2013

From veteran publishing consultant Mike Shatzkin:

Although “digital change in publishing” has a year that lags the calendar year and this year won’t “end” until we have a read on how post-Christmas ebook sales were affected by the new devices consumers got for Christmas, the dropping of the ball in Times Square is the signal most of us respond to when timing our look ahead.

The signals about what to expect when the “digital year” ends are mixed, but not wildly encouraging. There are anecdotal reports of strong sales by US indies selling Kobo devices and Amazon has bragged about their Kindle Fire sales. On the other hand, B&N does not seem to be meeting its targets on the digital side and we’re learning that we don’t get the ebook sales surge from replacement devices that we get when a consumer first switches over from print. Most of the devices being sold now are replacements.

. . . .

1. Overall migration of sales from print to digital will continue to slow down.

We have already seen this clearly in data that has been reported throughout 2012. After ebook share growth that was in triple digit percentages for four years (2008-2011), this year we saw that switchover slow down considerably to substantially less than a 50% increase over last year.

Although the slowdown was pretty sudden, it shouldn’t really have been that surprising. Since the ebook era began in earnest with the arrival of Kindle in November, 2007 (5 years and a few weeks ago), it has been clear that heavy readers were early adopters. Both price and convenience were drivers that made the reader of a book a week much more interested in the new way of purchasing and consuming than the reader of a few books a year.

. . . .

This does not mean the digital switchover has ended. My gut (I don’t think there’s a great empirical substitute available here) tells me that store sales for books will continue to lose ground to online (print and digital) at a rate of 5-to-10 percent a year for some years to come. But that’s a much more manageable situation than the one bookstore owners had been dealing with for the several years leading up to 2012.

This is good news for big publishers. Their model is still built around putting print on shelves and managing a marketplace that works around a publication date focus and the synchronized consumer behavior that store merchandising really stimulates. It is good news for B&N too, if they can take advantage of it.

. . . .

3. Mergers and consolidation among publishers are likely to become more common, after a long period when they haven’t been.

I have been a bit surprised about how little imagination has been evident from the kommentariat about the pending merger of Penguin and Random House. It seems like it is being viewed primarily for its cost-cutting potential (and that will be real), but I think it could actually be transformative.

I see two very big immediate wins for the combined company. They’ll be able to launch a credible general subscription, book-club-type offer using their own books exclusively (print and digital, although the big opportunity is digital). And they’ll be able to serve no-book-buyer retail accounts with a commercially-appealing selection of books working with a publisher’s full margin, not the thinner revenue available to a third party aggregator.

. . . .

4. Platforms for children’s books will become increasingly powerful gatekeepers.

Publishers discovered the power of platforms when Kindle showed them that they, not the publishers, controlled the customers and they, not the publishers, controlled the pricing. It took less than a year for Kindle to “own” enough customers that it would have been very difficult for any publisher to live without their sales, even without the leverage Amazon had as a significant customer for print.

Now we suddenly have a plethora of platforms that want to convince parents and teachers that they are where kids should be doing their reading. This is coming from the retailers: Amazon has a subscription offering for kids’ content and both Kindle and NOOK have parental control features. It is coming from the people who have been in this market all along: Storia from Scholastic and Reading Rainbow’s RRKidz. It is coming from outside enterpreneurs: Story Town and Ruckus.

Link to the rest at The Shatzkin Files

Big Publishing, Mike Shatzkin

12 Comments to “What to watch for in 2013”

  1. “I see two very big immediate wins for the combined company. They’ll be able to launch a credible general subscription, book-club-type offer using their own books exclusively (print and digital, although the big opportunity is digital).”

    Because the Columbia Record Club worked SO WELL.

    • Actually it did, for a long time.

    • Bertelsmann, the parent company of Random House, has long operated a very successful book club in Germany. Its luster has waned a little compared to the 1950s through 1980s, but it’s still going strong and the market share of online book sales (print and digital) only overtook that of book club sales a couple of years ago in Germany.

    • The US Book Clubs worked extremely well, until recently. The shift came when they stopped doing heavily-discounted Book Club editions and became promo outlets for the regular publisher editions at regular prices.

      I’m rather surprised that Amazon hasn’t launched a Book Club program: get a free Kindle with a two year subscription to a monthly (Baen-like) Bundle of titles. Say, 6 titles for $25: one a major release, two newcomers from KDP Select, three midlist or indie titles. More than enough value and margin to justify the deal for both sides.

      And the market power of the book club to essentially mint bestsellers (at today’s levels) would be downright scary.

  2. Mike Shatzkin says some interesting stuff. He might be wrong (I caught way offside once), but he isn’t boring.

    And even when he’s wrong he’s intelligent about it. I strongly suggest that everyone click on the link, and read the entire post.

    Wayne

  3. Over 2,400 words.

    Not one of them is “author”.

    • I think it’s fair to say without slamming him at all that in Mike Shatzkin’s world–not publishing itself, but service to the publishing industry–authors are pretty nearly interchangeable and pretty nearly irrelevant other than as content-producing units. Sadly, that’s only slightly less true in the publishing industry itself.

      • Very fair.
        There is a big difference between the publishing business and all its players and the bookselling industry. Shatzkin’s focus is bookselling with a primary interest in the BPHs. Authors and readers are only abstractions on the other side of the “important” interfaces; agents and deal-makers on the content-acquisition side, distributors and large-scale retailers at the other end.
        Notice how his concern over kid-lit platforms is gatekeeping and market power, not scope or accessibility.

        He offers a look into the worldview of the BPHs and traditionalists but it is very much a narrow slice of reality. Think of him as one of the three blind men fondling the elephant; he accurately reports what he senses but whether he is holding on to the trunk or a more… private… part is of no consequence to his customers.
        Not as long as it validates their ongoing policies, anyway.

        So he’s worth paying attention to.
        But he is hardly gospel.

    • Excellent point, Randall.

  4. “this year we saw that switchover slow down considerably to substantially less than a 50% increase over last year.”

    Well that sucks. At that rate it takes nearly two years to double.

    • Yeah, my thought is “Does he understand the Magic of Compounding?”

      When you are talking about percentage growth of this kind then you’re still talking about INCREASING numbers even as the percentage slows down.

      Let’s just say you sell 10 apples one year. Then the next year you have 200 percent growth, you sell 30 apples (which is 20 more than the year before). But then you have a huge drop in your rate of growth. It’s cut in half. You only have 100 percent growth…. which means you sold 30 more apples than the year before.

      When you are talking about this kind of growth, it slows down naturally partly because the base number starts out so low that any growth is a huge percentage, then you get to a number that is so high, that even great growth doesn’t look like much. But the growth is still accelerating.

      It’s only when the growth slows down a lot more that things become stable enough for such comparisons to really mean much.

      • Exactly. I’ve pointed that out to him before, but it’s doesn’t make for as interesting copy.

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