Ebooks, books and the future

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1. Books, ebooks and the future Enders Analysis and Nielsen BookScan Ann Betts ann.betts@nielsen.com October 2010 2. First, some numbers Approx. 130,000 new books 1.2m…
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  • 1. Books, ebooks and the future Enders Analysis and Nielsen BookScan Ann Betts ann.betts@nielsen.com October 2010
  • 2. First, some numbers Approx. 130,000 new books 1.2m titles sold at least 1 copy 3.4m active titles in the UK published in the UK each year in 2009 in the UK £3.5bn 2009 revenue in ~350m books sold in UK in UK, $22bn in USA, $118bn 2009 global revenue Books, ebooks and the future 2
  • 3. Publishing in context Global entertainment revenues ($bn) 200 180 160 140 120 100 80 60 40 20 0 Newspapers Books Films Consumer Games Recorded music magazines 2006 2007 2008 2009 2010 [Source: PwC] [Source: PwC] Books, ebooks and the future 3
  • 4. The music experience: US album sales halved over a decade [Source: Nielsen SoundScan] Books, ebooks and the future 4
  • 5. The music experience: impact on retail Music retail in the USA 90,000 9,000 80,000 8,000 70,000 7,000 60,000 6,000 50,000 5,000 40,000 4,000 30,000 3,000 20,000 2,000 10,000 1,000 - - Jul-03 Jul-01 Nov-01 Jul-04 Nov-04 Mar-06 Jul-06 Jul-08 Nov-08 Mar-09 Jul-09 Jul-05 Nov-05 Mar-03 Jul-07 Nov-07 Mar-02 Jul-02 Nov-02 Mar-01 Mar-04 Nov-06 Mar-08 Nov-09 Mar-05 Nov-03 Mar-07 Employees Stores [Source: BLS] Books, ebooks and the future 5
  • 6. Some perspective Just 5% of the UK/US Amazon has sold perhaps 3m Album sales have halved – but populations have iPhones – so Kindles took ten years to do so far Books, ebooks and the future 6
  • 7. 1:The last 10 years 2: The dawn of ebooks 3: The future Books, ebooks and the future 7
  • 8. Steady ASP, declining revenue UK consumer publishing, indexed 500 450 400 350 300 250 200 150 100 50 0 2001 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Volume Value ASP [Source: BookScan] Books, ebooks and the future 8
  • 9. Where are people buying books? UK book retail 100% 80% 253.2 General mass-market (i.e. supermarkets) market 360.4 Online 60% 5 year revenue growth 40% Bargain trade Stationers 82.1 34.2 20% 16.0 Market stalls Independent trade 349.0 0% 16.0Music specialists 146.0 743.7 -20% Major trade Other 271.5 9.1 -40% Campus Mail order -60% £3 £4 £5 £6 ASP £7 £8 £9 £10 Bubble size = 2009 revenue in £m [Source: TNS Consumer Survey] Books, ebooks and the future 9
  • 10. Chains growing until recently, independent shops declining [Source: BookScan] Books, ebooks and the future 10
  • 11. Supermarket share now stable at around 13% of all value and 22% of volume sales. [Source: BookScan] Books, ebooks and the future 11
  • 12. Growth of discounting masks stable ASPs Discount versus ASP (£) £9 30% £8 25% £7 £6 20% £5 15% £4 £3 10% £2 5% £1 £0 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 ASP RRP %Discount [Source: BookScan] Books, ebooks and the future 12
  • 13. Notionally stable value underpinned by discounting TCM Value vs Value Discounted (£bn) 2.5 0.55 0.56 0.59 2.0 0.50 0.46 0.38 0.32 1.5 0.28 0.26 1.0 1.69 1.80 1.77 1.75 1.58 1.64 1.49 1.27 1.32 0.5 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 Value Sales Value Given as Discount [Source: BookScan] Books, ebooks and the future 13
  • 14. How much are consumers paying for books? UK book genres by value, 2009 45 Genre fiction 40 General fiction 35 30 Volume (m units) Children & young adult fiction 25 Pre-school 20 Biography 15 10 Arts 5 0 0.00 2.50 5.00 7.50 10.00 12.50 15.00 17.50 20.00 22.50 25.00 27.50 30.00 ASP (£) Bubble size = 2009 revenue in £m [Source: BookScan] Books, ebooks and the future 14
  • 15. The long tail: the tail is certainly getting longer Number of ISBNs by sales band 900,000 809,943 800,000 700,000 600,000 500,000 400,000 384,266 293,957 300,000 229,956 200,000 100,000 26,347 29,048 2,849 3,041 148 168 1 3 0 <10 copies >10 <1k >1k <10k >10k <100k >100k <1m >1m copies 2004 2005 2006 2007 2008 2009 [Source: BookScan] Books, ebooks and the future 15
  • 16. But market share is moving from the middle to the end of the tail Volume share by sales band 40% 35% 30% 25% 20% 15% 10% 5% 0% <10 copies >10 <1k >1k <10k >10k <100k >100k <1m >1m copies 2004 2005 2006 2007 2008 2009 [Source: BookScan] Books, ebooks and the future 16
  • 17. The last ten years • TNS data shows that online is now 20% of total retail sales • At the same time growth of supermarkets – now 13% of value, 22% of volume • Consumer perception of value is changing as the RRP and discount continue to rise • Books are a complex retail environment with the shop experience mattering far more than in music • Retail drives discovery; online is fantastic if you know what you’re looking for Books, ebooks and the future 17
  • 18. 1:The last 10 years 2: The dawn of ebooks 3: The future Books, ebooks and the future 18
  • 19. The market has taken off in the last 18 months and increased over 10 times since 2008 – now about 6% of the US market Books, ebooks and the future 19
  • 20. Still concentrated in niches, for now Genres Demographics • Professional, legal, medical, technical • Business travellers • Textbooks (limited success so far) • Retired people travelling • Romance • Professionals • Long-form fiction • Kindle sales are probably 3-4m in total so far (4m = 1% of the US population) • Free – Jane Austen is the biggest ebook author • Weighted towards women • In general, big, heavy and free are good • Weighted towards people who write about books and technology Books, ebooks and the future 20
  • 21. Value of early and obvious segments [Source: BookScan] Books, ebooks and the future 21
  • 22. Key selling points for current ebook adopters 1 Instant – can buy wherever and whenever (i.e. windowing doesn’t work) 2 Convenience – easier to carry 3 Not tied to a particular device 4 Read on smartphones / mobile devices 5 Cost savings versus print – BUT all agreed that ebooks must be cheaper than print 6 Read offline – don’t need internet connection to get reading material 7 Highlight and annotate Source: Kobo Books, ebooks and the future 22
  • 23. Although Classics come preloaded on most Reade the US print book Classics market is only eaders down by -0.3% in the latest 52 wks (2010 MAT) less than the total market decline of -1.5% 0.3% [Source: BookScan] Books, ebooks and the future 23
  • 24. However, the US Romance sales are down by -3.1% in 2010 MAT, for the first time in US 3.1% BookScan history. Looking at the year to date sales, this decline is even steeper at -7.5% [Source: BookScan] Books, ebooks and the future 24
  • 25. Science Fiction/Fantasy (Adult & Kids) sales in the US are down by -22.1% in 2010 MAT, however this was after an all time high in 2009 due to the Stephanie Meyer titles [Source: BookScan] Books, ebooks and the future 25
  • 26. Crime, Romance and Science Fiction are stronger as ebooks than print [Source: Global BookScan] [Source: UK BookScan] Books, ebooks and the future 26
  • 27. 1:The last 10 years 2: The dawn of ebooks 3: The future Books, ebooks and the future 27
  • 28. A new product • “History doesn’t repeat itself, but sometimes it rhymes” • The iPod was better than a W Walkman: an ebook reader is not necessarily better than a book • Music sounds the same on any device – a book is not the same on any screen • Ebook adoption will vary widely by demographic and genre • The value of the retail experience will persists – book buying is a leisure activity • The books industry will have to interact with people who do not understand or care ave about books Books, ebooks and the future 28
  • 29. Four issues to consider for the future Fragmentation Price Genres Control Books, ebooks and the future 29
  • 30. Fragmentation and proliferation Ebook readers Ebook Feature platforms – phones Kindle and Google Proliferating ebook platforms Apple Book iPhone ‘iBooks’ apps Books, ebooks and the future 30
  • 31. The growth of mobile Books, ebooks and the future 31
  • 32. Route to market: the continuing importance of the iPhone Source: AdMob Books, ebooks and the future 32
  • 33. Target by genre and device Text Text with extras Database Rich application • Text only • Examples: Wolf • Some content works • For targeted Hall, Fry, Enhanced better as a database titles, build an app • Can be distributed Editions than as linear text with a custom rich- across many different media experience devices • Package a text work • Cookbooks, travel from scratch with videos and books (where the • Workflow rather than additional content publishers have them • Taschen, Thomas the custom development in the right formats) Tank Engine work • Needs to be an app • Potential to reuse • Significant • Reserved for high- much underlying development profile titles but can technology but budgets be template-based significant work needed for each title • Explore subscription models and in-app purchase Books, ebooks and the future 33
  • 34. Genres and ebooks Overall UK pbook genres by value, 2009 Fiction 27% All other 50% Arts 4% Pre-school & picturebook 6% Food Maps &4% travel IT, Law & Medicine 5% 4% [Source: BookScan] Books, ebooks and the future 34
  • 35. Users and demographics iPad vs Kindle Ownership Matrix Q2 2010 Mobile Insights, National 180 160 Wireless White- Collars, 3% 140 Mature Mid-Techs, 14% Likelihood to have Kindle Early-Adopting Elite, 8% 120 Offline Seniors, 18% Young & Wireless, 9% 100 Suburban Spenders, 7% Young Startups, 4% Emerging Techies, 13% 80 Frugal Folks, 11% 60 Elderly Traditionalists, 12% 40 20 0 0 20 40 60 80 100 120 140 160 180 [Source: Nielsen Mobile] Likelihood to Have iPad Books, ebooks and the future 35
  • 36. Novels are an early choice… Books, ebooks and the future 36
  • 37. … but many art books can be appealing (especially without the weight) Books, ebooks and the future 37
  • 38. … while data-driven books can be transformed Books, ebooks and the future 38
  • 39. Price: the ebook proposition Immediate DRM (can’t be impulse access to shared, sold or $10-15, not $20- new lent), no physical 25 books, portable product Books, ebooks and the future 39
  • 40. The price of pbooks Value of books sold by price (£m) 250 200 150 100 50 - >1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20+ [Source: BookScan] Books, ebooks and the future 40
  • 41. The price of books Price distribution of UK book sales 25% 20% 15% 10% 5% 0% Quantity Value Number of ISBNs [Source: BookScan] Books, ebooks and the future 41
  • 42. Two different games being played Book publishing issues Pricing Distribution model Discounting Release windows Premium formats Rights carve-outs Platform issues Platform Billing relationship DRM Devices Strategic positioning Books, ebooks and the future 42
  • 43. Gatekeeper strategies Apple Google Amazon • Sell hardware • Sell advertising • Push goods through efficient logistics and efficient ecommerce engine – use cost advantage to drive low prices • Build a great content experience • Make sure all content is findable from Google, so that people will always start their purchasing • Make Amazon the only place to buy • Lock people into the content to stop journey at Google goods online them switching to other devices • Use cash flow from the core • Build Kindle into a multi-device business to buy or build dominant platform for books (and eventually positions in any kind of content ecommerce?) people might search for • Amazon is not a books company Cheap content that looks great Free ad-supported content supported Cheap content, no role for publishers? Books, ebooks and the future 43
  • 44. A difference of scale [Source: Companies, AAP] Books, ebooks and the future 44
  • 45. Conclusions • Early days of ebooks - 10% of the US market this year • Will not be same as music - will be lumpier • Transition will be hard • Move to a world that changes all the time • Entering a world that doesn’t care about books Books, ebooks and the future 45
  • 46. Thank you Enders Analysis Nielsen BookScan • Enders Analysis is a research and consulting firm • The Nielsen Company is a global information and focused on the media company with leading market positions in media, entertainment, technology, mobile and fixed marketing and consumer information, television and telecommunications industries in the UK and Europe other media measurement, online intelligence, mobile measurement and trade shows • Our research focus is on changing consumer demand for media and telecoms and the shifting landscape of • Nielsen Book focuses on the publishing, bookselling media and telecoms supply, research which is and library sector providing information and designed to help clients understand sector economics ecommerce services through its four key brands: and investment opportunities and risks Registration Agencies (ISBN and SAN Agencies for UK & Ireland, ISTC), BookData, BookNet and BookScan • We track leading company results and produce detailed research on them, including • The Nielsen BookScan service provides the world’s Vodafone, ITV, BT, BSkyB, BBC, Google, NTL and so first continuous retail monitoring service for books in on the UK, Ireland, US, Australia, South Africa, Italy, New Zealand, Denmark and Spain and is currently building a global ebook panel and launches BookScan India • Over the past 10 years we have built up a blue-chip next month roster of over 250 clients, ranging from Fidelity and JP Morgan to DMGT, the BBC, Vodafone and Pearson Contact: ann.betts@nielsen.com Contact: benedict.evans@endersanalysis.com Books, ebooks and the future 46
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