Wave of ‘Bad’ E-Book News Dark Cloud or Blip?

Businessmen puzzling over the news of the day.

By Jeremy Greenfield, Editorial Director, Digital Book World, @JDGsaid

A mini-wave of middling news has hit the e-book world in the past several weeks in contrast to the usual positive narrative about explosive growth and boundless opportunity. Is it a dark cloud on the horizon or just a blip on the radar?

Mixed metaphors aside, what’s really going on with e-books right now? Despite the “bad” news, experts and observers say that e-book publishers have little to worry about.

Profits are down at romance-book publisher and e-book vanguard Harlequin due to print declines that were not offset by digital gains. The Association of American Publishers announced weaker-than-expected adult trade e-book growth in February, the most recent month for which numbers are available. The rate of increase for Simon & Schuster’s digital sales continued to decline, according to the company’s first quarter results. And after a banner fourth quarter 2011, sales of Amazon’s Kindle Fire reportedly fell off a cliff in the first quarter of 2012 (which could be good or bad news for e-book publishers, depending on how you look at it).

“I’m not hearing alarm bells from publishers yet,” said James McQuivey, Ph.D. and principal analyst at Forrester who covers the book industry. “So I can’t say whether there is an overall softening or just unevenness in the data or just that each of these things is potentially explainable as due to circumstances specific to the players involved.”

While the above news isn’t exactly “bad,” it contrasts somewhat with the long-term narrative of e-book growth that has been steady since the Kindle came out in 2007.

“We’ve become addicted to the pace of change,” said Thad McIlroy, a Vancouver-based digital publishing consultant. “So if any market numbers emerge that suggest that the pace of change may be in some way slowing, we react with disappointment.”

Publishers of e-books should be reacting to such news with “quiet celebration,” said McIlroy.

“Every executive in publishing today already has a 70-page ‘to-do’ list,” said McIlroy, suggesting that a slow-down in the pace of change would give publishers a moment to catch up with it.

Regarding the reported slow down in Kindle Fire sales, industry observer Chris Rechsteiner doesn’t buy it.

“Until I see the major investment bankers sour on Amazon, I’m not buying the ‘Amazon sky is falling’ mantras,” said Rechsteiner, founder and chief strategist at BlueLoop Concepts, a digital and mobile media research and advisory firm based in the Chicago suburbs. “The fact that Amazon may have over-bought components [the evidence cited among news reports for the slow-down in Fire sales] to be sure they didn’t run out was well built into their models and, likely, very easily managed at a financial level. If it was seriously a problem with their forecasting, sell-through and cash allocation to component inventory they’ll never use, you better believe their stock would be getting hammered right now.”

 

Trends to Watch

As the size of the e-book market grows to represent more of the whole book market, explosive increases “will be hard to sustain,” said, Kelly Gallagher, vice president of publishing services at Bowker Market Research. “We saw that through 2011.”

Mike Shatzkin, speaking at the Digital Book World Conference in Janaury said, “In 2011, for the first year in several years, e-book sales did not…double” as they did in previous years as the e-book market went from “nothing to something.”

Another trend to watch, according to Gallagher, is that there are fewer avid book buyers among new batches of e-book readers versus those that came before them.

“The early-adopter, heavy book buyers who make up over 60% of volume of all e-book sales have continued to slow in their migration to digital,” said Gallagher. “Without the ongoing influx of these key buyers, the market is more reliant on a greater increase of casual to moderate buyers to move the needle.”

Those casual book buyers may have the odds stacked against them buying a large number of e-books if they buy tablets, according to Gallagher and supported by research he conducted with the Book Industry Study Group.

“Growth of the tablet market is having an impact on people’s choices on whether to buy an app or a book,” he said.

Essentially, tablet readers may be less likely to buy e-books at the same pace as those who read on e-readers; and the proportion of people reading e-books on tablets versus e-readers is increasing, a trend that may not be favorable to e-book publishers.

Regardless of waves, dark clouds and blips on radars, the fundamentals of what’s going on in the e-book business haven’t changed recently, according to McIlroy.

Whatever news happens in the coming days or weeks, it doesn’t alter the fact that everything has changed forever in the publishing business and e-book publishers are doing all they can to keep up with the demand for e-books and the pace of innovation in the industry.

“They should pray for a quiet news day,” he said.

Write to Jeremy Greenfield

2 thoughts on “Wave of ‘Bad’ E-Book News Dark Cloud or Blip?

  1. gavin griffiths

    you were never going to see continual explosive growth as you go from zero to huge market penetration. It may have provided a glimmer of hope for the traditional book publishing industry but having worked in magazines for years I could see it was a false dawn. Ebooks are great if, like me, you are a writer who is doing it part time. Less of a thrilling prospect if you employ many thousands of people and have offices in large capital cities. The ebook market growth will level off, prices will fall because consumers know a book doesn’t need to be £5.99 anymore. Occasionally you’ll get a big brand author who people will pay extra for, in the way you pay extra for quality in any retail product, but the norm will be closer in pricepoint to a newspaper. So its bad news for the big boys, good news for the little boys. Thats my view. Good post.

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