Two Research Groups predict Rise in e-reader sales will Result in Decline of Traditional Book Publishing

The book publishing industry has entered a period of long-term decline because of the rising sales of e-book readers. So says IHS iSuppli, a US-based market research firm that supplies technology companies with market intelligence on the global consumer electronics, broadband and telecom industries.

New IHS iSuppli research indicates that the revenues of US book publishers will decrease at a compound annual growth rate (CAGR) of 3 percent from 2010 to 2014. According to IHS iSuppli, the overall weakening will be spurred by a 5 percent decrease in the CAGR of physical book sales from 2010 to 2014. “While e-book sales will soar by 40 percent during the same period, such an increase won’t be sufficient to compensate for the contraction of the larger physical book market,” said Steve Mather, principal analyst, wireless, for IHS.

He added. “For the traditional book publishing industry, the implications of the rise of the e-book and e-book reader markets are frightening given the decline in paper book printing, distribution and sales. The industry has entered a phase of disruption that will be as significant as the major changes impacting the music and movie businesses.”

In 2014 e-books will represent 13 percent of total U.S. book publishing revenue, up from 3 percent in 2010 and 6 percent in 2011, said Mather.  E-book prices are typically 40 percent lower than those of print books.

These trends are expected to spread throughout the world as non-U.S. sales of e-readers increase.  Shipments of e-readers are expected to more than triple during the period of 2010 to 2014. Global unit shipments of e-book readers will rise to 30 million units in 2014, up from 9.7 million in 2010, according to IHS iSuppli projections.

Their research findings further indicate that dedicated e-reader shipments will fall short of some expectations partly due to encroachment from media tablets, which many consumers will use to view e-books. “Furthermore, price declines for e-book readers will be less than many expect, since makers of such devices already have cut prices to the point where they earn near-zero margins,” says IHS iSuppli.

The IHS iSuppli research validates the findings of global management consulting firm Bain & Company which conducted a survey of almost 3,000 consumers across six countries and three continents (USA, Japan, Germany, France, UK and South Korea) in 2010.  Their study indicates that 15 to 25 percent of books sales will shift to digital format by 2015 in developed countries. It also showed that readers tend to read more when equipped with digital readers. “The vast majority of these readers will pay for their e-books,” said Bain & Company, adding, “The book industry is heading into wholly new territory.”

The USA and South Korea are setting the pace. “Other countries, particularly those in Europe, will lag but eventually catch up,” the researchers predicted.

“However long it takes, conditions are perfectly aligned for readers to embrace digital devices. Prices have sunk below consumers’ purchasing threshold, with some e-readers already less that $140. Meanwhile the reading experience and ergonomic design keep improving,” Bain & Company further stated.

Their study also found that most early adopters of digital reading devices and multipurpose tablets are already heavy readers. “In numbers they are more often men than women. They also describe themselves as more affluent than average and tend to be in the 20s and early 30s. This group values the flexibility of reading in different settings and the new devices’ ease of use. Their reading behaviours suggest that digital formats are bound for a promising future and will initially be used as a complement to paper. The second wave of digital migration should broaden the e-reader market,” said the research team.

They added: “Vast changes are in the wind with digital formats representing 20 to 28 percent of industry profits in the medium to long term … Powerful digital distribution platforms have already emerged with select players predominating. Amazon benefitting from its first-mover advantage with the Kindle, Apple riding on the success of iTunes (and more recently the iPad) and possibly Google in the near future.”

According to a February 2011 report from Goldman Sachs Group Inc., the Kindle has 67 percent of the e-reader market in the U.S., followed by the Nook at 22 percent. Amazon also generates 58 percent of e-book sales, followed by Barnes & Noble’s 27 percent and Apple at 9 percent.

Currently, the U.S. is the biggest market for e-readers and e-books.

2 responses to “Two Research Groups predict Rise in e-reader sales will Result in Decline of Traditional Book Publishing

  1. I agree, I’d say in 10 to 20 years readers may need to pay 3 to 4 times for a physical paperback book than for the price of an ebook. This would likely be due to the fact that e-book readership going up would already cause less paperback books to be wanted. With less demand for paperback books, if lets say only 10% of people requested a paperback version the cost of producing that version of the book would likely increase since it would be a smaller amount being manufactured. I believe that the industry will change quite drasticly over the next 10 to 20 years just as computers in general have changed our day to day lives the past 10 to 20 years.

    • Brian, I agree. Some publishers, it seems, are trying to delay the inevitable by pricing their e-books the same as hardcovers or even higher – or in some cases delaying the release of e-books for several months so they don’t cannibalize the sales of their physical books. As Chris Meadows of Teleread notes in a post “E-books are rapidly gaining popularity because people find them more convenient than paper books. If you try to force them to go back to the old dead-tree format for the sake of “saving bookstores,” you’re going to cost yourself sales.”

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