The death of the book is e-fiction

As digital publishing sees book prices fall, author profit ratios are rising and books becoming more like joint ventures than risk management exercises. In fact, publishing is improving as a business.

One thing the digital revolution has not done is kill off the book. In fact, I think we can conclude now that, if anything, it is leading to the book’s rebirth.

E-reader and tablet sales are booming, with another big Christmas for them just past, and it looks like e-books now take about 10 per cent of total book sales, rising fast.

I used to think that digital publishing would at least end up redefining what a book is, since the number of words was determined by the optimal size of the printed object, both for pricing and for the shelf, but that’s not happening either – yet.

Well actually, sales of short novels and summaries at a price point around $3 each are doing well and there was a lot of talk at the Digital Book World conference earlier this month about the need to slice books up into smaller parcels for better indexing by Google.

But on the whole a book is still a book, and it looks like the decline in reading has been halted and turned around by the advent of digital publishing. It’s just that more and more are being read on small screens – tablets and e-readers rather than paper.

It’s not good news in the long-term for bookshops, of course, but sales of printed books are still doing okay, and the best bookshops are surviving doing other things.

Amazon released the first Kindle e-reader in November 2007, just as the global stock market peaked and the credit crisis began. Five years on, from ad hoc discussions with those in the industry, we can start to form some conclusions about what’s happening.

Fiction is moving to e-book more quickly than non-fiction, especially romance and crime; in fact sales of romance novels have dramatically increased. The biggest market for e-books is women over 45 and whereas the split between female and male print book consumers is 60-40, in digital form it’s 70-30.

This stands to reason by the way: I tend to buy crime fiction on my tablet and serious non-fiction in print, although that may change in future.

Figures are hard to come by, but it looks like Amazon has about 60 per cent of the market and Apple and Kobo about 15 per cent each, although that varies around the world. For example, the Japanese-owned Kobo (an anagram of book) is the market leader in Canada because that’s where it was founded and is still based.

In terms of the business model, three things have happened: the price of a book has come down, Amazon, Apple and Kobo have taken the bookshop’s margin and authors are getting more of the pie.

E-book prices are about 40-50 per cent lower than print books. The sweet spot for pricing seems to be $10-$13, which compares to $20-$25 in print and up to $50 for substantial hardbacks, although it’s harder to get that price these days. There is, according to one e-book publisher, a "desert of unmet expectation” in the $20 price point; it’s extremely difficult to get more than $15 for an e-book.

Apple and Kobo take 30 per cent of the price and while Amazon doesn’t disclose its share it’s believed to be up to 55 per cent. Authors get up to 25 per cent royalty, up from 10 per cent of net proceeds in print, and publishers get the rest.

I used to think publishers might struggle to keep their place in the chain, with authors dealing directly with Amazon et al, and while there is a bit of that going on, at this stage publishers are still needed to edit and package the books for sale, including digitally.

In fact, publishing is improving as a business. With print books, publishers are essentially risk managers: they pay the authors an advance on royalties, which is a bet on what the book will sell, and then having created the book (paying cash to the printer) they send them to the bookshops on the basis of "sale or return” – that is, the bookseller gets to send back any that aren’t sold. The publisher sits in the middle taking all the risk.

E-books are created as they are sold, so no risk there, and author advances have come down dramatically and are continuing to fall – replaced by the larger share of the revenue. In effect, books are becoming more like joint ventures than exercises in risk management.

Moreover the publisher gets to keep more of the money: no printers and typesetters to pay.

At the Digital Book World conference there was a lot of discussion about how to make books searchable online. A former Apple staffer named Matt MacInnis who has now started up his own interactive book company called Inkling, is reported in The New Yorker as saying: "Look at a book as a bag of words. The word rank is going to be terrible for a bag of words of book length.”

But if it’s broken up into component parts it will rank higher in search engines because each section has a discrete idea that can be tagged, indexed and referenced by other sites. This is known as "link juice”.

Audio books are also growing rapidly, especially on smart phones.

Overall, as Mark Twain might say, reports of the death of the book are greatly exaggerated.

With tablets getting smaller and smart phones getting bigger, and e-reader sales still booming, albeit a bit less than they were, reading is not yet falling victim to the decline in attention span and the rise of video.

Follow @AlanKohler on Twitter

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