Jeffrey Trachtenberg and Geoffrey Fowler's article in the Wall Street Journal today really got me thinking. Trachtenberg and Fowler report that some publishers are withholding the release of eBooks until the hardcover printing has run its course–which we see as the latest manifestation of publishers' shock and denial of the digital revolution and the catastrophic change it will wreak on their industry.
In the article, the reporters quote a literary agent comparing eBooks to DVDs, arguing that the film industry would never release a DVD at the same time as a theater release, so why should publishers cannibalize hardcover sales by releasing eBooks simultaneously? Well, here's why we think publishers are wrong:
- eBooks aren't like DVDs. The experience of seeing a movie in a theater is significantly differentiated from watching a DVD, to the extent that you may see a movie in a theater but still find it worthwhile to buy a DVD to watch again later. (And even so, DVD sales are tanking, so why would you want to model yourself after another dying technology?) The same isn't true for the consumption of print and digital books–the technology that enables buying the book and carrying it around with you is different, but the experience of reading is largely the same. A better analogy is music, not movies: Music publishers release CDs and digital downloads at the same time–sometimes even leading with digital–and if they didn't they'd be encouraging piracy and losing revenue.
- eBooks do cannibalize hardcover sales, but not in a way that publishers can prevent. We have some new data that we're just about to publish on the demographics of current owners and future prospects for eReaders. One notable insight is that the profiles of early and later adopters of eReaders look a lot like the split between hardcover and paperback book buyers. Early adopters of eReaders, similar to hardcover book buyers, tend to be male tech-optimists who buy books from a primary source, whereas later waves of eReader adopters will be less tech-involved women who read a lot and buy books from multiple sources, which echoes the demographic of paperback bookbuyers. Anyway, the point of this is to say that yes, a portion of people who buy hardcover books are the same likely buyers of eReaders, especially Kindles, so in this sense they ARE cannibalizing hardcover book sales. But publishers can't prevent this group from buying eReaders, and once they own them, they will want content in eBooks, or they won't bother buying the book at all.
- Delaying eBook releases will cost publishers revenue. This brings us to the next point. We have reason to believe that the highest incidence of eBook sales occurs when the book is first released. Case in point: Sales of Groundswell, written by my Forrester colleagues Josh Bernoff and Charlene Li. As Josh blogged about previously, he compared Groundswell's Kindle sales numbers over time to what Bezos said publicly during the DX release: that for books available in both formats, Kindle units account for 35% of unit sales. Groundswell did see a spike in eBook sales when the Kindle 2 shipped in March, but even in that peak month, Kindle sales only accounted for 12% of total Amazon sales for Groundswell. Trying to make sense of Amazon's numbers, Josh says, "I can only assume things are picking up rapidly in the Kindle store, and that new titles account for a lot of that volume." I agree, and posit that publishers who delay eBook releases will miss their highest-volume sales window for that product.
- Heel-dragging on eBooks will have other negative consequences…The music industry dragged its feet on digital distribution until piracy forced its hand: It was losing too much potential revenue not to aggressively push digital distribution. This fate could befall the publishing industry–especially in sectors like textbooks–but it's true that print books are harder to pirate than CDs, which are already in digital file format. But neglecting digital could result in a fate worse than piracy for book publishers: Irrelevance, as more of its most valuable customers (hardcover bookbuyers) switch to digital as a preferred consumption medium.
- …and will prevent publishers from building new digital revenue opportunities. Delaying eBook releases, in addition to costing publishers the revenue associated with sales from their initial marketing push, will also cost them the missed opportunity of developing and launching new, digital-only products that could be sold along with eBooks, like text transcripts from research interviews from non-fiction books like Groundswell, author interviews, original author essays, and video and interactive content. All of these incremental products would only be possible with a) an aggressive digital strategy; and b) a stronger online relationship between the author/publisher and the consumer. Developing this second element could lead to entirely new revenue streams for digital, like eBook subscriptions for a particular author or series.
For all these reasons, publishers that drag their feet on eBooks are in for a painful, unproductive fight with retailers and consumers. This time around, it would be nice to see an industry that could skip denial and anger and go right to innovating with customer- and business-friendly solutions.
If you're an author, publisher, or other party that has data to prove me wrong, I'd love to hear it–leave a comment here or email me at email@example.com.