Several times per year, I write up a summary of the latest industry developments that have meaning for authors. The latest one was The Myth About Print Coming Back and Bookstores on the Rise. Here’s the picture now developing.
Traditional publishing is in a funk—is it temporary?
A Publishers Weekly article in late July pointed out that no new novel had cracked the top twenty print bestsellers in the first half of 2016—that the year lacked a blockbuster novel similar to 2015’s The Girl on the Train. The article speculates that current events (the election cycle, terrorist attacks) may have squeezed out book coverage, but also that the division of sales between print and digital formats may be a factor.
According to Nielsen Bookscan, for print book sales (primarily traditional publishing sales):
- During the first quarter of 2016, frontlist adult fiction sales were down by 17% compared to 2015
- During the second quarter, they were down by 4%
- First quarter backlist sales were up by 4% compared to the prior year
- Second quarter backlist sales were up by 9%
The fact that backlist sales are up while frontlist has declined may mean that readers aren’t hearing about new books as much as before, or that they may be price sensitive and are waiting to buy. Really, it could mean a lot of things.
But the picture became more clear when the biggest New York publishers released their financial results for the first half of 2016—compared to the prior year:
- Penguin Random House (PRH): sales down 10.7 percent
- Hachette Book Group USA: sales down 6.6 percent
- HarperCollins: sales down 2.5 percent
- Simon & Schuster: sales down 3.5 percent
For Penguin Random House, the CEO said the shortfall was related to “the absence of newly published megasellers,” as well as the poor performance of ebooks in the United States and UK. Helping make up for the losses: steady print book sales and audiobook sales.
Industry consultant Mike Shatzkin recently wrote, “Higher ebook prices reduce the speed with which a book can catch on in the marketplace. It feels like there is a consensus in the big houses now that it is harder to create the ‘surprise’ breakouts. … The Girl on the Train phenomenon is always unpredictable, but big publishers still could count on it coming along often enough to keep the sales revenue trend line rising. That doesn’t seem to be the case anymore. High ebook prices—and high means ‘high relative to lots of other ebooks available in the market’—will only work with the consumer when the book is ‘highly branded,’ meaning already a bestseller or by an author that is well known. And word-of-mouth, the mysterious phenomenon that every publisher counts on to make books big, is lubricated by low prices and seriously handicapped by high prices.”
Barnes & Noble losses mean even more grief for traditional publishing
The largest bookstore chain in the United States is once again without a CEO. In August, he was given the boot by B&N’s board of directors, who cited a poor fit. The company continues to lose sales even while other retailers—both Amazon and independent booksellers—enjoy increases.
Here’s a brief look at B&N milestones over the past year:
- September 2015: New CEO Ron Boire takes the helm; the stock plunges 30 percent upon news of a surprise loss. Media outlets wonder if Barnes & Noble can be “saved,” since the Nook business shows a decline of 22 percent against the prior year.
- December 2015: Boire hopes to turn B&N into a lifestyle brand, saying “Barnes & Noble has become a destination for personal development, learning, and entertainment.” Overall performance continues to look stagnant, at best. The BN.com website suffers reduced traffic and sales to the tune of 22 percent due to its problematic relaunch over the summer. Nook sales are 32 percent lower against the prior year.
- March 2016: Nook pulls out of the UK market; it now operates only in the United States after previously operating in forty countries. Nook’s digital content sales are down by 56 percent since 2012.
- June 2016: More information is released about B&N’s new concept stores, with the first set to open in October 2016. For fiscal 2016, B&N overall sales are down 3.1 percent from the prior year, and print book sales decrease 1.5 percent.
According to Publishers Weekly, the Big Five publishers were unhappy to hear about the CEO’s exit, which was not at all anticipated. Some worry it will set the retailer further behind than ever, right as the industry heads into the critical holiday shopping season. The Wall Street Journal said the new B&N leadership believes the bookseller “‘shot itself in the foot’ by cutting store personnel and aggressively reducing in-store inventory.”
B&N financial reports consistently show increases when it comes to sideline items, such as toys and games. The new concept stores are expected to decrease shelf space for books and provide space for customers to just hang out. The most widely touted feature is the inclusion of full-service restaurants, complete with wine and beer offerings. B&N hopes that such features will drive more traffic to stores and keep customers around longer. Once again, Mike Shatzkin has some of the best insights, this time on what B&N needs to do to survive.
Meanwhile, Amazon increases its physical retail footprint
A little less than a year ago, Amazon opened its first brick-and-mortar bookstore in its hometown of Seattle, and apparently it’s doing well enough that Amazon is moving ahead with stores in other locations across the country. If you’re unfamiliar with the concept of Amazon’s stores, here’s what you need to know:
- They have a relatively small square footage when compared to Barnes & Noble. The most recently opened store is 3,500 square feet, and the average Barnes & Noble is ten times that size, sometimes more.
- All the books are face out, so the emphasis is on curation.
- No prices are listed; customers have to check book prices on their phones. The San Diego Union-Tribune reports that the sales staff’s most frequent refrain is, “Do you have the Amazon app on your phone?”
Perhaps even more interesting: Amazon is investing in pop-up stores across the country. Such efforts are separate from the bookstore initiative and focus on promoting Amazon’s hardware, particularly the Echo; each has a small footprint—about 300 to 500 square feet—and they are found primarily in malls. According to Business Insider, “Given Amazon’s obsession with data, the decision to expand the network of stores may indicate that the company has seen an uptick in online sales in the regions where it already has pop-up stores.”
Some media analysts have speculated that it matters little how much Amazon profits from its stores; the real play is about customer data-harvesting, particularly in relation to dynamic pricing, and selling such methods to other retailers. For more on this theory, check out this On the Media episode.
Two years of Kindle Unlimited: the question of Amazon exclusivity still looms large
Amazon’s ebook subscription service, Kindle Unlimited, launched in July 2014; for $9.99 per month, Amazon customers can have “all-you-can-eat” access to more than 1 million ebook titles and thousands of audiobooks. It remains one of the most important services to keep an eye on for both traditional publishers and self-publishing authors.
For those who aren’t aware of KU basics, here’s a quick recap:
- None of the major publishers offers its titles through KU. It is populated predominantly by small to midsize publishers and self-published authors.
- KU pays self-published authors based on pages read. For indie authors with titles available in KU, Amazon sets a monthly per-page payment rate retroactively. (Yes, that means authors don’t know what they’ll earn in KU until Amazon tells them—after the reading takes place.) Furthermore, authors can enroll titles in KU only by being exclusive to Amazon through KDP Select.
- Amazon must continually root out scammers. Some unscrupulous people have accumulated falsely high page reads in KU by deceptive means; Amazon has to remain vigilant to prevent underhanded tactics that hurt all indie authors, since there’s a fixed amount of money to go around each month.
Despite the flaws, indie authors, as well as some small and midsize publishers, are going all in with Amazon on ebooks and KU because it makes financial sense, at least in the short term. But the question remains: Does it pay to stay enrolled?
- Established authors have less to gain by being in KU and exclusive to Amazon. Bestselling authors, especially, favor having their books distributed as widely as possible; they have a reliable fan base and a steady stream of sales for new releases as well as backlist. Joanna Penn is one established author who goes wide, not exclusive, but does make exceptions for some of her titles with little to no audience outside of Amazon.
- Established authors are more likely to view KU as a short-term marketing tool. They enroll specific titles in KDP Select and KU for ninety days knowing they may earn less overall for that title, but accept that fact as the cost of marketing. KU page reads do contribute to a title’s Amazon ranking, and thus can make a title more visible and discoverable. Indie author Lindsay Buroker said in December 2015, “KU really only helps if you can leverage it into being in the top 100 in your category, and if you’re selling a book or two a week it’s probably not going to change anything.”
- New or unestablished authors have less to lose. Without an audience in place, authors may benefit both from the increased visibility that comes from KU reads and from the income from those reads. Lindsay Buroker has a good explanatory post on this.
- For an outlying perspective: Hugh Howey has been an advocate for KU and exclusivity. Read his blog post.
To see charts and data about the historic performance of KU payouts, take a look at Written Word Media’s comprehensive description. As long as Amazon represents 80 to 90 percent of most indie author ebook sales, there’s little risk to new authors to enroll in KU for ninety days at a time. That said, other ebook retailers have (understandably) tried to discourage authors from going exclusive, saying that sales aren’t being given a reasonable chance to grow at other channels.
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