MoneyMagpie

Jul 30

Are We Reaching the End of the eBook Age?

Very few incidents caused quite the ruckus in the typically quiet realm of eBook publishing than when, James Daunt, managing director of UK bookstore juggernaut, Waterstones, reported to the Financial Times that sales of eReaders had “disappeared for all intents and purposes.” As it turned out, traditional paper-based books had a surge in popularity. Daunt based his pronouncements on the end-year sales figures of Waterstones stores, and further attributed this trend to the company refurbishing hardbound and paperback books to its 290 stores across the country.

 

Where is the Decline?

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According to reports, sales of standalone eReading devices peaked in 2011 with 23.2 million units out in the market. Since then, global demand for such devices rapidly declined with only an estimated 7.8 million expected to be shipped by the end of 2015. Analysts attribute this downward trend of declining hardware sales to a couple of factors. One, such devices do not require frequent refreshing. Devices purchased in 2011 that still work today will likely not get replaced with new models anytime soon.

The other factor is Android. Google’s operating system is now enjoying a 78 percent market share over competing services like Apple’s iOS and Windows Phone. Meanwhile, Google’s hardware partners like Samsung and Asus have introduced devices that infringed upon eReader territories. With 5 inches now their standard display size, it makes more sense for users to opt for mid-range smart phones that can do more and cost less, if not about the same, as an entry-level eReader.

Android isn’t doing so badly itself. According to App Annie’s Q2 2015 market report, Google Play actually surpassed its closest rival, the Apple App Store, in the number of apps downloaded worldwide, by a significant 85 percent. However, revenue-wise, the App Store still had it higher at 70 percent. This inverse correlation can also be explained by a couple of factors, first being that inexpensive Android devices are flooding a larger market with less buying power than the average iPhone or iPad user. The other factor is that the Google Play Store is not available in China – a large market where iOS maintains a commanding presence.

 

 

Not a Decline—a Diversification

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However, App Annie suggests that there is room for growth and an expanding opportunity for app publishers in the Google Play platform. The app store analytics firm Reportex a 2.4 year-on-year increase by mid-2014 in indexed revenue for Google Play, of which 90 percent are contributed by games. Revenue from “freemium” apps grew to around 98 percent of Google Play’s revenue worldwide in the same period. Freemium apps are apps that are initially available for free but require a one-time payment to unlock additional features like, as in the case of most games, more difficulty levels.

On the other hand, free reading apps for Android by Nook and others don’t make their fortune by putting a price on half of their features. They get installed on a user’s device “guns blazing,” ready to fire everything they’ve got. Such apps peddle content to make money. Yet even there, the numbers don’t look particularly well.

According to a report presented by Nielsen Book president Jonathan Nowell at the Digital Book World Conference in January, sales of eBooks are also at a decline after shooting up an impressive $60 million in sales earlier in 2014 before gradually losing steam as the year progressed. Another group, the Association of American Publishers (AAP), seemed to have corroborated this report with its own research which uncovered that revenues from eBooks are down by 10.2 percent in early 2015 compared to the same period last year.

 

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However, this “decline” actually appears to have been caused by a spike that generated an outlier in the data of 2013. This confusing performance can be attributed to the sudden and dramatic increase in sales of hardware like smartphones and tablets during the holidays at the end of 2013. New users would be more inclined to purchase and load up their devices with eBooks during the holidays than they would be at any time of the year afterwards, where more casual sale rates are to be expected.

Recent squabbles between publishers and online retailers over pricing may have also contributed to this decline. The conflict led to agencies pricing eBooks more liberally, which either scared off the market or led them to independent and self-published eBook stores, whose sales performance cannot be immediately tracked by groups like Nielsen or the AAP—but appear to be thriving globally outside the capacity of professionals to measure.

 

Professional Confidence

Despite the seemingly lackluster performance of the industry at present, experts still see value and growth in digital publishing and distribution. In separate reports, three different market intelligence firms—Strategy Analytics, PricewaterhouseCoopers and Forrester Research—have expressed more bullish outlooks, predicting double-digit growth in five to ten years. All agree that eBooks aren’t going anywhere anytime soon.

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