Wednesday, August 24, 2011

Peak Book Value

"Don't be an author unless you can't not be an author" was the triple negative I heard at recent author's panel in my town. The speaker was a literary agent offering scant encouragement to hopeful authors. Making a living by writing books is just so difficult these days, that only pure love and passion for writing can justify such a poorly rewarded existence.

Part of the reason for this is basic supply and demand economics. On the demand side, people will read only a certain number of books per year, and only a fraction of those are purchased in a way that generates revenue for the author. The people who read and buy the most books also patronize libraries and used book stores. While library sales are quite profitable for publishers due to the lack of returns, the author's royalty on a library book read by 50 people is the same as on a book sold through a bookstore. Even so, despite all the nonsense about people reading fewer books because of the internet, book sales keep on rising, year after year. Last, year, the AAP reported US book sales up 2.2% from 2009 to 2010.

It's the supply side that's the problem for authors. As difficult as it is to get published by a reputable publisher, the supply of books keeps increasing. According to Bowker, which publishes Books in Print, 316,480 books were published by traditional publishers in the US last year, a 4.6% increase over the prior year. So if you do the math, the average published book grossed 2.4% less in 2010 than in 2009.

But it's worse than that. Bowker also reports the number of books published non-traditionally. Non-traditional means publishers of print-on-demand books, public domain reprints, author-financed books: LuLu, xlibris, Amazon's createSpace, AuthorHouse, BiblioBazaar, and Kessinger Books. This category increased 169% from 1,033,065 in 2009 to an amazing 2,776,260 books in 2010.

Even if 90% these titles are spam, the remaining 10% equal the number of traditionally published books. If you include these, the average sales revenue per published book has dropped by half over the past 3 years.

This analysis doesn't consider backlist sales, which historically have been the most profitable for publishers. Backlists, as measured by Books In Print, have expanded, even as their contribution to total sales has apparently declined over the years. Books in Print has 3 times as many entries in 2011 as it had 8 years earlier; total revenue increased only 21%.

According to John Thompson's masterful "Merchants of Culture", the decreasing sales contribution of the back list is due to a combination of factors. The "big book" focus of mass market retailers such as Walmart, Target, and the big box book stores concentrate consumer attention on the top list, while competition from cheap editions of public domain "classic" titles has squeezed the backlist. I think another factor is a more efficient used book market enabled by the internet.

If book rights were securities, traders would be short-selling. On the demand side, the pluses come with downsides. eBooks could expand backlist sales by destroying the library and used-book channels; rapidly growing international markets are price sensitive, and particularly vulnerable to piracy.

On the supply side, the downward pressure on book value is pervasive. Public domain books, which include the crowning cultural achievements of humanity, will be free and are worthy of readers' precious time. The mass digitization of in-copyright books means that books no longer go "out of print". But to my mind, the biggest source of price pressure for the traditionally published book will be the creative output of non-professional and semi-professional writers, offering their work for free.

In many ways, the book industry is becoming like the movie/television/video industry. The blockbusters are getting bigger, and established market segmentation is being rearranged by the internet. We're starting to see services labeled as "the Netflix of books". We've not yet seen the emergence of a "YouTube for books", but at least a few readers feel that some blogs are worth reading.

It's undeniable that future revenue streams from books, and thus the worth of a book, have a huge uncertainty. Who knows, ebook rights might turn out to be the next tulip mania.

  1. The effect of an increasing supply of books is not new. The New York Times noted the issue 6 years ago.
  2. A good resource on book industry statistics comes from Foner Books.
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