Thursday, December 16, 2010

Why We Should Get Ready for a Plunge in Print-Book Sales

I wrote earlier this week that publishers need to prepare for a decline in print-book sales that's much steeper than what we have seen thus far, and that is likely to accelerate the reshaping of the industry. The reasons why this seems inevitable derive not from any intrinsic superiority of e-books, nor any growing technophilia or screen-tropism of readers, but rather from the structure of the market. 

For one thing, e-book sales don't replace p-book sales on a one to one basis, as my colleague Evan Schnittman points out in his post "E-Books Don't Cannibalize Print, People Do." Evan argues that once you have adopted an e-reader--whether it's Kindle, Nook, or your iPhone--you soon give up buying print books. You become so happy with the convenience of instant purchase and the bookshelf-in-your-briefcase that you virtually give up purchasing hardcovers--in fact, he argues, you'll simply forgo a title that's not available in e-format. 

I don't think this holds true 100% for all readers--I read e-books aplenty but still buy p-books. But my hunch is that Evan is pretty much on the money: the graph of p-books purchased by an e-reader owner is a step-function. It doesn't slope down gradually, it drops almost straight down once someone becomes an e-book convert. (The good news for publishers is that (a) those e-book sales can be more profitable than print and (b) the graph of e-books purchased by the new e-thusiast is of course also an upward step function, from zero to lots. Lots of evidence suggests these e-thusiasts buy more books than ever, partly because it's so easy to do. But right now I'm focusing on print, which is a less happy story. Keep in mind that those e-reader owners are usually avid readers, i.e. they are our best customers for print books.) 

So at the level of individual consumers we're losing not just one print-book purchase at a time, but potentially scores, or hundreds, as that person adopts e-reading. Now look at this at the level of bookstores. Right now e-book sales constitute, at a rough guess, 10 percent of the market and their share is growing rapidly. For many small businesses, especially in a low-margin industry like ours, losing 10 percent of your sales volume is the difference between profit and loss. Even a 5 percent dip is a challenge; imagine looking at a 10 percent dip and thinking, next year it'll be 15, and the year after, who knows? Yesterday I linked to an NPR story about a couple of independent booksellers who have prospered despite the difficult market, and hats off to them. But over the past several months, stories of bookstore closings have, alas, been more common. This week, two beloved indies in Minnesota announced closures, explicitly pointing out that they have lost customers and sales to the e-book revolution. One store owner made the complaint, common among booksellers, that customers browse her shelves to decide which books to download at home. " We're really now a showroom for books." You can see why these folks may decide it's time to call it quits.

This, too, is a step function. When a bookstore closes, the sales at that location don't slope down, they drop to zero. Multiply this across many bookstore closings--including locations now being closed by the chains. Furthermore, many surviving stores, in self-defense, are devoting more shelf space to nonbook items, which means fewer print books stocked, and fewer sold. With all this, it seems clear to me that print sales are going to fall, if not off a cliff, down a teeth-rattling escarpment. Just to tighten the spiral, we're also going to see smaller print runs, thus higher per-copy costs, thus higher prices for printed books--which is only going to push more consumers toward e-books! 

What all this means is: up to now, e-book sales have been growing faster than hardcover sales have been declining, so overall big publishers have been seeing growth. But we may soon reach a tipping point where because of the loss of sales outlets, print sales drop off much faster than e-books replace them. I remember the wailing and gnashing of teeth--and the austerity programs and downsizing-- among publishers back in the 90s, when the chains' great expansion of superstores leveled off (that is, when sales merely stopped growing, never mind declining).

I'm not predicting apocalypse here, or even calamity. As I said in yesterday's post, I expect hardcover books, bookstores, and publishers to survive, and some even to prosper. But I am predicting major disruption. 

(Photo: Cliff diving in Cyprus, via Wikimedia Commons)