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Sales of e-books will "double in size in a flat market" over the course of 2012, accelerating to a "US-scale proportion as the year progresses", according to the head of one of the UK's leading publishers.
Pan Macmillan m.d. Anthony Forbes Watson was speaking as publishing heads of houses and leading trade figures anticipated a testing year for the industry, with challenges to the high street in the UK balanced by opportunities in digital and overseas territories.
HarperCollins chief executive Victoria Barnsley predicted a year of "upheaval" for the industry, with the focus turning to export markets. She predicted Amazon could end up with over a 40% share of the combined physical/digital book market by the end of 2012.
Booksellers Association c.e.o. Tim Godfray also predicted "a reduction in the number of high street and campus [book] outlets" over the course of 2012, and called for publishers which recognised the value of bricks-and-mortar shops to "test and introduce new financial models to help our members adapt".
Bloomsbury c.e.o. Nigel Newton anticipated a year in which it will become clearer how big issues‚ such as the reach of e-book readership and the extent of the high street squeeze‚ would work themselves out.
Random House Group UK c.e.o. and chair Dame Gail Rebuck said: "We are in an industry where the old ways of doing things are fading, but the new way has not come into focus yet . . . I feel paradoxical about the year ahead. I am extremely confident about our list, but I am mindful of the changes ahead."
Penguin UK c.e.o. Tom Weldon remained optimistic, but predicted a "very bumpy" external environment, incorporating the threat of piracy, self-publishing and regulatory investigations, as well as the economic and retail concerns.
Forbes Watson earmarked 2012 as a year of "cultural shift" in terms of skills, where the industry would begin to recruit "science graduates who can write a paragraph" rather than "arts graduates who can count". Weldon, Barnsley and Rebuck also stressed that new skills must be developed around brand amplification, data management and how to publish on multiple platforms.
Meanwhile, Publishers Association c.e.o. Richard Mollet highlighted the government's consultation on copyright as the most important policy debate of 2012, adding that he also expected to see some progress in attempts to get a more "responsible attitude towards combating online copyright infringement".
Tom Weldon, Penguin UK c.e.o.:
"2012 feels like it is going to be a year of unusual consequence. The external environment will undoubtedly be very bumpy as we deal with a whole range of challenges including a consumer recession, enormous pressure on the high street, the relentless growth of online retail, a broader competitive landscape for publishers, piracy, self-publishing, and regulatory investigations.
"However, I refuse to feel despondent. 2010 and 2011 were two of the best years in Penguin's history. And we keep needing to remind ourselves that amidst all this disruption and turbulence, what will determine whether we succeed or fail will depend more upon what we do than on what the world does to us. We are doing a lot right and we need to keep doing it but better.
"At the same time, we need to be completely clear sighted about what new skills we must develop quickly and I would particularly emphasise the following: truly imaginative digital storytelling (especially in the children's area), managing data, dynamic pricing, brand amplification (and at Penguin we are very fortunate to have a real consumer brand), publishing authors on multiple platforms, shifting from a display to a discovery marketing model, creating a halo of recommendation and engagement for the reader, developing our own IP, and becoming even more ambitious and selective about what content we bring to market. None of this will be easy but what an extraordinarily interesting time to be working in publishing.
"I think we are going to surprise a few people."
Anthony Forbes Watson, Pan Macmillan managing director:
"I think the year ahead will have a very tough first six months, followed by an exuberant Olympics and Royal Jubilee in the third quarter. The year as a whole will see digital accelerating to a US-scale proportion as the year progresses, but I think the difference associated with physical books will be greater than in the US, because of the scales here compared to the US . . . I think digital will double in size in a flat market.
"[There will be a] polarisation between hardcover authors and the rest—the miasma of self-cannibalising paperback and digital sales. There will be an increase in digital-first and digital-only publishing. I do agree with the objectification of the object, which in publishing terms means beautiful books. I think that every year it is make or break for bricks and mortar and there is no reason for that to change in 2012.
"Another trend this year will be the first glimpse of the future of illustrated publishing, both in children's and adults, with the Kindle Fire and epub 3.0, which is a genuine excitement.
"I think the economic market will be dire, but there will exuberance with the Olympics and the Royal Jubilee as we will have so many visitors—it will help the book trade.
"I suppose in the bigger picture, there is one cultural change, where publishing will start its migration from being an industry for arts graduates who can count, into an industry for science graduates who can write a paragraph. It's a cultural shift."
Victoria Barnsley, HarperCollins c.e.o.:
"I think 2012 will be a year of even more upheaval in the book industry, and many of last year's trends will continue. On Christmas Day over 100,000 HarperCollins e-books were downloaded; proof that the digital market is growing at an outstanding pace. However while ebook growth will be significant, it will largely—but not entirely—be at the expense of physical sales. As a result fewer titles will be published in two physical formats and for those that are, the gap between the publication dates will inevitably narrow . . . While the amount of physical retailers will probably decline, there will be some new entrants in the digital space—the long-awaited Nook being the most notable . . . While it's to be lamented that the digital revolution is threatening territorial copyright it does at the same time afford great opportunities to access many markets which were previously inaccessible. Reaching global markets has never been easier and is a real growth opportunity for 2012.
"Another growing trend that I think we'll need to keep a close eye on is self-publishing. We really need to understand how this is impacting our sales, and in particular we need to keep a close eye on our pricing strategies, because of this and the increasing threat from piracy. In fact piracy is something we're going to be hearing much more about in the coming year.
"2012 will see publishers debating even more keenly their role in the content value chain."
Ursula Mackenzie, chief executive and publisher of Little, Brown:
"Economic conditions are going to be tough and combined with the move to digital are bound to put pressure on the bricks and mortar retailers in particular. Christmas 2011 has shown that good books continue to sell in volume and it was cheering to see the independents reporting increased sales over last year. Digital sales represent a major opportunity for publishers and will help to offset the loss of physical sales, as will international sales, especially in emerging markets such as India and China.
"At Little, Brown we have been impressed with our sales of the Steve Jobs biography especially in Asia with total export sales now outstripping the UK by around two to one. With my PA hat on, I expect to see great efforts continuing to be made to support copyright and resist illegal downloading, and I am pleased that more co-operation between World Book Day, World Book Night, Quick Reads and the Reading Agency should result in a stronger than ever platform for improving literacy and expanding readership in general."
Jamie Hodder-Williams, chief executive, Hodder and Headline:
"It's going to be another huge digital year with e-book sales approaching 20% of revenue by the end of the year, and the first genuinely high quality enhanced e-books beginning to sell for the new generation of tablets.
"Publishers will be more thoughtful and strategic about their use of social media to build audiences for their authors, and we all need to concentrate on getting closer to our readers. Meanwhile great stories, well edited, packaged and marketed will continue to sell extremely well‚ especially the "new thing", with readers loving that excitement of discovery more than ever, and social media spreading those discoveries faster."
Gail Rebuck, chairman and chief executive Random House UK:
"It is quite a complex picture at the moment. Towards the end of last year I would have characterised it as an award-winning sprint to the finish line, but paradoxically have to balance that with the forecast for 2012 and all the wider issues . . . We need to work on ways we can keep the high street a vibrant entity, and somehow recreate the emotional contract of someone going into a store and actually purchasing a book . . . The warning sign is the economy and what will happen on the high street. We need to adapt quickly, and be ready if there is a fundamental shift again."
"With the importance of the digital future, we are very excited about getting all our staff engaged in that, for a long time now we have been working to engage people, working on reskilling, training and developing new skills in the organisation, balanced with a much more focused approach in developing direct contact the consumer. This is an area that traditinally with publishers we have not put a lot of resource into, but it is now paying dividends. This will continue as the world is changing very fast."
"Piracy, and protecting copyright—these are things we are putting a lot of effort behind-providing 360 degree care."
"It's a paradoxical picture but as ever I remain enthusiastic about the future."
Nigel Newton, c.e.o., Bloomsbury:
"2012 will be an important year for the trade, as many of the big issues which are already in play, will work themselves out further: firstly, we will get a better idea of how far e-book readership will rise. E-book downloads are already a remarkable success story but whether that grows to 20% or 70%, for example, is obviously of huge importance to the industry.
"Secondly, the problems faced by both the high street and independent bookshops will either stabilise or be exacerbated in 2012, and this is of crucial importance not only to these businesses themselves, but to publishers as print runs become smaller.
"The third challenge to publishers will be to benefit from the economies of those regions of the world which are at a different point in the economic cycle to our own and business is still relatively buoyant for them."
Richard Mollet, c.e.o. of the Publishers Association:
"For the PA, the most important policy debate of the coming year will be around the Government's latest Consultation on Copyright, which puts forward proposals for implementing the Hargreaves Review. There is near unanimity across the British creative industries that the Intellectual Property Office's proposals to weaken copyright would be highly damaging for creators and the wider economy. We all have a huge task in persuading ministers that if they are concerned about driving growth then the half-baked Hargreaves proposals are absolutely the wrong way to go about it.
"Secondly, I hope, and predict‚ that we will see some progress in attempts to get a more responsible attitude towards combating online copyright infringement from the search engines. The creative sector appears to have won ministerial support for the common sense view that it can't be right for search engines to allow clearly infringing sites such high prominence in search results. Encouraging Google and others to work with us to address this will be a major step forward in the development of legal e-book services.
"2012 will also see a ramping up of interest around VAT on e-books. At the end of 2011 we saw increasing interest in removing the anomaly of e-books being hit by VAT from British and European politicians. The PA will be engaging more closely in this debate in the coming months."
Tim Godfray, c.e.o. of the Booksellers Association:
"There will be almost no growth in the UK economy during most of 2012. I sense there might be a pick-up in the last quarter. Unemployment will rise. The euro will hold, but there will be two groups of countries within the eurozone . . . With these changes going on in the financial sector, and concerns over jobs, consumers will be cautious in their spending . . . More potential book buyers will be using bookshops as places in which to inspect books, to take photos of the EAN/ISBN bar code, to check prices with other sources of supply and then, if appropriate, to order online.
"But there will also be an increasing awareness of localism and the benefits to the community if local businesses are supported. High street and campus bookshops selling printed books will face further competition from internet suppliers and the e-book. Competition will be intense. Independent booksellers, moreover, are not finding it easy to obtain and supply e-books at attractive margins.
"Complaints will continue to be made about the dominance of one company in the internet bookselling sector. The European Competition Directorate will determine that the Agency Agreements do not fall foul of European competition law.
"There will, however, be a reduction in the number of high street and campus outlets. But James Daunt will receive plaudits for the changes he has made and his work will ensure that the Waterstone's brand will continue to flourish; and Kate Swann will continue to impress The City. But the decline in high street and academic bookshop numbers will lead to publishers having to give serious consideration as to whether it is in their commercial interests for these shop windows promoting their products to reduce further. And if they come to the conclusion that in order to have a diverse marketplace they need to see these bricks and mortar shops survive, publishers will have to test and introduce new financial models to help our members adapt to a fast moving market place.
"I estimate that at the end of 2012 that e-books will account for around 15.5% of total sales."
"I predict that the European Parliament and Commission will agree that e-books can be among the special products and services that may obtain a reduced VAT rate (which would mean that member states, if they wish to do so, could allocate a VAT rate for e-books of 5% upwards), but I'm not sure whether this change will be introduced before the end of 2012.
"I suspect we will be see more e-book platforms being developed for independent booksellers."
Bridget Shine, chief executive, Independent Publishers Guild:
"2012 will be a testing time but hopefully it will be offset by digital opportunities and agile publishing. For many publishers, knowing where to invest money will be increasingly important to their future. But, given the explosion of digital channels, knowing where to invest time may be even more of a challenge.
"While our academic publishers are for the most part sheltered from the challenges of the high street, the global economic slowdown means that library budget—academic publishers' bread and butter—remain tight.
"If the dollar strengthens in the ongoing Eurozone crisis, IPG members who are seeing good US sales should benefit. (Although this is likely to affect our academic publishers more, as their business tends to be global, with the US being their largest single market). A shift in the exchange rate can have a big impact."