August 11, 2013

Stability In Bookselling?

by Alan Beatts

The last few years have seen some pretty big shakeups in the bookselling industry.  Probably the biggest shakeup has been ebooks' rise in adoption, driven by Amazon's commitment to the market and the popularity of tablet computers.  Added to that, the closure of Borders Books, the increased success of self-publishing and the contraction of the whole publishing business in the wake of the Great Recession have made for a bumpy time for everyone in the business of books.

However, I think that we're heading into a much more stable time for the business.  I don't foresee anything on the horizon in the near term that will cause any significant changes.  Of course, it's very difficult to predict innovations and so it's certainly possible that something will appear next week that will knock the whole business on its ear again.  But I'd be happy to bet that we'll have a few years, perhaps as many as five, before something truly notable happens.  Here's why --

Although sales will continue to move from physical books to ebooks, we're not going to see the huge shift that happened in the past three years.  Most people who want to use ebooks rather than physical books have already changed their buying habits.  The cost of ebook readers really isn't a barrier anymore (a new Kindle costs $69 and you can find older ones on eBay for as little as $10), you can get almost any book as an ebook, and the various ebook stores are well developed.  Ebooks will continue to gain popularity as people who were on the fence switch, but that may be counteracted by a similar number of people who switch back to physical books after trying ebooks.  I think that the main growth will happen as older readers pass away and younger readers, who have been using tablets most of their lives (many schools are getting tablets for _all_ their students, not the least of which is the Los Angles school district), start to represent more of the book-buying market.  But that is going to be a slow, steady process and not a sudden shift.

If the technology of ebook readers were to get tremendously cheaper - for example, if it was cost-effective to give them away with a minimal purchase of ebooks - that would change the rate that people are switching over.  Since the technology for dedicated ebook readers is all pretty mature, it isn't likely that the component costs will drop sharply, so hugely cheaper readers aren't going to appear soon.  Right now in fact, the main attention is on improving the performance of tablet computers with better displays and improved processor speeds.

Chain Bookstores
Although Barnes and Noble is showing consistently increasing losses and has abandoned the ebook reader market, it's unlikely that it will go the same route as Borders.  Unlike Borders, B&N is carrying relatively little debt but, much more importantly, the Riggio family has effectively complete control over the company.

Len Riggio, the founder, is already in talks to buy the retail side of B&N.  If he does so, it is his express intention to make the company privately held, which means that there will no longer be stock market expectations to satisfy nor share-holders to worry about.  That will mean he can run it as suits him, including ruthlessly closing stores that are performing poorly.  Mr. Riggio is a very capable manager and bookseller.  If he has a free hand, I think that B&N will last as long as he's at the helm.

The low level of debt, Len Riggio's control of the company, and his desire to take the retail stores private in combination mean that Barnes and Noble will not collapse the way that Borders did.

On-Line Bookselling
Like ebooks, the customer shift from brick-and-mortar to on-line has already happened.  There will continue to be a slow shift towards on-line purchasing (especially if Barnes and Noble shrinks its number of stores) but it won't be a sudden shift.  In fact, it may even be balanced out by people moving the other direction as the importance of supporting local businesses continues to penetrate consumer awareness (as it has been for the past decade or so).

Major Publishers
The big New York publishers are in a pretty stable position right now.  The economy has improved to the point that sales are pretty much in line with business as usual.  The big merger of Penguin and Random House has reduced the ranks of publishers by one, but the remaining publishers seem to be stable.  Amazon continues to try to attract authors away from existing publishers but the early "land grab" quality of their efforts has slowed significantly and they are being much more cautious.  Like much else in the business, there will be slow, steady change there but I don't see any sign of sudden shifts.

Despite some notable forays into self-publishing (including Terry Goodkind), it seems that successful, popular authors would prefer to concentrate on writing and leave the rest of the business to publishers, even if it means giving up some control and some money.  There are some exceptions but that seems to be the trend.  Meanwhile, self-publishing has been an excellent way for authors in the mid-list and below to make some money from their backlist, much of which has been out of print.  That means they can spend more time writing and less time chasing a buck, which is probably good for everyone.

Overall, I'm quite optimistic about the next few years.  I'm looking forward to booksellers having a bit of a respite and the opportunity to improve their positions in preparation for the next set of shocks to the business.  I know that I am very much looking forward to a couple of years of "business-as-usual".  Let's hope I get it.

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