The Digital Tsunami Continues to Bear Down on the Caribbean

Jeff Bezos, founder and CEO of Amazon.com and the driving force behind the Kindle e-reader revolution

A sharp spike in the sales of electronic book readers for the Christmas season is causing quite stir in the world trade-book sector. No one is happier about the sales bonanza than online retail giant Amazon.com, the creator of the popular Kindle e-reader.  It was their “# 1 bestselling, most-wished for and most gifted product” Amazon crowed, and had the good news emblazoned on their website.

And they had still more reasons to be pleased. Barnes & Noble, the designer of the newly-launched Nook e-reader, and one of Amazon’s strongest competitors, is biting their dust in the race for Christmas e-reader sales.

The Nook e-reader

Barnes & Noble had earlier announced it would have to delay shipments of pre-ordered Nooks to stores. It was having difficulties keeping up with the Christmas-season demand for the product. Sony is having similar problems with its new electronic readers.

Sarah Rotman Epps of Forrester Research, a media and online book-trade analyst and one of the leading experts in e-books and e-readers, said both Sony and Barnes & Noble are having supply problems because they brought their latest e-readers to the market prematurely.

“Supply is short because the companies rushed the announcement of these two products, and the reality is they’re not ready for holiday primetime,” said Epps.

Meanwhile, US bookstore chain Borders Group Inc is learning the hard way that it’s not smart to be left out of the e-reader race. Borders’ shares fell sharply during the first week of December on fears that it was losing out on the rapidly-growing electronic-reader market during the holiday shopping season.

Reuters quotes options strategist William Lefkowitz at the New York-based brokerage firm vFinance Investments as confirming the slippage of Borders’ shares. “As investors gain confidence in Amazon’s Kindle product, they are selling Borders shares and buying Amazon stock,” said Lefkowitz, evoking an image of Borders caught flatfooted with its pants down. http://www.reuters.com/article/email/idUSTRE5B15LG20091202

Both Borders and Barnes & Noble are feeling the pinch from Amazon. And Amazon declared as much, adding proudly that they were putting pressure on both companies.

The Kindle’s success confirmed what industry experts had earlier predicted – that e-readers would be a hot gift item for the holiday season.

“Lower prices, more content, better distribution, and lots of media hype are contributing to faster-than-expected adoption of e-reader devices in 2009,” said e-books analyst Sarah Epps. “Based on consumer data and reports from vendors and retailers, Forrester [Research] is revising the projections we published earlier this year. We now anticipate sell-through in 2009 of 3 million units — up from our previous estimate of 2 million units — with 900,000 units selling during the holiday season [November and December]. Based on a number of factors, we expect sales in 2010 to double, bringing cumulative sales of e-readers to 10 million by year-end 2010,” she added.  http://blogs.forrester.com/consumer_product_strategy/2009/10/ereader-holiday-outlook-forrester-ups-its-projections-by-50.html

To appreciate the power of the e-book and e-reader phenomenon, just consider that the device can store approximately 1,500 books – a virtual library and one that you can around with you to almost anywhere. And it weighs about the same as a paperback novel. E-books also tend to be cheaper than hardcovers and even paperbacks. They can be accessed not only through dedicated e-readers but across multiple devices, including desktops, laptops, netbooks, smartphones, tablet PCs, MIDs, and portable gaming devices.

Forrester Research analysts Sarah Epps and James L. McQuivey predict that Amazon will eventually come out with a touch screen Kindle e reading device, and that electronic readers will have apps of their own to allow readers to share what they’re reading with social networks and do a lot more besides. Forrester’s research findings also suggest “apps will make it easier to view reading content on non-reading optimized devices, which will provide a ‘good enough’ experience for the majority of consumers.”

Their data further shows that “most consumers don’t read enough to justify buying a single function reading device” and “more consumers already read e-rooks on mobile phones and PCs than on e-readers.”

Studies by the firm iSuppli confirm Forrester Research’s findings that the market for electronic book devices is among the fastest-growing segments of the consumer electronic industry. They forecast that the market will grow from 1.1 million units in 2008 to over 18 million units in 2012.

According to Publishers Weekly, “The growth of Amazon has easily outpaced gains made by its bricks-and-mortar competitors … Over the last five years, sales through bookstores rose a meager 3.6%, while sales through Amazon jumped a remarkable 104%. … And Amazon’s book sales include much more than new trade books, since the e-tailer is a major outlet for used books, professional books and textbooks.” http://www.publishersweekly.com/article/CA6550867.html/

Across the Atlantic, Amazon is dominating the UK market. The online giant reportedly commands around three-quarters of online book sales in the UK.

Along with Amazon and other online book retailers, the social publishing website Sribd.com is fanning the growing public appetite for digital literature. According to Wikipedia “Scribd currently has more than 50 million monthly users and more than 50,000 documents are uploaded daily.” The site allows users to post documents of various formats, and embed them into a web page using its iPaper format.

Cooler e-readers

Also vying for a foothold in the e-book market is the British company Interead, the creator of the Coolerbook e-reader. The device has a 6” e-ink screen that displays text in eight shades of gray, and 1 gigabyte of memory for storing books and a card slot for adding more. It comes in a variety of bright colours.  Users can download books to their PCs and then upload them to a connected Cooler e-reader. In September Interead announced it had signed a deal with Google that allows it to add more than 1 million free public-domain books to its online bookstore. The texts are available from Google’s book-scanning project. Half of them, however, are not available outside the U.S. because of copyright restrictions. In addition, Interead currently offers approximately 330,000 books for sale in different formats.

Sony Corp. also offers a million free books from Google, along with 100,000 other titles.

Analysts’ forecast of 10 million e-reader sales by the end of 2010 constitutes a mere drop in the ocean of potential consumers. Internet World Stats estimates that as of September 30, 2009 there were 1,733,993,741 persons using the Internet – approximately one out of every four persons in the world (25.6%). Of that number, 478 million users are English speakers. Among the top three languages in use by Internet users, English tops the list, followed by Chinese (384 million users) and Spanish (137 million users). http://www.internetworldstats.com/

For now the prices of the Kindle and other e-readers are likely to limit access, especially outside of North America, UK and Europe. Gradually, however, prices are falling as competition heats up.

Amazon recently cut the price of the international Kindle to $259 from $279. A refurbished first-generation Kindle sells for $219. Sony has a new entry-level e-reader available for $199. Further, Amazon, Barnes & Noble and other booksellers have been pushing e-book bestsellers at the discounted price of $10 to lure readers.

What does all this mean for Caribbean bookstores? Will they be able to survive the marauding onslaught of the online retail giants? Increasingly, Caribbean readers are buying their books via the internet. The Kindle is now widely available in the region.

If the pervasion of mobile phones, video games and other media-related electronic gadgets is anything to go by, the future looks bright e-readers in the region – assuming that prices drop substantially and the Caribbean economy grows out of recession sufficiently to spur levels of economic consumption.

While the prices of electronic readers and e-books look set to decline over time, there is no indication that the costs associated with the shipping, warehousing and distribution of physical books are heading downwards, especially given the region’s susceptibility to the ongoing global recession and fluctuations in world oil prices.

As far back as 2004 the Caribbean Regional Negotiating Machinery, in a draft report submitted to a workshop on The Impact of Trade and Technology on Caribbean Creative Industries, issued the following warning to CARICOM governments and other stakeholders in the regional publishing industry

“Another major problem facing the [publishing] sector concerns the high shipping costs associated with transporting books and magazines to and from the Caribbean. Because books are very heavy cargo, they cannot be easily transported by air, so printers and publishers must rely on maritime transport, which is slow as typical orders to retailers in export markets are never large enough to benefit from container loads.  This means that shipments in and out of the region are often late and expensive. This problem must be a priority area for attention by CARICOM governments in negotiations on maritime transport services.”

Two years later, Director of the Shridath Ramphal Centre for International Trade Law, Policy and Service, Keith Nurse gave some sound advice to the publishing sector that lent weight to the CRNM observations.

Said Nurse: “The enhancement of existing distribution networks into efficient electronically facilitated channels from manufacturers to markets must be accelerated through rationalization, intra-industry cooperation and sharing a clear picture of the market opportunities that can be exploited by a lean and coordinated distribution system facilitated by e-commerce technology … The inefficiencies of a labour-intensive manual system are multiplied with the multiplicity of nations that make up the Caribbean region. An opportunity for competitive efficiencies to be built into a regional distribution network is afforded by an internet-enabled distribution network within the Caribbean Single Market & Economy.” Nurse’s recommendations are contained in a report on the cultural industries in the Caribbean done on behalf of the Caribbean Regional Negotiating Machinery.

It is not clear to what extent his recommendations have been taken on board and implemented. What is clear is that in a subsequent report entitled ‘The Creative Sector in CARICOM: The Economic and Trade Policy Dimensions’ prepared in July 2009 – 3 years after he issued his previous report – Nurse had cause to issue more or less the same counsel.

Under the prevailing economic situation, the region’s bookstores and publishers have little choice but to try and control their costs as best they can in order to survive. Beyond that, their best bet is to hope that literature will continue to flourish and there will always be a space and a demand for physical books. Organizing book events and inviting authors to launch their books can also help. In effect, they’ve got to see themselves as part of the community and the public must be given reason to view them likewise. They’ve also got to know their books and their customers and be well read.

Essentially, they must take their future into their own hands. No one else is going to do it for them – least of all the governments.