The European E-book Market

[dgaughran]

Hi all,

If anyone is interested in the European market, I have blogged about that today, covering the market share of e-books there, the factors restricting growth, why Amazon is not as dominant as in the US, and the additional challenges facing European self-publishers, and those publishing in non-UK markets.

For those that don't want to read the whole thing (it's about 1500 words), here are some quick takeaways:

1. E-book market share is about 5% in the UK and Germany, very low in Spain and Italy, but growing everywhere.

2. Sales tax on e-books in Europe is huge, over 20% in many cases, but very low on print books.

3. Kobo and Apple are making big moves.

4. European self-publishers face additional barriers to entry to the US market.

5. Small publishers and self-publishers have restricted access to distribution channels.

6. European publishers are being investigated for price-fixing.

7. The Agency Agreement could be deemed illegal in the UK very soon.

8. Amazon only pays 70% royalties for sales to UK readers, 35% for sales to customers in all other European countries.

You can read the whole thing on my blog, but I want to place a health warning on the figures in the post. European numbers are much harder to come by and are less reliable, for example, e-reader market share is often determined by small-sample self-reported customer surveys and e-book market share is often announced by publishers associations without accompanying data. I am happy to correct any of the information in the post if any errors or omissions are brought to my attention in the comments, or by email, or in the posts below, or by PM. I am also happy to alter any of the suppositions based on those figures, if they are found to be flawed.

Full post here:

http://davidgaughran.wordpress.com/2011 ... -mistakes/

Dave

[J. T. SHEA]

I read your 1,500 words with great interest, David, and commented on them, possibly twice, once in the wrong post. Apologies if so. Or maybe Wordpress swallowed my comments. So, I'll reiterate my thoughts here:-

I take it French law prevents discounting BY more than 5% of list price rather than BELOW 5% of list price?

I don't agree that price-cutting is the solution to theft. The only price thieves will pay is zero.

I too was surprised publishers charged more for e-books than for mass market and even trade paperbacks. But it seems to be working. Most bestselling e-books are quite expensive, and their prices are going up, if anything.

Many, if not most, readers seem as 'conservative' in their choice of e-books as in their choice of paper books. Not what I expected! Then again, I didn't expect the fall of the Berlin Wall, so I don't hold myself out as a prophet.

[dgaughran]

Hi John,

I appreciate it!

Thanks for spotting that typo, you were indeed right, the piece is correct - cheers. I got both of your comments (and replied to both). Wordpress hold up comments from new commenters to prevent spam, but you are now "approved" so anything you post from now on will go up live.

Piracy is a fascinating issue (to me at least), and not one where there are hard and fast answers. I won't repeat what I said in response to your comments, but let me come at it a different way:

1. Piracy exists and there is not much we can do about it.

2. The things that we try to do (e.g. DRM), don't stop piracy and only piss off the people who actually pay for the product.

3. I am doubtful about how much of that piracy really represents any lost sales.

4. Some people will pirate things no matter what the price.

5. Other people will pirate things when they feel the price is unfair.

6. Others again will do so when the book they want is unavailable as an e-book.

7. There is some evidence that piracy boosts sales rather than cannibalising them.

8. The greatest threat to a writer isn't piracy, it's obscurity.

In short, piracy happens, the only counter-measures piss off your customers, and I think you will head a lot of it off at the pass anyway if you offer your stuff at a reasonable price in the format the customer wants.

Dave

[J. T. SHEA]

Thanks David for all your replies.

You won't be surprised to hear I disagree with your first three points.

I agree with point 4.

I also agree with points 5 and 6, but only within their limits, meaning I agree some people will do such things but do not consider their piracy justified.

I mostly disagree with points 7 and 8. In particular, while obscurity can be a greater threat to some writers than piracy, I do not believe theft is the solution to obscurity.

Most justifications for piracy could be and have been offered as justifications for many other forms of theft. For example, currency counterfeiting was so prevalent after the American Civil War that many viewed the dollar as a lost cause, yet the problem was largely (though never completely) solved.

[Mira]

This is really interesting. Sounds like there's even more of a battle going on in Europe than over here. I wonder why the difference.

[dgaughran]

Hey John,

I know we have different views on piracy. But lay out your objections to my points, let's discuss it!

I'll tell you a story you might get a kick out of. At the start of every DVD in Ireland there is a piracy warning, trying to get people to equate piracy in their mind with other forms of theft: stealing cars, stealing handbags, shoplifting etc.

Anyway, I was watching a movie with my friend, and this same warning starts up, "You wouldn't steal a car..."

And my friend says, "I would if I could download it."

Dave

[dgaughran]

This is really interesting. Sounds like there's even more of a battle going on in Europe than over here. I wonder why the difference.

Hi Mira,

Lots of reasons.

First, the Kindle has only been launched in the UK. If you want to get one outside of there, you have to order from America (even if you are in Ireland, right next door - ridiculous!), it ships with an American plug, instructions only in English, and you have to pay extra.

Second, many European countries have a much lower cost of living than the U.S., so e-readers and iPads are more expensive relative to people's general expenses and their wages. On top of this, there's a 20% sales tax (at least) on all electronic devices. And on top of THAT, the companies charge more for the stuff as well, so it really adds up.

Third, we don't have the same wifi/broadband infrastructure in Europe.

Fourth, Amazon only has sites in France, Germany, UK, and Italy. Spain, a country of 40 million people, doesn't have one. Poland, 40 million people, doesn't have one. Russia, 140 million people, doesn't have one.

Fifth, Europe is big. Delivery costs are expensive.

Sixth, self-publishing scene is a lot smaller (for all the above reasons, plus, because of various taxes and charges and the way Amazon does business, it's harder for us to do it).

Seventh, Amazon charges a $2 surcharge ON EVERY DOWNLOAD made through your Kindle.

Eight, because Amazon hasn't put a lot of time and resources into developing the European market, it has been targeted by competition (it's a big market after all, 500 million people in the EU, 800 million in Europe in total - if you include places like Turkey and Russia). Sony made early moves, followed by Apple who are showing strong now, and Kobo are going to make a BIG play in the summer.

[dgaughran]

For anyone interested, Amazon launched the first Kindle store in Europe outside of the UK today.

The German Kindle Store is now open: http://www.thebookseller.com/news/amazo ... rices.html

Key points:

1. German is the third largest book market in the world (pop. 80 million, plus Austria, parts of Switzerland, Liechtenstein, and one teeny tiny town in Italy).

2. The Kindle is finally on sale in Germany (officially), but still has English-language menus and instructions, and is priced at 139 Euro (US$200) for the basic model and 189 Euro for the 3G model (US$275). These prices are inclusive of sales tax, and show the massive price difference with the US ($61 more for basic model/$86 more for 3G model).

3. Prices are set by publishers with no Amazon discounting allowed.

Dave

[J. T. SHEA]

Good story, David! Your friend honestly admits only inconvenience stops him from stealing. So he probably would steal a car if the law was enforced more laxly. And I don't think cutting the price of all new cars to $500 would help the very large problem of car theft.

Thanks for the invitation to further discussion. The arguments in the e-book piracy debate are already so well know and often repeated that the debate has become ritualized and repetitive, like debates on the Middle East, or Northern Ireland used to be. I. e. each argument on both sides could simply be numbered to save time and effort! Meanwhile, I think you are now the Bransforums European Publishing Correspondent!

Interesting that Amazon appear to have missed their chance for world domination...

[dgaughran]

You may be right, that there is no point talking at each other if we are so entrenched in our respective views. Let me see if I can find some common ground.

Would you agree that we have not yet found an effective method of stopping piracy?

And if so, would we not be better off dealing with the world as we find it rather than as we would like it?

P.S. I wouldn't write off Amazon just yet. There is talk of rolling out Kindle stores in Spain and Italy (but how soon is anyone's guess). And Apple might be selling a lot of iPads, but they are not selling a lot of books - most iPhone/iPad owners use the Kindle app. And while Kobo are interesting, they are starting from a small base. Finally, Barnes & Noble seem to have little interest in Europe. It's a very open field, and somebody we haven't even mentioned yet could be a huge player in the future. Google will announce their second language store soon. It's a toss-up between Spain and Germany. Germany would be the obvious choice, but Spain would be a more interesting move (to me anyway), given the huge untapped market worldwide. If Google sees a big future in reading on smartphones, the Spanish market is the one to go for, because I can't see huge Kindle/iPad sales in South America for quite some time - they are just too expensive.

[J. T. SHEA]

I do not consider either of us terribly entrenched in our particular views, David. I believe we are both in information gathering and sifting mode in a changing publishing world. My ultimate personal concern is how best to publish my trilogy and later novels. I imagine you have similar concerns.

I agree we have not yet found an effective way of stopping piracy. Or an effective way of stopping other forms of theft, and most other crimes. Further, we probably never will find an effective way of stopping most crime. But that is obviously no excuse for giving up and making everything legal. Apply the argument to murder, for example!

I do deal with the world as I find, but with due regard to the way I (and others) would like it. Hence my posts here, for example. I am seeking to influence public opinion to some extent.

I'm certainly not writing off Amazon, just the notion of them taking over the book world. They appear to be trying to monopolize the means of consumption more than the means of production, a task I consider impossible, like herding cats. Nobody 'owns eyeballs' apart from their own.

[dgaughran]

As I am sure you will agree, there is a qualitative difference between deciding where to allocate your resources, and condoning something.

I don't condone piracy.

However, just as the shopkeeper quantifies the amount of stock he loses through theft and then runs a cost-benefit analysis of the various measures he can employ to prevent shop-lifting, he usually sticks with a couple of cameras, a sign warning of prosecution, and a careful eye.

He could employ four security guards, but the $100,000 that would cost him a year is far in excess of the value of the stolen merchandise, and probably just annoys his paying customers.

He's not condoning theft, he's just being sensible with his money.

With e-books, the 'stock' has no intrinsic value, in that it is just a copy of a copy, its only real value is in a potential sale.

I argue that the vast majority of pirated work does not represent a potential sale. In reports I have read on the books available on the various bit torrent sites, most of them are unreadable garbage, or only portions of the text. Hackers see cracking protections as a challenge, they do it just for kicks, then share the work on sites to show their prowess. I doubt any of these guys would be paying for e-books, even if you found a way to make them uncrackable (which you can't anyway).

I believe that only a small minority of pirated work represents lost sales, simply because only a small minority of pirated e-books (in terms of volume) are in any way readable.

This latter group is where the publisher/writer is losing money. So what do we do?
Publishers have responded with DRM and by holding back the release dates of e-books.

I believe that this strategy is wrong-headed for several reasons, and instead that the correct strategy to combat piracy with convenience and price.

I wrote a long blog-post (too long to quote from), explaining why, here: http://davidgaughran.wordpress.com/2011 ... le-of-rum/

[hektorkarl]

Dave, I agree with most of what you say, but the casual pirates I've known insist there are pirated versions that are pretty much indistinguishable from the retail versions, especially when it comes to newer bestsellers. I believe they take the retail Amazon file and just strip the DRM.

It doesn't change your basic point, but 'low quality' will not be enough to discourage the spread of piracy.

[dgaughran]

It's simple to do. A twelve year old with rudimentary programming skills could handle it. But it does mess with the formatting, and that takes time to fix. Because they are giving it away for free, most don't bother - hence the messed up file. They might look okay on your PC, but as soon as you look at it on an e-reader, it is essentially rendered into HTML, which garbles it. The quality is even worse if they are working off a scan of a printed book.

But there are clean copies out there, especially of popular books. Writers don't really need to worry about it unless they are popular.

And even then, people like Neil Gaiman and Joe Konrath say that piracy actually boosted their sales. Gaiman said his sales went up in Russia after clean, cracked copies of his e-books appeared on the file-sharing sites there. Konrath did an experiment and gave his book (a clean, cracked copy) away for free on his website, invited pirates to share it on the torrent sites, and tweeted and blogged about it.

Sure enough, it spread all over the torrent sites straight away. His sales went up too.

Now, this is too small a sample, and not very scientific, but it's interesting.