January 23, 2012
This week hundreds of us in and around the book industry will converge on Digital Book World 2012 (#DBW12). It's a conference that has risen in significance because this industry has rapidly come to understand that it is uniquely susceptible to digitization — and poised to benefit from it — in a way that other media are not.
This awareness has translated into relative optimism among publishers. As I'll share with the DBW12 audience on Tuesday morning, we recently conducted a survey with Digital Book World of publishing executives whose companies together earn 74% of all US trade publishing revenues. As we closed out 2011, 82% of publishing executives we surveyed were optimistic about the digital transition. That's a large number, even if it's smaller than the 89% it was a year ago. But when we take into account all the measures of optimism we threw at them — about the industry in general, about the fortunes of readers, and the importance of their own roles — most of them decreased somewhat and some decreased significantly.
Most tellingly, only 28% of these executives thought their own company would be stronger in the future because of digital compared to 51% who agreed with this sentiment the prior year. This suggests that publishers have started to do the hard work of making the digital transition and they're finding that it is, indeed, hard work. It's worth putting ourselves in the shoes of these publishing industry product strategists for a moment to consider just why they aren't positive that their companies are going to come out better off. I see three reasons:
1 – Physical book sales will decline significantly in 2012. A solid 54% of our respondents believe print sales will go down, though just 5% are willing to say they will "decrease significantly." You can't lose Borders in 2011 and not expect overall sales in 2012 to hold steady. But it's not just Borders; even Barnes & Noble will be ordering fewer copies of fewer books as it reformats its stores to promote the Nook Tablet and all it has to offer — including nonbook experiences like movies and games. This decline will at best be distracting to publishers and at worst will cause them to stumble in their digital efforts as they swallow hard and adjust their product mix.
2 – Amazon will go for broke this year. Executives think Amazon and other online-only booksellers will sell 41% of eBooks in 2012. But this does not even begin to describe Amazon's ambitions — the company wants to control the future of books, movies, music, apps, shopping, and all of their intertwinings. There are billions of dollars of value yet to be harvested from the unprecedented efficiencies that Amazon's Kindle platform can create. To do this, the company will underprice all of those product experiences — you'll get everything cheaper if you're a faithful Amazon customer — and it won't care if it permanently resets price expectations. Complain if you must, but this is called Econ 101 and it's the reason Amazon has A to Z in its name.
3 – Content will slip farther out of publishers' control. Apple's new book-authoring tools and NBCUniversal's announcement today that it will become a publisher are just the latest in a long train of abuses launched by disruptive outsiders, startups, and discontented authors. From Kindle's self-publishing platform that made Amanda Hocking the talk of the publishing world to Smashwords' tripling author count and quadrupling title count. All the while apps no longer inspire enthusiasm for publishers — just 19% think apps could be more transformative than eBooks, down from 46% the year before.
Notice that I gave Amazon a whole paragraph but only barely mentioned Apple. That's because Apple won't win in digital publishing in 2012. And possibly not ever, not without a cheaper device strategy (explain that one to Wall Street) or a more inclusive distribution philosophy (iTunes as an Android app? Not likely). But the company's mere presence on the horizon will spur Amazon to make its boldest moves, and that's reason enough to give the company a nod. Despite all this, publishers need not fall into despair — and our data suggest they haven't done so, at least not yet. As I'll share tomorrow at the conference, people are generally optimistic still, even if that optimism is waning. But they do have hard work ahead of them, which is all the more reason to spend the next few days together trying to figure it out. I expect to see a lot of sleeves rolled up!