Source: Reuters
Book publishers have survived the first stage of a digital revolution in better shape than the music industry and are now embracing the shift to e-books in their search for new revenue streams and lower costs.
The industry has been battered this year by a significant shift from physical books to e-books that has transferred power to internet retailers led by Amazon and helped put some high-street chains such as Borders out of business.
Publishers have fought and won for now a key battle to keep pricing control over their titles, unlike the music industry, which a decade ago allowed Apple to impose a flat rate of US$0.99 on music tracks in its iTunes store.
Penguin and Hachette told Reuters recently they were quite optimistic that e-books would help them increase profitability and reach bigger audiences, although they had not yet figured out how to sell digital extras to readers.
“The consumer sort of slightly shrugs his shoulders and says: ‘Well, that’s marvellous but that’s not something I’m going to pay for very much,’” Penguin Chief Executive John Makinson told the Reuters Global Media Summit.
As an example, he said Penguin had created an e-book of Jane Austen’s Pride and Prejudice enhanced with clips from the Hollywood movie with Keira Knightley, as well as recipes and dance moves from the period, to no avail.
Children, he added, had taken more quickly to extra features, especially on touch screens such as Apple’s iPad. Many classic kids’ books such as Alice in Wonderland and the Cat in the Hat have been rejuvenated in the digital form with added animation and games.
Hachette CEO Arnaud Nourry agreed that readers of e-books had proven conservative so far.
“Customers do not want these enriched things that we are talking about all day,” he said. “I don’t think we would have sold more Dan Brown books with recipes.”
The shift to e-books, which is most advanced in the United States where Amazon catalysed the market with its Kindle device and store four years ago, has already touched off changes to publishers’ business models, distribution systems and costs.
While e-book prices are on average 20 to 30 per cent lower than those of physical books, they save publishers the cost of storing and moving books around, and reduce the working capital tied up in inventory.
In markets where book prices are not regulated by law, including the United States and Britain, this has already made e-books more profitable for publishers than print books.
In regulated markets such as France and Germany where laws prevent book stores and supermarkets from discounting in an effort to protect local culture and prevent the book from being a commodity like any other, print books are still more profitable.
In the United States, e-books account for about 25 per cent of book sales by volume and 20 per cent by revenue. In Britain, the figure is about 10 per cent by volume, while the rest of Europe and Asia excluding Japan are just getting off the ground.
Germany, the world’s second-biggest book market after the United States, was the first in continental Europe to get the Kindle and local language titles in April. Amazon launched the Kindle in France in October, and in Spain and Italy recently.
Publishers have reached a kind of peace for now in their often stormy relationships with internet giants such as Amazon and Google, who were largely responsible for bringing the digital revolution to the world of books.
Ironically, it was only the emergence last year of Apple with its iPad as a counterweight to Amazon that allowed the so-called “Big Six” publishers to win back control of pricing.
In what was a major shift for the industry, the publishers, determined to avoid the mistakes made by the music industry, imposed an “agency model” in which they set their own prices.
The evolution of the book market is still in its early days, however, and issues such as piracy are re-emerging as digital booksellers try to replicate features popular with book-lovers, such as lending, in the digital world.
