Are Ebooks Declining, or Just the Publishers?
I framed yesterday’s piece Disconfirming Ebooks as the search for, well, disconfirming evidence about Aggregation Theory, which, I believe, has the potential to provide a framework for understanding how the Internet will fundamentally remake traditional industries. To that end I was very interested as to why ebooks, according to this New York Times article, seemed to be behaving differently than I expected: specifically, why were they declining?
To my regret, and in a rich bit of irony, I failed to research disconfirming evidence for the New York Times’ conclusion that ebook sales were indeed dropping.
Fortunately, the Author Earnings blog took no such shortcuts and came to some different conclusions. I strongly suggest reading the whole thing, but here are some pertinent excerpts:
The widely-heralded “plateauing” of the US ebook market has gotten plenty of press over the last 18 months, fueled primarily by these reports of declining ebook sales from the AAP, from Nielsen, and in the released quarterly financials of the Big Five. Traditional publishers and publishing industry pundits are claiming that the broader US ebook market has now flattened, or is even shrinking…
A lot of the confusion stems from this: in nearly all media coverage of the AAP’s declining ebook revenue, their sales — the sales of just 1,200 traditional publishers — are being conflated with the overall sales of the entire US ebook market…
Here at AE, over the last seven quarters we have steadily built up a comprehensive database of quarterly cross-sectional snapshots of the Kindle store, each of which captures between 45% and 60% of Amazon’s daily ebook sales. And while Amazon’s Kindle store alone doesn’t comprise the entire US ebook market, it does account for 67% of all traditionally-published ebook sales by most accounts.
AE’s conclusions, captured in this chart, certainly seems to suggest that the original Aggregation Theory thesis — that suppliers (authors) would be unbundled from distributors (publishers) — is exactly what is happening:
That is a pretty stark shift from the big publishers to independents (and it’s present in units as well).
However — and in the spirit of seeking disconfirming evidence! — I’m not sure exactly what this data says. Specifically, note that it only shows share of ebooks, not total sales. And, in fact, if you dig into the underlying data, it turns out that despite this shift Ebook sales are at best flat. I compared the Author Earning’s blog’s May 2015 report to its May 2014 report (to best match the data in the New York Times story, which is for the first five months of the year) and found that publisher ebook revenue is only up 1%, while Amazon’s revenue is down 1% (which, should be noted, contradicts the company’s public statements.
Moreover, I’m not sure how much stock to put in these numbers: as best I can tell the Author Earning’s blog takes snapshots of the entire Amazon store on a single day, which has two problems: there could be an outlier effect, depending on what is happening that day, and given Amazon’s push towards its own labels and to independent publishers in general there is likely a stronger representation of independent writers in Amazon’s data.
Ultimately, I actually do think most of my conclusions in Disconfirming Ebooks holds. Ebooks aren’t nearly as revolutionary as you might expect, in part because they’re basically like online travel agents: a more convenient mechanism for what actually exists. That said, one takeaway from the Author Earning’s blog data is that books do seem to be very elastic: it seems obvious that the shift to agency pricing and associated higher prices has a direct connection to the falling share for big publishers in the ebook market. And, beyond that, the fact that there is any shift at all away from publishers to directly dealing with Amazon is very much inline with the original formulation of the theory.
That said, based on some of the responses I got, I think many folks missed the implications of my conclusion:
There is one more point though: books don’t exist in a vacuum. The implication of ebook sales falling while remaining 20% of the industry is that the industry itself is in decline. Ultimately, in the grand competition that is the market for consumer attention, the fact that books aren’t really improving while everything else is getting better means the publishers may in the end be celebrating the most pyrrhic of victories.
If ebooks don’t really modularize books, that doesn’t mean modularization isn’t happening. Consider this blog: the length of a standard book is about 64,000 words which just to happens to be about how many words I write in a month-and-a-half! Basically, since the launch of the Daily Update, I’ve written the equivalent of about 10 books.
Moreover, the time you all spend reading this update has to come from somewhere: attention is the ultimate zero sum game. By my count I have basically reduced ebook sales by the tens of thousands, in part by breaking up what in the past may have been my book into many component parts. That, ultimately, is probably the true modularization: ideas, not books.
Sadly, I wanted to prove this was the case: I spent nearly eight hours today trying to massage the Author Earning’s data to discover which types of books had increased or decreased over the last year. Unfortunately, that meant dealing with an Excel file with 197,225 lines, and after about my 30th crash (not exaggerating), I had to give up. For today, anyways — I’m going to give it one more go after I finish this (for good reason!) late update.
To read the rest of this Daily Update, including a discussion of Oyster and how niche the book publishing market is, along with some notes about the Washington Post, Business Insider, and yet another problem with programmatic ads, you must be a subscriber.
To read this daily update you must be a subscriber (Current members login here.)
Stratechery.com is supported by subscriptions to the Daily Update.
- $10 per month or $100 per year
The Daily Update consists of substantial analysis of the news of the day (~1800 words) delivered via three daily emails in addition to the free weekly article (four total articles per week). These updates are always timely, but also timeless in their investigation of “Why” and “What’s next.” If you love Stratechery’s Weekly Articles, you’ll love the Daily Update.
Ben Thompson’s depth of thinking and analysis around technology trends and market disruption is pretty much unparalleled. The ratio of “Wow that’s an interesting way to think about it” reactions to dollars spent on the Stratechery subscription is off the charts.
Aaron Levie, CEO Box and Daily Update subscriber
Stratechery is one of the few websites that makes me angry. It makes me angry because Ben Thompson consistently writes things that I wish I had written myself.
John Gruber, Author of Daring Fireball and Daily Update subscriber
I love reading Ben’s daily strategy pieces. As an investor in startups and public markets, I want to hear what passionate thinkers and strategist think of all the product and feature news released by the leaders. Ben takes the time to dive deep after digesting the daily tech news.
Howard Lindzon, Founder Stocktwits and Daily Update subscriber
In a world of hyperbolic tweets and biased content marketing, Stratechery is a daily shot across the bow of tech’s echo chamber.
Hunter Walk, Partner Homebrew and Daily Update subscriber
Ben Thompson’s Stratechery is usually the smartest thing I read all day, and the first thing I open in my inbox each morning.
Mike Arrington, Partner CrunchFund, Founder TechCrunch and Daily Update subscriber
In addition to the Daily Update, subscribers get access to the Stratechery Membership Forum for in-depth discussion of tech strategy, moderated by Ben, as well as priority email access.
You can see samples of some Daily Update articles here or see a list of recent topics in the sidebar (bottom of the page on mobile). Please note that all subscriptions auto-renew monthly/annually (but can be cancelled at any time; there are no refunds).
If you are interested in ordering and managing multiple subscriptions for your team or company, please fill in the form here.
Can you create a custom invoice that meets my government/company requirements?
I am happy to create an invoice to your specification for annual subscribers; however, it is simply not viable for me to offer this service to monthly subscribers. Therefore, if you need a custom invoice please subscribe or switch to an annual subscription.
Do you offer a student discount?
Stratechery is purposely kept at a low price — thousands of dollars less than other analyst reports or newsletters — to ensure it is accessible to everyone, including students.
I can’t purchase/login.
Check the security setting of your browser: if you have disabled 3rd-party cookies then Stratechery’s membership software won’t work. Either use another browser or change your setting; after you register/login you can change the setting back for a good long while.
Can I switch to an annual plan?
Yep! Just go to your account panel and select the alternate plan. You’ll be switched after your current subscription period ends.
Can I give a subscription as a gift?
Yes! Please visit this page.