2012: Year in Review and Peeking Ahead
So what happened in 2012? More important, perhaps, is that we look forward at the same time as looking back, and peek for clues about what is GOING to happen next year based on what we're seeing now. But we are, finally, beginning to see some stability building in the market. Things are settling down, moving toward a "new normal", and there are advantages to be taken from understanding that new normal. Let's break it down a little:
Traditional publishers saw, in general, rising profit margins in 2011. It remains to be seen whether that trend continued in 2012, but I believe it did. To quote the 2011 Penguin stockholder report, the "more profitable nature of digital book sales" is driving this increased profit.
The DOJ settlement issue has come, gone, and the publishing world has not imploded. In fact, I predict zero short term impact on publishers' bottom line from that change. Discounting, which is now an option for retailers, is mostly just happening on major titles. Publishers still get the same income from titles which are discounted, and their suggested pricing gives them profit levels on most ebooks in excess of what they were earning on print sales. Amazon market share continues to slip, as everyone who knew anything about retail (including Amazon itself) knew would happen.
However, publishers are facing some stressors. Mostly, these revolve around author relations. The recent move by Penguin into subsidy press scams (by acquiring Author Solutions) and then Simon & Shuster's new co-op venture with Author Solutions for their own subsidy scam, have angered thousands of writers. When Random House merges with Penguin, it acquires the baggage of Author Solutions with the deal. This leaves Pearson (owner of Penguin) free from the stigma, but there is a dark stain now on the reputation of Penguin, S&S, and soon Random House as well. This sort of thing is penny wise and pound foolish, because to writers one of the last remaining reasons to use a major publisher is the reputation of that publisher. Sullying that reputation by scamming newbie writers out of thousands of dollars may make a few bucks, but is potentially deadly in the long run.
The mergers raise their own concern. With four of the "big six" merging or discussing merging, we'll be down to the "big four". And maybe the "big three" next? Multiple problems with this. First, they're trying to get big enough to fight Amazon, which simply isn't possible. All of the big six could merge, and they'd still have a tough time outspending Amazon, should Amazon choose to go to the mat with them. The merger will not achieve the desired goals. Second, the merger will result in overlapping lines and imprints. A good chunk of those will likely be cancelled or merged. This will cause more editors to go to the street looking for freelance work or starting their own small presses. It will offer less slots to writers who want to publish with these publishers, forcing more writers down the indie path. Publishers are LOSING good talent by shrinking their collective mass.
Third, it means these companies are growing larger at a time when small and nimble is better. The last couple of years have seen hundreds of comments about publishers being "like the Titanic", "turning like an oil tanker", or compared to dinosaurs. We're living in a time when the small animals are going to succeed better than the huge ones. Yet the major publishers are trying to intentionally evolve themselves into bigger and bigger dinosaurs, rather than smaller and more nimble animals. This seems backwards to me.
Indies have seen a pretty static year. Self published ebooks began the year at about 35% of the top hundred bestsellers, and ended the year at about the same level. Indies began 2012 at about 40-60% of the top hundred lists in most genres and have ended the year at about the same level. Not a lot of change there. The indie position in terms of market share seems pretty static at something like 40-50% of US ebook sales.
Pricing has seen some changes. Amazon altered the algorithms for visibility, giving free downloads and sales of below $2.99 priced books much less impact on what books readers see. This upset a lot of writers who had been using the 99 cent price tag and Kindle Select programs to get visibility. The ranting on the internet has been significant. Other writers simply adapted, moved on, and changed their pricing to take advantage of the new algorithm. The latter group tended to perform much better. Overall, the price of indie books on top hundred bestseller lists has risen about fifty cents over the course of the year - from about $3 to about $3.50. It's a small change, but it's a good trend. Indies are selling well at higher prices, which is good for the writers.
This was a big year for midlist writers vacating major publishers. With advances crashing and big six imprints still offering very low ebook advances while also being unable to competitively price their ebooks, many experienced writers have shifted from submitting work to the majors to indie publishing that work instead. Some of them are being sucked into the subsidy scams. Hopefully, over time the word will get out about best practice methods for production.
Another huge note for this year: indie publishers are beginning to decline major publishers who offer to pick up their work. This began in 2011, but became much more common in 2012. I feel the trend will become common in 2013. Publishers are making offers on indie books which do well, but by the time major publishers are noticing an indie book, the writer is already making more money than the publisher is willing to offer, in many cases. Also, as writer faith in publishers continues to decline, the cachet involved in being traditionally published is slowing being replaced with a stigma - an odd reversal from just a few years ago, when the stigma was on self publishing!
Lastly, professionalism is coming to count for more. A couple of years ago, a writer could put up a barely edited work with a mediocre cover for 99 cents and get some decent sales. Even last year, that was the case, pretty much. In 2012, we saw readers beginning to ignore the 99 cent deals in favor of higher priced work. More importantly, there is a trend toward readers ignoring mediocre work in favor of better edited, better produced books with stronger covers and blurbs. As competition for readers' eyes continues to heat up, this will intensify. The moral here is simple: write good books, and produce them very well. The minimum bar for most indie success in 2013 will, I believe, be to match the big six imprints on quality.
B&N got an influx of cash from Microsoft, announced they were spinning off all their profitable elements into a new corporation, and then... Well, we haven't heard much else, since then. B&N's new company will include the Nook, online store, and college bookstores, we're told. This still reads as protective measures to me. With the big box retail stores losing money every year for years now, the likely answer is that they're trying to protect the good assets from upcoming bankruptcy involving the bad assets. Time will tell. In the meantime, I expect further shrinkage of their physical bookstore assets, and further expansion of their online sales and ebook assets. The Nook remains a strong contender for ebook sales, and with the new moves into the UK, B&N is perhaps opening doors to work globally now as well.
All ebook retailers except Amazon continue to struggle with poor web design and search systems. It's gotten so that even avid iBooks users are browsing for books on Amazon before buying on iBooks! Kobo is not a lot better, although B&N seems to have made some forward strides. The iBooks store is the worst though (reflected in their poor market share). On their iPad app, it is almost impossible to dig deep into the stacks looking for good books. You have to either already know the title you want - or you have access only to the top hundred bestsellers in each genre.
Contrast that with Amazon, which has genre breakdowns, subgenre breakdowns (in increasing numbers), released in last 30 or 90 day toggles for every genre and subgenre, and ability to browse as deep into a genre as the reader wishes - scanning hundreds, even thousands of titles deep. You can even exclude low rated books if you like. And the "customers who read this also read" and recommendation systems are superb.
Retailers take note: competing with Amazon means meeting or exceeding their level of professionalism. A smaller retailer cannot compete with a larger one without being *better*. Since it is unlikely other retailers can compete with Amazon by setting lower prices, that means the quality of user experience must be higher at your store than it is on Amazon. The best retailer is the one which best helps readers to search through the sea of available books to find ones they will enjoy. That's Amazon, right now. Other retailers need to step it up.
This year has flown by. And we've seen some significant changes. But mostly, I feel like we've seen things settling into a new normal. We've seen more static results in data this year than we have in the last three. Ebook sales are still climbing, but more slowly. Market shares are no longer in as much flux as they once were. Pricing is settling down a bit. And readers are getting used to finding new ways to discover the books they want to read.
2013 will be an interesting year to watch, as well. Will we see things become more stable, less fluid? Will something break somewhere in the system under the assorted stresses still present, and send everything stumbling again?
What are your predictions for the new year? And what did you feel were the most noteworthy publishing events of the last? I'd love to hear from you!