Publisher Secrets: Startling New Statistics

What are publishers saying behind our backs? I discovered some startling information from a little-noticed trade association meeting in New York City. The once-a-year meeting of the Book Industry Study Group took place on September 24 — and reading about their event felt like peeking into insider secrets.

What percentage of book sold are ebooks? 5.8%, one presenter announced (matching my own recent back-of-the-envelope calculation). And just 32% of Kindle owners are men, according to their statistics (from April to June of this year). Between January and March of 2009, they’d calculated that 42% of Kindle owners were men — suggesting that this year saw a huge surge in new Kindle purchases by women!

The statistics came from Kelly Gallagher, who’s the Vice President of publishing services at a publishing-industry reference publisher called Bowker. And he’d uncovered another strange anomaly: only 46% of the people who own Kindles and other digital readers actually purchased the device for themselves — while another 47% had received them as gifts. But the industry is definitely growing. He also reported that 44% of the people who are now buying ebooks only acquired their digital reader within the last six months…

In fact, the President of Kaplan Publishing announced results from a startling experiment. Last month they took 95 of their e-books — one-third of their total e-book catalog — and offered them for free for one week in Apple’s iBookstore. The results? Their downloads for that week were 25% of their total print sales for one year. Her conclusion: there’s a big untapped demand for ebooks. (My conclusion? People love free ebooks.)

Kelly Gallagher reached the same conclusion. “[R]eceiving e-books for free is one of the largest motivators for people to pick up and buy e-books,” he told the group, “whether it’s a sample chapter or another promotional approach.” But there’s more to learn besides that it’s easier to sell ebooks when they’re cheaper. The Kaplan publisher argued that there’s “a large population of readers who are almost our customers.” And Kelly’s actual slideshow of statistics turned up elsewhere on the web, showing that free promotional chapters are still what’s most likely to influence someone to buy an ebook — between 34% and 36% of respondents.

But I also learned something else: what the best-selling books were for each generation. For example, among readers born within the last 30 years, the top five best-selling books are all from Stephenie Meyer’s Twilight series. And even if you’re between the ages of 31 and 42 (the so-called “generation X”), four of the top five best-selling books are still by Stephenie Meyers. (The non-Meyers book is Dan Brown’s The Lost Symbol.) For the “Baby Boom” generation — 43 to 61 — there’s just two Stephenie Meyer titles in the top five, plus The Lost Symbol, along with The Shack and Stephen King’s Under the Dome. And for people over the age of 61, the most popular books were The Lost Symbol and The Shack plus John Grisham’s The Associate, and then two political books — Glenn Beck’s Common Sense and Sarah Palin’s Going Rogue.

But the most exciting part of the report was the closing keynote speech from the president of Ingram Content Group. He announced to the assembled audience that “the market for books is not fixed. I believe the whole publishing pie can grow.”

Here’s how his speech was covered by a publishing-industry news site called “Shelf Awareness”.

The print book will coexist with the digital book “for years” and will survive because of its “portability, flexibility and durability,” he maintained… ” Among other qualities, the book has “a limitless power source, can be read in the sun, can be read on a plane on the tarmac, looks good on the shelf,” and more. Many people “are like me and want it both ways,” Prichard said. “I love my iPad, but I still look forward to reading that relic of the past, the good, old-fashioned book.”

He concluded: “Let’s stop looking admiringly to the past, let’s stop handwringing about the present and let’s start creating the future.”

Click here to read their full report.

Are Publishers Lying about the cost of eBooks?

Last week the Wall Street Journal ran a controversial opinion piece about ebooks. A former book editor and a business professor argued that publishers needed to sell advertisements in ebooks in order to offset their shrinking profit margins. “[A] digital book is far less profitable than its hardcover cousin priced at $25,” their article argued. But according to responses on the web, there’s a problem with that argument. It isn’t true.

“Baen, a publishing house that specializes in fantasy and sci-fi, mostly with a militaristic bent, says that they’ve found that e-books significantly increase profits,” responded one commenter at a technology web site, even though that publisher sells DRM-free versions of their ebooks “for substantially less than they sell dead-tree versions.” And then another commenter backed up their skepticism with actual data provided by the New York Times.

Publisher’s Profits Before Overhead
On a $26 hardcover: $4.05
On a $12.99 ebook: $4.56 – $5.54
On a $ 9.99 ebook: $3.51 – $4.26

This isn’t speculation. The Times based their statistics “on interviews with several publishers and consultants who work with the publishing industry.” eBooks eliminate many of the costs associated with stacks of hardcover books, including printing costs, storage fees, and the cost of shipping books (and then shipping back the unsold copies).

“That, obviously, is exactly what logic would tell you,” one commenter concluded. And the Times article suggested the publishers’ real motive might be simple self-preservation — they’re trying to keep up the demand for printed books. In a future with even more digital readers, lower ebook prices would mean “print booksellers like Barnes & Noble, Borders and independents across the country would be unable to compete… if the e-books are priced much lower than the print editions, no one but the aficionados and collectors will want to buy paper books.”

One publisher’s consultant even tells the newspaper point-blank that “If you want bookstores to stay alive, then you want to slow down this movement to e-books. The simplest way to slow down e-books is not to make them too cheap.”

So are publishers being honest about the costs of publishing a book? It’s a hotly-debated mystery, even to those people who are most affected by it: the authors who are actually writing the books! At the end of their article, the New York Times tracked down best-selling author Anne Rice, who admits that “None of us know what books cost. None of us know what kind of profits hardcover or paperback publishers make.”

Most of Rice’s books are available on the Kindle — though not her most famous book, Interview with the Vampire But as the publishing industry faces historic changes, it was nice to see that Anne Rice still remains firmly committed to the future of the ebook. “The only thing I think is a mistake is people trying to hold back e-books or Kindle and trying to head off this revolution by building a dam.

“It’s not going to work.”

Will Amazon put ads in Your eBooks?

It’s a horrible thought, but the Wall Street Journal suggests that ads in ebooks “are coming soon to a book near you.”

It’s an opinion piece, rather than a piece of technology reporting, so the evidence is a bit skimpy. For example, the article notes Google already displays advertisements beside the results of searches on Google books. (“It’s a small step to imagine Google including advertisements within books.”) But they also note that last year Amazon filed a patent for advertisements on the Kindle. The article is written by a former book editor at Houghton Mifflin (William Vincent), who’s presumably given a lot of thought to the future profitability of the book-publishing industry. And his co-author, Ron Adner, is a professor at the School of Business at Dartmouth College.

They focus on the future, arguing that the ads-in-ebooks model just makes sense. One suggestion is to include ads in an ebook’s free sample chapters. (“Because not every consumer who reads a sample chapter will buy the book, it’s reasonable for the publisher to extract some additional value.”) Another suggestion: offer a book without advertisements — for a price. “Seeing ads in the sample may also convince a reader to pay for a premium, non-ad version of the full-length book.” I’m envisioning a massive boycott of the first book that attempts to include advertising — but there could be one silver lining. If the publishers earn enough money on the advertising in a book, they might consider reducing the book’s price, or even giving away new books for free!

In fact, Amazon used to sell ebooks at a loss, according to one analyst, earning its profits by selling the Kindle. But now Apple’s new iBookstore lets publishers sell their books at a higher mark-up. The competition pressured Amazon into offering offer their own publishers the same leeway, and ironically, Apple “has now forced Amazon to turn an estimated 30 percent profit on each book it sells.” It seems like Amazon prefers selling their ebooks at a much cheaper price, and the publishers are the ones who are resisting. But publishers might be willing to finally lower their ebook prices dramatically — if they could make up the difference on advertising.

Ironically, then publishers then have an interest in whether the reader finishes the book. “[W]ith advertising in the mix, a book downloaded 100,000 times but never read…may be worth less than one downloaded 50,000 times and read cover-to-cover.” Suddenly an author who writes an irresistible page-turner is more valuable than the author of a massive tome that takes forever to finish, the article argues, suggesting that in a future where there’s ads in ebooks, “Unread books suddenly become less profitable to a publisher.”

But it’s not clear to me who earns the profit in this scenario — the publisher of the ebook, or the digital bookstore who sells it. After all, advertisers would be thrilled for a chance to “target” their ads to readers of a specific kind of book — and would probably be willing to pay extra for this. But as a technology company, Amazon seems much more likely to deliver these customized ads than, for example, Houghton Mifflin. And hypothetically, Amazon could keep updating the advertisements displayed in your ebooks whenever you sync to their server. Advertisers would love the idea of delivering same-day announcements — so Amazon could charge a high premium for their in-book advertisements.

It’s may all come down to a single question. Would you accept advertising in your ebooks if it meant that the ebooks were free?