Arvind Narayanan (arvindn) wrote,
Arvind Narayanan

The death of the printed book is closer than you think

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.
Tags: e-book, economics, kindle, publishing
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