From veteran publishing consultant Mike Shatzkin:
Many, if not most, of the people in publishing houses I know have what they feel is a pretty clear picture of the changes we’re seeing in the business. There seems to be a strong consensus that the ebook share is leveling off or diminishing as opposed to print. And there is an enthusiasm about what is characterized as a vibrant and growing independent sector. And stronger print, too many (if not most) people (even inside the industry) figure, means stronger brick-and-mortar and a lessening of the power of Amazon.
But data is really elusive and confusing in our business. Nobody really counts everything in the same way with the same time periods and methodology.
. . . .
The challenge of aggregating that data and making sense of it has been tackled by Data Guy, the anonymous quant who put together the Author Earnings website with indie author star Hugh Howey. The original mission of Author Earnings was to get a handle on how much money indie authors earned in relation to conventionally-published ones. Indie authors often sell ebooks, particularly, at much lower prices than established publishers do, with the author getting a much larger share of the consumer dollar from those sales. But indie authors don’t get the same level of print sales (almost none in stores) and often don’t produce audiobooks, which require a separate creative effort.
So indie authors often make more per copy on ebooks, even when they are priced very low, than published authors do, ignoring, for the moment, that so many published books don’t earn out their advance so the effective royalty rate is higher than the contractual royalty rate. The indies also usually give up a big share of the potential market because many of them only get ebook sales through Amazon.
. . . .
So it requires a certain amount of faith to accept Data Guy’s analysis. It is almost certainly not 100% correct. But Bookscan doesn’t capture all the cash registers and PubTrack doesn’t get reports from all the publishers either. (Welcome to the world of publishing data!)
. . . .
That’s analysis each publisher needs for each book they do, and should perhaps engage Data Guy to help them with. There are some stunning revelations even within his DBW slides but, as he spells out, he can get exceedingly granular with that analysis. If my commercial success depended on knowing the landscape, I’d want him to inform me about the market for each book I published.
The other set of insights provided blows away the picture of reality painted here in the opening graf. (Admittedly, the sophisticated quants inside the biggest publishers must know this picture isn’t accurate about their own books.) It documents that the strategy of the biggest publishers, going to agency pricing so it was harder for Amazon to discount ebooks, is not solving their “Amazon problem”. It is exacerbating it!
Data Guy delivers a much clearer picture of the real market by including and integrating data for what Bookscan and PubTrack leave uncounted: the indie-published books (and even some from publishers) that don’t carry ISBNs and Amazon-published books that aren’t reported. He estimates the total “non-traditional” market at $1.25 billion consumer dollars, almost 300 million units across formats, with the lion’s share — 263 million of the 297 million units — being ebooks. The ebooks are on the cheaper side (he says an average of $2.92 per unit for the self-published and $4.38 per unit for Amazon-published). The ninety-nine cent price is pretty much a relic, except for windowed promotions. Amazon made that happen with their royalty structure, encouraging authors to price at $2.99 or above.
This shadow market constitutes 43% of the units purchased on Amazon and 24% of the dollars spent.
Those 263 million ebooks that Data Guy counts and Bookscan doesn’t are the difference between the flat or shrinking ebook market that publishers see and the perhaps-still-growing ebook market that Amazon sales suggest.
. . . .
No, the strategy of forcing Amazon to eschew discounting of ebooks — the agency pricing publishers have fought for and accomplished over the past several years — is not fostering an ecosystem more hospitable to the publishers.
In fact, it is making it more difficult for them.
This is clearly revealed through Data Guy’s consolidated picture of print book sales (only) in 2015 and 2016. In fact, the year-to-year change over those two years showed that the percentage of sales delivered through B&N, Walmart/Target, and “other” (smaller chains, airport stores, non-bookstores) all fell. The celebrated independent bookstores held their own, at a pretty paltry 6 percent of the sales.
But Amazon increased its share substantially, from 38 percent of the print units to 42 percent.
So if the original point to the agency strategy was to reduce the power of Amazon, it isn’t working.
. . . .
It is an incredible irony that the publishers had a strategy to hobble Amazon: stop ebook discounting. The courts found that unpalatable, so the publishers were forced to relent a bit. But, Amazon effectively said “no, thank you, we’re okay with what you did originally” and changed tactics to create a different pressure point.
We now live in a world where 69 percent (shout it out: SIXTY-NINE PERCENT) of book sales — print, digital, and audio — are online and only 31% in brick-and-mortar stores. For kids books, fiction and non-fiction, that’s a bit under half. For adult books, fiction and non-fiction, that’s about three-quarters!
Link to the rest at The Shatzkin Files and thanks to Jan and others for the tip.
PG suspects “sophisticated quants inside the biggest publishers” don’t exist. If PG is wrong about the nonexistence of quants, the only explanation for Big Publishing’s strategy during the last 5-8 years is that management never listens to anyone with the tiniest bit of quantitative ability.
At every major fork in the disruptive road, publishers have made the wrong decision. Fighting Amazon when they should have embraced Amazon. Mispricing ebooks to support print sales. Chasing talented authors away when they should have been treating them like queens. (Yes, publishers are sexist, particularly in their attitude towards “women’s” genres and the authors who write in those genres. Anybody with a single quant cell in their brains would have gone all-in for ebook romances and their voracious readers.)