Down, down, down: Books, e-books and apps all trending to zero

“We expect DVD Subscribers to decline every quarter.. forever.”
— Reed Hastings, CEO, Netflix

Does your business model rely on selling paid content?  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:

Printed guidebook sales, millions/year

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 in 2006-2009.

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-disappearing Frommers. 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 bestsellers 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.)

Average price of e-books in Kindle Store Top 100

Despite that 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:

Books Under $5 in the Kindle Store Top 100

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.)

Average price of paid applications in the Apple Store

By the end of the year, the average app will cost under 99 cents, and even that’s pulled up by every $999 BarMax and wannabe in the store.  The median price is already zero:

Share of free applications in Apple Store

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:

Advertisements

6 thoughts on “Down, down, down: Books, e-books and apps all trending to zero

  1. On the topic of apps, there may be more free apps, but most free apps nowadays contain ‘in app purchases’ to either remove adds or extend functionality.

    1. Sure, but that’s kind of my point: the revenue comes from ads or people paying to get rid of ads, not the actual content.

  2. I think most people are still stuck with the “book” mindset in terms of apps. They’ve just created slightly more interactive versions of books and called them apps. I think they should probably be building much more interactive versions of maps instead, they’re alot more use to travelers than guidebooks ever have been.

  3. Might a future model be paying for convenience & curation of content? Respective examples would be Netflix and New York Times come to mind as relevant examples. Especially live sports will also be a moneymaker for a long time to come.

    Paid content is by no means dying out, it is being disrupted. Christensen has written about disruption in journalism and Louis CK has disrupted comedy distribution. Content won’t be free as long as it is refined and renewed regularly – the trick will be to find the job that audiences are hiring the content for. Once you have an idea what jobs the audience values, asking for money becomes a whole lot easier.

    Also, taking the average price of anything is weak analysis – tracking the median would be far more interesting. Another interesting App Store specific analysis would be growth of user-base vs. growth of developer payout.

    1. Agreed in part. I’m not saying all paid content is going to go away, I just think the era of people paying for mass-produced content is coming to an end, because with digital distribution costs effectively zero, competition will whittle away to profit margin to zero as well. Instead, business models will have to shift to reflect the actual costs of the model: people paying to have content created in the first place, whether it’s customized personally for them (convenience/curation) or simply something that doesn’t exist yet (Kickstarter style).

Comments are closed.