Ebook Trends: The Year of Living Digitally

After years of obscurity, the e­book has become a full-fledged disruption for publishers—supplanting print sales in North America and Europe, and threatening to do so throughout the developing world. Influenced by rapid changes in handheld, portable devices, as well as new pricing and supply chain models, e­books represent both problem and opportunity for publishers. Rather than attempting absolute predictions, it may be more helpful to assess the current situation—and the many remaining obstacles to e­book adoption and profitability—all with an eye toward discovering ways for publishers and their partners, at least in theory, to thrive in this new environment.
There’s no need to detail the history of e­books, except to point out a specific turning point: Amazon’s 2007 combining of E Ink devices with its enormous e-commerce potential. The Kindle phenomenon transformed e­books from novelty status into a viable consumer trend, especially for narrative text reading. The big question today is whether the tablet trend marks a similar, fundamental transformation in e­book consumption, or just an incremental step in the process.

Trends in E­book Adoption

A growing body of research confirms the rise of e­book reading and the displacement of print in the minds of consumers, especially in the U.S. In December 2012, the Pew Research Center found that 23% of Americans 16 and older had read an e­book in the past year—up from 16% the year before. Over the same time period, the share of those who read a print book declined from 72% to 67%. [1]

The impact of digital formats is especially noticeable in adult trade books, where e­book revenue grew from 13% of publishers’ total revenue in 2010 to 30% in 2011, according to BookStats. [2] This was mostly at the expense of mass market paperbacks, which fell from 33% to 24% during the same period. Other sectors, like juvenile trade books, are also showing increases in e­book use and corresponding declines in print. This is not happening at the same pace as it is for trade publishing, but is likely to do so as ereading device usage becomes more common.

Digital adoption in higher education, however, has taken a different route altogether. Industry analyst Steve Paxhia of Beacon Digital Strategies noted that education publishers—traditionally known for selling print content at very high price points—are beginning to switch not to selling e­book versions of this content, but to offering interactive systems. “By switching their emphasis to integrated learning systems, which have an inherently more reliable revenue model, education publishers can afford to offer related content, both print and digital, at a significantly lower price. Trade publishers just don’t have that kind of leverage.” Paxhia co-authors a Book Industry Study Group (BISG) bi-annual report documenting changes in students’ interaction with print and digital curriculum. [3]

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Consumer Attitudes

Since 2009, BISG has also reported on consumer e­book reading and purchase behavior. [4] The report surveys show that changes in portable device use continue to influence e­book adoption behavior. Just as Amazon’s successful blending of dedicated e-readers with its e-commerce prowess sparked a rise in narrative fiction e­books, so too are more complex devices beginning to drive nonfiction readers toward the e­book format. From early 2010 through mid-2011, dedicated e-readers displaced PCs as respondents’ most preferred device for reading e­books. However, the subsequent rise of tablet devices—led primarily by Amazon’s Kindle Fire—has changed the field again. The next report, out in March, shows tablets and dedicated e-readers at 43.9% and 42%, respectively. (See Table 1.)

The BISG study also provides insights into the book genres most affected by the e­book format. Fiction, particularly “guilty pleasure” fiction (e.g., mystery, romance) shows a rise in e­book popularity corresponding to the dominance of dedicated e-readers through mid-2011. However, while general fiction e­books seem to have tapered off with the rise of tablets, other fiction types appear to be recovering as e­book-preferred genres. (See Table 2.)

Overall, general fiction and mystery/thriller genres are more highly preferred, at 7.4% and 6.4% above average (63.3% and 62.9%, respectively) among those who have used dedicated e-readers. Curiously, however, these two genres are slightly below average among those who have used tablets. Science fiction, on the other hand, is preferred at 6.8% above average (44.2%) by those who have used personal computers to read e-books. [5]
The study has not yet shown a definitive rise in tablet-driven popularity for nonfiction e­books, although these are more popular with those who still read e­books on desktop or laptop PCs. This would suggest that publishers have not yet taken full advantage of the interactive capabilities of tablets, which would enhance the non-linear nature of nonfiction books such as travel guides, cookbooks, K-12 textbooks and general reference works. [6]

In higher education, BISG’s Student Attitudes study found that digital adoption is much more about integrated learning systems, such as CengageBrain or Pearson’s MyLab, than it is about simple, narrative e­books, per se. The relative scarcity of tablets and e-readers and the dominance of laptop and desktop computers, plus the complexity of learning environments in general, are driving the education market in a much different digital direction than trade publishing.

Another factor affecting tablets and e­book consumption is the fact that these new devices are by definition capable of doing other tasks than ereading. Studies have shown that other activities—streaming video, audio, games, general Web browsing and email—have an impact on e­book consumption, particularly on the Apple iPad and Android tablets other than Amazon’s Kindle Fire and Barnes & Noble’s NOOK Tablet. However, the Angry Birds argument should not be overstated. Avid book readers appear to be switching from dedicated e-readers to tablets. More importantly, once they experience e­book reading, most consumers are buying and reading less print.

Devices, Demographics and the Fate of Print

E­books and the devices needed to read them are more frequently acquired by younger, better educated and more affluent than average consumers. When the BISG study began in 2009, the e­book adopter “profile” had higher than average percentages of male, 30- to 44-year-old, employed college graduates with incomes between $50,000 and $75,000. Today, women far outnumber men. The other demographic “norms,” while still high, are less so, compared with other age, education, employment and income groups. For example, respondents over 55 and retirees now make up significantly higher percentages of e­book “Power Buyers” (those who acquire e­books at least weekly) than they did in 2010. Younger consumers are still dominant, but the e­book adoption landscape is getting flatter.

In the short term, this means that print will remain a preferred traditional book format—but for a progressively smaller audience. Print’s greatest advantages—comfort level, lack of technology overhead, lower total cost of ownership—will not survive as device costs drop, and as consumer comfort levels with digital increase.

Print may in fact find a lasting niche for book consumers—analogous to vinyl albums in the recording industry, or perhaps based on another, yet-to-be-defined value proposition. Be that as it may, many analysts believe that print will not be the primary mass medium for book content in the long term.

This prediction has caveats. For all its other flaws, print is still a more open, stable reading and storage medium. It is not subject to technical malfunctions, the lifecycle of DRM-controlling companies, or the longevity of their e-reading software. To fully supplant print, the e­book format must also satisfy the needs of future readers, researchers and archivists.

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E­book Channels and Discoverability

According to the BISG study, Amazon dominates the resale channel, with 73% of respondents acquiring e­books via the Amazon Web site, and 13% doing so directly with the Kindle app. Amazon is certainly not the exclusive source, however. The Barnes & Noble web site is an e­book source for 21% of respondents’ acquisitions, followed by public libraries, Apple’s iBooks/iTunes apps, and a host of smaller sources. Most of these are based on an e-reader app, such as Google Play Books or Kobo, with in-app purchasing on Android devices and web-based purchasing for Apple iOS devices. [7]

Except for Barnes & Noble and some public libraries, e­book discoverability is not a brick-and-mortar phenomenon. [8] It is a virtual process, led by Amazon. Some publishers have taken advantage of this by working with Amazon to feature titles on its “hot new releases” list. However, publishers are understandably nervous about this dependency, and are experimenting with other discoverability techniques, including publisher- or author-driven social media. This has achieved limited success so far. Online and even printed reviews, as well as recommendations from friends and family members and downloads of free sample chapters, remain the top influencers of e­book purchases.

The BISG survey asked two separate questions about ebook discovery—one about preferred sources of general ebook information and the other about the specific discovery method for the respondent’s most recently acquired and read ebook. The Amazon.com web site ranked highest as a general information source (47.4%), and was also highest ranked as a specific ebook discovery source (25.2%). Amazon’s emails and newsletters also ranked high (26.1%) as sources of general information, but did not fare as well (9.7%) for immediate discovery. Recommendations from family and friends ranked fairly high in both general (24.4%) and specific (16.1%) rankings. Social networking fared reasonably well as a general information source (15.7%) but not for specific discovery (3.5%). Other resale channels, notably Barnes & Noble and Apple, did fairly well as general information sources (14.7% and 10.7%, respectively). However, they were not considered key discovery sources, at only 7.2% and 3.7%, respectively.

Libraries are the logical partners for helping readers discover new e­books. However, the current state of publisher-library relations over e­book pricing and availability has hindered this potential. A study by the Library Journal [9] has documented library users’ chief complaint: not enough e­book titles. Future versions of the study will explore possible ways of breaking the current deadlock—

including the notion of letting patrons buy certain e­books through their libraries. In the BISG study, libraries were the third most popular sources for e­book acquisition among Power Buyers (weekly e­book acquirers), at 24.9%, only 0.5% behind Barnes & Noble.

Obstacles and Opportunities

On the issue of price, new e­books clearly have the advantage over their print counterparts, as highlighted by Apple’s controversial attempt to implement agency pricing. This does not take total cost of ownership into account, however. While the price of dedicated e-readers is falling rapidly, the price of tablets—the increasingly preferred e-reading devices—is still a barrier for many consumers. Tablet prices must drop, or smartphone screens must become larger—and still remain affordable—before e­book reading can overcome print, regardless of income levels.

E­book pricing is, on its face, a reflection of the cost savings realized by eliminating print manufacturing and distribution. Consumer sentiment reflects this. Respondents in the BISG study were asked about acceptable price points for an e­book when the hardcopy list price was $30, but available at most stores for $17. Respondents indicated that they would consider $9 as “a great value,” $13 as “expensive but within reason,” and $18 as “too expensive.” The “great value” and “expensive but within reason” numbers have risen—albeit very slowly—since May 2012. This may signify a gradual change in the public’s perception of books themselves, regardless of format.

It’s important to remember that content development, editorial and marketing costs are not different for print books and e­books. Low e­book prices are—arguably—a public overreaction to perceived cost changes, made worse by the aggressive strategies of etailers like Amazon. Publishers are already streamlining their internal processes—in some cases eking out profitability despite lower e­book prices. In the end, however, authors and publishers need to develop new sources of value (both content- and marketing-related) that cannot be duplicated by a reseller.

The Resale Dilemma

Related to the price issue is the fact that e­books cannot—many would say should not—be resold. At Tools of Change in February, analyst Bill Rosenblatt of Giant­Steps Media noted that e­book transactions are fundamentally different from print, in that the latter is a true sale, with a buyer and a seller of a specific bundle of copyrighted content—over which the publisher has no control. Conversely, the latter is a limited software license, with a specified user agreement between the licensee (“buyer”) and licensor (“seller.”) The publisher and its channel partner retain full control. If the work is DRM-protected, that control restricts resale, and even lending, to the policies of the publisher/reseller.

In January, Amazon filed for a patent that would allow users to resell e­book content, by relinquishing all rights to another licensee, and by deleting all the original user’s copies. Rosenblatt noted that this move toward a “digital first sale” approach is problematic, given the difficulty of deleting all legitimate local copies—on multiple Kindle devices and apps, for example. While libraries and other members of the Owners’ Rights Initiative are pushing for more open resale practices, the chaotic state of DRM and proprietary e­books and platforms makes this unlikely

Publishers have a vested interest in keeping resale out of the equation, since DRM-protected e­books are a deterrent to prices falling even further. Authors with strong ties to publishers are also likely to lose if Amazon has its way. Rosenblatt believes that publishers will fight the issue in court, probably for many years.

The resale issue has not yet become a major obstacle for current e­book consumers, according to the BISG study. Over the last four surveys, only 13% of respondents, on average, said that “inability to legally resell or give away e­books after I’m done with them” was a major problem, while 17% considered it somewhat of a problem. Future surveys will explore how the issue resonates with consumers who have not yet started reading e­books.

One scenario for resale could involve capturing a portion of secondary market revenue by the publisher and author—something that is impossible in the print world. However, the technical barriers to such a transaction, combined with the proprietary nature of competitive e­book platforms, and the short-term strategies of larger publishers, make this approach highly unlikely in the short term.

Conclusions

Perhaps the single greatest barrier to increased e­book adoption is the newness of the medium itself, and its domination by proprietary technology companies. The ereading experience is anything but uniform, as a cursory look at the many apps and reading devices will reveal. Over time, certain aspects of the user experience will become more uniform, making it appealing to a wider audience. Even some of the restrictions imposed by aggressive players like Amazon and Apple may in time yield to public pressure, and the needs of readers and researchers—which have not changed since the invention of reading.

Until then, however, e­books will remain a disruptive force—favoring innovative authors, publishers and resellers, and increasingly dominating the habits of technically savvy readers. x

John Parsons (john@intuideas.com) is an independent writer, researcher and analyst in the publishing and printing industries. He is the co-author of BISG’s Consumer Attitudes Toward E-Book Reading, and the former Editorial Director of The Seybold Report.

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1. Pew Internet & American Life Project; bit.ly/ZDqqKE
2. BookStats (www.bookstats.org) reports on revenue and units sold by publishers to resale channels, not on consumer purchases.

3. Student Attitudes Toward Content in Higher Education; bit.ly/hYzZWF

4. Consumer Attitudes Toward E-Book Reading; bit.ly/6P50bX

5. These numbers reflect non-exclusive device use.

6. It should be said that creating tablet-enhanced ebook content is no small undertaking. The chicken-or-egg dilemma facing nonfiction publishers is made worse by the limitations of EPUB version 2, which is meant for simple, linear content, and the slow, fragmented adoption of the multimedia-friendly EPUB3 standard. Multimedia authoring is problematic today, since many of the existing tools are limited to a single platform, as in the case of Apple’s iBooks Author (www.apple.com/ibooks-author).

7. Apple iPad users can read non-iBooks content on each company’s respective reader app, but they must purchase ebooks via the Web, thanks to Apple’s restrictive in-app purchasing requirements.

8. In August, Kobo and the ABA announced a program to promote and sell Kobo ebooks in independent bookstores (bit.ly/PsFctH). However, according to the latest BISG research, Kobo’s ereader app is only installed on 1.8% of respondents’ devices, compared with 52.4% for the Kindle app. Current ownership of “other” e-reading devices, including both Sony and Kobo, is at 3.1%.

9. Patron Profiles; www.patronprofiles.org