An entrepreneur's view of ebooks and the publishing market

The economics and business model of ebooks has caught the attention of entrepreneur Luke Johnson who runs the private equity firm Risk Capital Partners. He’s also a NED at publisher Phaidon so is well placed to reflect on this fast moving market – though he acknowledges that Phaidon – art, cookery, illustrated books may be less affected by this technological and market change for the time being. He has also recently written several books and where content is time sensitive, as for example with business books, waiting a year from manuscript to bookshop is ‘ludicrous’. Here are some of his reflections, predictions which can be found in full on FT.com Wednesday May 11, 2011.

- In the US, digital sales are at least 20% of large publishers’ revenues and growing fast.

- Authors generally receive 25% royalties on ebooks (15% for print) – given the much larger gross margins of ebooks, publishers need to start sharing more of this revenue with authors – in the meantime publishers such as Penguin are recording huge profits by maintaining ebook price points close to or at the level of print.

- Publishers could be missing a trick – the huge number of English speakers and readers who do not currently buy books but who might if prices were right – in other words a volume opportunity around much lower price points.

- There are of course challenges – piracy is a fear , as is the disappearance of high street bookstores; the increased dominance of Amazon; growing use of devices such as Kindle and iPad and other ebook readers; and decreasing importance of libraries will all contribute to an urgent need to re-think publishing business models and skills (e.g. SEO - Search Engine Optimisation).

- Good publishing brands (perhaps series too) can find success – Johnson cites the Dummies series where a reader is unlikely to know an author’s name but will likely own several copies of the series.

- Overall, he sees huge opportunities and threats as well as consolidation and upstarts coming from nowhere.

- Comment – an interesting perspective and good to see a concise update on some of the key issues from someone with broad business experience, not just of the publishing world. I think I would question the longer term viability – as he sees it – of illustrated books over other genres - it will be very interesting to see if the high quality format of illustrated books will be replaced by digital.. seeing how comfortable particularly younger readers are to read magazine content and view images online, am not sure the illustrated book is as safe as Johnson suggests. The opportunity is to consider how digital can enhance further the beauty, look and feel of illustrated print titles.. take a look at Touch Press titles to see what can be achieved...