While sales of e-books from major publishers have declined since 2014 — the year many gained the right to price their digital titles sold through Amazon — the overall market continues to progress, helped by independent and nontraditional publishing.
Sales of e-books from major publishers have waned since 2014, the year in which many of them gained the right to price their digital titles sold through Amazon — and jacked up prices. Those moves suddenly made books printed on dead trees a better deal. But that doesn’t mean the e-book market is stagnant. Far from it.
On Wednesday, Arnaud Lagardère, who heads Lagardère, the company that owns major publisher Hachette, said in an earnings presentation that e-books accounted for 22 percent of its U.S. general public book sales, down from a peak of 30 percent in 2013.
But the slack was picked up by a “rebound in the growth of sales of printed books to the detriment of e-books,” he told investors.
Last month, Robert Thomson, CEO of News Corp., the parent of major publisher HarperCollins, called the decline of e-books “a fascinating question” that “clearly shows that purchasers make a discerning decision based on price. They’re valuing a print book vs. an e-book.
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“You can see that as people are getting devices, they aren’t necessarily downloading as many digital books as they did previously,” he said.
E-book sales in the first nine months of 2015 were down 11.1 percent from the same period in 2014, according to the Association of American Publishers, which includes data from 1,200 publishers.
But that’s not the whole story, experts say. Part of the reason for the decline comes from terms of the new contracts the major publishers negotiated with Amazon, which allows them to set prices, based on the so-called “agency” model. That means the publisher is the seller of the digital product and Amazon acts as its agent, taking a big cut of revenue from the sale.
Lagardère acknowledged in the conference call Wednesday that the new contract with Amazon was weighing on profits.
In addition, independent authors that publish more often and more cheaply than the traditional publishers are taking a bigger slice of the pie.
Amazon doesn’t disclose Kindle e-book sales, but it says they grew in 2015, “with particular strength” in books released by the company’s publishing arm and by independent publishers. Also gaining were books that are part of Kindle Unlimited, a Netflix-like subscription service for readers.
Author Earnings, a website run by two self-publishing pioneers who survey authors and mine data from Amazon’s website, estimated that in less than two years the market shares of independents and the so-called Big Five publishers (Hachette, HarperCollins, Penguin Random House, Macmillan and Simon & Schuster) have inverted.
The Big Five account now for less than a quarter of e-book purchases on Amazon, while the indies are closing in on 45 percent of the market, according to the site.
That allows the digital market to stay vibrant. “There’s more dollars going into it; there are more authors going into it,” said one of the two people behind Author Earnings who uses the nom de plume Data Guy.
The decline of major publishers’ digital presence is a legacy of a longtime struggle between Amazon.com and the New York publishing world.
Bookselling has long been dominated by a so-called “wholesale” model, in which publishers sold books to retailers at a discount, and then retailers charged as they saw fit.
Enter Amazon. The aggressive retailer, seeking to jump-start the budding market for digital books when it launched the Kindle e-reader in the middle of the past decade, offered steep discounts.
Traditional publishers disliked the discounts, fearing not only Amazon’s eventual dominance of their business, but also an unprofitable race to the bottom that would wipe out the value of books.
“They were protecting consumers’ perception of what a book is worth,” says Peter Hildick-Smith, CEO of the Codex Group, a New York-based consultancy.
In 2012, efforts by the Big Five publishers to push for higher prices with the help of Apple under the agency model landed all of them in a federal court, battling an antitrust lawsuit by the Justice Department.
The publishers soon settled, but Apple held out until Monday, when the Supreme Court decided not to hear its appeal.
But in the end, starting in 2014, the Big Five got to switch their deals with Amazon to the agency model. That means they control the price but they also had to give Amazon a bigger cut of the money.
Newly released Kindle books that were once offered at $9.99 can cost nearly the same as the hardcover version. Data Guy said that might not be a problem for big-name authors. But midlist and new authors might have trouble selling at $12 to $15, which means “the traditional publishing pipeline is at risk. We’ll see the damage down the road,” he said.
Rise of the indies
On the other hand, independent and nontraditional publishing (including by Amazon) seems to be flourishing. Codex’s Hildick-Smith says Amazon added about 1 million new titles to its Kindle store in 2015, most from self-published authors.
Probably most of those books didn’t sell more than a few copies, he says, but “there’s a few guys who are doing pretty good business.”
Data Guy points to A.G. Riddle as a paragon for the genre. His first novel, “The Atlantis Gene,” sold more than a million copies in the U.S. and is being turned into a motion picture, according to the author’s website.
Traditional authors have embraced Amazon, too. The No. 1 book on the Kindle Store’s Top 100 Paid titles was “While You Were Mine,” a World War II love story by Ann Howard Creel. It was published by Lake Union Publishing, an Amazon imprint, and sells for $5.99.
One of her well-known previous novels, “The Magic of Ordinary Days,” is published by Penguin and was turned into a movie. It sells on Kindle for $11.99, more than the $10.39 paperback.