Tuesday, July 20, 2010

A Tipping Point: E-books Outsell Hardcovers at Amazon

The WSJ reports that e-books now outsell hardcover books at Amazon.

Since the marginal cost of reproducing and delivering e-books is close to zero, we are reaching a tipping point for new revenue models.

We already see some scattered examples like subscriptions, bundling, ad-supported books, subsidized or even free books that drive sales of complementary products, etc. It's also a sure bet that a lot more books will be simply given away the way authors donate articles to Wikipedia or bloggers blog. Digital music, software, videos, and news all offer possible glimpses at the future of book pricing.

The biggest barrier to these new models is not technological. Instead, it is in the myriad contracts and implicit culture that links together publishers, authors, distributors, retailers and consumers. For instance, Amazon would have trouble offering an all-you-can-eat subscription or bundle to its titles without the agreement of all the parties expecting royalties which are typically based on per-unit sales.

Over time, these institutions can and will evolve. In 10 years, will the traditional a la carte pricing model be the most common way books are distributed, or will an alternative model dominate?


  1. Look at Spotify - all music at an all-you-can-eat monthly fee of $12. Telcos give it away if you sign up an 18 or 24 month contract. I think books will go the same way. But what will be the premium of books - like concerts and merchandise within music? Maybe it is the book itself, the physical book. They have to release limited editions with special interviews or additional chapters that will have the real fans paying a premium. Audio books or streaming of books is an additional source of revenue as it adds real value to the listener.

    Conclusion: You subscribe to books for a time based fee. Additionally you pay a premium for the physical book with additional material. Or you sign up for a contract of some sort and get a limited book offer.

  2. Size matters. Reading a book is a multi-hour event that requires a large percent of the reader’s concentration. That is a substantial time investment, making discovery expensive. Contrast with songs, which take a few minutes and can be used as background while performing other tasks. The street performer serves as an example. I'm far more likely to stop and listen to a sidewalk musician then I am to read a 100+ page pamphlet being handed out by someone on the sidewalk.

    So even if distribution costs go to nil I don't think books will have the same liberalization of production that music has seen. The discovery cost becomes the barrier to entry. Some popular bloggers will become authors, but that isn't distinctive. Popular radio hosts put out books too.