E-books are not taking over the world! That seems pretty clear from a Pew Research Center survey released last week, which showed that the percentage of Americans who read digital books hasn’t risen since 2014.
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The survey didn’t show any real sign of a print resurgence either, though. Overall, the percentage of Americans consuming books in any form appears to be trending modestly downward. By holding steady, e-books are thus gaining a bit of ground over print.
This is not exactly the “return to print” story that the nation’s book publishers have been telling lately. Yes, the Association of American Publishers reported in June that physical book sales were up in 2015, and that sales in brick-and-mortar bookstores rose, too. The percentage of people who read books is down a little, but the people who do read books are buying more of them. That’s what one should expect of a mature industry in an improving economy — which is certainly better than being in a rapidly declining industry like newspaper publishing.
The AAP also reported, though, that e-book revenue was down 11.3 percent in 2015 and unit sales down 9.7 percent. That’s where things get misleading. Yes, the established publishing companies that belong to the AAP are selling fewer e-books. But that does not mean fewer e-books are being sold. Of the top 10 books on Amazon’s Kindle bestseller list when I checked last week, only two (“The Light Between Oceans” and “The Girl on the Train,” both mass-market reissues of novels that have just been made into movies) were the products of major publishers. All the rest were genre novels (six romances, two thrillers) published either by the author or by an in-house Amazon imprint. Their prices ranged from 99 cents to $4.99.
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Book publishers are what business-school professors call two-sided platforms, or two-sided markets. They’re selling books to readers, but also selling publishing services to authors. When it comes to e-books, the established publishers are choosing not to offer a very good deal to either. After Amazon’s early experiment with limiting Kindle prices to $9.99, publishers now set the prices, and for prominent new books they’re often in the $12.99 to $14.99 range — not much less than the discounted hardcover price on Amazon. And even though publishers spend a lot less to produce and distribute e-books than paper ones, they generally don’t offer authors a bigger cut of the proceeds.
The publishers have instead chosen to prioritize physical books, and you can’t entirely blame them. Most book buyers still seem to prefer reading books on paper (I do, unless I’m traveling), and keeping physical bookstores alive seems like a much better deal for publishers than relying on an all-powerful Amazon to distribute all of their products.
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There are a few problems with this steady-as-she-goes scenario. The most obvious is that Amazon doesn’t really do detente. It’s now opening its own physical bookstores, and surely has other plans up its sleeve. Another is that cheap genre fiction is a lucrative business that publishers didn’t really want to give up. (News Corp, owner of Big-Five publisher HarperCollins, bought romance-novel publisher Harlequin, which has been hammered by the rise of digital self-publishing, in 2014.) Finally, the rise of e-books fits Harvard Business School professor Clayton Christensen’s classic model of disruptive innovation so perfectly that it seems unwise to assume that it is already all played out. This is from the introduction to Christensen’s book “The Innovator’s Dilemma”:
Generally, disruptive technologies underperform established products in mainstream markets. But they have other features that a few fringe (and generally new) customers value. Products based on disruptive technologies are typically cheaper, simpler, smaller, and, frequently, more convenient to use.
Established companies naturally focus on serving their existing customers, who aren’t all that interested in the new product. They also look at the lower profit margins on the cheaper, simpler new product and think, “No, thanks.” This leaves the field to new entrants, who keep improving their product and luring new customers until it becomes dominant. The former industry leaders are left on the sidelines wondering what went wrong.