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Will 2008 be the year of the e-book?

06.12.07

As Amazon.com starts selling e-books in the US, The Bookseller asks six book world professionals, including author Naomi Alderman and Random House's Fionnuala Duggan, to debate the opportunities and threats ahead for the UK market [you can see the full list of contributors here].

What proportion of the book market is likely to go digital next year? How about in five years?

Sara Lloyd (SL): “We’re all working within a set of parameters. I’d be surprised if anyone had specific sales targets within a set time period. There is no real device in the UK and no channels, let’s face it. It’s really only the beginning. Any action is in the US.”

Fionnuala Duggan (FD): “There is an e-book market out there; it’s not huge. In the US, it kind of chugs along at a reasonably low level and had a big injection with the Sony Reader. And in the UK, it chugs along at a low level. So, are we talking about 10%, 20%, 50%? To me, it’s a question of what do we mean by success in this market?”

Bob Jackson (BJ): “Taylor & Francis has reported its e-book sales at 9% of total revenue. But there’s not really anything wrong with the book as a format. It could grow to 10%, 20%. But I don’t think e-book sales will be more than 40% for books overall.”

SL: “It depends on format, genre and generation; there is a matrix of different influences on what will happen. You can’t say for all books that e-book sales will be a certain percentage in five years’ time, because there are too many variables.”

FD: “If you look at fiction and narrative non-fiction, fiction is going to be slowest [to migrate to digital], and narrative non-fiction is going to be very interesting; and consumer reference is a complete ‘web play’, but there will still be a role for a book.”

SL: “Trade fiction is the bit that is the last bastion. In the academic sector, online revenue is already 10%. It’s very significant.”

Andrew Crawford (AC): “In the music market, digital sales represent about 7% or 8% of total sales, and that’s a really developed market. And haven’t overall sales in the music industry declined something like 20% in the past two years?”

FD: “But books aren’t digital already—when they launch the CD in the 1980s they unleashed an unprotected digital master. At that time, nobody could have imagined a computer large enough to hold a single CD on. That was a different era. That was the seed of their future downfall.”

David Roth-Ey (DRE): “If e-book sales are incremental sales, it’s significant, even if it’s 1% or 2%—or if they’re new readers, or if people are buying more books than they would’ve otherwise. The e-reader is important for e-book sales in the next one to three years. If you buy an e-reader, you have to buy e-books.”



Should e-books be subject to Digital Rights Management, in order to protect authors’ and publishers’ copyright?

SL: “The experience of the music industry throws up the whole question of Digital Rights Management (DRM). At the moment, even though the music industry has gone through all these hoops of fire and ended up taking off all of its DRM technology, we as publishers—and I hold my hands up—have gone in with the view that we have to lock it all down. That is coming from authors and agents to a certain extent.”

Naomi Alderman (NA): “Don’t [use DRM]. People will crack it as soon as you do it.”

AC: “But you can’t lock it down anyway. I had a look at mininova (www.mininova.org), and there were some collections of more than 4,000 titles. I downloaded one, thinking it would perhaps be Gutenburg material. But it wasn’t, it was all current writing. Someone had taken the time to put together a collection of e-books.”

SL: “The problem is that all DRM is hackable. The more DRM you put on the file, the more it’s likely to be pirated, because it’s almost like a challenge. At the same time, you are also at risk of having much worse sales in what is a very tiny, nascent bit of the market, because DRM makes the files clunky and annoying to download.”

NA: “As an author, I would say not to put DRM on files, and as publishers you probably need to do some evangelising. The Society of Authors is brilliant, but it’s terrified: it feels like [digitisation] is going to destroy -everything. You need to say to authors that actually, if you give people the opportunity to pay money honestly for your product, they would much rather do that than download it dishonestly.”

SL: “Yes, I think it might be true of book readers because they have a different profile to music lovers.

FD: “The music demographic is a  lot younger, so you’re looking at teenagers.”

AC: “When I used to work for Amazon and we first starting selling books we had no problems with fraud. As soon as we started selling CDs and DVDs (this was before peer-to-peer networks), the returns went right up. People used to buy them, rip them and then send them back. Books is a different market. But hypothetically, if there was a suitable e-book reader and a lot of e-books, and someone finds a way of pirating those e-books really easily then that could cause a decline in the book industry.”

FD: “Piracy is going to become a much bigger problem.”

 

 

 

 

 

 

 

Do you think e-books will bring  about changes to the way in  which books are written, and what kind of changes?

DRE: “What excites me about the  e-book is the idea of creating a new form and then writers writing to this new form, creating a sense of connectivity and community. This is potentially commercial trade fiction—it’s a real opportunity, for writers and readers of romance fiction or what-ever, to interact. It really opens  up something special.”

NA: “I spend half my time writing novels and half my time writing computer games. For me, the really fascinating thing about the concept of an e-book is that I could have a novel which is also a game. In the same way that you had Masquerade in the 1970s, that had links to the outside world.”

SL: “This has already happened with Nintendo DS and ‘Hotel Dusk’. If as publishers we had the multimedia rights, maybe we could do more with it.”

FD: “It’s a question of rights, but it’s also a question of risk. To make a computer game now costs £10m; you need 200 people working for five years. Unless you’re confident that you know how to make and market a good game, then it’s a terribly risky business. The games business is completely different from book publishing. But building a multimedia presence around a book is not different, and it’s an obvious thing for the publisher to do.”

NA: “They are bleeding together at the edges, those two things—the game and multimedia presence. Creatively, that’s what’s interesting.”

FD: “Creatively? Yes. Conceptually? Yes. But from a business perspective? There’s a big difference between spending £10m on a computer game and hiring 200 people, and building a website around a book.”

DRE: “The opportunity that presents itself through an e-book is interactivity around the book. So there could be additional content; it could be readers commenting to each other or to the author, adding addenda.”

FD: “If you think about someone writing historical biography, they’ll spend many years researching, and there will be a lot of material which doesn’t make it into the book. So the question is, what happens to all that material? Can you build a community around the book, at the point of its creation, so that the author can get involved with a peer-review pro-cess? How do you bring in the rest of the material? How do you help the author find a digital platform to bring all these things to an audience?”

DRE: “What we’re really jazzed about is taking a young demographic who isn’t really reading—they’re not finding the books, the cool factor is definitely not there—and having the device that gets them excited, and an e-book experience that’s interesting to them. And potentially it’s going to transform the way you actually write books.”

NA: “There are possibilities of convergence, creatively, that it opens up.”

DRE: “You could gradually build from games into a book. It’s a kind of story-telling and a narrative anyway. As publishers we know we’ve got good stories—they’re the inspiration for so many films—so can we get that younger generation and convert them, and turn them onto books?”

NA: “As a reader it would be an amazing experience to be reading a book and say: ‘Wasn’t that different to the way it was in the movie? Show me the movie.’ And then you’re watching the movie. This is science fiction now, but it will happen, convergence will happen, maybe in 25 years.”

What can the book industry learn from the music industry in preparing for the market shift to digital?

BJ: “There’s a massive price differential between music CDs and downloads. If an e-book was the same price as a paperback—so that it’s not a few pence to buy an e-book as opposed to a few pounds to buy a book—then they can co-exist.”

FD: “It’s an important question, because if there is going to be a role for traditional bookshops, they are going to be competing with online bookshops or those who have other businesses.”

DRE: “My understanding of US e-books is that their price reflects the hardcover price, and then when the book goes into paperback, it’s repriced against the paperback. So people are getting technologically the same thing, but they’re wondering: ‘Why is it one price one day and another another, when the product  is the same?’ ”

FD: “Every time I go back to Amazon.co.uk and I look in my shopping basket—which is filled with Rainbow Magic books by my daughter—there’s always a note saying: ‘This has gone up by 5p’, ‘This one has gone down by 20p’, ‘This is back at full price’. The prices change all the time.”

AC: “We price according to market conditions, so our prices fluctuate continually.”

BJ: “If publishers don’t actively encourage other outlets, it wouldn’t be a surprise if in five years’ time there’s only one player in the game. You cannot as readily get hold of digital marketing and e-books as you can physical books. There are a whole set of building blocks that are not in place. A lot of publishers will say: ‘We’re making it available’, and then if you say: ‘Give it to me’, then that’s a challenge.”

FD: “I agree it’s not coming as quickly as it should. But it is coming. It’s very easy to look at the music industry and say: ‘Oh, you did all these things wrong.’ And the major record labels were very slow to license, and they were reluctant to co-operate with each other, so they stymied the growth of lots of little companies. But there were all kinds of issues: at that time, you couldn’t take a track out of an album and sell it separately, it was disallowed in the contract.”

DRE: “So why did iTunes take off?”

FD: “Right time, right place. Also, Steve Jobs is an entertainment guy, he’s got Hollywood credentials. He understood, and he had the means and the capabilities to pull it off. And also it was at a time when the major record publishers were finally ready to license the same entity. iTunes also had DRM, which everybody wanted; but of course now DRM has turned out to be the sting in the tail, because its down to DRM that they’ve ended up in a monopolistic position.”

Where will consumers buy their  e-books in future, and is there a role for traditional bookshops to sell  e-books?

BJ: “Consumers will buy e-books from wherever they can. I don’t see why a high street shop can’t also sell an e-book and send it to an email address. If you can send a physical book to a postal address, why can’t you send an e-book version too?”

FD: “Who do you think is the main e-book retailer? You’ve got ebooks.com and Sony Connect (ebooks.connect.com).”

AC: “I don’t think there is a main e-book retailer out there.”

SL: “Amazon.com—since the launch of the Kindle. The Kindle is the first really interesting e-reader because it has Amazon behind it. It’s the first one to capture people’s imaginations.”

BJ: “Name an e-book seller in the UK.”

FD: “W H Smith.”

BJ: “And a second? I can’t.”

FD: “The market is created by those who spend money marketing the e-readers. You have to spend money on launching them, getting the pricing right, the instore training, demos and customer support. To launch a consumer electronic device is a major thing, and you need a big manufacturer to get involved. Sony’s continuous commitment to the market is very welcome by us.”

DRE: “Do you think that retailers who do not specialise in books will ever seriously involve themselves with e-books, given the investment involved and the infrastructure required?”

AC: “They will offer them, but it will be the non-retailers that will sell more. Newspapers will be able to sell books. Places where they are saying: ‘You should buy this book.’ ”



NA: “Yes, it’s about the ambient experience. When you’re doing your shopping on Tesco.com and it sees that you’ve bought three types of fish, and it says: ‘Would you like Hugh Fearnley-Whittingstall’s fish book?’, and then you can just get it instantly.”

BJ: “The traditional book industry, if it really wants to compete, has got to go to availability. And if consumers are choosing to buy online, then that’s where booksellers have got to be.”

DRE: “I don’t think the high street is written off, at all. Obviously the online retailers have an advantage, but the high street does have the community advantage. If they work that advantage, they have a play there.”

AC: “They have potential if they can get their act together. But there are at least three major booksellers who are really dragging their feet on this.”

FD: “People really love going into bookshops. So this isn’t a question of a direct transition of books to digital, or offline to online. The question is at what point is this going to plateau and stop? With audiobooks, we are looking at a shift from traditional retail to audio downloads and internet sales of CDs. All that has an effect on the traditional retailers’ decision to support the CD format, based on sales per square foot. Even if sales shift online by 10%, it has an impact on the trade. So we have to be ready to shuffle and reshuffle, and fill that space with something else.”

AC: “Most physical booksellers are having trouble keeping their heads above water. If there is going to be a 10% turndown, they won’t be able to afford the extremely high rents.”

FD: “Retail generally is suffering because online retail is growing so phenomenally. If we talk about the small niche companies and about marketing becoming a selling opportunity, you get into the long tail concept. You have your aggregators—your mass market people—and then you have your long tail of all the activities that people are doing online. They are all being collected by a back-end that does the selling—the technical powerhouse that a company like Gardners can provide. The front-end is customised and pretty, like an author’s website or the niche retailer, but the back-end is the person who knows how to deliver the e-book and do the DRM and has the economies of scale.”

E-BOOK ROUND TABLE

Naomi Alderman (NA)
Alderman is an author, e-books enthusiast and writer of alternate reality computer games. Her first novel, Disobedience, won the Orange Award for New Writers in 2006, and she also took the Sunday Times Young Writer of the Year Award in March 2007. She is a lead writer at games design agency Mind Candy.

Andrew Crawford (AC)
Crawford is The Book Depository’s managing director. He founded The Book Depository in 2004, selling books online by using innovative supply chain technology; UK sales have grown to £24m in three years. Crawford previously set up pan-European operations for Amazon, and began selling books online in 1996 with bookpages.co.uk.

Fionnuala Duggan (FD)
Duggan is director of Random House Group Digital. She was previously vice-president, new media, at EMI Music Europe and International. She holds an MBA from French business school INSEAD and a degree in experimental physics.

Bob Jackson (BJ)
Jackson is commercial director at Gardners. He has worked at board level at the wholesaler for 25 years, and was previously trade sales director at Hodder & Stoughton. In April, Gardners announced its intention to create a digital warehouse, which it hopes will go live in the first half of next year.

Sara Lloyd (SL)
Lloyd is Pan Macmillan’s head of digital publishing, responsible for developing a digital strategy and publishing stream. She was previously Palgrave Macmillan’s business development director, where she created and developed Grove Music Online and Grove Art Online, and oversaw the set-up of an online subscription service at Nature.

David Roth-Ey (DRE)
Roth-Ey is director of audio and e-books at HarperCollins. He recently moved from HarperCollins US, where he was editor-in-chief of Harper Perennial and Harper paperbacks; he was previously at Quality Paperback Bookclub.

Reporting by Liz Bury, Hannah Davies and Laura Barnicoat.

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