Book Trade – Trends in the Wider Market

Canadian retail blogger, PaulThinkingOutLoud was upset recently by one publisher’s website and its aggressive discounting policy. Writing in his blog – which is well worth following – he saw this as

 ‘Another example of a publisher or distributor bypassing the brick and mortar stores. Although some of this might be legitimate overstock inventory, it raises the expectation of consumers for this level of discounting to be normative, which adds to the discouragement of already battered retailers’.

In another post, Paul writes movingly of competing emotions during the closure of one of his stores. He ends with an appeal to press on towards the goal of in-store ministry.

Do you feel battered by falling sales or emboldened by spiritual opportunity? Yes, Christian bookshops continue to close, footfall is in decline, competition from online is savage and at best support from churches is patchy. Yet we are not always that well informed of current trends in the wider publishing scene. In the same way as what happens in the USA often affects the UK, the same is true of events in the general market impacting the Christian trade.

Generally speaking, our grasp of the financials on both ‘sides’ is often lacking. Retailers operate on lower margins with high fixed costs (upward only rents, rising business rates – up 2.6% again in April) whereas publishing in the main has higher margins and a far more flexible cost base. Clearly there are worries on all sides and as publishers face lower physical sales, print-runs continue to fall making the viability of mid-list titles ever more tenuous. Many publishers struggle with storing high levels of physical stock, much of which will eventually be written-down. Ironically for publishers, digitalisation represents yet more cost and a growing overhead; this, coupled with falling average cover prices (ebooks sell at half the average price of a paperback: £3.21 v. £6.31).

Our industry is a torrid place. The physical consumer book market declined by 4.6% in value in 2012, with fiction down 4.5% and non-fiction down 6.3% – only Children’s books held steady. The value of print sales slumped by £74m last year. (It could be worse – in Australia their market fell 6.3%). The marketplace churns violently in a volatile landscape; over 200 libraries were closed between 2011/12 and in another sign of turbulence, Cambridge University Press ceased print production on their Cambridge site after 400 years.

Yet 2012 saw the continued growth in digital publishing, social media marketing and self-publishing. Hive became established. Amazon’s Kindle grew faster than ever and a number of other e-readers, notably Nook, Kobo, and Nexus gathered momentum. Controversially Waterstones began to sell Amazon’s Kindle, recognising that they had neither the time nor money to develop their own platform. The Fifty Shades publishing phenomenon came out of nowhere ending the year with sales of £47.3m.

The market for ebooks was revised upwards to £300m late last year and continues to grow, albeit more slowly. Major publishers report e-sales of between 8% and 17% of overall revenue. In November, the ebook agency price probe in the USA and the EC brought a chill to the major houses as they battled against what felt like unfair external pressures. Now ebooks sell for an unsustainable 20p (a marketing idiocy pioneered by Sony) and most slots in the Kindle top 20 are populated by cheap ebooks. Nielsen data suggest that there are 7m UK ebook adopters, with heaviest use amongst ages 35-44, lowest in the under 20’s. However, the BBC reports that just as many UK adults, 7.4m or 15% of the population have yet to access the Internet.

Bookshop closures continue apace with The Booksellers Association figures documenting ongoing decline: down to 1,028 shops (2012) from 1,535 in 2005 – conversely Children’s bookshops are thriving with more opening this year. In the USA, the one surviving major bookstore chain, Barnes and Noble announced after Christmas that they expect to slim down store numbers by a third. B&N have 689 stores currently with 190-240 of these slated to close over the next decade. It’s a widely held view that the holy grail of ‘Discoverability’ is best achieved in a physical bookshop; browsing activity is their USP.

The debate over the future of our libraries is equally as fierce. The UK Government’s Sieghart ebook library lending review is yet to report but author, Terry Deary said recently: ‘Libraries have had their day. They are a Victorian idea and we are in the electronic age’. How to win friends! It’s worth noting that the PLR on printed books from library lending is more than £6m paid out to 23,000 authors. The debate remains live as people continue to ask if digital will trounce the physical book or whether in due course it will all settle down benignly?

There’s a lot of anger amongst booksellers towards the perceived lack of a level playing field. Writing in The Bookseller, Charles Tongue of the Stroud Bookshop said, ‘I believe Publishers are blindly colluding with Amazon and the result will be the destruction of High street retailing’. He was widely applauded.

I like Foyle’s of London advertising slogan; This Bookshop Will Change Your Life – no ambiguity there! Earlier this year, Sam Husain, CEO of Foyle’s sent an open letter to publishers arguing the need for better terms (an average of 60%) and increased support (promotional stock on consignment). He stated that the current bookshop model is broken, needing a complete rethink. This at a time as Foyle’s announced eight redundancies. Bravely, Foyle’s and The Bookseller have since conducted a two-day ‘Re-imagining the Future Bookshop’ workshop, held in London, allowing the trade to collaborate on what the bookshop of the future might look like. 

WH Smith continue to do a sterling job in showcasing books but even their sales fall year on year; down 7% to the end of August 2012 and down a further 6% in the 20 weeks to mid-January 2013. Another indication of the parlous state of the High Street trade is wholesaler Gardners sales results which dropped 3% to the end of February last year. Blackwell’s did improve their results last year but remain loss making.

Waterstones is far from being out of the woods with the release of poor results (admittedly pre-James Daunt) showing a £37.3m loss. I wish Waterstones well because if their 290 branches were to disappear from the High Street then it would be a very serious matter, and I might add, particularly for publishers. However, I’m encouraged for two reasons: anecdotally, people seem very warm towards the ‘W’ brand and some are switching their buying away from the mighty ‘A’. The question is, will it be enough? Waterstones iconic branding campaign last autumn was well received and this year it has plans for the refurbishment of another 60 shops.

My other reason is that when I visit Waterstones, they generally prove to be busy places and people are markedly buying books. It’s just a shame that Waterstones do not ‘do’ Christianity better and with more visibility. On a positive note, I welcome the announcement by Waterstones of the launch of its staff-training academy and Certificate in Bookselling (accredited by the University of Derby); surely a vote of confidence in its own future by a visionary book chain?

Maybe I’m pipe dreaming? After all, Amazon had overall sales in the UK in 2011 of £2.91 billion (on which they famously paid £416m UK tax). They reported Q4 worldwide revenue growth of 22% to £13bn last Christmas! Latest innovations include customer collection lockers in railway stations and newsagents. This is an immensely powerful online juggernaut and our small trade faces a very significant challenge indeed!

Yet I dare to believe that localism can prevail, customer attitudes can change and that people continue to care about their local shops – you must just hope that I am right! The demise of retailers, Jessops and Blockbuster earlier this year followed by HMV going into administration shows just how tough conditions are. Incredibly, HMV was selling 27% of all CD’s and 38% of DVD’s at the time of its demise.

I would echo Philip Downer’s (ex-Borders) comment from last year;

 ‘The old days of Borders and Ottakars will not return … Coffee, carrot cake, cards and an ebook offer are now essentials for Indies who want to stay in business and thrive for the future’. 

We have to give customers a reason to come to our shops. Why should they shop with you? I was recently handed a forward-dated 15% off voucher for a national (non-book) retailer. It worked. I visited the shop on the stated date, I used my voucher … and I bought far more than I had intended. In the Christian trade we must start thinking more creatively and connecting with customers in a very different way to the past.

Church engagement is a hugely important topic that needs far greater attention and one to which we shall return in the next issue. Many shops find difficulty in communicating with ministers. An earlier church / retail compact has seemingly broken down as leaders shop around – usually online – driven by ‘best price’ owing to the Churches’ own financial constraints. Managers struggle to venture outside their own premises due to low staffing levels or sometimes, unwillingness. And yet, somehow, retailers have to get back in touch with their core customer base – the Churches.

The days of waiting for a church to contact you are long gone. It’s often a salutary task to record daily footfall and till data – but it may just serve as the severe jolt you need in order to take action?

This article was written in early March 2013 for Together Magazine (April – May 2013)

Book Trade: Pressing Issues facing the Trade: The PA Year Book 2011

Last week the deputy editor of The Bookseller described the Book Trade as ‘Bystanders watching a race that began before we were ready’. Is this apt or just plain wrong? He was writing about the global growth of the e-reading market where the statistics continue to astonish and possibly frighten us in equal measure.

The Bookseller postulated in its leader that same week; 50/50 digital-print parity could be with us by 2020. It also posed the chilling question, ‘How many Indie and chain bookshops will remain’? 

Why such gloom? Well, the Publishers Association had released its 2011 Yearbook, containing all the sales value and unit numbers for last year. You’ll need a strong stomach to read this as for most printers, publishers and terrestrial booksellers it makes for grim consumption. On the other side of that particular coin; for self-published authors and for publishers in the eBook market, particularly in Romance or Horror, the future looks very bright indeed. In 2011, digital accounted for a sharply growing 8% of the book market.

Physical book sales declined 4.8% to £2.9bn but when you factor in the growth of the e-Market (up 55%) at £243m, the overall decline falls to 1.9% (at £3.2bn). This represents the first drop in total book sales in more than three years – not the best place for the industry to find itself. When you take inflation into account, this fall is actually much more serious. We are going backwards, not forwards. Even export sales fell, declining by 3% (£1.2bn). It’s worth noting that exports remain almost a third of all UK invoiced sales.

Sales of print fiction – the largest category of print falling victim to the e-Reader – dropped over 10% in the year, a loss of £57m. e-Fiction popularity grew strongly to £70m but by not quite enough to cover the losses in print. Non-Fiction and Reference also fell (down 4%) but these categories were not compensated at all by additional digital sales. In fact, all print categories declined apart from some growth in School and ELT sales. The value of Children’s book sales fell by 8% on the previous year (post-Twilight).

According to the commentators these are now the pressing issues facing our trade:

(1) The speed of digital migration, (2) the vexed question of ‘discoverability’ (and the related importance of browsing in a physical shop), (3) whether DRM should or should not be embraced by the industry (with strong views either way), (4) the growing dominance of Amazon and (5) the steeply falling price of eBooks online, thus devaluing books in general.

Oh, and it’s raining as well!

Note – the PA figures as published here often differ from the Nielsen BookScan figures for the UK book market. Both are correct but each takes slightly differing approaches when compiling the data – apples and pears spring to mind.

Book Trade; eBook debate – a view from Singapore

Next week the global book trade will gather in London for the annual London Book Fair. Once again, the ongoing eBook debate will dominate both the trade agenda and the fair programme.

The burning question continues to be, amongst all the hype and speculation, what will happen to physical book sales in the light of the widely predicted digital onslaught? Opinions range wildly from ‘Do nothing; we’ve seen this kind of thing before’ to ‘Get out quickly whilst you are still able to salvage something of value’. Is this truly a ‘Caxton’ moment or will life carry on much as it has before?

 As I write this, I’m in Singapore, probably one of the most wired societies on the planet. The answer to the question here seems to be that there is no discernable impact yet on sales, which to my mind is mildly surprising. Even the mighty Amazon has only a limited Asian presence (although there is an Amazon Japanese site). Singaporeans, if they use Amazon, log on via the UK or American sites.

I met with a significant general market distributor and they reported seeing no real impact on their business. Even Borders troubles here are put down to poor chain management rather than sales being siphoned away through digital stealth. I therefore conclude that, as in the rest of the world, no-one really knows quite what is going on although it seems clear to most in the wider trade that something pretty significant is beginning to stir in the undergrowth!

What is abundantly clear, however, is that all sections of the trade have their own particular fears and are watching the developing situation incredibly closely, leading to some sharply divergent views; 

• Retailers – seeing their business disappearing online and wonder where it’s all going to end
• Publishers – scrambling to find a viable rights and pricing model as authors potentially disappear from view hand-in-hand with online retailers
• Distributors – wondering if they will be cut out of the action all together
• Authors – either upset by inferior internet royalties or sensing new opportunities to cut out the publisher and self-publish via the big internet players such as Amazon

Back in February, the International Publishers Association (IPA) asked its various members for their views on their own embryonic eBook markets. These findings, widely reported at the time in the trade press, are worth summarising;

•  The proliferation of smart phones and tablet computers (such as the iPad) is radically fuelling the eBook market as millions of these devices cry out for content
• Amazon.com’s eBook sales were recently reported as surpassing their print unit sales
• Most reference and academic journal publishing has already largely migrated online
• USA newspapers have started to incorporate eBook sales into their regular bestseller lists
• The UK e-market is around 18 months behind the USA – but the gap is fast shrinking
• Amazon, Apple and Google exhibit every sign of becoming ePublishing competitors!
• The existing copyright and territorial rights are not always relevant to the digital environment
• The new model significantly challenges territorial marketing as eBooks are effectively global in reach
• The proliferation and ease of digital piracy and file sharing is a major worry particularly in certain emerging markets
• Price remains contentious as consumers expect digital texts to cost less than the printed work
• Savings in print and distribution are largely offset by technology costs, new services and VAT
• Surprise, surprise! French publishers are lobbying to extend fixed retail print prices to all eBooks sold in France!

The overall conclusion to all this seems to be that, yes, this market is changing faster than we realise but, in the words of IPA, ‘the day eBooks will outsell print is not imminent’.

No doubt the debate – and the opinions - will continue for a while yet.

Book Trade; eBooks – Leading Publishers weigh up the Digital Impact

Having castigated The Bookseller recently for poor journalism, I draw your attention to a superb and in-depth reporting piece looking at what life for the trade could look like in 2011. Bringing together the opinions of a wide range of UK book industry leaders it looks at, amongst other things, the likely impact of digital sales on the industry.

You can read the full article here but I want to highlight the main points of interest to High Street book retailers as they face the imminent digital challenge.

Amongst the key points of the article;

• Industry chiefs unanimously earmark digital as a key area of opportunity in 2011
• Digital sales have reached a tipping point and will grow further next year
• Those booksellers not getting a good share of e-book sales are going to find business tougher than ever
• The main challenge lies in supporting retailers in an uncertain economic environment
• However, nearly 95% of all books sold in the UK in 2011 will still be in print format

To my mind, here is the killer statement; ‘Growing e-book sales could lead to the Total UK Consumer Market being negative in 2011 as they hit 7% of the adult trade market’.  

Print may no longer be capable of ongoing growth. Fiction – in particular – and mass market publishing in general, is highly susceptible to this drift. How are High Street shops to deal with this change in their market? If print is dropping away, what steps do they need to take to get a bigger slice of the digital cake? If the High Street trade is not careful, it will be the publishers and not retailers that will benefit from an inevitable sales shift to digital.

Gardners’ respected commercial director, Bob Jackson, is quoted in the article as saying:

‘I think that the retailers who continue to focus on customer service and manage overheads will be doing the best they can. They need to stay very consumer focused. It won’t get any easier in 2011. We launched our digital service three years ago, so it’s available to every single retailer. I think the challenge might come more as retailers using e-books as part of their retail offering, I’m sure they [retailers] can be as creative as they have been to date. That’s the challenge’.

Faber Publisher, Stephen Page, said:

‘The big question is how retailers fared at the end of last year and how they will fare in 2011. Looking around the world I can see the retail environment changing and that change is not complete. Retailers have to adapt to a world with very powerful mass market retailing and online retailing and now there is a digital component too. Look at the REDGroup in Australia, Borders in the US. Here we have had a narrowing of the specialist chains to Waterstone’s and W H Smith, and it’s a question of how they adapt. Waterstone’s over the last nine months have been pursuing quite a different tack and it’s a question of where that gets them to. We all want a healthy retail environment. In 2011 we will see a hardening of the e-book market and a lot of people becoming habitual about reading electronically. We will catch up quickly with America – I’m estimating e-books will be 3-5% of the [UK] market in a year’s time’.

The long-serving chief executive of the Booksellers Association, Tim Godfray, stated:

‘This Millennium has seen a huge amount of change in the way books are sold and in the formats available. As ever, booksellers have shown great resilience and those who have adapted have survived. As we enter a new decade, only further change is on the cards. We face in particular three challenges. First, the Government cutbacks and the state of the economy; secondly, the digital economy; thirdly, the consumer having fewer leisure pounds to spend. But with challenges, there are opportunities. The tipping point concerning e-books has been reached and digital content is coming of age. The popularity of e-book readers demonstrates this. The selling of digital content is a threat to traditional booksellers, but it is also an opportunity. A lot has been written about the death of the printed book and the bookshop. Not far short of 95% of all books sold in the UK in 2011 will be in print format and booksellers will develop their offers, customer service and specialisations’.

 Victoria Barnsley, chief executive of HarperCollins is quoted as saying:

‘Digital developments continue to present both the challenges and the opportunities for our industry. E-book sales more than trebled over the Christmas period as people rushed to buy e-books for their new gift devices. And, unlike some, I really do think the growth of the digital market is a huge opportunity for bookshops—not only to provide a unique and personal service to book lovers, which is hard to replicate online, but to capitalise on the new readers these devices are creating. …  finally, I believe that we should all fight vigorously to support and encourage a broad range of retail options on the high street and online which hugely benefits consumers, retailers and our own industry’.

Well done, The Bookseller – some fascinating opinions and really insightful reporting. I cannot help but think that we continue to be in very uncertain territory with even the most able minds in the trade pretty unclear as to how that future may turn out.

However, I am beginning to think that the tipping point for eBooks is beginning to tilt – albeit slowly but surely.

POSTSCRIPT – If all this gloom and uncertainty is getting you down then read these recent comments by the Editor of The Irish Times;

‘Yet there are opportunities for the retail sector. Barnes and Noble in the US have really got on top of things with their own device and have encouraged their customers to become digital readers. They’re looking at sales of about $400 million (€308 million) for digital content in a 12-month period – and that’s impressive’.  He believes, though, that there will always be a market for print books. ‘It might not be huge. It might be down to 30 per cent of the market in 10 years’ time, but there will still be a demand for physical books and the browsing experience that you can’t get from Amazon or the Book Depository’.

Book Trade; eBook Sales – nonsensical figures in The Bookseller

The Bookseller really should know better!  In an online article today, it published an utterly meaningless statistic – not backed up by any figures that I could find – that Random House UK was ‘seeing a true tipping point in our digital publishing with an 800% year-on-year increase in e-book sales.’  800% of what exactly?

This is simply poor journalism as it does not give the reader any comparisons or data to make their own judgement as to whether this is a tipping point or not. I suspect that it probably isn’t (yet) and that it’s more likely a way of keeping the Random House brand in the public eye at a time when Hachette UK are divulging their actual eBook data!

A poor show – I am surprised at The Bookseller for using a ‘Letter to staff’ in a banner headline and expecting readers to take their report seriously. At the very least, why not wait until the actual RH figures are fully available and we can judge for ourselves.

On a more substantive note, I see that Luke Johnson – the former Borders UK financier – writing this month in Management Today, had the following to say about publishers and eBooks;

‘The future for some players may be much darker. Already, almost a fifth of revenues of certain major trade fiction publishers are generated by eBooks. I fear that soon parts of the industry may face a terrible reckoning – squeezed by piracy, deflation, Apple and Amazon: I desperately hope they manage it better than the recorded music business did. I was always told that there were three ways to achieve immortality: have children, plant trees and write books. I’ve done all three, but I worry intensely that today’s books may not endure, as previous titles have for the past few hundred years.

So the debate drags on – but in this case not helped by poor quality reporting by The Bookseller.

Book Trade; eBook Sales – One UK Publisher’s figures revealed

At last, some eBook sales figures to help make sense of what’s going on in a confusing publishing market!

Today, in an intriguing report, The Bookseller quoted Tim Hely-Hutchinson, Group CEO of giant Publisher, Hachette UK, owner of Hodder Headline as saying that ‘eBooks now accounted for 5% of Hachette’s total sales in the fourth quarter (of 2010)’.

Other fascinating facts revealed by The Bookseller;

• USA eBook sales have been tripling year on year, from 1% of total sales in 2008 to 9% this year.
• Hachette claim to have a 22% share of e-book sales, ‘outperforming our market leading 15.5% share in print books’.
• Hachette will have 15,000 titles available as e-books by 2012, up from 5,000 now. This would account for 10% of sales.
• Hachette has made major investments this year in order to respond to digital change including ‘Biblio3, an operating system for managing print and digital books from pre-acquisition to publication, a digital asset management system to store and distribute all digital files and a new web system for internal and author websites’.
• Google’s planned move into e-books next year “might be another game-changer“

Buzzle.com published an estimate this month from IT analyst’s Gartner predicting the number of eBook reader sales in 2011. Fascinating stuff, here’s a taste of their report;

‘The global sale of electronic eBook readers will reach up to 6.6 million units by the end of 2010. This will be a stupendous 79.3% rise from the earlier sales figures of 2009, which saw a sale of 3.6 million units worldwide’.

North America has recorded the greatest number of eBook reader sales in 2010, with a share of 4 million units.

Competition in the eBook reader sector is heating up by the day – Amazon’s Kindle, Barnes & Noble’s Nook, Sony’s eBook Reader and Apple’s iPad.

 ‘If demand continues to rise at this rate globally, we can expect the global eBook reader sales to reach the 11 million mark in 2011’.

So game-on, I feel.  There’s no going back now. This Christmas will almost certainly see an increase in the number of eReaders – the Kindle apparently has the largest market share and then there’s that iPad – boosting eBook sales even further.

There are still an awful lot of printed books being sold! It’s not quite reached a tipping point – yet!

Book Trade; eBook sales v. Hardbacks – Hype or Tipping Point?

Update; Friday 23rd July – Further facts emerged today concerning the sales performance of eBooks.  The Bookseller.com reports that June saw further Kindle eBook sales growth with the ratio rising to 180 eBooks for every 100 Hardbacks sold in that month.  Authoritative figures from the UK’s largest publishing house, Hachette UK, stated that ‘digital formats’ now represent 8% of their sales by volume – this is five times higher than in 2009. Clearly, the gap is closing fast.

Nielsen figures (for Jan to Mar 2010) show that hardbacks are just over 20% of the UK market (by volume).

The Bookseller.com goes on to say that the first mass market author to exceed 1 million eBook sales is James Patterson with 1.14m in total.  Most publishers in the UK seem to be seeing fairly rapid growth in their eBook sales.  

Nielsen also announced today that they would launch a UK eBook sales chart ‘within a matter of months’, another sure sign of a rapidly changing marketplace.

Perhaps the jury is still out but it would be a brave person who suggests that this is all going to die away and come to nothing. We shall see!

 See www.thebookseller.com/news/124094-uk-e-books-grow-to-amazonian-stature.html

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July 20th – according to a report on The Bookseller.com today (see http://www.thebookseller.com/news/123655-amazon-sells-more-kindle-books-than-hardback.html), Amazon are now selling more Kindle eBooks than physical Hardbacks. In the three month period – April to June 2010 – for every 100 hardbacks sold online, 143 Kindle eBooks were downloaded.

This was picked up in an excellent piece on BBC Radio 4 tonight and the question posed to a couple of guests, ‘Do these sales figures represent a tipping point and does this mean the demise of the case-bound book’?

There followed a mixed but measured response. Two points stood out in my mind; first, that the physical book really can be an ‘escape’ for people who spend all day, every day on a screen and therefore do not want to have to read on-screen in their leisure time. Secondly, earlier parallels were noted with radio v. television and cinema v. video.  The newer technologies represented a threat to the old but in both these cases, radio and the cinema have survived and indeed are thriving.

However, the argument breaks down when you compare CD’s and downloadable music. In this case, online music is clearly winning against the physical CD. I buy much of my music online and just occasionally I will buy an actual CD.  I enjoy reading the inside cover notes and admiring the photographs and the design but that still is not enough to prevent me from buying my music online.

 

I was lent this lovely casebound book at the weekend and I truly appreciate the physical ‘feel’ of a beautiful book. I’m just not sure, that at this stage, I’m quite ready to give up that pleasure to buy online and read on-screen. On the other hand, do I really want to ‘lug’ all 600 hardback pages onto a plane when it can reside so easily on an eReader?

So does this latest report from Amazon represent simple marketing hype or is this really the tipping point in the seemingly inexorable rise of the eBook?

Discuss.