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...

Sony Ebook Reader at The London Book Fair

This week I attended some sessions on ebook readers, epublishing standards and digital marketing at the London Book Fair (aka The LBF).

Sony were very optimistic about the prospects for their ebook reader and explained how their ability to enter the market successfully - though it's still early days - was as a result of their collaboration with a number of key players including the retailer Waterstones, the International Digital Publishing Forum (idpf), Penguin and Google. Sony is a pioneer and innovator in consumer electronics - it also knows all about making, owning and selling content in the music and film industries - and the thorny issues of IP and copyright, but the book industry represents a departure from their traditional comfort zones and clever partnering is essential.

If Google is an advocate of the Sony reader then that will surely add a lot of weight to the manufacturer’s campaign to succeed in this space. Google may still be persona non grata for some publishers but it’s the readers and consumers who count here and the recent Google Booksearch settlement agreement reached between the search company and the US book publishing industry should encourage publishers to move on and focus efforts and energy on creating new ebook products and services. That is to say once the settlement has cleared the remaining obstacles: opt outs, objections, and a final hearing the deadlines of which have just been extended several months, in the case of the Final Hearing until the week before the Frankfurt Book Fair.

Sony trod carefully given the august LBF audience, and while not wishing to upset those underwhelmed by the propsect of ebooks, they did a good job of making publishers sit up and take note. Graphs, stats and images illustrating the crisis in the newspaper industry paved the way for a discussion about emerging business models for books and content, the inevitability of ebooks as a medium and the opportunities they present for publishers wanting to develop complementary and new sales channels.

According to Sony’s research, users of their ebook reader are buying a lot of books around the key holiday times and are particularly attracted to the device as a way of travelling light but with all the books you want.

They also discussed ebook formats in particular the EPUB format - I shall post on this soon.

Some brave person from the digital community commented on the size of the seminar theatre in the Digital Zone of the LBF - it was approximately the size of a waiting room at a small dental surgery. Says something about the relative importance of digital at the London Book Fair - it's growing but should that be renamed the London eBook Fear..?