An interesting article on e-reading in the Wall Street Journal the other day reports a large-scale survey of the reading habits of people who use Kindles, ipads and Sony Readers. Of the sample of 1200, 58% said they were reading the same amount as before and 40% said they were reading more.
The article says: “Because e-book gadgets are portable, people report they're reading more
and at times when a book isn't normally an option: on a smartphone in
the doctor's waiting room; through a Ziploc-bag-clad Kindle in a hot
tub, or on a treadmill with a Sony Reader's fonts set to jumbo. Among
commuters, e-readers are starting to catch up with BlackBerrys as the
preferred companions on trains and buses.”
The year on year growth of e-book sales in the US in the first six months of 2010 was 183%, similar to the year-on-year growth for 2009 (176%). According to the Association of American Publishers, U.S. publishers had net sales of $23.9 billion in 2009, down from $24.3
billion in 2008, a 1.8% decrease. The total includes e-books which made up 1.4% of revenues in 2009, so there was a slightly faster decrease in sales of physical formats. However, the decline was less pronounced in 2009 than in 2008, so there is clearly a recession effect on top of any underlying trends. In the last seven years
compound annual growth rate in revenues was plus 1.1%.
This isn't a stellar growth rate but neither is it terrible, especially in a context of tremendous growth in competition for people's time and attention.
What I'm suggesting is the possibility that digital books are not a threat to publishing that some publishers fear, looking over their shoulders at the music industry (indeed, online music needn't have been a threat to the music industry until they turned it into one, but that's another story). It's often assumed, and especially by incumbents, that an alternative mode of delivery is a substitute for existing modes when it is a complement. Maybe people who like reading (or listening to music, mutatis mutandis) will like reading in a new way as well as in the old way?
Publishers are embracing e-reading, in their different ways. The innovation in devices is obviously helping. Readers are being lured in by free books. In the survey reported by the WSJ, e-reader users said that 52% of their e-books were paid for, while 48% of their e-books were free. Pricing e-books will be key, and the prices seem to me far too high on the whole. Readers will expect e-books to be far cheaper than physical books – not only is there the zero marginal cost, but in addition it's much more like a rental than ownership because you can't resell or give an e-book to a friend, nor even share it with another family member who has a different reading device. I think publishers are still being too greedy about their pricing. There's no rationale for expecting high or higher margins in this extension of the market. My hunch is they'll also find the price elasticity of demand is high.
Anyway, although it's a challenging time in publishing, it's also an exciting one. And for readers too.