The War of the Tablets and the rise of Ebooks

The Microsoft Surface

One after the other the world’s tech giants are throwing down the gauntlet in a bid to corner the lucrative tablet market.

Last week Microsoft unveiled the Surface, a 10.6-inch Windows 8 tablet. Techradar.com has an excellent in-depth review of the Surface with video footage.

Google has also launched its own tablet – the the Android Jelly Bean-based Nexus 7. It’s surely no coincidence that the unveiling coincides with Google’s recent announcement of a major deal with some 600 French publishers and a major writers’ group who have all agreed to drop their lawsuits against Google and allow the search giant to index and sell scanned out-of-print French books with prior permission.

Google Nexus 7

Meanwhile, there’s talk that Apple is planning to launch a new smaller-size tablet called the iPad Mini this year to compete with offerings from Google and Amazon.

As for Amazon, the word in US tech-industry circles is that it too is planning to release a new version of its Kindle Fire tablet in August. According to DigiTimes, the new Fire tablet will have a 7.85-inch screen (the current version is 7 inches), and it’ll cost $199.

Talk of the impending launch of a new Kindle Fire comes amid reports that Kindle sales went into a slump after a strong showing during the 2011 Christmas season.

Paulo Santos, an independent trader, analyst and algorithmic trading expert cites a number of sources that appear to corroborate this claim. According to Santos, the Kindle ereader has “fallen beyond the wildest dreams of Amazon.com’s management.” He added, “The drop in Kindle ereader sales came with the introduction of the Kindle fire, and the cannibalization has been nothing short of stunning, massive. Why do I say this? Well, Amazon.com has slowed down its demand for Kindle ereader e-ink screens to near zero since December 2011, the month after the Kindle fire was introduced.”

Notwithstanding the Kindle’s alleged woes, several industry experts believe tech giants like Dell, HP and other PC makers can’t afford to sit on their laurels and risk being left out of the game, so we can expect the introduction a slew of new tablets in the near future.

Kindle Fire and iPad 2

On the ebooks front, the Association of American Publishers (AAP) released a new report in May showing that ebook net sales revenue in the US for 2011 was $21.5 million, up 332.6% over 2010. Print books revenue increased 2.3% to $335.9 million in 2011.

The four most rapidly-growing regions for US publishers (according to the AAP) are:

–       Continental Europe — 14.7% overall increase in revenue; 218.8% in eBooks, 9.5% in print

–       UK — 22.9% overall year-to-year increase in revenue; 1316.8% increase in eBooks, 10.4% in print

–       Latin America — 15.4% increase in revenue overall; 201.6% in eBooks and 9.7% in print

–       Africa — 21.9% total increase in revenue; that translated to 636.8% gain in eBooks and 17.1% in print.

According to the AAP report, US publishers currently export, on average, 90% of their titles in print and/or e-formats and work with nearly 15,000 international retailers in 200 countries.

UK

In the UK the Publishers Association (PA) recently published its Statistics Yearbook 2011 of publishers’ sales, which reveals that ebook sales increased by 366% in 2011.  Ebook sales in the UK are now equivalent to 6% of physical book sales by value. In addition, the PA says:

–          13% of academic and professional book revenues came from digital products

–          Overall digital sales grew by 54%

–          Total physical sales of school books (excluding ELT) increased by 6% to £271m.

Europe

Germany is proving to be a harder nut to crack for ebook publishers. Spiegel Online International says the German e-book market is “almost nonexistent”. It adds, “Though e-book sales have increased by 77 percent in Germany in the past year, they still account for just 1 percent of total book sales, market research institute GfK reported last month.”

Spiegel Online International cites a culturally ingrained preference for printed books as one of the main reasons for German consumers’ slow adoption of ebooks. High value added taxes are reportedly also to blame, not just in Germany but in other parts of Europe.

According to the New York Times, “Across most of Europe, e-books are taxed at full national value-added rates, which reach 25 percent in Sweden, Denmark, Hungary and other countries. Printed books, benefiting from an industry lobby, are taxed at a fraction of the full rates — and not at all in Britain.

The Global Ebook Market: Current Conditions and Future Projections – a report prepared by Rudiger Wischenbart for the Frankfurt Book Fair 2011 – provides a detailed look at the global e-book market.

From all indications, printed books still account for the vast majority of global book sales, proof that most people still choose (or prefer) to read the old fashioned way.  Nevertheless there’s no denying that there continues to be a rapid rise in ebook sales, particularly in North America and the UK.

Now to the million dollar question: should we take last year’s surge in ebook sales as a further sign that hardbacks and paperbacks are on the way to extinction?

Stakeholders in the US music industry are mulling over a similar question; will digital music downloads ultimately replace CDs? In fact, if recent news reports are correct, the die has been cast and the major music labels have already placed their bets. Word is that America’s major labels plan to abandon CDs by the end of 2012 and replace them with digital download/stream-only releases via iTunes and other music distributors.

As for the US auto industry, they’ve had it with CD players. In their push for lighter, more fuel-efficient vehicles, they are reported to be sounding the death knell of CD players on dashboards. NYDailyNews.com quotes senior Ford designer Michael Arbaugh as saying that he was ‘looking forward to the day’ when designers ditch CD players on dashboards forever.

Asked if CDs would still exist in 5 years, chief editor of Side-Line Music Magazine, Bernard Van Isacker said, “Yes, but in a different format. Normal CDs will no longer be available because they don’t offer enough value, limited editions on the other hand will remain available and in demand for quite a few more years.”

Side-Line Music Magazine proffers a rationale for the anticipated move on the music labels’ part and says it “makes complete sense.”

“CD’s cost money, even when they don’t sell because there is stock storage to be paid; a label also pays money to distributors when CDs get returned to the labels when not sold and so on. In short, abandoning the CD-format will make it possible to just focus on the release and the marketing of it and no longer focus on the distribution (since aggregators will do the work as far as dispatching the releases to services worldwide) and – expensive – stock maintenance. In the long run it will most surely mean the end for many music shops worldwide that only stock and sell CD releases.”

Sounds familiar? It should to all book publishers and their authors.

But here’s the kicker.

According to a Nielsen and Billboard report, digital music purchases accounted for 50.3% of music sales in 2011, up 8.4% from the previous year, while physical album sales declined by 5%.

Now, assuming it’s true that the labels are looking to jettison CDs soon, it means they would have no qualms about dumping a product for which there is still strong customer demand. Remember, CDs still account for nearly 50 percent of music sales by US labels.

The reason for this is obvious. Although CDs may still account for a substantial portion of music sales, in the harsh realities of the prevailing economic climate, and the cutthroat competition in the market, they are fast becoming irrelevant. Crucially, what matters most to the labels is which medium generates the most sales and the highest profits.

Now back to the book publishers.

I predict that those who eventually switch to a predominantly digital model would most likely do so for more or less the same reasons as the music labels. They will conclude that there’s no other way to surmount the obstacles they’re up against – their inability to reduce production, distribution and storage costs which are constantly rising, or to induce customers to continue forking out higher prices for printed books.  Also, if they’re not able to increase their sales volumes because the books are not moving off the shelves fast enough, that’ll be another incentive to switch gears and radically restructure their production and distribution setup. In short, if publishers (particularly the major corporate houses who have the most at stake) decide that their continued dependence on the old print-based model could eventually break them, what you and I prefer ceases to matter.

Ultimately, the need to increase sales and profitability is what will force publishers and the music labels to tip their hand; all the more with their bankers and shareholders breathing down their necks.

Update: Amazon to Build Android Smartphone

Amazon is going to produce a smartphone running Google’s Android platform in a bid to challenge Apple’s iPhone and have another vehicle through which it could sell content, according to a Bloomberg report. Read more.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s