A changing book business: it all seems to be flowing downhill to Amazon

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!

. . . .

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.

. . . .

[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.

. . . .

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.

. . . .

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.

. . . .

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.

. . . .

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.

. . . .

3. Legacy publishing below the Big Five is suffering more, seeing their market share increase at Amazon even faster than the major houses are.

. . . .

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.

13 thoughts on “A changing book business: it all seems to be flowing downhill to Amazon”

  1. Yeah, pretty much everything was survivable except abusing their authors. As they drive out the mid-listers they lose their bread and butter without even realizing it. I am not sorry to see them suffer from their own stupid mistakes.

  2. I am fascinated by the spin produced by Shatzkin, the steward in charge of the deck chairs on the Titanic.

    I skim, and go down to PG’s always apt commentary which tells me what it really means.

    Then I shake my head. And I’m grateful BP has no hold on me because however bad the publishers have it, by their own actions, their authors have it worse.

    How long does it take for the objects circling the maelström to be sucked into the void?

    It’s kind of nice to be on a cutting edge for once. Haven’t mastered it yet, and hope I do prehumously, but I can’t write any faster. It’s still fascinating to have ringside seats.

  3. A friend who subscribes to K-Lytics (and swares by its data) recently shared with me information on the sales stats of books in the Mystery, Suspense and Thrillers category.

    7 of the 10 top sellers were books published by Amazon’s own imprints. The 7 outsold the rest of the Top 20 list, several times over.

    The #1 and #2 spots were Amazon imprints. The #2 spot was a book in the Pre-Order Sales process by an author who had no other books listed on Amazon (unless I missed something).

    Just saying….

  4. The key word is “downhill”.
    Sales are flowing to Amazon (and Indies) because they have to go *somewhere*.

    – Borders could have been allowed to reorganize. Instead it was pushed to liquidation. The reduced shelf space drove many online. Amazon had around 20-22% market share at the time. They inherited most of Borders 19%.

    – The agency conspiracy forced out many small players in the ebook space and the BPHs followup push towards print over digital has crippled Google, Apple, and Kobo, all of which were more dependent on BPH sales than Amazon and none of which sells pbooks. When Rakuten bought Kobo they bragged of “high single digit” US market share. These days they run maybe half that.

    – With online and ebooks drawing away avid readers the fabled “discovery strolls” through B&M stacks are mostly myth and memory. More importantly, online carries broader selections leading to the spread of avid reader spend across more midlist and backlist titles instead of the release window frontlist. As a result you get reduced buzz for much of the front list which means no bandwagons rolling for casual/social readers to latch on to. And, as DG pointed out, B&M is heavily dependent on casual readers (and the children books) these days. Less buzz means less casual reader sales.

    – With avid readers heavily invested in digital, friends and family know better than gifting pbooks. Result? Less holiday traffic and sales.

    – Less buzzworthy titles and less casual reader sales means books aren’t much of a traffic draw in non-bookstore B&M resulting in lower shelf space tbere.

    – Lower shelf space means bigger competition among tradpubs for what remains, driving the smaller players online.

    All these moves have compounded and snowballed over the past 5 years. By now the snowball is getting pretty darn big.

    And the most vexing thing for Shatzkin and co is that very little of the falling dominoes have been tipped by Amazon. If anything, it is the BPHs (and to a lesser degree, B&N) with their policies that started and have maintained the cascade.

  5. “and it seemed logical to figure out a way to encourage competition across ebook ecosystems.” This is spun so hard it’s making me dizzy. Publishers illegally conspired to raise ebook prices to push sales toward print books.

  6. Without paper, publishers provide an unnecessary service to authors and consumers. The paper service they provided was the industry. They could have redeployed their assets into another industry, but they had no choice regarding the paper industry they were in.

    It didn’t matter how they treated authors, how many midlisters they dropped, how they marketed, or how many puzzles were on bookshop shelves. An industry that does not provide a necessary economic service has no future. An industry that does not do something better than everyone else has no future. When what you do better is no longer necessary, the future dims.

    People pretend they were in the content business. They pretend they were curators. They pretend they were guardians of culture. But, anyone can do that. What they did better than anyone was producing and distributing paper products to consumers who had no alternative to paper.

    Provide an alternative, and the whole thing collapses. Nothing can change it. Nothing could have changed it.

  7. Mike Shatzkin quotes and points to Data Guy for authoritative facts on the publishing industry (not just any old facts, real time data) — Goodness, how times have changed.

      • @ Felix

        His agenda is milking the Trad Pub cash cow until all the milk is gone. But then what?

        Gotta feel sorry for Shatzkin. I’m certain he’s smart enough and aware enough to see what’s going down, now and in the future. Watching his income sources go down the tube must be scarey. So he’s telling his clients what they want to hear, providing rationalizations for them, and hoping it all lasts long enough for him to avoid the poorhouse. 🙁

  8. Mike Schatzkin has come a long way over the years to seeing the larger pix. He appears to go, however, by publicity releases, rather than doing more than 1″ deep journalism and investigation.

    “data guy” and his new biz to sell to multi million dollar earner trad pub companies will never be able to give accurate numbers to trad pubs, for he will never have no access to the income streams many authors have that have nothing to do with amazon. We sell ok on amazon, but our majority of income comes from our partners, other pubs that do not sell through amz, bor and more.

    I dont deny anyone trying out their latest brain child. But in the biz of stat/analyses, wildly skewed numbers dont carry a lot of cred, if only amz is measured in order to show large pubs ‘what is trending and selling’ by numbers limited to amz andmaybe book stat, etc

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