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Dear Author

Has everyone conceded the US ebook market to Amazon?

Let’s try, just for a minute, to stop cheerleading. In the recent weeks, it’s seemed like publishing has become an all or nothing sporting event and that we all have to pick sides. You have to cheer for self publishing versus traditional publishing versus some other path.  But that type of thinking is short sighted and obstructive. A self publishing “win” is a vibrant and robust publishing community that has both publishing houses and avenues for business minded authors to advance on their own.

The downfall of traditional publishing would only hurt self published authors along with readers because it would result in a huge contraction of the market for books.  I’m a firm believer in the saying “a rising tide lifts all boats.”  The more robust the publishing industry is, the more readers are brought to the table and that helps every author and every publisher. According to one poll, over a quarter of Americans hadn’t read a book in 2013. 

In the data that has been scraped, the most transparent information reveals that Amazon is doing a spectacular job of selling its own books. If you look on any Amazon tablet or Android Amazon App, you’ll see a parade of Amazon titles promoted in its Kindle Select 25.  If you look on the Kindle bestseller list, on any given day there are at least 3 or 4 titles in the top 25 that are Amazon published titles. I believe that the scraped data revealed that at least a quarter of the top 100 are Amazon published titles from 47 North, Thomas & Mercer, Montlake, Amazon Encore, and the like.

Amazon pushes its own books on the Kindle devices through front page, full screen ads. It allows additional free downloads of books (referred to as borrows) of its books in exchange for reviews. Each “borrow” counts as a sale which is why you see so many pre order books at $4.99 at the top of the charts. Those are Amazon titles that Amazon promotes through special programs, coupons, discounts, and marketing campaigns.

Why is this important?

Sony has announced that it is closing its US Reader store and it has stopped introducing new ereaders to the US Market. Barnes & Noble has reduced the funding for Nook by 74%.  Kobo, which is supposed to take over all the US Sony accounts has announced it is withdrawing funding for promotion within the US.

Kobo has since stopped investing in marketing in the US, closed its office in Chicago and is focusing on other markets. Its market share and revenues are now negligible there.

For Sony and Kobo (owned by rival Japanese companies), the market share they are looking to conquer is international. B&N has no clear digital future.

That leaves Google and Apple. As the market for Android devices becomes larger, both in the US and in other regions, Apple will lag farther behind in the content department. It has evinced no desire to allow its apps and content on any device other than the iOS systems. Thus, Apple’s marketshare in books extends only as far as its marketshare in devices which is still dominant but still fading (although losing ground in non US markets rapidly).

The most recent data from IDC shows that for Q3 of 2013 Android made up 81 percent of devices shipped. You read that right—four out of every five smartphones shipped in Q3 were built on Android. Meanwhile, Apple’s iOS scraped by with a sad and distant second place figure of only 12.9 percent.

While Google is interested in scanning books in furtherance of search engine dominance, it has shown less interest in moving content. There is little advertising or promotion of the actual book content (as opposed to say the Nexus phone).

The effect of this is that new and emerging authors have decreased visibility as the dominant marketing spaces of these digital marketplaces will be devoted to proven sellers. It will be harder for new authors or lesser known authors to break out because there won’t be any individuals assigned at these digital marketplaces to help readers discover new books and new authors. The same sellers will appear on the front pages of these digital marketers over and over. It’s already happening. As you know, I visit about four to five retailer sites every morning to look for Deals to include and the same titles are discounted and the same titles are promoted on the front pages without much variation.

A couple of weeks ago a well known British author wrote an ill advised piece for Huffington Post asking JK Rowling to quit writing because she’s sucking all the air from the publishing media.  (There were also aspersions cast about young adult and middle grade novels) But Lynn Shepherd isn’t wrong to some extent. There’s only so much media that can be devoted to books and visibility shrinks as the market gets smaller.

The reason that it took so long for Borders to reach its expected end was because publishers had a vested interest in keeping it in business. It had far less to do with ensuring that there was a viable competitor to Amazon and far more to do with creating opportunities for discovery. With shelf space decreased, print runs languished and digital discovery for those books also were reduced.  We know that showrooming is an important tool for discoverability.  Showrooming, where customers go to a physical retail store and then buy online, is an increasing problem:

Among the people on its panel who reported buying items on Amazon after looking at the same item in physical stores, Placed found that Bed Bath and Beyond, PetSmart and Toys ‘R’ Us were the retailers that Amazon showroomers visited the most, with Amazon showroomers 27 percent, 25 percent and 21 percent more likely to visit the three stores, respectively, than the average consumer.

In store placement has a direct effect on online purchasing and this is as true for books as it is for toasters.  When books have both digital and print, digital sales often decline if there is no visibility in stores. (Obviously this has no effect on self published authors who have no print presence).

Recently Amazon announced that it was reducing the royalty rates of self published audio books. For any new self published audio books, the royalty earned off every sale has been reduced from 50-90%  to a flat 40%.  Under the old system, with every increased sale you received a higher royalty.  Amazon can do this because with the purchase of Audible, Amazon represents the primary path of audio book delivery. Even iTunes has Audible integration. In other words, there is no real competition for Amazon. 

In sum, an Amazon dominant marketplace results in two things:

  1. Reduced visibility for all books.
  2. Reduce profitability for all authors.

Now I know that some who read this will complain that I took a strong and active stance against Agency  Pricing. That’s true and I’d do it again. Competition based on price is singularly focused and requires huge volume in order to make up those whisper thin margins. Amazon is not competing solely on price and never has. It offers amazing customer service, selection, and a robust feature set.

And apparently the digital marketers have folded up their tents and left the US marketplace to Amazon. It may be in four years there will be a new competitor that we cannot foresee. Let’s hope so because an Amazon dominated landscape isn’t good for anyone. Not readers, authors or publishers.

2014 Publishing Predictions

2014 Publishing Predictions

  1. BN and Sony will partner.  Barnes & Noble will buy back the investment made by Microsoft and will instead sell a huge portion of the Nook business to Sony.  Sony has a terrible domestic (US) presence and has withdrawn devices sales from the US market, instead concentrating overseas.  BN has an abysmal overseas presence. Its plan to expand internationally has been delayed several times.  It’s not very good at selling its devices.  Sony should make the devices and then BN should leverage its ebook store through Sony’s international outreach. Their strengths and weaknesses overlap. I do not see BN closing nor do I see it selling the Nook arm. The Nook arm is worthless without the BN brand.
  2. Penguin and Random will buy a large reading community.  Right now other than streamlined distribution services, the merger hasn’t resulted in much of a change. Each publisher has its own sales, marketing, editing, and acquisition teams. But data about readers is more important than ever and so is the issue of discovery. Traditional publishers need a community of readers already built. They don’t have the time to create it from the bottom up (and their efforts like Bookish and Book Country have been failures).  Their best option is to buy Wattpad or Scribd and given that Wattpad is venture capitalist-backed, Wattpad is the more viable candidate.
  3. Traditional publishing will rise back up in 2014-15. It’s not like traditional publishers have even waned but 2012 and 2013 were really years of the self publishers.  They’ve gained a toehold within the digital reading audience but other than a tiny handful authors (maybe under five), few have made the transition from self pub to traditional publishing with much of any success. The print sales for most authors that have been paid six and seven figures have been abysmal. There is a divide between what digital readers will buy and read and what print readers will buy and read. As the indie market tightens (and it will do so at even a greater rate than it is now), traditional publishing will look more promising with its advance first, low risk business model.  Plus, as we can see in the past three or four months, traditional publishers have really caught onto the pricing game. Harlequin is doing box sets in 2014.  While indies will lead innovation, publishers will be quick to capitalize.
  4. Self pub prices will raise, but sales will dominate.  I expect to see more 3.99, 4.99 and even 5.99 pricing from self published authors in 2014 for books you would once pay only 2.99 or 3.99 for as indies try to compensate for lower unit sales with higher profit margins.  But I also expect that because the indie pace of publishing is so fast (many indies publish 4-6 or more titles per year) that you’ll be able to pick up most, if not all, of these titles at 99c at one point.  I’ve been seeing a lot of on device promotion for Amazon published titles and corresponding appearances on important lists on Amazon’s site.  This along with traditional publishers discount pricing of its extensive catalog will make it harder for self pubs to garner that sales that they once did.
  5. Ebook marketshare will be 50% of all trade sales.  Ebooks, because of the lower price, have to sell 2-3x as many copies as one print book to match up in revenue, but because of the lower price, ebooks will sell more units. Profit resulting from print sales will be larger than profit resulting from digital sales, but the unit volume will be the same.
  6. Authorized fan fiction will be more popular.  A number of big name authors are participating in the Dead But Not Forgotten collection of stories written about the characters that inhabit Charlaine Harris’ Sookie Stackhouse series.  Harris is writing the introduction and authors like Seanan McGuire and MaryJanice Davidson are writing about different characters.  Expect to see more of this in the future.
  7. Collaborations. In 2013, it seemed like the music hits were dominated by singers collaborating with other singers. In an effort to produce more content, I see more collaborations between authors in the future. I’d love to see something like Meljean Brook paired up with Tessa Dare or Courtney Milan and Lisa Kleypas writing together. Or maybe Courtney Milan with Kit Rocha.  Can you imagine the possibilities? Let’s make this happen authors!
  8. Digital audio books will rise in popularity. Saying this is kind of cheating because audiobook sales have increased.  The Wall Street Journal said that they were one bright spot in traditional publishing these days.  Sales have doubled in the past few years. As more and more people get tablets and smartphones, more people will adopt digital audio books. The prices have come down dramatically Some popular self published authors have reported that sales from their self published audio titles have produced significant income. It should be noted that Audible, owned by Amazon, is the largest retailer of digital audio books.
  9. Mass markets will be eliminated. I think I’ve been predicting this for two years and while mass market marketshare has declined, it still hangs on but I think 2014 will be the end of the mass market for the most part. Bookstores don’t want them because the margin of profit is too low per square foot. Publishers won’t want to produce them because the market is very low. Authors will either be digital, trade + digital, hardcover + digital. The demise of the mass market is accelerated not only by digital books but by the popularity of the format for erotic romances and indie publishers.
  10. Digital first publishers not named Samhain or attached to a traditional publisher will go out of business. It used to be that anyone with an idea and access to the internet could set up a digital publisher but with the increase popularity of self publishing, digital first publishers have little appeal.  This is another area where it took traditional publishers some time to make a change but now they all have a digital first arm. Kensington just bought Lyrical Press.  With these smaller digital presses (other than maybe the m/m ones but that could change easily in 2014 as more mainstream trad publishers pick up m/m titles), there seems little advantage for authors to remain with them other than self publish other than, obviously, that self publishing is a helluva lot of work. I also believe that there will be consolidation and mergers in 2014.