Ten Bold Predictions for Ebooks and Digital Publishing in 2013

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Kindle as Magic 8 Ball. Illustration by Todd Goldstein

Another exciting year for the publishing industry is in the books, so to speak. The ebook and digital publishing landscape changed drastically yet again. In 2012, Amazon and other retailers gained control over ebook pricing at three major publishers, ebook revenue growth hit an inflection point, and a parade of non-book-publishing companies entered the ebook business.

Nobody saw it coming. Well, almost nobody. A team of publishing experts predicted in late 2011 some of the astounding developments we saw in 2012 for Digital Book World. See their original predictions here.

Seeing as though 2012 is just about over, we’ve gathered more publishing experts to predict what extraordinary events are to come in book publishing in 2013.

— For more insights into the ebook and digital publishing future, attend Digital Book World Conference + Expo in New York, Jan. 15 – 18 —

 

1. More consolidation.

One of the biggest news items of the year was the proposed merger between Penguin and Random House. If the merger goes through, the combined company will be by far the largest publishing house in the world.

There will be “more consolidation in the big-six publishers, especially in acquiring mid-size publishers,” said Andrew Rhomberg, founder of ebook discovery start-up Jellybooks and DBW Expert Blogger.

But it’s often forgotten that this year and last year were relatively big years for financial activity in publishing. HarperCollins acquired Thomas Nelson and formed a new Christian publishing unit and iEnergizer, a business process outsourcing firm, acquired ebook production house Aptara, just to name a few. When we covered this story in the Spring, we predicted more acquisitions and we were right; and there are yet more to come.

“What’s happening with Penguin and Random House is just the beginning,” said James McQuivey, Ph.D. and principal analyst at Forrester who covers the book industry. “I just look to other industries. At one point in the music business there was the big six, then it was five then it was four and now it’s three and a half.”

Related: What the New Random-Penguin Logo Should Look Like

 

2. 2013 will be the year of the enhanced ebook.

“Every year, we say this is going to be the year of the enhanced ebook,” said Wiley’s director of digital business development Peter Balis. “But in the second half of this year you’re going to see a significant number of titles with robust interactivity in areas like test prep and other non-fiction categories.”

The enhanced ebook has been the next big thing for several years running now, but it just hasn’t gained the traction that its immersive reading counterpart has. There have been some hits, like Hyperion’s Jacqueline Kennedy Enahnced eBook from 2011, but they have been few and far between.

So why this year?

First, “there will be an increased appetite for illustrated and nonfiction books that did not sit well on e-readers,” said Jo Henry, director of Bowker Market Research, a book-focused research firm.

Second, more people will have the devices that make reading enhanced ebooks pleasurable with the precipitous rise of tablets.

And, third, more publishers will be producing the kind of content for those devices that people want to read.

“There will be more enhanced ebooks by far in 2013 than there were in 2012,” said David Wilk, publishing consultant and provider of publishing services through his firm Booktrix.

 

3. The $0 Kindle.

It’s a prediction that we made last year, but this year will finally be the year that we see a free e-reader, specifically a free Kindle.

For Amazon, it’s not just about getting more customers for its content ecosystem but about keeping the e-ink e-reader device manufacturers in business.

Forrester’s McQuivey explains:

“We’re now starting to see shipments go down for e-readers. The devices and components that go into them – the people that do the building and assembly, the people that do e-ink – there is good evidence that they’re getting fewer orders. If you’re amazon, you want those devices to still be out there. They create customer stickiness that you want.”

That said, the e-reader that you get for free isn’t going to be top-of-the-line.

“If you want a nice [Kindle] Paperwhite, that’s going to cost you money, but if you want the cheapest, smallest device, they’ll give it away for free,” said McQuivey.

It’s not so far-fetched. After all, this year did see the invention of the $13 e-reader.

 

4. More publishers will start selling digital-rights-management-free ebooks (DRM-free) and directly to consumers.

“You will see increasing participating in the distribution of DRM-free ebooks, both front-list and back-list from some larger publishing houses,” said Wiley’s Balis. “Experiments like those at Macmillan and HarperCollins are going to continue.”

In 2012, Macmillan and HarperCollins joined other publishers like O’Reilly and F+W Media (parent to Digital Book World) in selling ebooks DRM-free and directly to consumers (or in the case of HarperCollins, experimenting with these models).

“Those things [direct selling and DRM-free] are connected,” said Noah Genner, CEO of BookNet Canada.

The reason is that when a publisher or any business that doesn’t also sell devices sells an ebook, if it has DRM restrictions, it could be very hard for the buyer to comfortably read that ebook on the device of their choosing.

Publishers want to sell directly to consumers to take a bigger percentage of the take and to develop relationships with customers that can pay dividends down the road, including the ability to collect data on the habits of those customers. Publishers that specialize in vertical markets like O’Reilly and F+W are already reaping the benefits.

“There are publishers who are getting much better at controlling their vertical and once you get good in that vertical, selling direct becomes a much more profitable position,” said Genner.

 

5. Ebook market-share growth will slow.

“In 2013, ebook market-share growth will slow after a certain point,” said Henry of Bowker.

Unlike the early days of ebooks, when growth was consistently in the triple-digits – though on very little revenue – 2012 was a time of “modest” growth for ebooks.

According to the Association of American Publishers, adult trade ebook revenue is “only” up 37% versus last year through Aug., the most recent month for which numbers are available. (These are of course growth numbers that are only modest in comparison to what preceded them. They are astounding by any other measure.)

That said, ebook revenues for trade publishing could eclipse $2 billion this year and there are still pockets of explosive growth – children’s digital publishing revenue, for instance, which is up nearly 200% so far this year. While revenue numbers can grow forever, market-share numbers can’t; and whether you believe that ebooks will eventually comprise 50%, 80% or 100% of trade publishing revenues, growth in this category has to slow and stop at some point.

“In 2013, we will see the ebook adoption rate plateau and settle out at a percentage that will surprise everyone – at about 30%,” said Wilk of Booktrix, who believes the plateau will be temporary because categories like illustrated ebooks and children’s ebooks will continue to grow at stupendous rates compared to adult trade.

 

6. Ebook marketing will be completely re-thought.

“Conventional trade book marketing at established, general publishers is going to be completely re-thought,” said publishing consultant and Digital Book World Conference + Expo partner Mike Shatzkin. “It has always been title-specific and publishing-date centric and it won’t be anymore.”

The way book marketing worked before the rise of digital marketing and ebooks was (roughly), that a book would have a pre-publication push that included publicity and advertising; after publication, it would receive more of the same for a set period of time; and then it would be left to fare on its own until sales petered out enough so that stores stopped stocking it as consistently. And then it would be relegated to the back-list, rarely to be seen as a priority by marketers again (except in the case of a movie deal, an award, or other public mentions that could revive a book’s status).

With the rise of digital marketing, ebooks (which make it relatively easy to sell back-list titles) and highly developed communities of interest on the Web, more successful book marketers are looking at their marketing agenda as anything they can sell, any time of year.

“There will be an obvious leader – that is to say, at some point we’ll start to see back-list books popping more out of one publisher than out of others,” said Shatzkin. “That will be the way the world finds out and people will be saying, ‘why is it that suddenly we see “Publisher X” books that are nine months old showing up on the best-seller list’ and somebody will poke around and say, ‘oh, well, they’re all part of their “single women” marketing group’ for example.

“What drives change is success. Imitation is the sincerest form of flattery,” he said.

Some publishers, like digital-first Open Road have already adopted similar marketing philosophies.

 

7. There will be a major privacy breach at a library that involves ebooks and reader information.

“There’s going to be some sort of privacy breach with ebooks and libraries and the industry and public will have to deal with that as well,” said Gary Price, editor of Library Journal’s infoDOCKET.

Some book buyers were taught a little bit of a lesson this year about using electronic keypads to enter in their debit card PIN numbers when buying books at Barnes & Noble bricks-and-mortar locations. In Oct., it came to light that PIN machines at 63 Barnes & Noble locations had been compromised and information was stolen and unauthorized purchases were made. There have been purely electronic privacy security issues this year – at Facebook and Google, for instance, just to name two.

No library has experienced anything similar, but libraries aren’t known for their air-tight security. Despite that libraries and ebook retailers alike are tracking user browsing, reading and buying habits, the public doesn’t seem to care all that much – until their privacy is compromised.

“Privacy only becomes a concern when your stuff gets stolen. A lot of people don’t pay attention to privacy until it affects them,” said Price.

 

8. By the end of 2013, 65% of U.S. children will have access to an e-reading device.

Children’s digital is on the rise and it’s only going to continue growing as more children have access to computers, smartphones, tablets and e-readers. According to a report from Digital Book World and PlayScience, 40% of parents who have children who read e-books plan to buy them new devices to do so this holiday season. And two-thirds of parents with children who read e-books plan on buying them digital content this holiday season, spending an average of $28.26.

“We are seeing a massive uptake in having tablets,” said Alison Bryant, Ph.D., who is the president of PlayScience and will be presenting the full results of the report at DBW 2013 in New York, including revealing the percentage of children in the U.S. aged two-to-thirteen who do read ebooks (spoiler alert: it’s very high and astounding). “We’re going to continue to see access increase and we’re going to see the e-reading numbers increase.”

 

9. Educational publisher Cengage will default on its bonds and be combined with McGraw-Hill.

“Disruption in the higher education market will make life hard on the educational publishers,” said Vancouver-based publishing consultant Thad McIlroy. “Cengage will default on its bonds and the company will be merged with McGraw-Hill.”

While e-textbooks are still not popular among students, they are popular among administrators, government officials who oversee education and the companies that will produce the bulk of them in the future – not to mention the spate of start-ups that have arisen to capitalize on changes in the education industry. Companies like Cengage, Pearson and McGraw-Hill are scrambling to make investments today to pivot their businesses digitally so that when e-textbooks do take off, they’re there to reap the benefits.

As of late this year, the companies are both controlled, in a way, by private-equity firm Apollo Global Management. Apollo owns a significant portion of Cengage debt and it paid $2.5 billion for McGraw-Hill in late Nov. In early Dec., the New York Post claimed that repossessing Cengage when it defaulted on its debt and combining it with McGraw-Hill was the financial firm’s plan.

 

10. Barnes & Noble share price will dip below $10.00.

This year was a roller-coaster ride for the largest bookstore chain in the U.S. Its stock was getting hammered until Microsoft invested $605 million in it in April to form a joint venture that valued the Nook business alone at over a billion dollars. The stock doubled in price overnight to $27.11.

The gain didn’t last, however, and stock sunk as low as just over $11.00 around Sept. In the past few months, it has recovered somewhat and is hovering between $14.00 and $16.00 for the most part, leaving the company with a market capitalization of under a billion dollars – very poor for a firm that should end its fiscal year with $7 or $8 billion in revenue.

During a recent conference call, CEO William Lynch said that the path forward for the company was digital content sales through its Nook platform. But new retail agreements with some of its largest partners – Hachette, HarperCollins and Simon & Schuster, and soon, Penguin and possibly Random House – make could make that a difficult proposition in the immediate future.

Nevertheless, “Barnes & Noble will continue to limp on,” said Rhomberg of Jellybooks.

What are your predictions for 2013? Share them in the comments below or email them to me here. And don’t forget to check out our predictions for 2012. At the beginning of next year, we’ll review how we did. Here’s where we were through the first six months.

Kindle as Magic Eight Ball. Illustration by Todd Goldstein

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