Continuing on the theme of change in publishing, I came across the latest report by The Publishers Association, released a few days ago. Philip Jones did a great job at going through it, explaining what one can learn from it. Although it refers specifically to the UK market, the trends are similar in the US. Please note the information below refers to traditional publishing; there is a growing number of digital-only publishers not represented in the PA data (not least Amazon Publishing) that would help broaden our understanding.
You can read below what I consider to be the highlights.
The Yearbook confirms that e-book sales have softened for most trade publishers, with sales growing just 5.3% in 2014. The impact was felt most acutely in the fiction sector, where e-book sales did not bring in enough additional revenue to cover the gap made by print’s continuing decline.
To put this in perspective, the rate of growth was 375% in 2010/11; 134% the following year; dropped to 18% from 2012 to 2013 and finally to last year’s 5%.
It is worth noting, though, that the market has not yet peaked. We won’t know for another year whether in 2015 it reaches its plateau—and there is much that might alter the trajectory over the course of a year. According to data released monthly by the Association of American Publishers (and analysed by Publishers Marketplace) e-book sales rose also by 5% in 2014, driven primarily by YA titles. However, there are occasional dips just as there are in the printed book market.
Nevertheless, the narrative of slowing e-book growth is now widely recognized. Digital sales saw yet another year of steady but decelerating growth. The evidence from the Yearbook is that fiction e-book sales, currently standing at 37% of total fiction sales by value, are still rising, but the growth trajectory is less steep than it was in 2012 and 2013. If the UK follows the pattern shown in the US, this graph may well level off completely in 2015.
For books, digital sales are now 17% of the total by value, and have increased 33% in the last two years. For some categories of book, digital now vies with physical for importance: for fiction, e-books are 37% of the total by value, and have trebled in absolute terms in three years. But, as was observed in the 2013 Yearbook, the rate of digital growth for books has leveled off overall in the last two years, and it is clear that a flexible mix of print and digital will continue to be required by consumers, with no single pattern dominating all categories.
The PA report also contains other surprises.
Export sales of fiction e-books actually fell slightly back. In this, it mimicked what happened in the physical export book market, where sales also retracted by 6%. The Global E-Book Report examined the difficulties of finding genuine digital growth in markets outside of the English-speaking world. Yet still, that sense of a growing and more easily accessible overseas community happy to read certain titles in English remains. The potential is certainly there, but realizing it can be tricky.
Non-fiction digital sales also retrenched after a few years of encouraging growth. Non-fiction e-book sales doubled in 2012, grew again in 2013, and then stalled in 2014. In fact, the overall non-fiction market fell 8.5%.
Sales of UK fiction digital sales rose 8%. And for many publishers this remains a buoyant area, if mainly confined to a certain type of fiction. The available data shows a continuing dominance of major brand names and deep discounting mechanics – in effect, a mass market retail model. Price, author recognition, competing format (i.e hardback or paperback) and genre can strongly impact sales in this sector. Some authors and genres skew more towards e-book sales than others – it is not unheard of in the paranormal romance or ‘new adult’ genres for e-books to make up 90% of all sales, whereas in some more traditional genres e-books account for under 20%.
The children’s digital market continues to show few signs of activity. Digital sales rose from £16m to £22m (and that includes audio downloads). In the UK it went up from £12m to £15m. Perhaps a new generation of children, whose digital world is increasingly all-consuming, will take to e-books. However, the latest reports highlight the continuing importance of the printed book in the lives of children, despite the ever-increasing use of the internet and technology. Rather than an explosion in accessed digital content for kids, the golden age for children’s books continues.
The Big 5
Domestic e-book sales for the five groups—Penguin Random House, Hachette, HarperCollins, Pan Macmillan—totalled 49m units in 2014, a 15.3% rise on 2013. Three of the five publishers recorded double-digits growth, with only Simon & Schuster down—albeit marginally—on 2013. This, we project, represents a year on year rise across all publishers of 18.5%. But that compares with publisher reported invoice growth up just 6.8%. If volume sales are rising ahead of value growth then we can surmise that average prices are shrinking—and that publisher margins are being squeezed. In other words growth comes at a cost.
The backdrop to this is the reintroduction of agency pricing in the US (but not yet in the UK), and one might further deduce that while publishers are continuing to experiment with pricing, they are watching the value of their e-book business like hawks—providing further opportunities for those willing to chase volume at the expense of turnover. In the UK, this will only be exacerbated by the imposition of VAT on e-books at the UK rate of 20%. What looked like a high margin business for sometime, now looks like a race for the bottom (agents take note). In fact, since the average selling price of printed books is on the rise, publishers might actually be banking on print to back up their e-book growth.
The audio download market continues to surprise. In 2014 the PA report suggests its value has increased five-fold from 2013 to 2014. Even that number looks suspiciously low; according to some, the actual increase has been even more spectacular. Publishers now talk about audio downloads in almost the same way they used to talk about e-books (growing and highly profitable).
The Academic Market
Schools market have yet to develop digitally, but the academic and professional markets are in a different country. Sales have risen consistently by a double-digit number. The journals market outstrips all of this: electronic-only revenues grew by 6%, representing a 79% share of subscription income.
What about Indies?
We still have no clear sight of the self-published digital market. Our perspective might change a lot if we did. That said, the traffic from self-published author to traditionally published author (or Amazon published) is still broadly going in one direction, suggesting that even successful indie writers are faced with the same worries traditional publishers have come up against.
In Conclusion: No one Knows Anything
With e-book growth patchy across different sectors, pricing a constant challenge, margin a worry, and new models such as subscription likely to further disarrange matters, the market’s complexity will only increase. The e-book market might grow, or it could shrink a little, the formats might shift about, the balance change, good publishing might make a difference in one year, but so might bad publishing. New players, or new devices might stimulate adoption one way or another, as will whatever happens with self-publishing.
In preparation for an uncertain future, the big publishers are either consolidating, or retrenching. Publishers are expecting their costs of doing e-book business to increase (from author royalties to retailer discounts and in the UK due to the impact of VAT) and are already responding appropriately.
Either way it is a market that is here to stay: and ever fascinating to watch.
Read Philip Jones’ original post for more information and links!
Or, if you’re in the mood for something to take your mind off all these numbers, you can always read my award-winning children’s book, Runaway Smile, for free!