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Guess What? No One Knows How Big the E-Book Business Is [Update]

There are lots of numbers floating around that purport to show how big the e-book industry is. The Association of American Publishers (AAP) says that ebooks are the single best-selling category in U.S. publishing. Amazon (AMZN) says that ebooks are its most popular category of book format. A growing number of independent authors, selling ebooks without a publisher, are making significant numbers of sales.

All the numbers suggest that e-books have some serious momentum. But when you look at all the data together, it's clear that no one knows how big the business is, because the information is woefully incomplete. There's no way to tell how many e-book titles sell, the most popular genres, or even who the most important publishers are.

Focus on dollars, not units
One of the most popular sources for ebook sales numbers is the AAP. The organization has nearly 300 members, including the largest commercial publishers and heavyweights in educational, professional, and scholarly publishing.

The organization, however, reports sales in dollars actually paid to the publishers. Because the e-publishing world is far less Byzantine than print, that does show direct sales -- as opposed to the sublicensing of rights, which can obscure how many copies a book sells, and how much in royalties a publisher actually owes an author.

[Update: Writer, editor, and agent Allan Guthrie (@allanguthrie) pointed out on Twitter that, according to the AAP's own material, the organization gets its e-book numbers from only 16 of its members: "Data on e-Books comes from 16 houses. The report does not include all book and journal net sales but provides what's acknowledged as the best industry snapshot currently available." Un-freaking-believable. This isn't a snapshot, it's hand waving.]

But the price of e-books is now all over the place, if the analysis by Kindle Nation Daily is any indication. Here's a break-out pricing table for both December 2, 2010 and March 7, 2011 (click to enlarge):

As e-book prices are frequently lower than those of their print counterparts, a dollar spent on e-books typically suggests greater unit volume than print. This gets more complicated when you remember that between $2.99 and $9.99, the author or publisher gets 70 percent of the sale. Above or below that amount, the cut goes to 35 percent. So there has to be a lot of price experimentation to find numbers that maximize revenue for the author or publisher.

Translated, it means good luck trying to find out from the dollar sales how many ebook copies of titles actually sell.

Forgetting the little people
The AAP's 300 members are just a fraction of all publishers, particularly when you look at e-book bestseller lists. Here are a few from the Amazon (AMZN) Kindle top 10 bestseller list:

  • Number 4 is Heaven Is for Real, from Christian publisher Thomas Nelson.
  • Number 5 is Vegas Moon, from Telemachus Press, a digital publishing house for self-published authors.
  • Number 10 is The Innocent from ebook publisher StoneGate Ink.
None of these top selling ebook publishers (or vanity houses, as in the case of Telemachus Press) are members of AAP. To put it differently, 30 percent of the top selling Kindle ebook publishers don't appear in AAP estimates. The days are over when you could draw reasonable conclusions about the publishing industry from what the largest companies did.

For example, ebook erotica author Selena Kitt sold nearly 30,000 novel and novella copies in February through Barnes & Noble (BKS), according to data she supplied. In March, the number was just under 17,000. But even at that rate, given that she generally sees half again as many sales from Amazon, that would be 306,000 copies for a year of just her work. Thriller writer JA Konrath claims to have sold more than 176,000 book copies since October, so call it several hundred thousand books a year. Young adult paranormal romance writer (and can we cut niche markets any more narrow?) Amanda Hocking reportedly sold 900,000 titles in less than a year.

At what point do these self-sold numbers represent a significant percentage of the total units? The less representative the normally reported numbers are, the less accurate the trend projections. E-books may actually be growing at a far faster rate than even those who are bullish on the subject think.

Professional and scholarly books rule
According to a press release from Simba Information, a well-known book publishing market researcher, professional and scholarly books -- which include science, technology, medical, business, and legal â€" "hold 75.9% of the $1.76 billion U.S. E-book market." That's a percentage of a dollar volume, which makes sense, as these will be among the more expensive titles.

But it shows that many seriously misconstrue the e-book market. Most discussions center on e-book versions of popular fiction and nonfiction. If often expensive reference books hold that large a portion of the dollar sales, then maybe the assumption that ebooks are supplanting consumer print publishing isn't as well-founded as you might think.

When such companies as Amazon or Barnes & Noble (BKS) claim that e-book sales have overtaken paperbacks or hard covers, would that include these very expensive titles? Are the retailers measuring in units or dollars? In Amazon's case, the answer appears to be units. If so, could it mean that e-books have begun to represent an over-sized portion of the company's sales and profits?

No way to answer any of the questions, which is why no one really knows what the market-at-large is doing. Unfortunately, many companies have merrily proceeded with business plans and strategies based on misleading conclusions from incomplete data. That will happen in business, as perfect information doesn't exist. But then hedging bets and accounting for the unexpected would be prudent.


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