Monday Morning Musings – 2014 Publisher Predictions Part 3

Monday Morning Musings

Monday Morning Musings is a themed post I share approximately weekly. Every Monday, I will share my thoughts on something related to the book industry, be it publishing, blogging, economics, or some other related topic. Feel free to join in with posts of your own and link back here, or just have some open discussion in the comments.

The current series of topics for Monday Morning Musings are in response to this article, written in January 2014. Basically, it’s about predictions that the book publishing industry made for the book market over the course of this year. Now that we’re roughly 3 quarters through, I though it might be interesting to give my perspective on the status of those predictions. This will take place over 7 posts (2 topics each)—since there’s so much content, this post would go on forever if I tried to do it all in one!

Please weigh in with comments or related posts!

Previous Topics:

  1. Big publishers lower prices
  2. Price promotions will become less effective
  3. Ebook growth slows (follow-up: check out this article; it pretty much confirms that the ebook growth slowing down to almost a halt happened in 2013, not this year)
  4. Competition increases dramatically

This Week:

  1. Ebook sales, measured in dollar volume, will decrease in 2014:

Summary of article comments:

The article basically draws the logical conclusion from two of its earlier points: with prices dropped and the ebook growth slowing, it only makes logical sense the dollar volume of ebook sales would decrease. It points out that as ebooks make up a larger portion of the overall book market, they will meet constraints due to the size of that market, whereas previously growth had been virtually unrestricted. Developing countries may mitigate that contraction, however.

My thoughts: 

OK, first reaction: there is a difference between slowed growth and contraction. Yes, there is a constraint driving ebook growth—the number of people who read. In theory, that pool doesn’t grow, though I’d argue that with lower prices, ebooks might encourage new readers (if only to a small extent). But just because it doesn’t seem possible to grow anymore (and I’m not saying that I even agree with that statement), it doesn’t mean that there will be a contraction in the market. I realize that the title of this section is about dollars, but a lot of the comments weren’t, so I want to make that clear.

Now, that said, let’s take a look at a couple of scenarios.

1) Booktopia— a town that has a population of 500 readers—sold 100 ebooks in 2013 at $10/book. In 2014, they sold 5% more ebooks (based on the 2013 growth figures from this article): 105 ebooks at $4/book (the recommended price from our favorite article).

2013 $ sales = $1000

2014 $ sales = $420

This scenario lends some credence to the article’s claims.

But let’s talk about price elasticity. Price elasticity is basically a measure of how much the demand for a given type of good changes when the price shifts. A highly elastic market might see quantity purchased triple or more for a 1-2% price decrease. A highly inelastic market will see very little quantity change for a sizable price decrease.

I went and did some digging on the price elasiticty of ebook demand, and I must admit I’m a bit stymied. One article (someone’s thesis paper) seems to indicate that price elasticity is almost 0 for ebooks (and even negative in some cases, which I simply don’t believe). The model that they set up is really not particularly significant (r-squared=0.1, which is really low—you generally want .7-.95), and I’m not even sure about the significance of the coefficients that were calculated (they weren’t shared, and I’m too lazy to calculate them manually right now).

Then there’s this other article from Smashwords that indicates that demand should be 3.5 times as much at $4 than at $10. They may have a bit of a bias, but at least they’re trying to justify positions with data (slide 52 of the slide show).

Let’s just run a scenario where this would be the demand increase:

2) Booktopia— a town that has a population of 500 readers—sold 100 ebooks in 2013 at $10/book. In 2014, they sold 3.5 times as many ebooks: 450 ebooks at $4/book.

2013 $ sales = $1000

2014 $ sales = $1800

If the 3.5 times prediction were to hold true, this market would indicate that volume of sales in dollars would still increase.

But, quite honestly, there’s so much uncertainty on this one that I’m not sure how I feel about either side of this.

  1. Ebook unit market share will increase:

Summary of article comments:

This one is pretty self-explanatory. Basically, the unit quantity of ebooks sold will increase, and it will do so dramatically enough to make up for the hit in lower pricing.

My thoughts: 

Wait a second, didn’t bullet #5 say that the total dollars sold would decrease? Yet now they’re saying the volume increase will make up for it?

Theoretically, I completely agree with bullet #6. I’m just not sure that this article is being terribly consistent with itself. It was great until I got past the first couple of sentences in this topic.

But yes, it seems fairly evident that more ebooks are being sold. I couldn’t find any reasonable data 😦 Again, I’m running into the issue where most of the data I find is from 2012 or earlier, and there have been a few gems that go out as far as 2013, but nothing really for this year yet. In the absence of that, I don’t really have much to say here that hasn’t already been said.

Upcoming Topics:

  1. A larger wave of big-name authors will defect to indieville
  2. It’s all about the writing
  3. All authors become indie authors
  4. Subscription ebook services will change the game
  5. Traditional publishers will reevaluate their approach to self-publishing
  6. Author platform is king
  7. Multi-author collaborations will become more common
  8. Production takes on increased importance in 2014

 

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Posted on September 22, 2014, in Monday Morning Musings. Bookmark the permalink. 2 Comments.

  1. I’ve tried looking for sales data of both books and ebooks before and I’ve run into the same issue – sellers, even big ones, seem to want to guard this information for some reason or another. I wonder why?

    • It’s terribly frustrating! I suspect they hoard it like proprietary information; I’m sure that they feel it supposedly gives them a competitive advantage by keeping the data to themselves. :/

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