Wednesday, November 10, 2010

The First Billion Is The Hardest

(With thanks to T. Boone Pickens, who is also on my List of Billionaires with the Coolest Names Ever.)

We've all known that e-books are kind of a big deal, meine Autoren, but the requisite benchmark facts & figures haven't been consistently available. Well, good news, everyone!

Forrester Research has found that e-book sales are closing in on one. Billion. Dollars. (For 2010.) And with sales up 176% year-on-year, they project that that billion-dollar figure will triple by 2015. Some of you might be thinking: "that is totally bananas." I'm thinking: "it's probably going to be even more than that."

As I've recently mentioned, I believe that parity between physical book sales and e-book sales (that is, the point at which electronic sales will comprise 50% of the market) will be in 2013 or 2014. Keep in mind that currently, only 7% of on-line adults who read books read e-books; as the price of devices comes down (I think the magic number is under $99) and the industry further adapts to the electronic format, I expect that number to spike. My guess (and this is just a guess!)? At least 30% over the next three years. If 7% of on-line reading adults are generating a billion dollars in e-sales this year, how much money will 30% of on-line reading adults generate three years from now?

It's hard to say. The industry made $35 billion in 2009, but that was almost exclusively physical media (e-books accounted for only $169.5 million, or 0.48%, dollar-wise). If the industry were to make another $35 billion in 2010 with $1 billion representing e-book sales, that percentage would jump to 2.9%. My guess is that the industry will make a little more money next year, but over $1 billion will be in electronic media sales. At that rate, it's not difficult to imagine double digits next year and parity two or three years after that.

It's true that e-book pricing will become an even bigger problem over the next few years, and I expect that, on average, e-books will become cheaper as more competitors enter the market and attempt to undercut each other. There's already some downward pressure on pricing from retailers like Amazon, so unless publishers withdraw from third-party retailers altogether and begin selling directly to consumers, there's no reason to assume e-books will stay at $14.99 (or $12.99, or even $9.99). But! Another topic for another day, mes auteurs.


  1. This is exactly what I've been wondering...why don't the publishing houses create their own websites or use B&N website to sell books? Amazon is a giant with their fingers in lots of pies -- but they can't sell product they don't have. If I can only buy books online at B&N, then that is where I'll shop. And then writers and publishers wouldn't have to have their hands held to the $9.99 flame. The pricing structure would revert back to the publisher. (I guess used books are still fair game on Amazon since the publisher/author never sees that money anyway.)

  2. As a Kindle owner and consumer, I'd love to see the price of e-books come down. As a writer, I'd have to ponder that a little more. Depends on whether the author's cut decreases or stays the same in correlation to e-book pricing.

  3. I'm still not sure why writers should be excited about the Wal-Mart-izing of the publishing industry and the mentality that everything must get cheaper and cheaper. The idea that we should never have to pay what anything is actually worth leads to the idea that nothing has value adn we are entitled to everything. IMHO.

  4. More volume can mean more profit. That is why McDonalds replaced so many high priced quality hamburger places.

    The e-book is good news for the writer. First, the royalty system for the e-book seems to be leaning for the writer to get a bigger piece of the book sale. Second, more readers mean the real reason you write (to tell a story, to share an idea) is more successful as you are reaching more people than ever before. Third, volume sales can improve the profit of your work with the publisher and make it more likely you will sell your next book. Four, it will be easier to start or increase your fan base. Drop the price on your first book and hook readers for the rest. Five, the e-book is just another format. Was any writer hurt when they added the paperback format in the early 20th century? Did your money decrease when people started to buy audiobooks?

    Finally the classic example of the financial benefits from cheaper books.
    Do you want to sell 1 books at $30 each or 4 books at $10 each? The question for the publisher is, are there 4 readers willing to spend $10 for the book for every one that would spend $30. As the number of e-readers increase it reduces the risks for the publishers to lower prices. It should also reduce the risks of publishers trying new writers or staying with mid-list writers. As many small press publishers publish in one format only (usually TR trade paperback, sometimes HB or MM), the lower cost of e-book publishing only should help some publishers stay profitable.

    My question for you Eric, are the e-readers new readers? When e-books and p-books reach 50/50 will that double book sales or just split the sales between the two formats?

  5. People are already complaining about $9.99 for an e-book. And when $5.99 is no longer acceptible? When $2.99 is no longer acceptible? What's different from the days when paperbacks appeared? The players and *their business models*. Amazon already staged one attempt to dictate prices. Interesting comparing the future of e-books to McDonalds. Between the McDonald's quantity over quality example and the Wal-Mart correlation, I'm somehow still not buying the win-win scenario.

  6. I love the idea of e-books (and I'm proud to have contributed about forty dollars to that billion) but not ready to ring the death knell for printed books just yet. Maybe in a few generations. It will be interesting to see what happens to the different players in the publishing industry.

  7. I've got to comment on what Michael said above..."Four, it will be easier to start or increase your fan base. Drop the price on your first book and hook readers for the rest."

    My argument with this reasoning is personal. I don't mind paying $15-20 for a book, especially if it is a good book. If it's a great book, I'll keep it forever, and that was a bargain. Now, if it is a crappy book, I feel robbed. Even if I paid $5, I'll feel robbed because I invested more than my money, I invested my time and imagination and more to get into that book. Books that aren't vetted by professionals or even edited, even at .99 cents would not be worth it. You'd have to pay ME to read them. And, I've come across some real stinkers in the self-publishing realm.

  8. Wonderful and insightful post. Thanks for sharing

  9. In all the discussions about e-books here and on other blogs, I've yet to see anyone comment/complain about the way pages appear, in particular, lack of hyphenation (impossible for current html, so I'm told) and the resulting loose lines that impede readability. Until this is solved, I'm sticking to print books.

    That said, I'm a book designer and typesetter so maybe I'm more sensitive to the esthetics of text.

  10. Interesting point, Maggie. I don't have an e-reader and I've wondered about things like that. Intrigued, but not ready to take the plunge.

    One billion dollars. Can you imagine anybody telling you 15 years ago that people would pay a billion dollars for a machine that does what you could do all by yourself for the price of a cheap paperback?

    I wonder if they'll come up with an expensive electronic substitute for toilet paper next? And reasons why we all can't live without one?

  11. Margo: Booksellers such as your favorite local bookstore has been dictating prices since the Guttenberg press ended the monopoly of the Universities (the publishers of the day). I am not sure why Amazon (or your favorite bookstore) can cut the price on every book format except the e-book format. But you are right, readers won't be happy until the books are free. Of course that applies to everything we buy.

    Courtney C.: Many of the books under $5 are from published authors with titles no longer in print or trapped in the mid-line. Me, I am not able to risk $15 on a writer I am not familiar with, I will take the risk for $5. This has hooked me to buy that author's new book at higher price.
    Let me give you two examples. Douglas Corleone's "One Man's Paradise is a book I would buy for $9.99 at most. The book won the Minotaur Book/MWA First Crime novel award for 2009. The price remains at $11.99. I usually wait for the mass market version to come out and drop the price. But no MM has been released. Here is a new writer who would have had one more reader/sale if his book had been published by Random House (which lets Amazon set the price) rather than agency model MacMillan. I waited to buy "A Bad Day For Sorry" until the price went down. Finally the price went down to promote readers for the just released second book in the series by Sophie Littlefield. Lower prices help sell even the best book. How many of us pay full retail price for any bestseller? I do agree 99 cents can be too much to pay. Then I thank Amazon for its sample feature.

    Thank you both for your thoughts (or is that Eric's line).

  12. I don't want to ride a horse to work, nor do I want swim to Europe. I do not want to sit next to a scratchy radio to hear the news and I do not want a crank phone...I love my computer, cable, movies, CD's and DVD's.
    But I just want to hold a book in my hands, open it and smell the pages.
    If it's my book...then all is well with the world.

  13. I'm 25 and I don't often buy traditional books. The newest hardback I have was a christmas present from 2009. I only buy physical books from known authors, or books I'm 100% sure I'll like.

    I won't pay over £3.99 ($6.50) for an ebook, new or old. Low prices have led me onto books I wouldn't have bought otherwise, and I usually buy more than one at a time.

    Michael's comment said it best. Lower prices = more sales. Selling 100 at $10 isn't as good as selling 500 at $4.

    For example, a video game on Steam ( was reduced by 90%, requiring 9x as many sales to break even, but they ended up selling 17x. They made more money by slashing the price by 90%.

    If The Girl with the Dragon Tattoo was a $10 ebook, I imagine it would get less sales and make less money.

    CourtneyC: If I paid 99 cents for a stinker I wouldn't feel ripped off at all. I could take my dog for a walk and find that much on the ground. At that price I would probably buy 5 books, and if one of them was good then I'd be pleased.