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The death of the printed book is closer than you think - Arvind Narayanan's journal [entries|archive|friends|userinfo]

The death of the printed book is closer than you think [Nov. 26th, 2009|04:21 pm]
Arvind Narayanan
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I've been saying for a while that the e-books are going to take over soon. Let me elaborate on that, now that I have some data to back up my claims.

First, let's get the obvious stuff out of the way. The Kindle seems to be following roughly the same adoption curve as the iPod. Barely two years after it was first released, everyone my age has at least played with one or knows someone who has one. Amazon has been pushing it massively and adoption is only going to accelerate with the recent price cut, international availability, and the emergence of serious competition.

Bezos announced back in May that 35% of book sales are on the Kindle when a Kindle version is available. How can that be, when penetration is still small in absolute terms? It's because Kindle owners are disproportionately voracious readers.

But my real point is about digital-only books. Let's ponder the consequence of the above 35% figure. An author reveals her numbers from being on the NYTimes bestseller list. The most striking number to me is the fact that her royalties are only 6-8%. I assume that the number is roughly the same for sales of the Kindle version. (If anyone knows otherwise, please let me know.)

On the other hand, Amazon shares 35% of revenue with the author for self-published books. In one sense that's unfairly low: Apple for instance shares 70% of revenue with app publishers. Still, it is five times higher than royalties from a traditional book publisher.

Let's do some math. Consider a typical book that sells for $14.99 in print and $9.99 on the Kindle (the only thing that matters here is the ratio of 3:2. If the ratio is closer to 1, then my argument is even stronger.) Let's assume that half of all sales are via Amazon, and the rest are through physical bookstores. That means that Kindle sales are 35% × ½ = 17.5% of the total. Let's say an author were to self-publish digitally with Amazon, and thus forgo all non-Kindle sales, but maintain the same volume of Kindle sales as they would get with a publisher. Their revenue with the self-publishing route would be 0.175 N * 9.99 * 0.35 = $ 0.61 N. With the traditional route, the revenue would be (0.175 N * 9.99 + 0.825N * 14.99) * 0.07 = $ 0.99 N.

Conclusion: Kindle penetration is already three-fifths of the way to the crucial tipping point, where kicking out your publisher generates more royalties. This is no doubt a simplified model, and ignores several factors:
  • The publisher gives you an advance, which might make it attractive to authors without a financial cushion.
  • The publisher has an advertising budget to spend on your book.
  • On the other hand, without a publisher, web-savvy authors would be better able to leverage social media to get the word out about their books.
  • Amazon will probably start sharing more revenue with authors, making the self-publishing route even more attractive.
  • On the other hand, publishers will probably increase royalties for Kindle sales, due to the same pressures.
  • I've ignored the fact that you can self-publish on multiple platforms, although none are as yet competitive with the Kindle.
In spite of the shortcomings and shortcuts, I think my model provides a good ballpark estimate, and I trust the prediction that we are close to a tipping point. Just as Radiohead generated a lot of free publicity (and hence extra sales) by breaking ground with their "pay what you want" model, the first major author to self-publish will generate a lot of publicity. I predict that we're no more than a couple of years away from this happening.

Far more interesting than what digital books will do to the head of publishing is what they will do to the tail. The idea of the struggling author trying to land a deal is a cultural staple, but one that exists purely because publishers have had a monopoly on distribution channels. With ebooks, someone who thinks they are a great writer doesn't have to wait and beg to be discovered—they can find out for themselves by self-publishing, promoting their work on Facebook and Twitter, and seeing what kind of response they get.

People will continue to read printed books for a long time, just as some people still watch movies on VHS. But the printed book will be "dead" in a few short years in the sense that the bulk of the adoption curve, the pragmatic majority, will have moved on. For the first time in history, the discovery of writing talent will depend more on skill and persistence than on luck. And the notion of the book itself will morph to occupy an entire spectrum—traditional linear, textual narrative on the one end and videogame-like interactive, graphical narrative on the other.

I can't wait.

Update. Here is another author who reveals his numbers, including Kindle royalties and self-publishing revenues. His calculations are similar to mine, as are his conclusions:
I don't think I'll ever take a print contract for less than $30,000 per book, because I'm confident I could make more money [with ebooks] over the course of six years than I could with a publisher over six years.

Isn't that bizarre?

For the bestselling author, this is all still very trivial. These numbers are chump change compared to the advances they get.

But for the midlist author, I'm beginning to think it's possible to make a living without print contracts.

I've struggled mightily to break into print. And I've made a nice chunk of change on my print novels.

Now I'm hoping those novels go out of print, so I can get my rights back.

I never would have guessed my mindset would change so dramatically in so short a time.
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Comments:
[User Picture]From: descartes_rock
2009-11-27 03:28 am (UTC)
Wow, that is an impressive piece of research. There are a lot of problems with self-publishing though, and I doubt we will ever cut out the publishing industry altogether. The most important reason for this is the publisher's gatekeeper role. Publishers generally only print a very small fraction of the manuscripts they receive. As a result, when you buy a book supported by a publishing house, you know it has already undergone a pre-screening to ensure it meets some basic standards of quality, and more often than not, the publisher has also worked with the writer to advance the work from its original manuscript version. I know some people will say that this editing process interferes with the crative vision of the author, but I know a number of authors who will tell you differently, and who thank God for having access to a talented publishing house editor. Editors generally improve books. Bottom line, when a publisher takes a chance on a new manuscript, it provides a really high degree of legitimacy to that manuscript, which you simply cannot get from self-publishing.

Self publishing also has many other issues. In Canada, very few people read literary fiction. As it stands, the industry can only support a small number of new books each year. In other words, there is a pretty severe demand side limitation. Self publishing will increase supply, but not demand. The result is that you will have a lot of self-published books that nobody reads. For my part, there are a lot of pretty promising books that come out each year that I do not have the time to read. I would need to get through those books before I would even consider touching a self-published work. I suspect many other avid readers feel the same way.

Then the other element that enters into this situation is consumption behaviour. History suggests that as new mass media are introduced, there is a restructuring that occurs, but generally, the previous media find a new niche in the restructured environment as opposed to perishing. Everyone said radio would replace newspapers, and then they said TV would replace radio -- but today we have all three media coexisting.

I have a lot of respect for publishers. They don't make much money and it's a tough business. Mostly they are not in it to get rich. It's more a labor of love. While it's true that many writers complain about the gem manuscripts they send out that get rejected, generally these gems are not really gems at all. Publishing houses wade through a lot of crap to get to that one new manuscript that merits their attention. That's crap I don't have to go through, and I'm thankful for that.
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[User Picture]From: patrickwonders
2009-11-27 05:31 am (UTC)
I agree with most of the above here especially that "Editors generally improve books." I think there could be a whole freelance editor market opening up to support those who want to do their ebook right.

Most of the books that I'm interested in reading are higher-level math books. They never get shelf space outside of University bookstores. And, they are such a niche that they pretty much start at $100 for something in the 120-page range. I cannot wait until I can get these self-published (actually, I have a few physics books from lulu.com that are awesome).

It may take some real word-of-mouth to sort the good books from the incoherent jumbles... but that's what blogs are for.... and, I'd rather occasionally buy a piece of schlock for $20 than pay $140 for a book that I could only find online when I'm not sure I will ever have the prerequisites to get through chapter one.
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From: (Anonymous)
2009-11-27 05:44 am (UTC)
Exactly. Publishers add quite a lot to the product.

This argument also does not make sense. What matters is the demand, and I think it is still far from taking over the market. Self-publishing authors have no control over when uptake will reach a tipping point.
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[User Picture]From: arvindn
2009-11-27 06:14 am (UTC)
That's a great counterpoint, thanks.

I remain skeptical that the role of the publisher as a gatekeeper is essential. Personally, I've never looked at who the publisher is; I make my decisions purely by Amazon reviews and word-of-mouth. Clearly, there are a lot of readers (like you) who feel differently and for whom self-publishing is a turn-off. I don't know how prevalent the two views are and whether things can change quickly, so lets leave it at that.

The value that editors add is, in my opinion, harder to re-capture with a self-publishing model. As a software person I want to say that a "beta" to a small group of avid fans might be a viable way to do it, but I don't know if anyone's tried it with any success.

Finally, it is quite conceivable that printed books will wane in popularity while publishers retain a role. One could imagine a process where the initial run of a book (except for established authors) is online-only; this way the publisher doesn't take as much of a chance. If it performs well initially, then they spend more money advertising it online finally and take it to print as well.
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From: ext_216271
2009-11-27 07:11 pm (UTC)
An interesting development could be that, instead of a gatekeeper role for publishers, respected or popular figures might recommend books which are available from various distribution channels, or even for free. That would filter books efficiently if you were able to trust the recommendation. Certainly it would be abused as some celebrities would be paid to endorse a particular book, but this would in turn reduce their credibility if the work turned out to be bad. This model is also valid for a world in which television channels no longer exist and are replaced by access to all programmes on demand. Filtering could then be shifted to recommendations from friends or public figures. Of course, being noticed in such a storm of unfiltered creativity might be quite a challenge, but perhaps this itself will lead to an overall increase in the quality of work.
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[User Picture]From: patrickwonders
2009-11-27 05:22 am (UTC)
What's your sense of how the DRM will shake out? How long will we be stuck having to self-publish for n-different proprietary vendors? Will Amazon hold 80% of the content market share with Sony and others fighting over the remaining 20%? or will something standardized take over?
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[User Picture]From: arvindn
2009-11-27 05:56 am (UTC)
Although I'm philosophically opposed to DRM, I've never seen any credible evidence that e-book DRM hurts either users or publishers, aside from occasional SNAFUs and grandiose posturing.

It's very different than with music, because people want to do things like remixing with music. They also want to swap entire music collections. Neither of these happens with books. People do swap individual printed books, but e-books are cheaper to begin with so it works out the same.

As for self-publishing, DRM is entirely transparent so publishers so I'm not sure what your argument is. We'd have to upload individually to each platform anyway simply because the functionalities and formats of the platforms are different.
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[User Picture]From: patrickwonders
2009-11-27 05:33 pm (UTC)
Right now, I have eReader and Kindle-App on my iPhone. I much prefer the eReader interface to the Kindle-App one.

However, there are many publishers who only publish to Kindle and not to eReader. Maybe in a self-publishing market, that goes away. But, it wouldn't at all surprise me if Amazon tries to make self-publishing to Kindle be an exclusive deal or a deal where you cannot self-publish the same book for a lower price anywhere else or some such thing.
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From: (Anonymous)
2009-11-27 09:58 pm (UTC)

DRM stops me from buying ebooks

Howdy,
You say DRM is transparent, but I don't see how, I don't buy any eBooks with DRM because I have no way of reading them. I would not consider a Kindle because of the restrictions they put on eBooks. I read books on a laptop from the Baen Free Library and I an investigating open source eBook readers. If I buy an eBook, it will only be ones that give me the same rights as physical books. That pretty much means no DRM system. I'll keep an open mind, but I doubt any DRM system will even preserve my rights as a consumer.
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[User Picture]From: arvindn
2009-11-27 10:25 pm (UTC)

Re: DRM stops me from buying ebooks

I said it's transparent to publishers, so apparently you didn't read my comment very well. I included your viewpoint under 'grandiose posturing' above. I'm aware that this fringe group of consumers exists, but you're what, 0.1% of the market? Not enough to have an effect.
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From: (Anonymous)
2009-11-28 02:03 am (UTC)

Re: DRM stops me from buying ebooks

Howdy,
You can file it where you wish. I see it as purely practical. And, if your message had said transparent to publishers, I probably would not have commented. It did not and does not say that. It says transparent so publishers. I knew you had made a typo, but I guessed wrong as to what you meant.
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[User Picture]From: arvindn
2009-11-28 02:07 am (UTC)

Re: DRM stops me from buying ebooks

Oh sorry! Didn't realize there was a typo. Yeah, I can see how that would have been confusing.
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From: (Anonymous)
2009-11-27 02:36 pm (UTC)

Another angle to consider

While the basic cash economics are pretty powerful indicators, there's something about authors to consider. Many authors I know and have met are people for which, the money isn't the most important thing to them. Plenty are willing to be broke, to write for free if they have to, just so that their stories can reach a wide audience. They have a burning, almost desperate need for this. That's why agents try to NEVER let their authors anywhere near contract negotiations, really, ask an agent - any agent.

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[User Picture]From: drplokta
2009-11-27 03:20 pm (UTC)
A self-publishing author has to pay for a proofreader and copy-editor themselves -- or do without, in which case the product will be significantly inferior to professionally published books. Those costs will take a large chunk of the extra money they're earning from Amazon.
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[User Picture]From: Ben Babcock [tachyondecay.net]
2009-11-27 09:36 pm (UTC)

Long live print

I'm not sure I understand why an increase in digital self-publishing heralds the end of print books. I completely agree that the explosion of digital books means that self-publishing will be more viable. This doesn't mean the end of publishers, but it means that publishers will need to rethink their revenue model in a way that hasn't been done in centuries. Much of it depends on how publishers react to Amazon's increasing role in digital book market (so far they are missing the boat).

I find the analogy of print books to VHS inadequate. Perhaps comparing print books to "physically stored copies of movies", i.e., either VHS or DVD or Blu-Ray, would be better. It's easy to move from purchasing or renting physical copies of movies to just downloading them online because of the nature of the movie itself. However, I don't think the same is true for the book. A book is so much more than just the content it contains.

For instance, many people like getting a book signed by its author. How does one do this with a digital book? A digital signature seems so effortless and impersonal. Print books have tactile and sentimental advantages over digital books. A single "instance" of a print book diverges from its identical counterparts the moment it leaves the factory. It wears differently, sustains different marks, and gets passed through different owners. This doesn't happen to digital books (beyond perhaps digital annotations).

Mind you, I'm not trying to say that print is always superior to digital or that digital won't capture a large portion of the market. However, digital books have disadvantages, and print books aren't going to die.
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From: (Anonymous)
2009-11-27 10:43 pm (UTC)

Re: Long live print

Print format will exist for my lifetime at least, since booklovers who grew up with books like the physical sensation of holding books, of cuddling up with books. Or should I say, every booklover I know. And Cory Doctorow (Boing Boing)has found that giving away e-books as samples increased his print book sales either because those people decided to buy the physical book or word of mouth.

I do not say this to disagree with any thing this essayist wrote, since it makes perfectly good sense, but I am in the camp of multiple media coexisting (radio, TV, movies, as was the example given). But I will be wary of Kindle as a writer until they improve their contract and formatting difficulties I've heard about, and not just the % of profit shared with the writer. Kindle making money off both Kindle sales and book sales is a lot like a TV manufacturer making a % profit off of the TV shows broadcast as well as the TV.
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From: (Anonymous)
2009-11-30 06:04 am (UTC)

Pay what you want ebooks

Funny you should mention radiohead's pay what you want model and self publishing ebooks. You say that's a few years away still which is probably true, but theres already a platform for that - Anjuno (http://www.anjuno.com) . And their royalties are far less than anything on the market now.
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[User Picture]From: arvindn
2009-11-30 06:12 am (UTC)

Re: Pay what you want ebooks

That's fantastic, thanks for the pointer!

And I think you meant far more, not far less :-)
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