A scintillating day yesterday at the FutureBook Conference at the QEII Conference Centre in the heart of Westminster.
2011 has been the Year of Change, with digital content and eReading becoming established across the sector, thanks to the explosive success of the Kindle and (to a lesser extent) the iPad. The potential of smarter and more versatile devices, allied to social networking in the very broadest sense, has got people like Stephen Page rethinking the whole publishing paradigm – and it was great to see experienced but independent leading publishers like Page, Rebecca Smart and Kate Wilson being recognised for picking up the old business models and giving them a damned good shake. It was also refreshing to see more young and/or independent delegates, who will reshape the face of publishing over the next 5-10 years.
Dominique Raccah, CEO of Chicago-based Sourcebooks, kicked off:
Ereader users believe they are purchasing more titles. The evidence suggests, yes; but the industry still lacks a reliable eBook “chart” in the UK and the US, and Amazon/Apple are notoriously tight-fisted when it comes to sharing their data.
Ereader users believe their overall spend on books has risen. As overall spend (eBooks + pBooks) has fallen, this is hard to prove.
Ereader users believe they’re reading more. Again, ths is unproven, though there may be a link to “dual screen” use, whereby the user browses a device (most typically, an iPAd) at the same time as they’re watching TV.
A snapshot of the Top 85 Kindle charts in the US: 66% of titles were published by “traditional” publishers; 18% were self-published; and 16% came from “non-traditional” (ie digital) publishers. nb for the traditionalists, this compares to about 95% (my guess!) trad publishers in the average print bookshop.
Evan Schnittman of Bloomsbury divided the audience with his “hardcover + eBook” proposal (he’d charge a 25% premium for the bundle, which presumably would include a VAT element). Personally, I’m gung-ho for this idea, particularly as Evan reminded us of the difference between “books” (objects that deliver permanence and permit display), and “reading” (which is all about content).
I sometimes chuckle at the “convenience” argument around eBooks. Is it really a whole lot more convenient to carry an eReader than a single book? (Do you remember, in the dim, dark days before Kindle, when you used to say “I’d love to read more, but carrying a book is so inconvenient“?) It’s the enhanced convenience of carrying lots of books, and being able to purchase when you wish. These are great qualities, though perhaps they encourage the grasshopper mentality of the dual-screener? (Research suggests that 26% of Kindle users do this.)
Meanwhile, while the take-off trajectory of eReaders has been, and will continue to be, spectacular; though bear in mind that 76% of book-buyers have yet to buy any kind of eBook and – according to BML research – over 50% of those aged 35 or over don’t at present intend to do so.
Finally – I think this was an AT Kearney stat – European eBook sales currently break down as follows: 52% of all eBook purchases take place in the UK. Germany – where Thalia’s Oyo is making the running – delivers 28%. After that, France is at 7%, Italy 3%, and the rest of the continent 10%.
This brief run-down of stats doesn’t give the reader any real flavour of the optimism, enthusiasm and boundary-breaking that characterised great ideas and discussion from William Higham, Valla Vakili, Charlie Redmayne, John Mitchinson and many, many more. But we need to press on…
OK, let’s talk about bookshops
It fell to me to wave my accustomed bucket of cold water around the Fleming Room, and to remind the Conference that this once-in-300-years reshaping of the industry is taking place during the worst consumer downturn, and the worst set of economic forecasts, for many, many years. New devices, formats and ideas are being launched into the teeth of last Wednesday’s Autumn Statement, which promised austerity beyond the next election, and a return to 2001 living standards in – 2017? 2020? Providing the Euro doesn’t implode, of course – then things will be much worse.
So, book people need to be thinking not just about how to reshape their industry in such a way as to preserve copyright, encourage new talent and stop Our Friends in Seattle (or, more broadly, the “GAFA” group*) from dominating commerce and innovation; they need to embed that change at the same time as Joe Public is devoting his dwindling income to candles and tinned food.
I was chairing a discussion panel that brought together Kobo vendor relations manager Cameron Drew, Hive development manager Julie Howkins, Middle East bookseller/publisher Jeremy Brinton, Retail Week Knowledge Bank director Robert Clark, and Leo Burnett marketing strategist Dr Alan Treadgold. Here are some of our key points:
The UK pBook market has consoidated to one specialist (Waterstone’s), one generalist (WH Smith) and one website, which between them meet most of the needs of committed book-buyers. (Of course, there are also three participating supermarket chains, though they aren’t specialist by any definition.) This represents a real narrowing of the market – but perhaps that market will now start to broaden again, driven by feisty and more self-confident indies, the arrival of eReader alternatives to the Kindle (specifically Kobo), and an expanding reach (devices, channels, formats) from the Stephen Page-defined world of broad publishing.
However, no one has yet resolved the “showroom” conundrum: once its sales have fallen by around 20%, a physical bookshop becomes untenable, and has to close. Bookshops can move to cheaper premises, can sell a broader range of products (toys, coffee etc), but unless they are actively participating in eBook sales, their market share will be eroded beyond recovery. This will leave those 50% aged 35+ who don’t intend to buy an eReader for Amazon to scoop up into their search-excellent, browse-lousy world.
The panel recommended some solutions to this problem:
Ereader manufacturers that partner with retailers can encourage consumers into a bookshop relationship without committing them to a non-transferable, Amazon-type scenario. Hive-affiliated bookshops (currently about one-third of serious indies?) can sell eBooks in multiple formats, and share in the revenue they generate, as well as creating local incentives for their customers. And Kobo’s retailer partnership model (WHS, Fnac, Indigo etc) clearly has legs.
Physical bookshops must use their websites to drive store footfall. One of the UK’s most consistently successful retailers, Richer Sounds, has a strong eCommerce site, which nevertheless acts primarily as a driver to get customers into personality-saturated stores, where they can test the product and take advice from trained staff. There’s a bookshop model here.
Click-and-Collect is growing swiftly as a preferred distribution channel for many customers. 26% of Argos’s business is Click & Collect, and M&S, John Lewis and Sainsbury’s are among the retailers investing heavily in this service. Click & Collect allows the customer to pick up their goods at a time convenient to them – and of course exposes them to personal service, and many more buying opportunities.
Social networking through eReaders (Kobo Vox) can bring reading communities together, and could be curated by bookshops who currently support reading groups. Events and literary festivals not only bring together readers with shared interests, but underline a bookshop’s specialisms. (And deliver healthy book sales to boot.) In short, community runs through good bookselling like the words in a stick of rock, and good staff matter more in bookselling than perhaps any other retail sector.
Everyone in the world of books – publishers, authors, retailers, analysts – needs to be focusing more on their end customer: the person who buys the book. Historically (ie until a few months ago) publishers tended to view retailers as their customers, with (as John Makinson has noted) a B2B mindset at odds with the creation, marketing and selling of consumer products. Book trade people need to be aware of retailing best practice, and to understand how consumers and retailers are behaving in sectors far away from their own. We cannot integrate ourselves into 21st century lives while still behaving at one remove from our readers.
Finally, there is a common retail trend running through all sectors – fashion, homewares, electrical etc – and that’s a trend for fewer, better shops. We certainly have fewer bookshops than we had five years ago, and it seems likely that the number will continue to fall. Those that are left must be digitally integrated, and committed to a programme of continual improvement.
*GAFA: Google/Apple/Facebook/Amazon. Each is developing a vertically integrated suite of services and functions, as follows:
The walls around each of their gardens vary in height.
Richard Fletcher asks in today’s Telegraph, “Is the tax trap closing on Amazon, eBay and Google?”
Clearly, Amazon is having a hard fight in California, where the legislature is finally growing tired of internet businesses enjoying the legal right to avoid charging sales tax.
Fletcher goes on to highlight Amazon’s unusual position in Europe, where all its national entities function as “service companies” to a Luxembourg base. Luxembourg has very low rates of corporation tax (by European standards) and also very limited requirements for information disclosure. This gives rise to the absurd situation whereby the biggest bookseller in the United Kingdom makes no meaningful return to Companies House, and carries a significantly lower overall tax burden, compared to indigenous retail businesses.
Jeff Bezos hasn’t added his voice (as far as I know) to those successful Americans (cf Warren Buffett, Eric Schmidt) demanding more equitable taxation for large corporations or for the individually wealthy, and Amazon has fought federal and state tax collectors practically since its inception. Amazon has argued – with perfect legal justification – that their business model is not aligned with established taxation structures, but – as Fletcher concludes:
…the likes of Amazon, Google and eBay are no longer the loss-making start-ups they once were, but are now among some of the largest companies in the world.
It’s all been Borders, Borders, Borders for the past few days – I’ve written further on the topic for Publishing Perspectives, which you can read here.
So, today, without straying too far from our appointed texts, I want to look into the future, and ponder the retail cost of an eBook.
As I have previously written (and I’m far from alone, see Boyd Tonkin at the Independent), there is a battle going on between those who want to maximise the income they can derive from eBooks (which is understandable), and those who find so much of interest online that is free, that any attempt to charge them for content must be a big fat rip-off (this is also understandable).
This creates interesting philosophical questions around the value one applies to a product that doesn’t physically exist, and that, moreover, gives a single beneficial use before becoming largely redundant.
Paying for physical goods is a very different to paying for intangible services. I might pay more than I can afford for a picture on the wall, or less than I morally should for clothing from a cut-price store, but I least I have the thing, the object, with a value upon it, and I hold myself accountable for the price I paid.
Intangible services are different. Take something dismal, like insurance. Unless I claim, this product is useless, a waste of money, and a source of grievance each year when the premiums come around. And when I do need to make a claim, it’s hardly straightforward, but I have to buy the product, and that’s that – “you can’t put a value on peace of mind”.
And now, we have intangible goods. These have tended to be:
– relatively cheap, like iTunes
– expensive, but the product keeps on coming, like satellite TV subscriptions
– paid for by someone else – the company pays for those subscriptions to online professional journals, not the user
An eBook, by contrast, looks quite expensive, and in most cases (ie most narrative content), will be used (read) just once. My 99p iTune gets 20 plays before I get tired of it, whereas my eBook gets read once.
Now, I am in the Tonkin camp – I think books are too cheap, and I believe that society has been taught to under-value them. But we are where we are, and I am fearful of the next race towards the bottom.
Let’s assume that there is a right and fair price for a physical book, and let’s assume, to keep it simple, that it’s £10.
If I purchase this book from a chain bookstore, then (keeping the numbers round), the publisher gets £5, and the retailer gets £5. The publisher pays the author, the paper merchant, the printer and the distributor; pays for their own infrastructure and covers their marketing costs. The retailer pays for premises, staff, their infrastructure, and their marketing costs. (There will have been much horse-trading between publisher and retailer on marketing costs.) Both hope to make a few bob profit from the deal.
So, eliminate the retailer, and let’s assume that the costs of creating and maintaining digital content aren’t dissimilar to the cost of printing and distribution (a low proportion of the total value anyway). So the retail cost of the eBook should be £5.
However, and this is where we reach today’s thesis, how does the reader find out that the eBook exists? Book marketing has always been relatively low-cost. A launch party and review copies to drive press and media coverage. Advertising on the transport networks and in targeted magazines. And the holy grail, word of mouth recommendation.
The inventiveness of book marketing and PR, on budgets that wouldn’t keep Procter & Gamble or Unilever in paperclips for a week, is remarkable. Books are interesting, but they’re rarely glamorous, and they don’t generate much gossip fodder. (Even when Martin Amis flares up, it’s only really of interest to those in the know.)
But books have had one great marketing tool – national chains of showrooms in every town, that have enabled the online buyer, supermarket shopper or eBook reader, to browse as many titles as they like, read whole chapters, photograph the covers, note down the ISBNs and then purchase elsewhere. These showrooms (also known as “bookshops”) are now closing down across the western world, and their numbers will fall much further over the next couple of years.
So, if the showrooms close down, how will the publisher alert the reader to the existence of new downloadable content? “Social networking!” say the youngsters, but I don’t see this as a substitute for bookshop serendipity. My Facebook and Twitter pals flood my devices with a welter of messages, and I ignore at least 90% of them. Furthermore, while my pals are typically people who share my background or taste, they aren’t me. They don’t know I might be harbouring new interests, and that I might be susceptible to republished 1930s novels, or accounts of the Franco-Prussian War. And because my daughter browses Amazon more than me, Jeff Bezos thinks I’m mostly interested in frocks.
Bookshops have been a remarkably efficient tool for matching the right reader to the right book, because the reader is prepared to invest time in bookshop browsing. Online sellers have tried every which way – “You Might Also Like”, “Look Inside” – but these tools often just take the reader round in circles. People who bought Our Kind of Traitor also bought Tinker Tailor Soldier Spy. Great, but I’ve read that, and anyway, I’m done with le Carre for the time being, thanks.
If the established publishing houses are going to continue to bring us variety and innovation; if they are to support new authors, experimental authors, foreign authors (bones of contention all), then finding the readers for these eBooks is going to require a substantial increase in the volume, reach, quality and cost of marketing.
Quite how this will be done without my allowing Google to flog my search details to any third party (please don’t), or by having me fill in lots of online forms about my interests, or by me having to scour the Twitter feeds from every publisher, every day, to understand what will work for me, I don’t know. Whatever the approach, it will cost money, and it will require sophisticated consumer targeting.
What I do know is that bookshops sold books – sold books online, sold eBooks, sowed the seeds of their own destruction. Without these showrooms, the process of alerting consumers to new titles, and keeping old titles alive, is going to be a very different and challenging prospect.