The once high-flying ebook industry endured its second consecutive year of flat sales growth in 2016, renewing doubts about the platform’s ability to attract print readers and ward off competition from other forms of digital entertainment. Experts are mixed about the industry’s future, with predictions of continued stagnant growth contrasting with predictions of a resumption of sales momentum.
For the first few years of ebooks’ rise, Amazon helped keep prices down—often pricing best-sellers at just $9.99, offering a substantial discount to buyers. But when Amazon finally lost its price-fixing lawsuit to Apple—and had to offer credits to qualifying ebook buyers in June—the average cost of a best-seller shot up to about $15. It’s entirely possible that buyers turned away from ebooks at that point, when the discounts no longer outweighed other issues (such as not being able to lend a book to a friend). But as time marches on, we may find that big publishers—which have often been resistant to ebooks—will cede ground to indie authors who are embracing the medium.
The Year in Review
2016 started out with bad news for ebook publishers. According to the Association of American Publishers, in January 2016, ebooks sales were down 6.7% from the year before. Publishing experts wonder whether ebook sales will continue to decline or if they have reached a plateau. Richard Nash, an entrepreneur and digital media consultant, says that the pause in the industry’s growth could continue for the near term. “The main thing we’re seeing is a confirmation of the plateau,” he says. “Now, exactly how flat it is from a unit sales standpoint is difficult to tell. There are probably two micro-effects pointing in opposite directions. One is the amount of extremely cheap content that is available by Amazon.” The second micro-effect is the decrease of unit sales due to price increases by traditional publishers.
Plateaus are never flat, Nash notes. “There are always … little peaks and valleys even within a plateau, and I think, by and large, that’s where we are now, and that’s where we are for the foreseeable future, i.e., until something significant happens to change that,” he says.
With the exception of Amazon’s Kindle Unlimited service, subscription ebook services continued to struggle in 2016. Oyster shut down operations early in the year. And, in a move designed to compete with Amazon, Scribd introduced Scribd Selects, in which members now get unlimited access to selected titles plus three books of their choice per month.
Nash says that subscription services that compete on price and selection (such as Amazon) will dominate the market, while those that offer a smaller selection will fight to gain traction. It’s due to the nature of the services themselves. “The convenience of not having to click every time you want a song is pretty significant,” he says. With ebooks, it comes down to how many times a reader needs to make a decision. It turns out it’s not very often. So subscription services such as Spotify and Apple Music make more sense in their industry than Scribd does in its domain. “The most avid book reader is making a decision a week,” says Nash. “Whereas, with music, the most avid listener would be having to make 300 decisions a day that they now don’t have to make.”
Amazon’s virtual stranglehold on ebook sales is another reason that subscription services are struggling. The ecommerce giant controls “something north” of 70% of the ebook market, says Mark Coker, the founder and CEO of Smashwords, a company that helps authors and publishers distribute ebooks. For $9.99 a month, Amazon’s Kindle Unlimited program allows ebook readers to choose from more than 1 million ebooks.
“You’ve got this single purveyor of ebooks that has been able to leverage its dominant market position to coerce and bully authors to enroll their books into this exclusive program [KDP Select], and Amazon controls their cost of goods sold,” Coker says. “They control what they pay the author or publisher for that book for whatever the measure of reading is.”
Coker adds that traditional publishers haven’t come to terms with the pricing pressure that Kindle Unlimited has started to put on their business. “It means that 99-cent books start to feel too expensive, especially if you’re an avid power reader,” he says. “There are a lot of readers out there, romance readers especially, that can read 30 books a month, and it also has implications for traditional publishers. It’s really interesting when I talk with traditional publishers about what I think Kindle Unlimited means to them—none of them are concerned.”
A Look Ahead
After an explosive period of growth and then a leveling off of sales, ebooks need something new and bold to kick-start sales, according to Nash. Part of the problem is the shopping experience—it’s not very engaging and needs to be made immersive and fun. An interactive virtual reality “ebookstore” could make ebook buying as serendipitous as finding a new book at Barnes & Noble while browsing. “I completely agree that all kinds of experimentation are necessary in those areas, but it’s not going to have a significant business effect for a long time,” Nash says. “I don’t think Amazon is going to be the source of that solution, because Amazon, basically, doubles down on price and convenience and, increasingly, convenience, but not on the joyful [experience].”
Coker has many predictions for the trends that will impact the industry in 2017 and beyond. Print, despite its comeback over the past year or so due to the adult coloring book fad, will continue to lose ground to ebooks, he says. Publishers who continue to prioritize print over digital will do so at their peril. Meanwhile, indie authors will continue to take market share from traditional publishers. Indie ebooks now control “somewhere between 10% and 20% percent of the market,” says Coker.
He thinks the trend will continue due to indie authors’ competitive advantages, including “faster time to market and more creative and promotional flexibility for their books.” The glut of high-quality, low-cost ebooks—due in part to those indie titles—is putting downward pressure on pricing. “I think that is a big trend that has really come into play the last couple years and is going to play itself out even more significantly in the next few years,” Coker adds. And, of course, Amazon’s dominance will continue to impact the industry, setting the tone in terms of pricing and availability of titles.
Growth in ebook sales has clearly plateaued, and it’s not clear where new customers and sales will come from. “So the question then becomes, ‘What are the new sources of demand?’-—and we just don’t see them yet,” says Nash.