The plot may be unraveling for e-books
E-books, the one-time golden boy of the book industry, have hit a turbulent adolescence.
Their sales have taken a hard downward turn this year, thanks in part to sharply higher prices on new releases from the top five publishers. The higher prices have rolled out over the past several months as Amazon (AMZN) struck new e-book distribution deals with the country's biggest publishers, which gave the latter the right to set their own prices, said Peter Hildick-Smith, chief executive of industry researcher Codex Group.
The average price of books sold in the Kindle bookstore from the five biggest publishers -- which include Hachette and Simon & Schuster (a division of CBS, parent of CBS MoneyWatch) -- cost an average of $10.81 this year, while e-books from smaller publishers sold for an average of $4.95, according to Codex. From January through mid-August, almost half of newer e-book titles from the big five publishers were set at $12 or higher, Hildick-Smith noted. Prior to the new agreements, Amazon discounted e-books, often setting prices at $9.99 or lower.
"If you ask consumers what their expected price for a recently released book in the Kindle store is, that expected price is $8.28," he said. "So, if you're expecting $8.28, but what the big five were offering was $10.81, that's pretty big difference."
Readers, no surprise, can't be blamed for thinking that publishers have lost the story line.
Sales of e-books have slumped 9.3 percent from January to July 2015, according to data from the Association of American Publishers. That decline comes after years of strong growth following the introduction of Amazon's Kindle in 2007. Back then, sales of digital books took off, thanks to the Kindle's "E Ink" technology, which was easier on the eyes than LCD screens.
In an effort to boost interest in e-books, Amazon's strategy involved selling them below the publishers' prices, Hildick-Smith noted. Amazon was "paying out of their own pockets," he said.
With the new deals, the publishers set the prices for e-books and pay Amazon a percentage for serving as a transfer agent. The publisher "doesn't have the depth of pocket" to offer the same discounts as Amazon, Hildick-Smith said.
In some cases, e-books have higher prices than the hardcover editions of the same book. The last novel from Terry Pratchett, a British writer who passed away earlier this year, is selling in e-book version for $11.99, while its hardcover copy is $10.65.
Price isn't the only reason consumers may be shunning e-books. Some readers aren't replacing their Kindles or Nooks as they break or lose efficiency, opting instead to rely on smartphones and tablets to read. But those devices aren't as easy to read on, and that may be exacerbating the decline in e-book sales.
Another issue is whether there are enough hot new releases to get consumers buying. "This is a title-driven business," one publishing executive told The Wall Street Journal. "If you have a good book, price isn't an issue."