Although ebooks are seen as the symbol of “disruption” in the trade book marketplace, they’re really just a part of it and they’re the trailing component, not the leading edge. Online sales of print books were making life more challenging for booksellers in the US even before the Kindle debuted in late 2007. And it is the combination of the two — online purchasing of print and the penetration of ebooks among readers — that produces the disruptive effect: shifting the sales of books away from brick-and-mortar stores.
The disruption is evident among booksellers because they, and the shelf space they control, disappear. The disruption is evident among publishers because they are relatively suddenly confronted with a breakdown of the established order: their time-honored techniques for marketing and sales don’t function like they always did. They can’t find shelves on which to put the requisite number of books. They are obliged to find new ways to reach consumers with the message that their books are available because the old promotional avenues, including bookstores shelves, are drying up. Scale doesn’t help them like it used to.
And the disrupted marketplace creates another headache for publishers (and, in some ways, for booksellers too) by presenting authors with ways to reach book buyers without an organization, without much investment, without inventory. This makes old authors harder to sign and encourages thousands of new ones to put competing products into the marketplace. Recent Bowker data suggested that 12% of ebook sales are for titles that were self-published. (And most of those would be essentially unavailable for store sales.)
The marketplace disruption and the roiling of the publishing community is familiar ground in the English-speaking world. In the US and UK, ebooks quite often constitute half or more of the sales of a book. Bookstore chains have closed. Independents (despite some anecdotal reports of success, perhaps — in the US — facilitated by Borders’s disappearance) are threatened. Self-publishing has so many successes that, in the aggregate, it constitutes a new “major” player.
But the disruption, so far, has been confined to English-language publishing. In no other market are publishers and booksellers so obviously questioning the basics of their business models or speculating so openly about whether the publishing business we have known for a century can survive in its present form for another decade.
We keep scanning the horizon looking for the first market that will be disrupted in a similar way. We think we’ve found it. That market is Germany.
Recent reporting put the share for ebooks in Germany in the range of 2-3% of total sales. (This was the top line number reported to us by several people we spoke to; it is the definitely the prevailing understanding. A closer reading of the report, however — hard for us because we don’t know German — gets at some of the larger numbers we found through our investigation.) Nonetheless, we thought a closer examination of what’s going on there might show the potential for disruption. So we decided to put together a panel from the German trade to discuss the question at our Publishers Launch Conference at the Frankfurt Book Fair.
We looked for a real cross-section of knowledge across the German book trade, and I think our panel delivers it.
Steffen Meier is the head of “Online Publishing” (ebooks and ecommerce) at Verlag Eugen Ulmer, a specialist publisher focused on agriculture, horticulture and gardening. In that role he addresses both professional and consumer markets. He is also the spokesman for AKEP, the working group on electronic publishing for the Borsenverein, the German publishing trade association (which, unlike their counterparts in the US and UK, includes publishers and booksellers).
Ronald Schild is the CEO of MVB GmbH, a wholly-owned subsidiary of Borsenverein which provides marketing and publishing products and services that support the book trade. Schild also launched the ebook platform Libreka and formerly worked at Amazon.
Tobias Schmid is the head of ebooks and ecommerce at Osianderesche Buchhandlung, the 8th largest bookstore chain in Germany (and one that dates is founding to 1596!) Osiander operates 30 bookstores in southwest Germany and is the 2nd largest family-owned chain in the country. He is running an ebook program that has been in place since 2009 with over 700,000 titles available.
Anne Stirnweis is the ebooks project manager for Random House Germany and has been in that role since 2011, overseeing the development and expansion of their ebook program. Anne formerly worked at Amazon in content acquisition and vendor management.
In Germany, unlike the US or UK, there are price maintenance laws for books. They help protect bookstores by making it impossible for Amazon, or any other online or store retailer, to accelerate the disruption with heavy discounting. But, as we recruited our German panel, we have discovered that there are signs that the disruption that seemed inevitable to us is starting to take hold.
Among the things we learned recruiting panelists for the Frankfurt session:
Although the overall percentage of ebook sales in the German trade is only 2-3% of the total, on many titles they are reaching 10%, or even 20%, of the total. (This squares with the subsidiary findings of the report, which has German publishers reporting ebook sales percentages closer to 10% than to 2%.)
Free-standing independent stores are feeling the pain and closing, although in some cases their locations are being taken over by regional chains with superior capabilities to compete in the online environment.
Amazon is growing like a weed and is the dominant online bookseller, despite their inability to use price as a club in the competition. One observer told us that Amazon is about 2/3 of the online book sales marketplace. That’s not as much as they have in the US and UK, but let’s remember they’re playing without their pricing weapon.
Online purchasing is efficiency-competitive with shop purchasing because the inventory in shops is thin and many of the sales they make are for “next day” pickup after the store has gotten the book from a wholesaler.
And a fact we’ve learned that made us gasp is that many estimate the sales of print online to now constitute 25% of the total German market. This was also hinted at in a Borsenverein report, but it didn’t seem to strike many of the local players we talked to with the same impact with which it hit us.
Just as overall digital sales are 2-3% but they peak at 5 or 10 times that for some titles, the 25% online purchase of print is also unevenly distributed. So it is likely that there are a lot of titles in the German market now for which half or more of the sales are taking place outside of the shops.
So it would seem that all the ingredients for disruption are firmly in place. Most of the market can be reached without inventory, a warehouse, or sales reps. Amazon has enough of the market so that its author services that enable publication from a Word file constitute a viable commercial proposition for an author. The shops are feeling pressure, not finding that decentralized ecommerce or ebook solutions are particularly effective, and — even with price protection — steadily losing market share. And publishers can’t possibly ignore the changing marketplace. They’re already finding fewer places to put books on sale. Publishers that haven’t yet felt resistance from authors who have new alternatives to reach readers surely will before long.
It would be silly to predict a US- or UK-like course for Germany. There are two big restraining forces that weren’t present when the US and UK were undergoing their transition. One is, as we’ve said, that the publishers have the price-setting power in Germany and they are keeping both print and ebook prices high. (It is true, however, that average ebook prices are being pulled down by self-publishing in the ebook market.) The other is that they’re coming along a bit later, when tablets are cheaper and not much more expensive than dedicated ereaders (when Kindle launched, there were no tablets) and — related — when video, including popular movies and TV shows, are ubiquitously available to compete with ebooks. Nonetheless, the forces of digital change are powerful and increasingly taking hold.
In the course of putting together this panel, we found many participants in the German book trade who found the threat to bookstores and the established order an uncomfortable subject for public discussion. (It was absolutely startling to read in that 16% of German publishers have no plans to deliver ebooks.) Regardless of how uncomfortable it is, I suspect this is a discussion that will be very robust in Germany in the months to come.
There will be further insights into Germany’s digital transition from presentations at PLC Frankfurt from Jonathan Nowell of Nielsen and Russ Grandinetti of Amazon. And we are also featuring presentations from GoodReads, Scribd, and Wattpad — three virtual gathering places for the online reading and writing communities which, because they are emphasizing their global presences, are likely to tell us more about Germany too.