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The E-Book Era Is Here: Best Sellers Go Digital

4 minute read
Andrea Sachs

Two years? Three years? Five years? It’s a parlor game in publishing circles to speculate how long it will take before e-books constitute a majority of the industry’s sales in the U.S. But the tipping point aside, no one doubts that that is where the market is headed. Amazon, the industry leader, already sells three times as many Kindle e-books as hardcovers. Other book sellers aren’t far behind. Last week, the Association of American Publishers announced that in January, for the first time, monthly e-book sales had overtaken hardcovers. Paperbacks remain in the lead, for now.

E-books are by far the fastest-growing segment of the otherwise sluggish, recession-plagued publishing business. In 2010 e-book sales jumped 164%, to $441 million. “The acceleration has been quick and dramatic, and in some ways the uptake may get faster if physical outlets for books, like Borders stores, disappear faster than expected,” says Michael Cader, founder and editor of trade e-newsletter Publishers Lunch.

(See a TIME story on the boom in e-readers.)

After Borders, the second largest bookstore chain in the country, declared bankruptcy last month, the question arose as to whether the popularity of e-books had caused its demise. While industry experts say it was only part of the reason for the Ann Arbor, Mich.-based chain’s collapse, its poor showing in the e-book arena certainly accelerated the former retailing powerhouse’s fall. “They didn’t get it,” says Publishers Weekly business editor Jim Milliot. “They were way late to the game. They only started to develop a digital strategy last year.”

One of Borders’ main problems, according to Michael Norris, a senior trade analyst at Simba, was that the chain sold a dizzying seven types of e-readers, which confused consumers. Another issue was that for many years, Borders didn’t maintain its own website, instead selling through Amazon. In contrast, rival Barnes & Noble sells its own popular e-reader, the Nook, and has long maintained B&N.com, which features a vibrant store that has seen its e-book sales take off. Still, both chains are light-years behind Amazon, creator of the Kindle, by far the best-selling e-reader in the market.

(See how Barnes & Noble avoided Borders’ fate.)

Despite the growing popularity of e-books, they pose a challenge for publishers. The industry still makes over 90% of its revenue from print. That means major publishers like Random House have had to maintain their print business while at the same time growing their digital side. “The trick is not that the digital isn’t profitable,” says Cader. “Digital at its current level makes few or none of the costs of running a print business go away.” That means big warehouses, broad sales forces and extensive systems. The hope, of course, is that in time, digital will be cheaper to produce, but currently, publishers face a big expense in converting to digital. What’s more, publishing has always been based on economies of scale, and with a reduction of the number of paper books, printing is becoming more expensive. “Once people catch the e-book reading bug, they rapidly shift a large portion of the books they read to digital,” James McQuivey, a media-technology analyst at Forrester, wrote in a November report.

So are print books going to disappear? That’s not in the cards — at least not yet, say experts. “Formats to which lots of people are attached often take a longer time to go away,” says Cader. He compares publishing to the music business, in which CD sales have dropped significantly but not ended. And books were around a long time before CDs. Also, certain genres aren’t practical as e-books. “It doesn’t make sense yet for digital cookbooks, travel books, information books and textbooks,” says McQuivey.

Publishers Weekly‘s Milliot agrees that print books will continue to exist, despite the popularity of all things digital. The fact that a consumer can order and download a book instantly, he believes, is not enough to make print books disappear. “Some people just like to have books in their house,” he says. “Basically, if you just want to read a book, a print book is still a pretty good deal.”

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