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2017 Book Industry Predictions: Intrigue and Angst amid Boundless Opportunity

8 January 2017

From Mark Coker via Smashwords Blog:

If you could see into the future, what would you do to change it?

Each year I polish off my imaginary crystal ball and attempt to divine how the boiling crosscurrents of technology, competitive intrigue, author aspirations, and reader tastes will shape the opportunities facing authors, publishers and retailers for the year ahead.

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2017 will mark a special milestone for the ebook industry.  It marks the ten year anniversary of the Kindle.  It’s also the ten year anniversary of Smashwords’ incorporation.  In early 2007, after three years of crafting our business plan, I hired our first programmer and began active development on the Smashwords platform which we launched in early 2008.

Although my prediction track record has been pretty good over the years (see the end of this post for a complete list of my past predictions), my overarching objective is not to be correct.  Instead, these predictions are meant to spark conversation and contemplation.

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Before we get into my ten predictions for 2017, let’s take a moment to review the amazing transformational change over the last decade, and celebrate how far the indie author movement has come in such a short period of time.

Ten years ago traditional publishers controlled the means of book production, distribution and sales.  It was a print-centric world where print books accounted for 99.8% of book sales, and where publishers were the bouncers at the pearly gates of authordom.

Publishers controlled which writers graduated to become published authors, which books readers could read, which authors remained in print, and which authors would be allowed to publish another book.

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In the last ten years ebooks took off.  Ebooks today account for maybe 25% of book sales, up from essentially nothing a decade ago.  In genres like romance, the percentage is much higher.

When I look back at the rise of the indie author movement the last ten years, romance authors and their readers have always led at the tip of the spear.  They were first to embrace the indie ebook publishing, the first to achieve significant commercial success as indies, and the first to pioneer many of today’s best practices for ebook publishing and promotion.

Romance authors – predominantly women – are the some of the smartest players in this business, and their readers are the most coveted and voracious.  These are the readers who often read a book a day.

Romance authors are the canaries in the coal mine.  Romance authors were first to benefit from the rise of ebooks and the first to experience the deleterious effects when the market became saturated.  They’ve also been the first to fall prey to some of the more troubling developments in the industry now affecting writers and publishers in every category.

In the last decade, hundreds of thousands of writers have joined the indie author movement, drawn by the advantages of self-publishing ebooks.  What are these advantages?  In a nutshell, indie authors enjoy faster time to market, greater global distribution, complete creative control, greater pricing and promotion flexibility, greater opportunity to serve their readers with high-quality low-cost ebooks, and the opportunity to earn royalty rates up to five times higher than what the traditional publishers pay.

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1.  Indie authors will continue to capture greater ebook market share in 2017 

Indies will capture a greater share of digital reading in 2017.  Factors driving this include:

  • Each year the indie author community raises its game to become more sophisticated and more professional.  Indies are learning to implement – and in many cases pioneering – the best practices that motivate readers to choose one ebook over another.
  • Indie ebook authors combine quality with lower prices, providing readers tremendous reading value.
  • Even though indie ebooks are already low-priced, indie authors have greater flexibility to lower prices further than do the large publishers.  This is a mixed blessing.  This also means indies are vulnerable to some of the greatest devaluation pressures because indies don’t wield the collective bargaining power of large publishers.

2.  The glut will grow more pronounced

Over the last few years here at the Smashwords blog I’ve talked a lot about how there’s a glut of high-quality low-cost ebooks.  These ebooks are immortal and will never go out of print.  Thanks to low-cost virtual shelf space, retailers can stock these ebooks forever – even if the books don’t sell.  Although it’s great that your book will forever occupy the shelf, and forever be discoverable and purchasable by new readers, it also means that the virtual shelves are becoming more overcrowded every day.   The major ebook retailers each stock millions of ebook titles in their online stores, with Amazon fast approaching five million titles.  Every day from yesterday forward it will become more challenging to stand out, which leads me to my third prediction.

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10.   Amazon to face anti-trust scrutiny for unfair business practices

This is a long shot, but in the spirit of prediction folly I’m going to go out on a limb here.  In anti-trust law, there’s nothing illegal about operating a monopoly (where you have exclusive control over a commodity and can manipulate prices) or a monopsony (when there’s only one major buyer).  What’s illegal however, is when a company exploits their monopoly or monopsony for unfair business advantage that makes it impossible for other competitors to compete on a level playing field.

Amazon defenders will argue that Amazon is a brilliant competitor and innovator, and that those who think Amazon plays unfair should stop whining and start innovating.  But this argument rings hollow.  The other retailers have innovated, and continue to innovate.  I work with them.  I see it.  This specious argument by Amazon defenders confuses market share for commitment.  If Kobo earns authors 1/10th of what they earn at Amazon, it’s not necessarily a failing of Kobo, it’s a function of market share.  If you decide to open an indie ebook store specializing in personalized recommendations for cookbooks, the fact that you can’t grow sales to billions of dollars overnight is not a failure to innovate.

One industry watcher explained Amazon’s anti-competitive business practices to me with an analogy about trains, which I’ll paraphrase and expand upon:

Let’s say you own the railroad network that connects farms to the largest marketplace (which your railroad also owns) 1,000 miles away where 70% of corn is bought and sold; and your railroad also owns some corn fields along the rail lines.  If the railroad operator decides to give its own corn first priority on shipments, then their corn will reach the market first while the corn of other producers spoils or is late to market.  If the railroad also gives its own corn preferential display in the marketplace, or if it denies other producers the option to sell under favorable terms in their marketplace, or gives them poor placement within the marketplace, then what are the other farmers to do?  Shame on the other farmers for not buying their own railroad or operating their own marketplace!

Bringing this back to Amazon, Amazon operates the world’s largest ebook retailer providing access to 70% of the world’s ebook readers.  They operate their own publishing imprints.  This means Amazon has the ability to give its exclusive titles first class priority on the train and in the marketplace, and they do.  They operate the Kindle store where all books are allowed but exclusive KDP Select books and Amazon-imprint books are given preferential store placement.  They operate marketplaces such as Kindle Unlimited where only exclusive books are available and non-exclusive books are shut out.  Shame on you Mr. Retailer or Ms. Author for failing to innovate.

This is anti-competitive and unfair, and these facts have led some anti-trust experts to conclude that the only way to solve this problem is for Amazon to be broken up into smaller, independent companies that operate at arms length.

Amazon has so far been able to skirt anti-trust scrutiny by arguing that the network they operate benefits consumers because of Amazon’s track record of lowering consumer prices for ebooks, and this is very true.

But what about the producers?  Do they have any rights?  You’re a producer, you tell me.

Link to the rest at Smashwords