The Publishers Association’s Statistics Yearbook 2014 confirms what we have known for some time, that consumer e-book sales have softened for most trade publishers, with sales growing just 5.3% in 2014, and in the UK alone by 6.8%. The impact was felt most acutely in the fiction sector, where e-book sales—though up 8.2% in the UK—did not bring in enough additional revenue to cover the gap made by print’s continuing decline. This resulted in a drop in UK fiction sales (across both e and p) of close to £20m. Those wishing for a happy ending should look away now.
The digital numbers directly parallel what has also happened in the US: though if anything the e-book ascent in the UK was steeper as a result of Fifty Shades arriving when it did, while the softening has been more sudden. At invoiced prices the PA’s numbers show that the consumer e-book market went from £20m in 2010 to £275m in 2014, growth in that period of almost 1,300%. But watch the rate of growth diminish each year, from 2010/11 of 375% to 134% the following year, and then to 18% from 2012 to 2013 and finally to last year’s 5%. In absolute terms the market grew by £74m, £126m, £41m, and last year by £14m. (Incidentally, the bigger number for digital book sales you might see quoted elsewhere of £563m is for all digital sales, including those from the academic and professional sectors, and audio book downloads: the lower number of £275m is specifically for consumer e-books.)
It is worth noting, though, that the market has not yet peaked. We won’t know for another year whether in 2015 it reaches its plateau—and there is much that might alter the trajectory over the course of a year. The same appears to be the case in the States where occasional reports of a slide in sales seem overcooked. According to data released monthly by the Association of American Publishers (and analysed by Publishers Marketplace) e-book sales rose also by 5% in 2014 —— $70m to $1.5bn —— driven primarily by YA titles. However, there are occasional dips just as there are in the printed book market. In January 2015 over Jan 2014 trade e-book sales fell by $10.9m——a shallow drop caused most likely by tough comparisons with strong YA titles in 2014. Unfortunately, that is the way mature markets sometimes look.
Nevertheless, the narrative of slowing e-book growth is now widely recognised both here and in America. As PA chief executive Richard Mollet puts it in his intro “digital sales saw yet another year of steady but decelerating growth”. Or as David Shelley, deputy chief executive officer at Little, Brown, wrote: “The evidence from the Yearbook is that fiction e-book sales, currently standing at 37% of total fiction sales by value, are still rising, but that the growth trajectory is less steep than it was in 2012 and 2013. If the UK follows the pattern shown in the US, this graph may well level off completely in 2015.”
Or as Dominic Knight, executive director, Macmillan Science and Education and president of The Publishers Association, notes: “For books, digital sales are now 17% of the total by value, and have increased 33% in the last two years. For some categories of book, digital now vies with physical for importance: for fiction, e-books are 37% of the total by value, and have trebled in absolute terms in three years. But, as was observed in the 2013 Yearbook, the rate of digital growth for books has levelled off overall in the last two years, and it is clear that a flexible mix of print and digital will continue to be required by consumers, with no single pattern dominating all categories.”
He is right: The Bookseller first noted this slowing down of growth in 2013. It seemed remarkable at the time - and in some ways still does. This may be the reason there is so much debate about it: the electronic ceiling was reached too prematurely. This rebalancing of the market is good news for some (chiefly booksellers), but clearly unsettling for others.
The PA report is substantial and provides us with different ways of interpreting this market. There are some surprises.
* Export sales of fiction e-books actually fell back, from £56m to £55m. That was not supposed to happen. But it mimicked what happened in the physical export book market where sales also retracted, from £125m to £117m, a drop of 6%. The Global E-Book Report, which I referenced earlier this week, examined the difficulties of finding genuine digital growth in markets outside of the English-speaking world. Yet still, that sense of a growing and more easily accessible overseas community happy to read certain titles in English remains. The potential is certainly there: how to maximise it harder to fathom, perhaps.
* Non-fiction digital sales also retrenched after a few years of encouraging growth. Non-fiction e-book sales doubled in 2012 to £40m, grew again in 2013 to £55m, and then effectively stalled in 2014 to £54m. After helping to compensate for declining physical book sales in the past two years (2012 and 2013), the overall non-fiction market fell 8.5%. Since 2010 it’s a market that has fallen from £822m to £748m, with digital filling up only £54m of that gap—leaving £20m in lost revenue.
* In the UK the digital market was better than the export market. Sales of UK fiction digital sales rose 8%. And for many publishers this remains a buoyant area, if mainly confined to a certain type of fiction. As Canongate publisher Jenny Todd put it in the report: “The e-book chart data that is available shows a continuing dominance of major brand names and deep discounting mechanics – in effect, a mass market retail model.” She is referring to The Bookseller’s monthly e-book rankings that show how price, author recognition, competing format (i.e hardback or paperback) and genre can strongly impact sales in this sector. Shelley makes the same point: “It is worth noting that some authors and genres skew more towards e-book sales than others – it is not unheard of in the paranormal romance or ‘new adult’ genres for e-books to make up 90% of all sales, whereas in some more traditional genres e-books account for under 20%.”
* The children’s digital market continues to show few signs of activity. Digital sales rose from £16m to £22m (and that includes audio downloads). In the UK it went up from £12m to £15m. As Cally Poplak, managing director, Egmont UK, puts it: “What will be fascinating to see over the next few years is how – or whether – a new generation of children, whose digital world is increasingly all-consuming, will take to e-books. The latest Childwise report (The Monitor Report 2015) highlights the continuing importance of the printed book in the lives of children despite the ever-increasing use of the internet and technology.” She notes that rather than an explosion in accessed digital content for kids, “the golden age for children’s books continues.”
* Comparing the PA figures with The Bookseller’s own analyses shows that the e-book market is not for the fainthearted. The Bookseller reported back in January that domestic e-book sales for the five groups—Penguin Random House, Hachette, HarperCollins, Pan Macmillan—totalled 49m units in 2014, a 15.3% rise on 2013. Three of the five publishers recorded double-digits growth, with only Simon & Schuster down—albeit marginally—on 2013. This, we project, represents a year on year rise across all publishers of 18.5%. But that compares with publisher reported invoice growth up just 6.8%. If volume sales are rising ahead of value growth then we can surmise that average prices are shrinking—and that publisher margins are being squeezed. In other words growth comes at a cost. The backdrop to this is the reintroduction of agency pricing in the US (but not yet in the UK), and one might further deduce that while publishers are continuing to experiment with pricing, they are watching the value of their e-book business like hawks—providing further opportunities for those willing to chase volume at the expense of turnover. In the UK, this will only be exacerbated by the imposition of VAT on e-books at the UK rate of 20%. What looked like a high margin business for sometime, now looks like a race for the bottom (agents take note). In fact, since the average selling price of printed books is on the rise, publishers might actually be banking on print to back up their e-book growth.
* The audio download market continues to surprise me. In 2014 the PA report suggests a value of £10m, up just £2m from 2013, and from £4m in 2010. Yet publishers now talk about audio downloads in almost the same way they used to talk about e-books (growing and highly profitable). The £10m number looks suspiciously low, even though it is based on invoiced sales. If the consumer e-book market has an invoice value of £275m that might give it a value closer to £400m (with the final number heavily dependant on retailer selling prices). The multiple for audio downloads would be even more wonky based on what I understand about Audible’s contracts: the real value of this market is most likely closer to £30m.
* Away from trade publishing, neither the ELT nor schools market have yet to develop digitally, but the academic and professional markets are in a different country. Sales have risen consistently by a double-digit number and now stand at £252m. The journals market outstrips all of this: electronic-only revenues grew by 6% to £659m, representing a 79% share of subscription income.
* We still have no clear sight of the self-published digital market. Our perspective might change a lot if we did. That said, the traffic from self-published author to traditionally published author (or Amazon published) is still broadly going in one direction, suggesting that even succesful indie writers are faced with the same worries traditional publishers have come up against. The narrative that indie writers are taking significant marketshare from big publishers looks exaggerated (at least in the UK), but there are growing digital only publishers not represented in the PA data (not least Amazon Publishing) that would help broaden our understanding.
Of course while publishers have managed the transition to digital pretty well, no-one ever said that the end result would be uncomplicated. With e-book growth patchy across different sectors, pricing a constant challenge, margin a worry, and new models such as subscription likely to further disarrange matters, that complexity will only increase. My former English teacher once taught me—when assessing the value of a text—to be tolerant of ambiguity. It is useful advice when thinking about the digital market too. There are no easy answers, no pat analyses—though that won't stop people making them. The e-book market might grow, or it could shrink a little, the formats might shift about, the balance change, good publishing might make a difference in one year, but so might bad publishing. New players, or new devices might stimulate adoption one way or another, as will whatever happens with self-publishing. Either way it is a market that is here to stay: and ever fascinating to watch.