Wednesday, March 24, 2010

How Long Can Growth in e-Books Accelerate?

On Friday, Richard Curtis did a post titled "January '10 E-Book Sales Almost Quadruple (Over) January '09." He said:
... January 2010 e-book sales posted a nearly 370% jump over the same month in 2009, according to the International Digital Publishing Forum and the Association of American Publishers. The numbers are $31,900,000 for January '10 compared to $8,800,000 for January '09.
Go here to read the entire post.

Curtis points out that the biggest month for e-books sales prior to January had been the month before: December, 2009. December's sales were about $19 million. January's sales were almost $32 million.

Hello? That's a 68% jump from one month to the next.

Mike Shatzkin picked up on Curtis' post on his blog on Monday here. Mike asks the question, "How long can this growth go on?"

A little over a year ago, I did a series I called "The (Publishing) House is Burning." In Part III on February 16 here, I printed a graphic from the Nielsen Norman Group on the life cycle of a new technology. Here it is again:

I suspect that, with the forthcoming release of the iPad and the new Kindle application for Apple, we are about to jump the chasm separating the early adopters of the new digital technology from mainstream acceptance. You can see from the above chart that the growth rate on the bell curve continues straight up for some period of time after that point.

Intent on protecting their print business, the Big Six publishers have treated e-books as a red-headed stepchild. Fearful that e-books would cannibalize print books, they've dragged their feet, behaved in a passive-aggressive manner, and done everything they could to slow down the growth of the e-book business.

Right now, I have no doubt the Apple 5 are breathing a sigh of relief. Through the deal they've struck with Apple to put e-books on the iPad at prices ranging from $13 to $15, they believe they've taken back control of pricing. And--when push came to shove--Amazon blinked, as I reported on Friday here.

Or so they think.

I believe the Apple 5 are victims of their own history. Everything about the way they've handled the emergence of the e-book suggests they still believe the publisher is the most important part of the publishing equation. They've had all the power for so long, they cannot envision a world in which they do not continue to maintain both their hegemony and control.

Sort of the way the Big Three auto makers once believed.

Take a look at this comment by the BBC in 2/2007 about Detroit:
While it was inevitable [the Big Three] would eventually lose their monopoly position, their failure to adapt their production methods and meet changing consumer tastes has accelerated their decline.
And this:
In the 1950s and 1960s, US firms failed to innovate in the design of cars, preferring to make money by increasing the size and weight of their vehicles by adding extras like air conditioning, power steering, and fancy sound systems ... And the mass production system discouraged innovation because it was so expensive to introduce fundamentally new models.

Meanwhile, Toyota was also making a virtue of adversity, changing its production system to become leaner and more efficient than its rivals.
I believe the Apple 5 are ignoring the most important part of the publishing equation.

The authors.

In my post of 2/16/09, I said the following:
Does anyone seriously think that Amazon is NOT going to continue expanding its reach in the publishing arena? They now have both print and e-book publication capacity. They've built review sites and social networking opportunities into What's to stop them from approaching popular authors and offering to better the deals big publishing currently offers?
The Apple 5 are wanting an average retail price of $14 for e-books. Random House and HarperCollins are offering authors a 25% royalty, or $3.50 per book.

Amazon's $9.99 retail price has done what it was intended to do. It gave the e-tailer 90% of the U.S. e-book market. However, that price was a loss leader, merchandise sold at a loss in order to attract customers. A more realistic price would probably be $12.

Let's say Amazon offers authors somewhere between 37% ($4.44) and 50% ($6.00). And promises to print and distribute p-books through their CreateSpace division.

Which deal do you think the authors are going to take?

Charles de Gaulle once said: "France has lost the battle, but she has not lost the war."

Don't count Amazon out just yet.

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