Books are following the seemingly inevitable trend from physical to digital, with the e-book sector now taking up some of the printed book revenue slack, reports Alison Casey, Head of Global Content at Futuresource Consulting.
Over the last two years the physical trade book market has been in decline, with consumer spend dropping in the UK by 3% in 2010 and 7% last year. However, the consumer e-book sector (also known as trade e-books) is now beginning to produce a viable revenue stream, assisted by the increasing availability of e-book services and titles, as well as dedicated and non-dedicated eReading devices.
This growth – although not completely offsetting the slump in physical books – is going some way to ensuring the market remains stable, with consumers spending £88 million on e-books in the UK last year, which equated to 5% of the total UK book market, growing to 13% by the end of 2012.
The UK continues to lead the way in Europe, and in 2011 accounted for more than 50% of the European market in value terms. This is largely driven by Amazon and the Kindle, with owners purchasing an average of 18 titles a year. Despite the launch of the iPad and Apple’s foray into e-books, Futuresource research shows that by the end of 2012, 85% of people within the UK will still be accessing their e-books on a dedicated reading device. It is within the realms of newspaper and magazine publishing that the iPad is having by far the most impact.
As the market develops, it is starting to experience similar issues to the music and video industries, with piracy rife in some European countries (particularly Spain and Italy), non-interoperable DRMs and inconsistent pricing strategies. Although the e-book sector has been able to learn from some of the challenges that the music industry has experienced, the consumer’s perception of the monetary value of digital content remains the same, regardless of whether it is music, video or books. As a result, publishers are having to retail e-books at a price point that is substantially below that of physical books.
The educational and academic sectors are leading the way in terms of business model innovations, quickly moving to subscription services and offering paid-for access to digital files in perpetuity, as well as shifting into cross-platform multimedia publishing. Many businesses experienced an upsurge when the iPad was launched and a number of academic and reference book vendors are now publishing for tablet devices as well as for e-readers. Reference books in particular are ahead of the game here, with titles like Rough Guides, Eye Witness and Human Body pushing the boundaries of publishing on tablet, with audio and video being embedded into the offering.
The European landscape continues to exhibit many country differences, with all markets lagging behind the UK, primarily due to the language aspect, as the majority of paid for e-books available on the market today are still English language. The delayed introduction of the Kindle into both France and Germany has also impacted. Arriving in the second half of last year – due in part to Amazon’s negotiations with local publishers to ensure the content ecosystem was in place pre-launch – the market remains in its infancy. However, the Kobo e-reader, owned by the Canada-based company of the same name, is performing well within Europe and has brokered many retail partnerships across the region to further embed its offering.
Germany is making some market gains, but continues to be focused upon physical books. With the highest per capita spend on books in Western Europe – more than twice that of the UK – the opportunity for e-books is highly favourable, although local book pricing laws will restrict companies from replicating the loss-leading pricing strategies that were implemented in the UK and US.
The Spanish market and, to some extent, the Italian market are being heavily impacted by the challenges of piracy, echoing trends seen within the pre-recorded CD and DVD industry. A limited number of paid-for e-book services is compounding the issue and acting as a key obstacle to legitimate e-book market growth. Legally free e-books (predominantly out of copyright) continue to play an important role in these countries, offering legitimate content where paid-for services are yet to fully develop, providing consumers with an alternative to pirated content and instilling a sense of legitimacy to the business.
The launch of Google’s e-book service in Europe is having significant impact, providing a recognizable branded service offering millions of free legitimate titles alongside paid-for content. Additionally, the service allows for storing purchased books in the cloud, ensuring they can be accessed across multiple devices enabling consumers to reap the benefits of heightened competitive forces within the marketplace. However, due to the long history of content piracy within these countries, it is unlikely that paid-for e-books will gain much market share any time soon.
In the years ahead, the dynamics of the business across Europe will evolve rapidly, with the emergence of advertising funded and subscription library services, along with added value and interactive titles designed to enhance the consumer experience and blur the dividing walls between books and other entertainment platforms. There is also a groundswell of innovation taking place among many start-ups and independents that are focusing on various aspects of the backbone technologies, prompting publishers to evaluate acquisitions as a way to rapidly accelerate their knowledge base and gain first-mover advantages on the competition.
