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Effects of Digital Disruption on the economics of Book industry and writers

Posted in Industry updates by Manas Ganguly on October 5, 2010

Digital revolution is disrupting the economics of the book industry and beginning to have an impact on the careers of literary writers.

Priced much lower than hardcovers, many e-books generate less income for publishers. And big retailers are buying fewer titles. As a result, the are approving fewer book deals and signing fewer new writers. Most of those getting published are receiving smaller advances.The new economics of the e-book make the author’s quandary painfully clear: A new $28 hardcover book returns half, or $14, to the publisher, and 15%, or $4.20, to the author. Under many e-book deals currently, a digital book sells for $12.99, returning 70%, or $9.09, to the publisher and typically 25% of that, or $2.27, to the author.

The upshot: From an e-book sale, an author makes a little more than half what he or she makes from a hardcover sale. The lower revenue from e-books comes amidst a decline in book sales that was already under way. The seemingly endless entertainment choices created by the Web have eaten into the time people spend reading books. The weak economy also is contributing to the slide.

According to researches, Sales of consumer books peaked in 2008 at 1.63 billion units and are expected to decline to 1.47 billion this year and to 1.43 billion by 2012.On the other hand, E-books sales are exploding. Currently, e-books account for an estimated 8% of total book revenue, up from 3% to 5% a year ago. It is estimated that e-books could be 20% to 25% of total unit sales by the end of 2012 and, eventually, digital books will overtake physical books.

Some book-industry experts say that lower e-book prices could increase overall unit sales eventually. Whether they will make up for the loss of hardcover income remains to be seen. The Authors Guild and some literary agents are urging publishers to raise the author’s share of e-books to as high as 50%, arguing that there is less overhead for a digital book. Thus far, publishers are resisting.

The e-book is good news for some. Big-name authors and novels that are considered commercial are increasingly in demand as e-book readers gravitate toward best sellers with big plots. Unlike traditional bookstores, where a browsing customer might discover an unknown book set out on a table, e-bookstores generally aren’t set up to allow readers to discover unknown authors, agents say. Brand-name authors with big marketing budgets behind them are having the greatest success thus far in the digital marketplace. Not everyone believes that the shift to digital publishing is necessarily bad for writers. The industry may be transforming away from big corporate-owned publishers back to a cottage industry like it was many years ago. The shakeout could help prune an overcrowded market.

As e-book sales accelerate, their impact on physical book sales will also grow. Publishers worry that $12.99 digital books that typically go on sale the same date as physical books will cut into their hardcover sales and their $14.99 paperback sales down the line, a key revenue producer for literary titles.

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  1. World Wide News Flash said, on October 5, 2010 at 4:00 pm

    Effects of Digital Disruption on the economics of Book industry and writers…

    I found your entry interesting do I’ve added a Trackback to it on my weblog :)…


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