From veteran publishing consultant Mike Shatzkin:
Amazon showed a willingness to sell ebooks for Kindle at prices below the costs publishers charged them, the big legacy publishers became alarmed. They could see no end to the switch to ebooks and it seemed logical to figure out a way to encourage competition across ebook ecosystems.
Their solution, aided and abetted by the new Apple iBooks ecosystem that debuted in April of 2010, was to move from “wholesale” pricing, where the retailer controlled the ultimate price to the consumer, to “agency”, where the publisher was the seller to the consumer and controlled the price. The intermediary — the retailer — was just an “agent” without pricing power.
This led to anti-trust action by the US government by which agency pricing was allowed, but only by newly negotiated agreements between each of the major publishers and their vendors, including Amazon. And the DOJ made sure that those agreements entitled the retail “agent” to discount from the publisher’s agency price, as long as the aggregated discounts to consumers didn’t exceed the retailers’ aggregate margin on those ebooks.
They needn’t have bothered. Amazon was essentially done with the strategy of discounting big publishers’ ebooks. And big publishers are left wondering whether they should be glad they got what they wished for. Let’s remember that those discounts from Amazon came from their share of the price; now with agency protocols, publishers can only discount ebooks by reducing their own take!
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Author-driven publishing just continued to grow as Kindle and the other ebook installed base grew faster and faster when smartphones and tablets both spread like wildfire and removed the need for a dedicated ebook device. With Amazon establishing a royalty rate for its own self-published authors of 70 percent of the selling price, equivalent to what agency publishers collected, successful self-publishers could make substantial money with very low-priced ebooks and zero or near-zero revenues from print.
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[E]ach week now, a handful of those genre Amazon Publishing ebook titles are handily selling more units than most of the titles on the NYT and USA Today’s best seller lists. Amazon found it relatively easy to grow market share in those areas where the bookstore sale, and even the online print sale, was diminishing in favor of the ebook.
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That has produced the world where big publishers with their agency-priced ebooks tell us that ebook sales have flattened or declined and that print book sales are holding their own, but Amazon says ebook sales are continuing to grow. And it is also a world where the big publishers are working feverishly, and largely futilely, to make their non-Amazon sales grow.
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Data Guy, first encouraged by indie author star Hugh Howey (one of the early beneficiaries of the changed marketplace), is now one of the principals behind Bookstat.com, an online-sales database built by scraping Amazon and other major online retailers. Bookstats’s realtime dashboard presents a consolidated, title-level view of the online US market, current through yesterday. It includes Amazon sales. It separates out Amazon Publishing from the indie authors Amazon enables. And, when used alongside data from Bookscan, Bookstat now lets us back out how brick-and-mortar sales alone are faring in relation to online.
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1. Amazon continues to grow its share of print and digital sales. It appear to be approaching half of all print sales and more than 90% of ebook sales.
Data Guy says:
On the print front, Amazon is indeed very close to half the US market: Our own Bookstat-derived total of 312 million print units sold by Amazon in 2017 is 45.5% of Bookscan’s total reported 2017 print sales of 687 million, which means Amazon sales now comprise the majority of Bookscan’s “Club & Retail” share. Even allowing for the other 15%-20% of US print sales that remain untracked by Bookscan, that puts Amazon’s US print share is at least 40%. And that’s ignoring another 10-15 million unreported Amazon print sales a year from CreateSpace titles that aren’t trackable through Ingram “expanded distribution.”
Amazon’s share of of US print sales is still growing rapidly. In the prior year, 2016, the 280 million Amazon online print sales Bookstat reports were only 41.7% of 674 million total units and in 2015 Bookstall’s 246 million print unit total for Amazon was only 37.7% of Bookscan’s 653 million reported units. So Amazon’s online print sales continue to grow by a double digit percentage each year.
Barnes & Noble — the next largest retailer of print books, from their public financial reporting, was by our math contributing 23% of Bookscan’s total in 2017 — which means that B&N has shrunk to where it now moves only half as many print books a year as Amazon, and B&N’s own financials show those remaining B&N sales are shrinking by 4% a year.
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2. The overall market is growing, but Amazon Publishing and indies are the growing segments. All legacy publishing, including the Big Five, are sharing from a diminishing pool of “what’s left” after that growth.
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3. Legacy publishing below the Big Five is suffering more, seeing their market share increase at Amazon even faster than the major houses are.
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In ebook sales, both Big Five and non-Big Five legacy publishers have ceded a huge chunk of market share to non-traditional players over the last several years; roughly half of the ebook market in unit terms, and nearly a third of it in dollar terms.
Link to the rest at The Shatzkin Files
PG has witnessed disruptive change driven by new technologies in several different industries (and participated in more than one of those changes).
From that viewpoint (admittedly personal), PG suggests that no industry has reacted to a disruptive innovation – ecommerce and ebooks – in a more pathetic and self-defeating manner than Big Publishing and its bricks-and-mortar sales and distribution infrastructure.
At every major juncture, when faced with a decision, Big Publishing has chosen the wrong path.
Antitrust violations, understanding ebooks in the marketplace, allying itself with Apple and against Amazon, failing to hire people who might have had a chance to revive a moribund industry (It’s too late now.), engaging in the sleaziest tactics with authors (Hello Harlequin!) etc., etc., etc.
PR spinmeisters (“digital fatigue” “back to print), trying to get the Justice Department to bring an antitrust case against Amazon for selling ebooks at low prices, looking at opportunity and seeing dystopia and so forth.