Friday, 18 October 2013

ebooks and deadwood - how comes big publishers are making more money?

The top Amazon executive in charge of kindle content spoke last week at the Frankfurt bookfair - the largest publishers gathering in the world. One of the graphs he showed tells the story of ebooks vs paper very starkly. In the US and the UK, Kindle sales outstrip paper book sales on Amazon. And in the UK's case that happened within two years of Kindle's launch. Of course while you can only buy kindle books at Amazon you can buy paper books at your local bookstore (if you have one - in Africa they are often few and far between). But any publisher - or bookseller - will tell you that Amazon is the dominant retailer in digital and print, at least in the US and the UK. According to the trade paper, Publishers Weekly, Amazon had 29% share of all book sales in the US in the first half of 2013.

An interesting difference though between the books business and other media businesses is that in the transition from physical to digital, publishers don't seem to be suffering in the same way that their equivalents in the music industry for example are. Grandinetti quotes Random House, Harper Collins and Simon and Schuster to prove his point. He cites Simon and Schuster's profits rising 28% year on year due in part to (quoting the company) "the decline in expenses resulting from an increase in more profitable digital sales as a percentage of total revenues."


One obvious reason for the difference could be prices. If you buy ebooks you may wonder why the average price of a best-selling ebook is almost $10 according to - about the same as the top selling trade paperbacks at Barnes and Noble. But prices really don't differentiate books and music - buying eight or ten tracks on iTunes is at least as as expensive as buying a CD.


The recording industry points to piracy - books are not available for free to the same extent as music. But a recent Business Insider article cites studies by the UK telecommunications regulator - OFCOM, and Columbia University that suggest consumers of pirate content spend more on legal content than those than consumers that only access legal content. An alternative explanation is market concentration. The digital book market is controlled by a very small number of firms with Amazon dominant. But digital music sales are also very concentrated with Apple iTunes dominant.


Another explanation could be sharing. I was in a village in Kenya recently researching Internet use and came across a group of young men all intently listening to music on  their mobile phones. When we discussed how they got hold of their music, they explained that almost always they shared it - not via drives or the Internet but via bluetooth. That is what they were busy doing. My impression is that Digital Rights Management (DRM - the systems that try to control a users ability to share content) has been much more effective in books than in music. Media owners tend not to differentiate between pirate downloading and sharing. It is all lost sales to them. But we should. Paper books can be shared - given, resold, lent. And more than a century ago battles to ensure free access to books were fought and won in many countries - establishing public libraries built by governments, foundations and public subscriptions. Amazon allows for the limited ability to share ebooks if the publisher enables this feature on a title. Many don't. New York is the only city I have been to where I have seen ebook public lending widely available and used.

eBooks in Africa

From an African perspective, the most important issue is that books (and CDs) have been expensive to produce and distribute and so they have been too expensive for most to afford. Digital content has much lower distribution costs so should enable many more people to access them. But the lower costs of distribution are not being passed on to consumers. eBooks represent and extraordinary opportunity on the continent. Something for competition commissions to get their teeth into.

You can watch Russ Grandinetti's presentation below via slideshare.

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