Half-way Through the Revolution

From publishing professional Mike Shatzkin:

A couple of major (Big Six) publishers have acknowledged that ebook revenues for them have passed 20% of their revenues. Of the 80% that remains print, I think it would be conservative to estimate that 20% of that is sold online. That’s an additional 16 percent of their business. Adding those together tells us that, for at least some very major companies, 36 percent of of their sales are being transacted online. That would leave, on average, about 64% of the sales for print sold through brick-and-mortar retail and other more minor channels. ”On average” should not be read as “typical” on a title-by-title basis. It isn’t. For immersive reading, or straight text like novels and biographies, the percentage sold in stores is already almost certainly substantially lower. My hunch, and nobody really keeps these figures (but I think I’ve found a way to get at them, which we’ll try to show at a future Publishers Launch conference) is that it may already be down to 50% print in stores for new titles.

. . . .

Five years ago, early in 2007, it was a virtual certainty that 80%, and probably much more, of the sales of any trade book that sold a significant number of copies would take place in stores. There were almost no ebook sales. (The Kindle did not make its debut until November 2007; sometimes I feel like I was the only person reading ebooks before the Kindle arrived.)

Five years from now, by the start of 2017, I’d bet that 80% of the sales of any trade book that sells a significant number copies will be transacted online.

And that, even more than the ebook uptake that is a mere component of the store-to-online shift, is the story of our times that matters in trade publishing.

. . . .

But being halfway through the change in consumer buying habits in our decade of change has profound implications for all the big players in the publishing value chain. It would appear that publishers in both the US and UK are now accepting that the decline in numbers of bookstores and the shelf space they offer for merchandising is not temporary and not primarily recession-driven. (We heard that said more than once last year and the year before.) It is a fundamental societal shift that is inexorable and which shifts power away from publishers to their trading partners on both sides of them: the authors and the retailers.

. . . .

The transition has another dynamic which is the growth of Amazon’s power in relation to every other player in the value chain. Going back to the stats at the top of the piece, the publisher who is seeing 36% of total sales and perhaps nearer 50% of immersive reading sales taking place online, is also seeing the percentage of their sales through Amazon grow as well. Amazon has about 60% of the ebook sales in the US and perhaps 90% of the online print sales. That would make Amazon (12% of the 20% sold as ebooks and 16% of the 80% print) about 28% of such a publisher’s volume now.

But using an overall number like that understates the reality of Amazon’s dominance. Their share of the sales of straight text books is almost certainly higher (because they sell most of the ebooks), so that share is almost certainly above 30% now. If things proceed as this piece contemplates for the next five years and nothing drastic has happened to change the shares retailers have of the ebook and online print channels, Amazon is likely to be something more than 50% of a big publisher’s business. All they won’t have is the 20% that is brick-and-mortar print, a sliver of online print, and the chunk of the ebook business that is sold by other vendors. And, as now, the percentage sold online will be higher on straight text.

Link to the rest at The Shatzkin Files

As usual, Mike’s analysis is thoughtful and well-documented.

However, to project what’s happened ahead another five years is very dangerous if you’re in Big Publishing (including if you’re an author with a lifetime publishing contract with Big Publishing).

Passive Guy thinks we’ll see more major downsizing and either one or more bankruptcies or some shotgun mergers in lieu of bankruptcies among large and medium publishers.

For those who say big publishers are owned by major media conglomerates who won’t allow a subsidiary to go broke, PG begs to differ.

Having worked for a subsidiary of a major media conglomerate, PG can assure you that the people in headquarters watch the numbers very closely. They have no problem sending an order to cut headcount by 25% to bump profits up for a couple of quarters. They have no problem selling a sinking company for less than they paid for it so they don’t have worry about an ongoing adverse impact on corporate profitability in the future. And they don’t care who buys the subsidiary. While they’re in the media business, the big conglomerates don’t care if their dollars come from New York Times bestsellers or Hong Kong kung fu flicks so long as the dollars flow in at a reasonable and predictable velocity.

For a little revolutionary perspective, Louis XVI was informed that France was insolvent in 1786, the Bastille was stormed in 1789 and Napoleon effectively ended the French Revolution in 1795.

The guillotine was adopted as the official means of execution in 1792. All of the beheadings took place during the second half of the revolution.

Amanda Hocking, Amazon, Big Publishing, Mike Shatzkin