NB: This is a personal viewpoint by Jani Patokallio, a former publishing platform architect at Lonely Planet.
CEO of Netflix, Reed Hastings, put it simply when he famously proclaimed last year: "We expect DVD subscribers to decline every quarter... forever."
It does beg the wider question: does your business model relies on selling any type of paid content? If the answer is yes - welcome to Mr Hastings’s world.
Books
Many publishers continue to operate under the assumption that printed book sales are declining gradually or perhaps even plateauing.
Unfortunately the data tells a different story: the decline appears to be accelerating. Here’s Nielsen Bookscan for the travel market:
That’s from the "Guidebook Category Report, Rolling, Period 13" for 2006 to 2012. The trendline is a simple polynomial (n=2) best fit, and if it’s accurate, the market will halve by 2015.
And while that sounds drastic, it’s by no means unprecedented, as the sales of CDs did pretty much the same thing between 2006 and 2009.
Of course, the market’s not quite homogenous: Lonely Planet’s been beating the trend, mostly by continuing to invest in print and absorbing customers from the rapidly-disappearingFrommers.
But that just makes LP an even-bigger fish in an ever-shrinking pond. So can the white knights of digital paid content, e-books and mobile apps, save the publishing industry?
E-Books
Finding good data for e-books is a pain, so I ended up rolling my own: I grabbed Amazon’s Kindle Store Top 100 best-sellers lists since 2007, using snapshots from the Internet Archive that record the actual prices at the time, and computed average prices and the proportion of under-$5 titles, the vast majority of which are self-published (source code in Ruby here)
Despite the December 2012 spike, the trend is clear, and while the decline looks gentle, my personal suspicion is that the trend line is too optimistic and that there’s a collapse looming.
For one thing, the data above is only for best sellers, meaning new books by well-known authors who command a distinct price premium; the average price of an average e-book is both lower and falling faster.
Yet even in the Top 100, the share of "cheap" books, the vast majority of which are self-published, is growing exponentially:
While I didn’t use their data directly, I owe tips of the hat to Piotr Kowalczyk, who wrote a very detailed report on the growth of self-published books on Kindle, and Digital Book World, which has been keeping tabs for the past half year (albeit looking only at the top 25).
DBW also has a credible explanation for the spike, which boils down to publishers yanking up prices in the period before they had to start allowing discounting, and further reinforces that shrinking prices are the new normal.
Apps
The collapse of prices in the mobile app world has been even more drastic, to the point that outside an elite circle of bestsellers and the odd very specific niche, making money by selling the app itself is a pipe dream. (All data courtesy of 148Apps.biz and the Internet Archive)
By the end of the year, the average app will cost under $0.99, and even that’s pulled up by every $999 BarMax and wannabe in the store. The median price is already zero:
In other words, over half of all apps are already free. On current trends (and look how beautifully that line fits the data!), that will be over 80% within two years.
This is for the "premium" Apple Store widely opined to have less stingy customers; the equivalent figures for Android will be even more brutal.
What to do then?
The only answer is to figure out a way to make money that doesn’t involve readers paying for content. Here are some ideas:
NB: This is a personal viewpoint by Jani Patokallio, a former publishing platform architect at
Lonely Planet. This article first appeared on his
Gyrovague blog.
NB2:Start line image via Shutterstock.