Books on bookshelves.

What Role Should Ebook Profits Play In A Publisher’s Business Strategy?

In a post about ways that we can use publishing data, I briefly noted the steep decline in sales of mass-market paperbacks between 2010 and 2012, the latest year for which data is currently available. The likely culprit for the decline: rising sales of eBooks.

This claim led me to ask if the growing number of formats is a problem or an opportunity for publishers. I don’t usually put aside workflow challenges, but I was interested in figuring out if the rapid rise of eBooks was a net benefit or a net drain for U.S. publishers.

So, I used the Bookstats database to better understand dollar and unit sales for hardcover, softcover, mass-market and eBook formats between 2010 and 2012. During that time, dollar and unit sales of all three physical formats declined. The growth in revenues from eBook sales more than offset those declines, even as the total unit sales dropped by 6.8%.

The shifts in sales for print formats were not trivial. Revenues from hardcover sales dropped $500.5 million (6.9%). Softcover sales fell $688.6 million (9.6%), while mass-market revenues declined by $780.7 million (48.0%) Ebook sales increased $2.35 billion, more than offsetting the combined $1.97 billion drop in physical sales.

The falloffs in unit sales were more significant. Hardcover sales dropped 8.3%, softcover fell 21.5% and mass-market unit sales declined 47.0%. Although eBook unit sales rose by 269% between 2010 and 2012, to 473 million units, the increase was not enough to offset the drop in physical sales. The number of titles sold contracted by 6.8%.

The average revenue received for a book actually increased by almost 10% during this time. Publisher prices (that’s how Bookstats tracks revenues) rose by 8.0% for hardcover books and 15.3% for softcover formats.

Prices for mass-market titles fell slightly (2.0%), but the average revenue for publishers from mass-market formats was $3.90 in 2012. By comparison, eBook unit revenues were $7.21, $0.37 a unit higher than paperback and second only to hardcover books in terms of revenues per unit.

The database doesn’t report costs, so we can’t accurately estimate margins, but intuitively we know that the incremental cost of producing and selling an eBook is much lower than is the case for any mix of physical formats. At least in this three-year window, then, more formats meant more profits, even as total unit sales declined.

I don’t want to minimize the concern all publishers and authors should have with a contracting market for reading. A reasonable argument could be made that the increases in unit revenue from hardcover and softcover formats is coming at the expense of overall demand for books. Ultimately, that could be a bad tradeoff for publishing.

But the near-term impact of a shift in formats appears to be a more robust picture for revenue and profits. Now is a good time for publishers to ask themselves what they can do to productively invest this bit of windfall.

Brian O'Leary

About Brian O'Leary

Founder and principal of Magellan Media Consulting, Brian O’Leary helps enterprises with media and publishing components capitalize on the power of content. A veteran of more than 30 years in the publishing industry and a prolific content producer himself, Brian leverages the breadth and depth of his experience to deliver innovative content solutions.

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