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stores, an extensive range of electronic
books, and an aggressive price policy of
online retailers such as Amazon, eBook
revenue continues to expand. The market is
being further stimulated by multifunction
devices such as Apple’s iPad, and it has
already proved lucrative for publishers,
whose initial investments are paying off
because of higher margins for eBooks.
Digital publishing appears Nonetheless, when consumers are
asked about their knowledge of eBooks There is no doubt that the same trends
to be reaching critical mass. and eReaders, it becomes obvious that that spurred the adoption of eBooks and
Most consumers have an many people are missing the big picture. eReaders in the United States are having
understanding of eBooks and Although consumers seem amenable to a similar effect in other countries as well,
eBooks and eReaders, they do not yet such as:
eReaders, thanks to media grasp the larger concepts behind digital
coverage, as well as extensive publishing and may not understand the • Technical development and
reporting ahead of this year’s advantages of reading digital books over sophistication of reading devices that
paper ones. This is especially true in provide an experience similar to that of
major book fairs. Apple’s new Europe. reading an actual book.
iPad, which can serve as an
Attitudes toward eBooks and eReaders • The increasing penetration of the
eReader, also brings more Internet in all areas of life, which is
seem to differ on each side of the Atlantic.
attention to the market for the In the United States, publishers appear significantly changing reading patterns
digital technology. amenable to eBooks because they generally and reading behavior.
offer lower costs and higher margins than
print. An eBook publisher does not incur • The increasing extent to which
inventory return costs that are typically consumers are open to new
associated with traditional print channels. technological trends, for which in
In Europe, publishers seem more likely to particular the availability of attractive
view digital publishing as a step backward mobile devices such as smartphones,
for their companies – a necessary evil, portable games consoles, and MP3
so to speak – that represents more risks players are responsible.
than opportunities. Therefore, European
Publishers, content owners, and retailers
publishers may have less interest than their
should act promptly to secure leading
American peers in actively developing the
positions in the eBook and eReader
eBook market. European publishers are
marketplace, and not concede ground
more likely to express doubts about digital
to participants new to the industry.
transformation in the industry, and act
Publishers, bookstores, and device
slowly out of fear of high costs and the
manufacturers should take the opportunity
possibility of losing sales of print books.
to provide the market now with innovative
However, the progress toward a digital products before others do so. And authors
publishing industry can only move should explore opportunities for digital
forward. This is most obvious with the distribution, and support publishers in
developments in the United States, where their efforts to publish content.
eBooks accounted for about 3% of the
Publishers in the nascent European
overall market at the end of 2009 and will
eBook marketplace should actively and
2 PwC
aggressively digitize and market their with instant and simple delivery of separate dedicated reading devices from
electronic books, even if eBook revenue content through mobile wireless or wi-fi the iPad and other tablets.
does not cover costs in the short term. connections, built-in links to online
These investments are necessary to stores, and competitive prices. The Publishers should view these technological
establish the market, and provide a device manufacturers are now facing the advancements as opportunities to move
legitimate alternative to any pirated challenge of rolling out this development established readers to eBooks, which can
materials that may be available on file- worldwide. Manufacturers do not have improve operating margins and reduce
sharing websites. Publishers should also to vertically integrate the entire value production costs while creating a new
design a pricing strategy that attracts chain for this purpose. Cooperations with market for customers who are not frequent
customers without undermining the value publishers and online bookstores are a step book buyers but might find eBooks with
of content. A well-thought-out pricing in the right direction. multimedia content attractive. If the book
strategy may also help publishers and industry fails to establish the marketplace
content owners gain new customers – Online bookstores appear to be best now, companies may find themselves
those who would not have purchased situated for digital transformation, thanks playing catch-up later after losing sales and
a traditional book but may be inclined to their built-in customer bases and their customers to newcomers. What is more, by
to buy an eBook that costs less, offers experience as Internet retailers. However, waiting, established players may lose the
additional features, and works on a digital European-based online bookstores may be opportunity to establish pricing policies,
device they already own. The strategy challenged by new players, who can offer eBook format standards, and partnerships
of offering eBooks at a price lower than customers a wider range of products, or a that set consumer expectations and
that of printed books is a step in the right more engaging experience through reviews define the marketplace. In addition, if
direction. As soon as a mass market has and integration with social networks. legitimate vendors fail to meet consumer
been established, the investments will Amazon has already established itself as demands, either in terms of content
demonstrate their worth because eBooks an online retailer in Europe and has begun choices or reasonable prices, their potential
also provide an attractive source of selling the Kindle in several European customers may turn to file-sharing websites
revenue. markets. Although Apple’s iBookstore for pirated books – a situation similar to
does not carry many non-English books, the one that set back the music industry.
In the future, publishers will need to retailers should not underestimate the
position themselves as content providers, company as an online content seller, It is clear that many people are willing to
and not just the suppliers of physical books. evidenced by the growth of its iTunes make the transition from printed books to
They will have to make content available Store. eBooks and eReaders. Recent examples
on multiple media, in multiple formats, in the United States prove that consumers
on multiple platforms. This content may For every company involved in the will adopt eReaders, which ease the
not be limited to the text of a book itself book industry, these developments are process of buying and reading eBooks.
– it may also include audio, video, and challenging but exciting. For the first time, While the publishing industry, especially
games. This additional content may lead to consumers can purchase eReaders that in Europe, is at the beginning of its digital
incremental revenue. are relatively inexpensive and easy to use. transformation, the breakthrough is under
Customers in the United States already way.
Market participants will have to rethink enjoy eReaders with integrated Internet
their strategy and adapt to changes in the access, which allows them to purchase
value chain. Traditional bookstores face books directly on their devices or through
the risk of exclusion from the expanding a website and begin reading them in
market for digital content. More than about a minute. Some of these devices are
ever, the traditional bookstore will have available in Europe, and more are on the
to emphasize its strengths in terms of horizon. The iPad and other tablets give
customer knowledge, customer retention, publishers and authors the ability to put
and competence. And it will have to color pictures, videos, and music in their
distribute book content in all formats and books. While today’s eReaders are mostly
all channels. limited to black and white, future models
will introduce color and video capabilities
US companies have been successful by while maintaining the longer battery life,
providing user-friendly reading devices thinner form factors, and lower prices that
1 According to Allensbacher Market and Advertising Media Analysis 2008, 45% of women and 29% of men use books daily or several times a week. And most books are bought by women
(66% compared with 52% of men).
2 PwC: Global entertainment and media outlook: 2010-2014, 2010.
3 ePUB is an open standard for eBooks, based on XMLM; it has been defined by the International Digital Publishing Forum (IDPF) and replaced the older standard Open eBook (OEB) or Open
eBook Publication Structure (OEBPS). In addition to dynamic text adjustment, ePUB files can be individually adapted to a certain extent and support vector graphics. ePUB is also compatible
with Digital Rights Management systems. There are plans for further development: Accordingly, the IDPF has set up a commission which is expected to enable advertising and videos to be
displayed in ePUB and is also expected to permit standard or interactive add-ons.
4 PwC
• ePUB files allow readers to control
the size of the text on their screen.
However, eBooks published as ePUB
From Data Discman to Kindle
files do not have static page numbers. A brief history
Researchers and students may not be Sony pioneered the first electronic reading devices in 1990 with its Data Discman,
able to provide accurate page numbers a reading device with a CD-ROM drive that was able to display books and focused
for citations. PDFs allow publishers primarily on reference works. Its initial selling price, US$550, would have paid
to create more intricately designed for an entire shelf of books. In the United States, the Data Discman was marketed
books, with fixed page numbers and to college students and international travelers. The product was also marketed
illustrations, but these books may be in Europe, where it was introduced for €500.4 The Data Discman did not sell well
difficult to read on some eReaders and outside Japan, and Sony discontinued it in 1993.
other devices, especially those with
small screens. Readers may not want In 1998, the German-American joint venture NuvoMedia, in which Bertelsmann
to scroll left and right to read each line was also involved, launched the Rocket eBook for approximately €345 in the United
of text. States and Europe. The Rocket could hold up to 4,000 pages, and customers could
download additional books from the Internet. Various online shops for eBooks
Amazon uses a proprietary format, AZW, started at the same time as the launch of the Rocket eBook. For instance, eReader.
which is an extensible markup framework com was launched in the United States, being one of the first websites worldwide
like ePUB but offers a level of copyright to sell eBooks. The site still exists today and belongs to the US book retailer Barnes
protection and digital rights management. & Noble. Bertelsmann, in Germany, launched its eBook shop BOL.de, and offered
AZW is based on software made by the 600 or so eBooks in German that were available at that time via the online
Mobipocket, a subsidiary of Amazon. A bookstore dibi.de (now trading as libri.de). The books were published in PDF or the
version of Mobipocket is available for free. open standard Open eBook (OEB), the predecessor of the present-day ePUB format.
It is similar to ePUB: it allows flexible page
breaks and is suitable for small electronic The Rocket represented significant technological progress from the Data Discman,
devices. yet it was not successful on the market. The Rocket had Internet access, a
monochrome LCD display, weighed 22 ounces (or 630 grams), and contained
2.2 Electronic Reading Devices 16 megabytes of flash memory.
2.2.1 eReaders
Later Rocket models did not establish themselves on the market either, despite the
What is an eBook without an eReader? addition of color displays and lower prices. The products were discontinued. The
The eReader promises a comfortable, software group Microsoft, which had been working on a reader since June 2003,
computer-free experience for reading. The and the US bookstore chain Barnes & Noble also discontinued their efforts to press
devices work with so-called electronic ahead with sales of electronic book files. The Librié, a further reader of Sony, which
ink (eInk), which ensures an experience was the first device to be equipped with eInk technology, was initially not published
similar to that of reading a real book worldwide and was sold exclusively in Japan in 2004, although without success.
as a result of its precise and stable
characteristics. eInk displays do not require The reasons for the lack of customer acceptance at that time included the shortage
any background lighting and are easy to of available books and the fact that the devices were not attractive, particularly in
read, even in direct sunlight. Because they terms of weight, size, and price. For several years, consumers’ appetite for eBooks
only require power for turning pages, they and eReaders stalled, but Amazon’s Kindle changed that in the United States in
do not consume a lot of battery; this means 2007. Sony, with its PRS-500, had made a further attempt with electronic reading
that a recharged device can be used for devices one year previously. As was the case with the international Sony model,
several thousand pages, or several weeks. which was launched in Europe approximately three years later, the US equivalent
also did not have mobile access and was hardly perceived at all by the market.
eReaders are not a new phenomenon.
Many companies introduced reading
devices in the 1990s and early 2000s, but
customers generally felt these eReaders additional connection costs to access US$399. Today, Amazon has three Kindle
were too expensive, had too many the Kindle Store, where eBooks can be models:
technological limitations, and were too purchased, mostly at a considerable
discount compared with printed books. • The Kindle 3 with wi-fi, for US$139
expensive.
Amazon originally imposed a US$2
• The Kindle 3 with wi-fi and mobile 3G
The new generation of reading devices is charge when a Kindle user purchased
connectivity, for US$189
now expected to achieve the breakthrough, a book outside the United States, but
driven by advances in the US market. this international surcharge has been • The Kindle DX, with a larger screen,
eliminated now that Amazon sells the wi-fi, and mobile 3G connectivity, for
The Kindle: Amazon thinks big with a Kindle outside the US. Books are purchased US$359
device that is simple and friendly for at the push of a button, and this facility
customers encourages impulse buying because it is Amazon sells the Kindle on its website and
easy to operate and constantly available. through two brick-and-mortar retailers in
Amazon introduced the Kindle in the the US, Target and Staples.
US in 2007, and in Europe and other The Kindle’s simplicity, connectivity,
international markets in 2009. As the first and integration with Amazon’s digital Since the international launch in October
eReader model with an integrated mobile bookstore proved to be very attractive. 2009, the Kindle 2 (and, now, the Kindle 3)
access link to a major online store, the The first devices sold out within five and a can be purchased in the United Kingdom,
Kindle generated a considerable amount half hours in the United States. The Kindle the Netherlands, and Germany. Since
of market attention. Kindle users do not was not subsequently available for many January 2010, the Kindle DX, has also been
have to sign a mobile contract or incur months – although the device initially cost available on the international market.
4 Today’s currency. The product would have been sold in each country’s respective currency at the time.
6 PwC
Store to create a seamless environment in Laptop/
which customers can buy, download, and Features Smart-phone eReader Tablet Notebook
read books. iPad customers can download
from Apple a free application, or app, Battery life
called iBooks. This app acts as an eBook
reader, in which users can read books, add
notes, highlight passages, and organize Ability to display Pictures
their libraries. A button in iBooks links the
user to Apple’s iBookstore, where more
books can be purchased. Free books from Ability to display Videos
the public domain are also available.
5 PwC: Entertainment and Media Outlook for the Netherlands: 2010-2014, 2010.
8 PwC
Authors are also responsible for sluggish 2.3.2 Prices strategy and made those titles available
digitizing The prices of eBooks vary considerably, again. Macmillan books are now sold
depending on the value-added tax rules for between US$12.99 and US$14.99. In
Publishers are not necessarily responsible addition, Simon & Schuster and Hachette
and fixed book pricing arrangements.
for the sluggish pace of digital have announced that they will launch the
At present, there are fixed book pricing
transformation in some countries. In many eBook versions of their top titles only after
arrangements in 13 of 20 European Union
cases, publishers only have the marketing a certain delay to avoid cannibalization of
countries, including France, Germany,
rights for the printed and audio content. sales of printed books.
the Netherlands, and Spain.6 In these
To enable eBooks to be distributed,
countries, bookstores have to follow the
further negotiations are necessary with In 2009, the iPad presented an opportunity
price policies of the publishers.
the authors. This is frequently a time- for publishers to establish a new type
consuming and expensive process. In order Whereas the fixed book price arrangement of pricing strategy, one that would shift
to press on with developing the market, in Germany is not subject to any time pricing power from the retailer to the
most publishers are already digitizing most restriction, the corresponding arrangement publisher. Several major publishers worked
of their front-list books, including current in the Netherlands is applicable only for with Apple to arrive at an agency pricing
bestsellers and, to the extent that they own the first year after publication of printed model for Apple’s iBookstore. Under
the rights, are also opening up parts of and digital books. In the United Kingdom, the agency model, online retailers sell
their backlist for electronic sales. recommended retail prices were abolished publishers’ eBooks and receive 30% of
in 1995 and, in the United States, fixed gross revenues. The model is not tied to a
Google Books plans to enter the eBook specific pricing structure, rather publishers
prices contravene competition law.
market with Google Editions set their own prices individually. Amazon
So far, no standard procedure has been also implemented the agency model as an
In May 2010, Google announced plans
established for fixing the prices of eBooks option for publishers shortly after the iPad
to enter the US eBook market with the
in countries with a fixed book price launched.
launch of its Google Editions store. The
arrangement. While some publishers in
announcement came even as competition As publishers gained more control of
Germany offer their electronic editions
intensified among market leaders with pricing, consumers immediately saw
at a price that is up to 20% lower than
the launch of Apple’s iPad tablet and higher prices on many titles as a result of
the corresponding price of the printed
iBookstore. However, Google may be this shift. Consequently, eBook pricing
versions, others have a policy of offering
reconsidering or refining its strategy to is attracting antitrust scrutiny in the US
digital content for the same price as the
reflect new market conditions. As of this market. Reviews by state attorneys general
least expensive printed form, which is
writing, Google Editions is not yet available are under way in Texas and Connecticut.
usually the paperback format.
in the US market, missing its targeted Additionally, according to The Wall Street
launch date by five months. The absence of a fixed book price Journal, the Department of Justice is also
arrangement also explains the strategy showing keen interest in the emerging
Some analysts are suggesting that falling
of the online bookstore Amazon, which eBook sector with a focus on the larger
prices for eReader devices may have
sold nearly all books for US$9.99 or technology companies.
substantially negated the consumer
less to kick-start the eBook and eReader
benefits originally contemplated for 2.3.3 The Market Volume
market, encourage Kindle sales, and
the Google Editions business model. As
establish its online store as the market eReaders: A far cry from the hype in
planned, Google Editions lets consumers
leader. At US$9.99, a Kindle eBook was Europe
purchase and read content from any
significantly cheaper than a hardcover.
connected device, using only an Internet By the end of 2010, eBooks will account
eBooks are now available mainly for prices
browser. It is also intended to benefit for more than 7% of sales in the US book
between US$9.99 and US$14.99. In the
independent bookstores and publishers market. Additionally, industry observers
UK, new publications are available for the
that have previously been excluded from estimate that up to 8 times as many of
equivalent of US$12 to US$14.
participating in eBook growth. These these sales are coming through Amazon’s
sellers will be able to use the Google Antitrust Scrutiny for the Agency Pricing Kindle Store than all other online retailers
Editions platform to market books on Model combined. Comparatively few eReaders
their own sites. A similar announcement were sold last year in European countries
was made in July 2010 regarding Google’s The introduction of the Kindle in late such as Germany, the Netherlands, and the
planned entry into the Japan eBook 2007 with most titles priced at US$9.99 UK, where the market is in its infancy.
market. generated rapid uptake from Amazon’s
customers as eBooks were sold at a The UK bookstore chain Waterstone’s
Through a partnership with the American significant discount compared with included the Sony Reader in its program
Booksellers Association (ABA), which hardcover and paperbacks. On average, in autumn 2008 and has since sold
promotes independent booksellers, Google Amazon paid publishers US$13 per 60,000 eReaders. In the Netherlands,
plans to offer more than 400,000 titles in eBook and realized a US$3 loss on each iRex Technologies, a spinoff of Philips,
the United States initially. Members of the eBook sold. Setting the price at US$9.99 introduced eReaders at the end of 2008
ABA and others will also be able to leverage resulted in considerable unrest among and reported scarcely more than 4,000
the platform for selling books through their the publishers. Publishers’ concerns sales at the end of 2009. Sales rose to
own sites. Google Editions will be housed extended beyond how much profit they 50,000 eReaders by midyear, but it was
within Google Books, the current home for made on each eBook sold; they focused on not enough to save iRex from filing for
2 million public domain eBooks. Google cannibalization of traditional formats. bankruptcy protection in June 2010.
will retain a 37% share of the revenue by
selling direct to consumers. At the end of January 2010, Amazon Several other eReader manufacturers have
removed all Macmillan eBooks in a dispute filed for bankruptcy protection, including
over pricing but later adjusted its pricing the manufacturer of the Cool-er eReader
6 Cf. http://www.javnost-thepublic.org/media/datoteke/stockmann-4-2004-4.pdf.
7 PwC, International Publishers Association: VAT/GST/Sales Tax Rate: Global survey on books and electronic publications, 2010.
10 PwC
development are evident in the United script and structure. In addition, special- Intermediaries with considerable
States: Barnes & Noble has invested in interest publishers will have to develop additional costs
both hardware sales and eBooks with new revenue models, such as sales of
the Nook. Meanwhile, the Kindle has individual chapters and sections from The role of intermediaries within the
transformed Amazon from an online their books, and offer additional content value chain will be redefined in the digital
retailer to a hardware and software in order to provide consumers with environment. Production and distribution
developer and online content provider. added value in relation to their content. processes for eBooks are not comparable
Sony, which previously focused on selling Because the increasing digitization of with those for printed books. It is true
eReaders but now wants to provide both the special-interest book market means that traditional functions will continue
the hardware and content, has opened an that printed circulations will become less in parallel, but they will be increasingly
electronic bookstore. All three examples: significant, new revenue models and the redefined and substituted. This is because
the Nook, Kindle, and Sony Reader, show integration of upstream distribution stages core functions, such as the transportation
how companies are extending beyond their are particularly important. In these areas, and storage of printed books, are becoming
traditional lines of business and redefining the printing and storage stages no longer less significant in the digital environment.
themselves in the eReader and eBook will be applicable and will be replaced by In order to fill this gap, numerous new
environment. digital production, digital storage, updates, services can be provided by intermediaries,
and books on demand. such as the creation of an eBook platform,
Publishers: same role, new tasks handling of payments, support for digital
Authors: Time for self marketing? conversion, and establishment of a digital
Initially, eBooks and eReaders will not content system. But they are not the only
significantly change the role of mass In addition to content production, authors ones: International Internet or startup
publishers. They will continue to search are able to extend their role to include companies, which can handle distribution
for, aggregate, filter, process, and distribute further stages of the value chain. Rather operations for publishers too, will increase
content. The change, of course, is that than requiring traditional publishers to the competition.
in addition to creating paperbacks and market their titles, successful authors may
hardcovers, publishers also will need to take on responsibility for distributing their Shifting of business models into the
provide eBooks. Digital transformation books, as Stephen King and Paulo Coelho Internet
will not eliminate paper books, but it will have done. The advantage is obvious:
create new formats for publishers, with They not only receive the author’s fee, Online sales of books will increase by
new responsibilities and opportunities. but also retain sales for themselves. One way of eBooks. The Internet and online
There will always be demand for books disadvantage is that authors are unable bookstores will become the key distribution
in printed form. The digital environment to access publishers’ editing, marketing channels and will take on more tasks. In
also opens doors to new sources of income and distribution services. However, they addition to aggregating the publisher’s
not possible with ink-and-paper products, could license their books directly to online content, the online bookstore will also take
such as apps, and special eBook editions bookstores. In the United States, agency on the traditional functions of physical
enriched with music and video. Some US Andrew Wylies stirred up sentiment among bookstores, such as offering advice and
publishers are exploring these revenue publishers when it secured exclusive customer service. These will become more
sources already.8 Publishers also should distribution rights for 20 books for the important as a result of online reviews.
gain a greater ability to distribute content Kindle store. Publisher Random House,
As a result of the comparatively low
themselves, either through their own who published 13 of the 20 books, stopped
barriers to entering the digital market, all
digital platforms or shared platforms. For acquiring new books from the agency’s
players in the value chain will continue
instance, in July 2010, the Bertelsmann more than 700 clients immediately. After
to expand their operations into the
Group and the publishing group intense negotiations, Random House was
Internet– starting with the authors (self-
Holtzbrinck established a joint venture to granted the right to publish the 13 books
marketing), publishers (own distribution),
distribute eBooks in Germany. digitally and reentered into business with
and intermediaries (directly via their
Andrew Wylies. The 13 books will now be
Special-interest publishers: Developing own platform or indirectly via platforms
available through a variety of distribution
new sources of revenue for bookstores), right through to the
channels, including Amazon and the
bookstores themselves (own online shops).
Barnes & Noble store.
The entire value process for special- In addition, competition will increase as a
interest publishers is changing, from However, a self-marketing model can only result of mass aggregators such as Amazon,
aggregation right through to distribution. be successful if authors are well-known, Apple, and Google, which also boost the
Electronic and special interest book and an author is not likely to be well known market with their own devices.
contents differ significantly in terms of without the help of a publisher.
8 The Hachette Book Group, Penguin, and Simon & Schuster already offer enriched eBooks. David Baldacci’s Deliver Us From Evil, Ken Follet’s Pillars of the Earth and Rick Perlstein’s
Nixonland also contain video clips (Nixonland, Pillars of the Earth), research photos of the author and deleted sections from the manuscript (Deliver Us From Evil) and are offered at a higher
price than the standard editions. For instance, the enriched version of Nixonland costs US$15.99, US$1 more than the regular eBook.
What do the
hardly surprising, as eBooks have already
made a significant share of revenue in
the professional book market segment for
several years.
9 Publishers that have already invested in digital production systems may find the transition less costly and disruptive than those that have not. In the United States, publishers say the cost of
producing an eBook is low because the manuscript, editing, layout and production were already handled digitally.
12 PwC
1.2 Market Drivers the publishers or do not agree to digital Additional content and updates
The eBook market is in its infancy, marketing. They also fail because of wide
discrepancies between authors’ fees and Publishers have different views with
particularly with regard to mass market
the prices publishers are willing to pay. respect to additional content and
publishers. What factors will significantly
In addition, eBooks require a level of multimedia enrichment. While all special-
enhance the development of the market
investment that is particularly difficult for interest publishers surveyed stated this
and pave the way to a mass market? In the
smaller publishers. was important, most mass publishers said
opinion of experts, two aspects are relevant
such features were of minor importance.
in this respect: attractive devices and the
The supplementary range of free content, This trend is understandable if we
availability of content.
such as that provided by the Gutenberg consider that, for instance, an animation
Choice of attractive devices is important Project or Google Books, is considered of the blood circulation in a medical book
to be less important. This is, at best, can significantly enhance the reader’s
Devices are driving the market. For an additional driver for encouraging understanding of the organism, whereas
almost all experts, it is very important consumers to enter this market. However, a video in a novel would be a hindrance
or important that consumers are able this is not a crucial factor for market to relaxed and in-depth reading. Indeed,
to access a choice of attractive devices. success, according to the experts. according to experts, additional content
Experts agree that Apple, in particular, is a crucial criterion for special interest
will stimulate the market with the iPad. Closed systems literature because it creates added value for
This device addresses a large mass of consumers and opens up further revenue
Experts are of divided opinions with regard
consumers, and enables eBooks to be possibilities in the digital environment.
to user friendliness and closed systems
downloaded simply by way of iBooks. However, it is necessary to consider how
(so-called walled-garden models). It is true
added value can be offered to consumers
Increasing number of eBooks that the Kindle and iPad’s user-friendly
with publisher’s content and also what
experiences have helped kick-start the
services would have to be developed to
In addition to the devices, most experts market. However, it was thought that
make the content interesting.
agree that a wide range of available such models in the long term would result
eBooks is key. Indeed, the shortage of in frustration and a lack of acceptance 1.3 Market Barriers
eBooks in the past was one of the main because consumers are critical with regard
According to experts, obstacles are posed
reasons why the market did not develop. to access restrictions.
by the prices of electronic reading devices,
Many publishers now recognize the
At present, it is not possible to foresee the lack of compatibility of the devices with
attractiveness of the eBook opportunity,
whether open or closed systems will different formats, and restrictions posed by
both in terms of volume and margins.
become commonplace. Special-interest digital rights management (DRM).
Accordingly, larger publishing houses, in
particular, have significantly expanded publishers, in particular, are critical when
Prices of eReaders are still too high10
their eBook portfolio, and most of them discussing the chances of the success of
publish all new books in printed and digital walled-garden models; because users of Even if the experts praise the attractiveness
form. special interest information primarily work of eReaders, they are still too expensive
with a laptop, any user restriction might for the mass market. In order to energize
However, the digitizing process is posing quickly deter them. On the other hand, the market, eReaders should cost no more
several problems for publishers that should in the mass market, it would take longer than €100 (about US$135). At this point,
not be underestimated. For example, before consumers expressed concern over only the U.S. and lately also the German
publishers frequently have the marketing restrictions. Not surprisingly, executives market seeing such affordable pricing.
rights only for the printed and audio from online bookstores hope that open The publishing industry representatives
content, particularly in the case of older systems will become established so that involved in this survey were emphatic
books. Therefore, further negotiations they will be able to gain a slice of the about low prices. They said that ideally
with the authors will be required. These digital pie. The industry also tends to be a reader should cost about €50 (about
negotiations frequently fail because critical with regard to closed models. US$70), with a few bestsellers already
authors do not respond to the request of installed.
Fig. 4 Drivers for eBooks and eReaders in the opinion of the experts
Digital rights management (DRM) – not an The advantage of soft DRM is that the legal against eBooks: The book on the shelf and
inherent problem owner is easy to identify, and that the use the book as a gift. Books are a prestige
and forwarding of the electronic book is object frequently used to demonstrate the
Scarcely any other subject has stirred more not affected by the watermark. owner’s authority, taste, and education.
intense discussions in relation to eBooks They are also a popular gift for birthdays,
as DRM. The publisher or the author is Technical complexity – not an issue for holidays and other special occasions.
responsible for deciding whether eBooks everybody
are granted protection. DRM is not limited 1.4 Pricing and Distribution
to one format and is fundamentally Online bookstores and physical bookstores Models
conceivable in all formats. In general, also complain about the technical
There are also major differences among
Adobe Digital Editions (ADE) copy complexity of the devices and claim that
experts with regard to the pricing of
protection is used for this purpose. In order eReaders should be intuitive.
eBooks. Overall, approximately half of
to read text, users must first install ADE industry representatives consider that
On the other hand, for experts of
on their PC or mobile reading device, and a discount of between 20% and 30%
publishers or special interest publishers,
then register with an Adobe ID. This is a compared with the paperback price is
technical complexity is less important.
relatively complicated process and distracts necessary to kick-start the market. Even
In their opinion, the problem is the
the user experience. publishers believe eBooks should cost
willingness of consumers to tackle the
problems associated with new devices for less than printed books to encourage the
One alternative to Adobe Digital
reading books. development of the market. Consumers
Editions may be a watermark, which is
are less willing to pay for eBooks because
partially visible for the consumer but not
Customer interest and look and feel they do not believe they are acquiring a
distracting. This means that purchased
tangible object: they receive the rights to a
eBooks can be uniquely allocated to one Nevertheles, experts believe that virtual asset instead of a physical product
consumer. The advantage of a so-called consumers are (at least potentially) made of paper and ink that has been
soft DRM strategy is that it does not have a interested in eBooks. Even the look and printed and shipped. Online bookstores,
negative impact on the process of reading feel argument – that consumers would intermediaries, and device manufacturers
eBooks. prefer to hold a book in their hands and therefore believe that publishers should
thumb through the pages – appears to be permit a discount compared with the prices
Another option is the model introduced
an unimportant factor. On the contrary, of printed products.
in the US by Amazon and Apple, in which
industry representatives agree that this
content is registered to one user. This
attitude will change as soon as consumers Mass publishers and also most special
DRM policy allows the user to read eBooks
have tried out eBooks and eReaders. interest publishers, on the other hand, are
on many devices, but not to transfer it
convinced that there is justification for
to a device registered to someone else. No Oprah Winfrey effect setting the price of eBooks at least at the
The restriction often goes unnoticed and
level of paperback editions. This is because
usually does not affect consumers. Most experts believe Oprah-moment publishers incur additional costs as a result
consumers have not yet been adequately of the production of eBooks; together
In the long term, most experts expect informed of the advantages of electronic
cumbersome DRM will disappear and that with the full VAT rate of 19% charged for
reading. One expert believes that, in digital content, this exerts pressure on
developments on the eBook market will Germany, there has not been an Oprah-
follow those that have been seen on the margins. This is especially true in an early
moment for eReaders. “When Oprah market state. A further aspect is that some
music market. Music publishers abandoned Winfrey holds the Kindle up to the camera
DRM in spring 2009, after a lengthy battle authors demand higher fees for the digital
and says, ’I love this device’, at once, the marketing rights. In the opinion of the
against file sharing. Experts believe that target group that identifies itself with
abolishing DRM is necessary sooner rather publishers, this does not appear to be very
Oprah Winfrey will consider whether to acceptable. Some publishers also believe
than later because illegal content will be purchase such a device. This still has to
available anyway as the market develops, that the prices of eBooks should be higher
happen in Germany.” than the prices of printed books if the
and that DRM will not be able to perform
its protection function. Most experts expect eBooks contain multimedia enrichments.
The experts consider that there are two
that soft DRM will become established. not-to-be underestimated arguments
14 PwC
Club and subscription models as well as In view of the strong market success in take the opportunity, it might find itself
product combinations are conceivable the United States, and notwithstanding at a disadvantage with regard to the
the defects of and criticism leveled at competition and may lose revenue and
Club or subscription models, in which the eReaders, most experts expect that both market share.
consumer purchases an eReader for a low device categories will co-exist. However,
or subsidized price and pays a certain flat the prices of eReaders will have to drop Publishers: Transfer the business model to
rate per month for books, are considered further for this to occur. the digital environment
feasible by most industry experts. This
would increase penetration of the devices Representatives of the industry assume The main challenge facing publishers,
in the market, and sales of eBooks might eReaders will occupy a niche market. according to the experts, is to avoid making
surge, assuming that the devices are They are suitable for people who read a the same errors as the music industry.
indeed used for reading books. However, lot and who do not wish to be disturbed by This will require a new business model, a
publishers consider that the specific design other functions, such as incoming emails. wider range of content, and clarifications
of such models might be an obstacle to eReaders might also be attractive for regarding the question of copyright. In
market success. There are problems, for elderly readers: those with weak eyesight order to meet these challenges, publishers
instance, with regard to legal issues and can adjust the typesize and font size to will need to adapt their business processes.
authors’ fees. make reading easier, while those with To integrate content properly, editors will
impaired mobility can purchase new books have to become familiar with the special
Most experts believe there will also be a from the comfort of home. features of the eBook. Legal departments
market for jointly distributing eBooks and will have to devote more attention to rights
printed books. It is also conceivable that The experts are convinced that both breeds for eBooks and draw up fee models to take
consumers might read an eBook on their of devices – tablets and eReaders – are new circumstances into account. Publishers
mobile reading device during the day when at the early stages of evolution and will will have to concentrate to an even greater
traveling and that they would then have undergo significant changes. The experts extent on the role of a content provider. It
the printed version on their desk when expect that the devices will be merged, is, therefore, essential for these ideas to be
they arrive home. Such solutions would particularly if color eInk displays become established in the minds of employees, and
be attractive, for instance, in conjunction marketable. The trend is going clearly in for these employees to incorporate these
with a cloud model, in which consumers the direction of more usability, connection technological aspects and ideas in relation
acquire the rights to access digital books to mobile networks, and color. to eBooks.
and would be able to access their eBooks
with any device with online capability via 1.6 Looking to the Future Special-interest publishers, in particular,
their secured online access. In this case, the All experts agree: eBooks and printed will face a greater challenge. They will
book would not be stored on the devices; it books will co-exist. In certain cases, have to generate products with additional
would be stored in the cloud, as it would be printed editions will be replaced by digital content to meet their customers’ needs.
the case with Google Digital Editions. editions, but in other cases both media will These products will have to offer
complement each other. In the long term, additional value to generate sales. It is
No advertising banners between the lines only one representative of the industry true that customers are prepared to pay
expects that demand will dry up for printed for additional content, if they can clearly
Advertising might also be integrated in derive its benefit. This is also confirmed
books. Most experts believe eBooks will
eBooks to reduce the prices of electronic by a current study of PwC concerning the
partially replace the paperback. This is
books or to open up new sources of development of the market for special-
probable particularly in the case of special
revenue. However, most respondents interest information: Consumers expect
interest and travel books and in areas in
agree that such models could only to receive greater support in their work
which only sections of books are read.
function in conjunction with electronic processes– irrespective of the media form
sales of newspapers and magazines. Here, On the other hand, experts are less and in line with the individual needs of the
new types of digital ad models (beyond optimistic with regard to printed specific work situation.11
conventional online display and search) newspapers and periodicals. The vote in
might present ad opportunities that are this case is by no means clear. Tablets such No threat due to self-marketing of
more appealing to consumers, advertisers, as the iPad will ensure that newspapers authors, so continue maintaining strong
and publishers, such as a video pre-roll and periodicals can be attractively relationships
prior to a download or the placement of displayed in digital form and that they
logos, ads, or coupons on the device home Despite the digitizing process, publishers
can be purchased or acquired as part of a
screen. do not fear a significantly negative impact
subscription at any time as a result of the
on sales. In particular, they are relatively
integrated Internet access. Accordingly,
Not only consumers may not accept unconcerned with regard to the risk of
experts expect that the newspaper and
advertising in eBooks, also advertisers self-marketing of authors via the Internet.
periodical publishers will have to devote
are unlikely find advertising in eBooks Nonetheless, some bestselling authors have
more attention to the digitizing process
attractive. Devices on the market lack the proven successful at marketing their own
because, according to the majority, some
functionality to implement advertising. books and related products. Publishers
editions will be replaced by apps.
And authors may take a critical stance should not take their relationship with
with regard to advertising banners in 1.7 Challenges Facing Companies authors for granted. They should continue
their books. Only some special interest to work as the authors’ partners in
eBooks are changing the value chain in the
publishers could imagine using advertising marketing, selling, and promoting books.
book industry. The challenges are great
in eBooks.
for all parties involved, but experts say Online bookstores: Generating content and
1.5 eReaders or Tablets? the opportunities are also great. This is assuring unique selling points
because any company establishing a well-
Will multifunction tablet devices such as
thought-out position will have the prospect Experts in online bookstores agree that a
the iPad push eReaders out of the market?
of additional business in the digital market. comprehensive range of products is the
On the other hand, if a company fails to most important factor for distinguishing a
11 PwC: From paper to platform: transforming the B2B publishing business model, 2009.
16 PwC
The development so far has so far been in vain. And for a good Consumers are considering
Newspaper and periodical publishers reason: The devices available on the newspaper and periodical
European market do not have mobile
have been affected by the same trend
access, which makes it difficult to
subscriptions on tablets and
for many years: Circulation figures are readers, but the focus is on
declining, and advertising budgets are download subscriptions to newspapers
increasingly being shifted to the Internet. and periodicals onto the device. In reading books.
In addition, readers are going online addition, eReaders are scarcely suitable The fact that publishers have taken a step
more frequently, demanding their news in for newspapers and even less suitable in the right direction is also confirmed by
digital form, but they are not prepared to for periodicals because of their small a PwC consumer survey. Consumers are
pay for such a service. In order to open up size, their monochrome displays, and the receptive to digital reading of newspapers
new sources of revenue, compensate for limited facility for displaying images and and periodicals. Although book reading
falling circulation figures and stagnating graphics. is considered to be the more important
advertising revenue, and make themselves function, 36% to 49% of periodical
more independent of advertising business, Tablets – A success model for subscribers and 30% to 48% of newspaper
publishers are increasingly concentrating paid content? subscribers would use the iPad for reading
on paid content for their online products Tablets are expected to be the electronic newspapers and periodicals.
and digital revenue models. For example, breakthrough product for newspapers and
USA Today announced in August 2010 a The situation with eReaders is similar:
periodicals. With mobile Internet access,
strategy that places digital content in the Approximately one in three newspaper
color diagrams, good display quality,
center of all activities. Apple is considered subscribers considers that reading
the possibility of displaying videos, and
to be the solution in this respect because magazines on the eReader is a possibility,
accepted distribution channels, they form
the company with its App Store has been and 29% to 34% of newspaper subscribers
a virtually ideal platform for the digital
the first company to make paid content also consider that it is conceivable that
range of newspapers and periodicals.
acceptable. Apps for mobile devices are they would page through their newspapers
expected to curtail users’ expectations The United States is, once again, the on an eReader. However, the focus with
for free content from the Internet, and to pioneer. Major newspapers such as The eReaders is also on reading books: About
create new revenue streams for publishers. New York Times, The Wall Street Journal 70% of consumers would use the eReader
The App Store is proving fertile ground and USA Today as well as periodicals for purchasing and reading mass market
for publishers. So is the Kindle, which such as Time or Newsweek offer apps titles.
allows customers to buy single copies with functionalities and content that go
If consumers are asked to describe
or subscriptions to newspapers and far beyond what is available in Europe
their attitude toward digital publishing
magazines. (especially concerning non-English
products, one in ten consumers says
content). The free and advertising-financed
No wonder publishers were excited that he or she might subscribe to digital
app of the The New York Times had been
when Apple announced the iPad, a tablet newspapers and periodicals; the figure in
downloaded more than 400,000 times
that resembles an iPhone with a larger the United States is 16%. Indeed, half of all
by the end of July 2010. And more than
screen. In the weeks leading up to the people covered by the survey are thinking
10,000 iPad users have subscribed to The
iPad’s launch, it was nearly impossible about an electronic periodical subscription.
Wall Street Journal for a monthly fee of
to find a newspaper, website, blog, TV Subscribers and nonsubscribers are also
US$17.99. The advertising space within
station, or radio that did not mention the in agreement with regard to the future
the apps was in demand even before the
device. Mathias Döpfner, CEO of German viability of printed products. About two-
launch of the iPad; for instance, Morgan
newspaper publisher Axel Springer, thirds believe that digitally distributed
Chase booked all advertising space of
said, “Every publisher should thank God newspapers will at least partially replace
The New York Times app for 60 days, and
every day that Steve Jobs is rescuing the printed editions; only 24% (US) to
the advertising space of The Wall Street
the publishing industry with the iPad.” 45% (UK) of people covered by the survey
Journal was overbooked at the beginning.
Several US newspapers and magazines continue to believe in the printed edition
have launched apps for the iPad. Free apps Despite the success of the apps, some without any restriction.
include the The New York Times Daily consumers use the iPad to simply go to
Edition and USA Today. Paid apps, which websites, which are way more appealing
cost between US$3.99 and US$4.99 for on the larger screen of tablets than they are
each issue, include Wired, the New Yorker, on smartphone screens. With more tablets
and Vanity Fair. joining the market, a possible development
could be that apps will give way to specially
Range of products for designed web pages, which offer the same
eReaders: Different from one functions but are not accessed by a store
and are free on the Internet.
country to another
In America, the choice of electronic However, the response of numerous
publishing products for eReaders is much European publishers is moderate compared
larger than is the case in other countries: with the restrictive business policy of
Amazon is offering 132 newspapers and 40 Apple, which currently dominates the
periodicals for its Kindle as a subscription market with the iPad. Indeed, the company
or single issue. Barnes & Noble has demands a sales commission of 30%,
announced to expand the range of offered controls the content, and blocks access
newspapers and periodicals for its Nook to all user data. In order to stimulate the
with a colored screen. competition, numerous publishers are
working on producing a generic solution,
However, the search for specially processed as further tablets will be launched on
digital newspapers and magazines for the market in the course of the next few
electronic readers in European countries months.
customers want?
interviewed in the United States, UK, and
the Netherlands said they were unfamiliar
with such devices.
9%
No, I have never heard of 9%
them. 9%
11%
12%
I have heard of them but I 12%
do not know what they are. 11%
15%
I have heard of them and 34%
know a little bit about 33%
36%
them. 35%
27%
I have heard of them and 27%
know a lot about them. 27%
31%
18%
I own one or more 19%
eBooks. 17%
8%
18 PwC
own any eBooks – except in the United Country-specific differences with regard to prepared to apply an eBook. Moreover,
States, where 7% of consumers already the appreciation of eReader functions a wide range of eBooks is particularly
possesses an eReader. But the market is important for Americans and the British.
gradually picking up pace. Indeed, 20% of There are various differences in the This is not surprising because they already
people surveyed in the United States, 17% individual countries what consumers have the advantages of a choice of several
in the UK and 14% in Germany purchased consider as important criteria for eReaders. hundred thousand books. As specific
at least one electronic book last year. In The look and feel aspect is a major element advantages of eReaders, consumers
general, consumers offen still use their particularly in the Netherlands and in in other countries also appreciate the
computer for reading eBooks; eReaders Germany, and is an argument against mobility, space savings, rapid availability,
have not been established as reading buying eBooks. On the other hand, and environmental friendliness.
devices. US-Americans and the British are more
35%
No, I have never heard of 17%
them. 16%
18%
21%
I have heard of them but I 16%
do not know what they are. 18%
22%
I have heard of them and 22%
29%
know a little bit about 33%
them. 29%
20%
I have heard of them and 31%
know a lot about them. 30%
30%
2%
I own an eReader. 7%
3%
1%
More respondents in the United States On the other hand, there are no differences
and UK said direct mobile access to an with regard to the competition of eReaders
eBook store is important than respondents and tablets.However, consumers tend to
from Germany and the Netherlands. prefer to use eReaders over multifunctional
This is probably also due to the fact devices. This is due mainly to the fact that
that many devices distributed in the add-on functions such as music, camera,
United States and UK (the Kindle, Nook, telephone, video, and other applications
Sony Digital Editions, iRiver Story) are result in a higher price.
already equipped with this function, and
because consumers would consider that
it is relatively impractical to purchase
and transfer the books via the PC. In
general, there is much stronger interest
in eReaders in the United States and UK,
and considerably more consumers in
these countries are intending to purchase
eReaders than in Germany and in the
Netherlands.
20 PwC
How important are the following features of an eReader for you?
User-friendly operation
Display size
Low weight
Quick scrolling
Colored display
Touchscreen
Attractivedesign
Gaming features
€50/ 22%
US$50/ 21%
35%
£50 22%
€50– €100/ 41%
US$50–US$100/ 33%
36%
£50–£100 38%
€100– €150/ 22%
US$100–US$150/ 31%
17%
£100–£150 27%
€150– €200/ 11%
11%
US$200–US$300/ 8%
£150–£200 9%
€200–€300/ 3%
US$300–US$400/ 3%
3%
£200–£300 3%
≥€300/ 1%
≥US$400/ 1%
1%
≥£300 1%
22 PwC
How much you are willing to pay at most for an eBook if the price of the corresponding paperback is €10/US$14/£8?
up to €2 28%
€2–€3.99 28%
€4–€5.99 26%
€6–€7.99 9%
€8–€9.99 6%
≥€10 3%
up to US$2 17%
US$2–US$3.99 17%
US$4–US$5.99 16%
US$6–US$7.99 16%
US$8–US$9.99 14%
US$10–US$11.99 5%
US$12–US$13.99 4%
≥US$14 4%
up to £2 29%
£2–£3.99 36%
£4–£5.99 25%
£6–£7.99 7%
≥£8 3%
up to €2 29%
€2–€3.99 29%
€4–€5.99 24%
€6–€7.99 8%
€8–€9.99 7%
≥€10 3%
20%
None 13%
20%
26%
25%
1 to 4 19%
24%
23%
27%
5 to 9 24%
21%
23%
18%
26%
10 to 14 21%
18%
6%
10%
15 to 29 8%
7%
4%
30 or more 8%
6%
3%
How many eBooks would you buy in one year if the price for one eBook is on par with the corresponding paperback?
53%
None 34%
42%
53%
26%
1 to 4 33%
29%
27%
14%
5 to 9 18%
16%
13%
5%
9%
10 to 14 8%
6%
1%
15 to 29 3%
4%
1%
1%
30 or more 3%
1%
0%
Fig. 14 Number of potential eBooks bought per year (at price of paperback)
24 PwC
1.3 Purchase Intentions: most of the consumers covered by the 17% said they would use an iPad or similar
Tablet or eReader? survey prefer a reader, which can be tablet as an alternative to an eReader for
Would consumers buy an eReader if the used only for displaying books, instead mass market titles.
price was right? Most people in the survey of a multifunctional device, provided the
eReader costs less than a tablet. Survey As is the case with eReaders, there is a gap
would consider this, but only 3% to 8%
participants would also use a tablet as between the number of people interested in
said they intended to buy a device in the
an eReader if they purchased one. More tablets and the number actually planning
next six months.
than half the people interviewed said they to buy them. The survey shows that 53%
On the other hand, what is the situation would use the tablet for reading mass to 63% of participants are interested in a
with regard to tablets such as the iPad? Do market books, while 29% to 41% would tablet, compared with 56% to 76% who are
consumers prefer a multifunction device also consider using a tablet for reading interested in an eReader. However, only
compared with a simple eReader? Does the special interest books, and one-fourth to 1% to 5% said they intend to buy a tablet in
iPad make the eReader device superfluous one-third would use it to read newspapers the next six months (Fig. 15).
or redundant? Or do the two devices and magazines. Only respondents from the
complement each other? Surprisingly, Netherlands stood out in the survey: just
Could you imagine buying an eReader and reading eBooks with it in future?
I am planning to buy 3%
an eReader within 8%
5%
the next 6 months 3%
5%
I am planning to buy 8%
an eReader sometime 6%
9%
I can imagine buying 31%
32%
an eReader but have 26%
not made plans yet 24%
19%
28%
Maybe, maybe not 31%
22%
30%
Rather not 12%
16%
17%
12%
No, never 12%
16%
25%
I am planning to buy 2%
an iPad within the 5%
3%
next 6 months 1%
4%
I am planning to buy 5%
an iPad sometime 5%
4%
I can imagine buying 24%
an iPad but have not 23%
21%
made plans yet 18%
23%
30%
Maybe, maybe not 32%
24%
30%
Rather not 18%
19%
18%
17%
No, never 17%
20%
35%
26 PwC
1.4 The Future
Survey participants assume that printed
books and eBooks will co-exist. Acceptance
of eBooks appears somewhat stronger in
the United States and UK. In the United
States, for example, 7% of respondents
said they plan to only read eBooks, online
newspapers, and online magazines.
42%
I will read printed products, but also 51%
eBooks 50%
31%
I will not change my behavior and 29%
refuse buying electronic books, 16%
21%
newspapers or magazines 30%
I will still read printed products, but 18%
also electronic newspapers/ 19%
16%
magazines 20%
3%
In future, I will only read eBooks and 7%
electronic newspapers/magazines 4%
6%
8%
None of these possibilities 7%
9%
13%
What conclusions can be drawn from the assessments of the experts and the consumer survey?
What action can be recommended for the various players in the market?
Outlook and
children’s books, and books for gifts
and special occasions.
recommended action
but constantly drive revenue. The United
States, which had
3.7 million eReader owners at the end
of 2009, leads the world. Many earlier
predictions about an eBook and eReader
breakthrough did not come to fruition.
What is different now? First, the new
1. The Situation in the Year remain less expensive than tablets, and generation of eReaders promises to
2015 have fewer features to disrupt readers. meet consumers’ needs for simple, easy-
The Gutenberg era is not about to come to-use devices with improved screen
• Tablets will be lighter and have longer
to an end. Printed books will still exist. technology and integrated mobile and wi-fi
battery life than today’s models. They
After television, we still have cinema and connections that streamline the purchasing
will remain attractive options for
radio. There is no need to fear that bound and downloading of eBooks. Second,
people wanting to read eBooks but
books will only be found in museums, customers are ready for eBooks and
will not take the place of dedicated
connoisseurs’ collections, and in antique eReaders – their consumption patterns are
eReaders.
markets, or considered curiosities the evolving, they have become accustomed to
same way we now view eight-track tapes. • Tablets will take the place of printed buying digital music and video, and their
The book industry that we know and magazines and newspapers, especially reading habits have evolved.
understand today will continue to thrive, for men and young adults.
In addition, a majority of consumers are
but it will be transformed by eBooks and
• More publishers will offer multimedia still not aware of eReaders and eBooks, or
eReaders.
content in eBooks. have only a vague imagination of digital
In coming years, printed books will reading – even in the United States. With
still account for the majority of sales. • ‘Special interest books’ will be sold on a eReader sales and market awareness rising
Technology may change rapidly, but chapter-by-chapter basis. more consumers will be attracted to digital
people’s habits do not. People will continue reading, which will further boost sales.
• More special interest books, such as
to want books to fill their shelves, give as
cookbooks and travel guides, will The US market is by far the most mature,
gifts, and place on their bedside. But make
be offered as apps or eBooks with with eBook revenue expected to account
no mistake – modern reading devices such
interactive features, online updates, for 7.2% of all consumer book sales in
as the Kindle and iPad mark the beginning
and subscriptions. 2010. The majority of eReaders have been
of a digital transformation, and the book
sold there, and with Amazon announcing
market has taken its first, irreversible steps • Libraries may invest in eBooks rapid sales of the new Kindle, there is no
into new territory. and eReaders to complement their indication that momentum is slowing.
collection of print books. Furthermore, we expect strong sales of
At this point, it is difficult to predict how
quickly developments in the book industry tablets in the next few years, outpacing
• As demand decreases for print books, sales of eReaders in 2012. These will
will play out. The momentum in the US some titles may no longer become
eBook and eReader market shows what is stimulate the market because tablets
available in print. Others may be are recognized as reading devices by
possible in Europe. What’s to come soon: offered in a customized, on-demand consumers. However, we believe that by
basis. the end of 2012, most avid readers will
• Prices for eReaders will fall, and color
screens and Internet connectivity be equipped with an eReader and the
will become commonplace. They will growth will therefore slow down, because
28 PwC
eReaders will continue to be the primary in the ePub format rose significantly in 2. Critical Factors of
reading device for eBooks. We expect that both countries from 2009 to 2010. And Success for Different
eBooks will have a market share of 22.5% apart from Apple’s iPad, eReaders with
of consumer books in 2015. a wi-fi function have been introduced to
Business Models
the market, including the BeBook Neo in 2.1 Publishers
The UK is lagging behind the US in terms the Netherlands or the Oyo Reader by the Adapting for the future
of supply of devices and availability of German bookstore chain thalia.de. eBooks and eReaders represent both a
content. However, market conditions are
risk and an opportunity. If publishers
changing, which is reflected by market By 2015, we expect eBooks to make up
accept change, transform their processes,
participants reporting rising sales of 6.3% of all book sales in Germany, and
train employees, and offer their content
eBooks. Furthermore, new attractive 4.4% of all book sales in the Netherlands.
in multiple formats – in digital or printed
devices such as the Kindle are now sold The projection for eBook sales in the
form, bound or on demand, as a PDF or
in the UK, and it quickly sold out after its Netherlands is lower than in the UK, US,
ePUB – and on all platforms, they will
introduction. We expect that the eBook and Germany, and reflects several trends
have a good chance of developing a viable
market in the UK will, to a certain extent, that emerged during our consumer survey.
digital business model. Publishers that
mirror the development that can be seen Dutch consumers expressed the least
resist change, consider the digitizing
in the United States. In 2010, we expect a amount of interest in eBooks and eReaders
process to be merely an additional cost,
market share of 1.5%, which will rise to among the countries we surveyed and were
and attempt to defend their existing
14.2% in 2015. least interested in using iPads or other
content and business models, will face the
tablet computers as reading devices. In
Germany and the Netherlands show greatest risks.
addition, the eBook and eReader market
similar characteristics. The supply of is less mature than in other countries
eBooks in the ePub format is limited to Illegal products threaten the book industry
and eReaders in the Netherlands are still
a small percentage of available books. comparatively expensive. Finally, few Many current bestsellers are available for
Furthermore, available eReaders still lack eBooks are available in Dutch. people who wish to download them. But
the ability to satisfy customers’ needs also people can download illegal copies
concerning usability, connectivity, and The book industry is undergoing a process even if they are not yet on sale in a digital
pricing. But the situation is changing of change. And it is up to the industry format. Frequently, these illegal issues are
rapidly. itself to ensure that the digitizing process scanned copies in PDF and lack the quality
does not pass by. The industry should take of a legally distributed book or eBook.
In both countries, 2010 will be the first the opportunity of supplying the market However, consumers will not care about
year with significant sales of eBooks. We now with innovative products before quality if they cannot obtain an eBook
expect a market share of 0.4% in Germany others do so. What aspects should the through legal distribution channels, or
and 0.3% in the Netherlands. The market companies consider to ensure that eBooks if they cannot obtain it at an acceptable
shares will rise because of increasing become more than merely a cost factor price.
availability of content in German and for publishers and a new sales driver for
Dutch, increasing consumer awareness, Apple, Amazon, and others? What action The current state of illegal eBook
and advancements in eReaders and is recommended for the players on the distribution does not mean that publishers
tablets. The numbers of eBooks available market? face the same consequences as their
CAGR
2009 2010 2011 2012 2013 2014 2015
2010-2015
Germany
eBooks 4 28 95 190 299 394 490 77.1%
Print/Audio 6,665 6,756 6,849 6,956 7,061 7,194 7,326 1.6%
Total 6,669 6,785 6,944 7,146 7,360 7,588 7,816 2.9%
Share eBooks 0.1% 0.4% 1.4% 2.7% 4.1% 5.2% 6.3%
Netherlands
eBooks 1 2 7 14 24 33 41 77.5%
Print/Audio 808 812 819 829 843 861 880 1.6%
Total 809 815 826 843 868 894 920 2.5%
Share eBooks 0.2% 0.3% 0.8% 1.6% 2.8% 3.7% 4.4%
UK
eBooks 8 52 121 214 320 427 534 59.3%
Print/Audio 3,541 3,484 3,429 3,370 3,322 3,280 3,238 –1.5%
Total 3,549 3,536 3,550 3,584 3,642 3,707 3,772 1.3%
Share eBooks 0.2% 1.5% 3.4% 6.0% 8.8% 11.5% 14.2%
US
eBooks 551 1,518 2,569 3,371 4,302 5,022 5,571 29.7%
Print/Audio 19,890 19,620 19,359 19,224 19,110 19,113 19,169 –0.5%
Total 20,441 21,138 21,928 22,595 23,411 24,135 24,739 3.2%
Share eBooks 2.7% 7.2% 11.7% 14.9% 18.4% 20.8% 22.5%
PwC: Global Entertainment and Media Outlook: 2010–2014, German Entertainment and Media Outlook: 2010-2014, PwC Research. Numbers are
calculated using the average exchange rates of 2009.
Fig. 19 Market data books and eBooks (Books, million US$)
30 PwC
interest books and ePUB for the mass period, Barnes & Noble has succeeded the national online stores need to convince
market. It is now up to publishers, online in increasing its market share for eBooks customers of the value they provide by
bookstores, and device manufacturers to while its traditional bookstore business has offering a wide range of products, user-
join forces, press ahead, and develop a shrunk. As a bookstore chain, the company friendly service, and features like reviews
format that provides the greatest benefit to has an advantage over Amazon: customers and social networking. Stores should also
content owners and customers. The format across the United States can visit one of develop apps so customers can shop from
issue is less important for walled-garden its stores and test the Nook. Owners of the their smartphone or tablet. These efforts
environments because consumers are Nook can visit any Barnes & Noble location can improve customer retention, loyalty,
highly satisfied with the user experience. for free wi-fi, download free content, and interaction, and revenue potential.
However it will become an issue if other receive other in-store promotions. Amazon
market players such as Barnes & Noble has no retail locations and has only What do the international online stores
or Borders become more powerful and recently started selling the Kindle through offer customers? Consider one of the
consumers wish to move books they have other retailers. Barnes & Noble also sells advantages of Amazon’s Kindle. eBooks
purchased to a non-Amazon or non-Apple the Nook through another retailer, i.e. are available not only for the Kindle but
device. electronics giant Best Buy. In 2009, Barnes also for nearly every type of computer or
& Noble’s online revenue increased 24% to gadget a user is likely to own: a PC, Mac,
Publishers – and also authors – should US$573 million: digital revenue is expected iPhone, iPad, iPod, Android smartphone,
rethink their stance on digital rights to double this year. Bookstores should or late-model BlackBerry. The applications
management (DRM). As Apple and consider Barnes & Noble’s experience with are synchronized to users’ Kindle accounts,
Amazon have successfully demonstrated, the Nook as they plan their own eBook and so when they pick up a book on another
DRM can be user-friendly. Publishers eReader strategies. device they will continue at the place
should strive to embrace DRM systems they stopped reading on the last device.
that do not act as a deterrent by making it Consider cooperations for online sales Bookmarks, notes, and highlights are also
difficult to buy or use digital content. Large bookstores may have the resources synchronized across all the devices.
to open online stores or even develop
Cooperation: To be represented on all As is the case with physical bookstores,
their own eReader. However, even small
platforms online stores should explore the integrated
and special-interest bookstores will
For publishers, it is important to establish range of products with their own reader.
need to participate in the digital book
a presence with content on all platforms: Online stores do not have to enter the
environment. In order to get the most
in bookstores, online, and as apps. A more hardware market for this purpose. They
from investments, smaller companies may
open attitude with regard to ooperation may seek out suitable arrangements with
consider working with external providers,
and more courage are necessary in this device manufacturers that integrate the
such as intermediaries, to develop an
respect. online platform on their gadget. In such a
online shop. In addition, smaller stores
scenario, the online stores would assume
should analyze their strengths and
2.2 Physical Bookstores responsibility for actively marketing the
develop strategies to exploit them in an
products through their platform.
Physical bookstores have much to do in eBook and eReader world. For example,
order to prevent the digitizing process a small bookstore may consider creating 2.4 Device Manufacturers
from passing them by. The United customized book and eBook packages for
Amazon (with the Kindle) and Apple
States has seen an increase in bookstore institutional clients, or setting up terminals
(with the iPhone and iPad) have
closings in the past few years, although for customers whose eReaders do not have
demonstrated how sales and reader can
this may be partly due to economic an integrated Internet connection.
be skillfully combined. In conjunction
conditions. Bookstores must emphasize
Just as eBooks cannot replace printed with a well-planned communication and
their strengths in customer knowledge,
books as gifts or on bookshelves, online business strategy, the two companies
customer retention, and related skills,
bookstores cannot replace physical have encouraged demand to a previously
and sell book content in all formats and
bookstores as: unknown extent and have revived the
across all channels. Bookstores should
market with user-friendly and attractive
embrace a multichannel strategy, in which
• Locations for book club meetings devices.
the Internet, physical bookstores, and
catalogues complement one another. In • Author signings and speeches Adapt devices to customer requirements
particular, the bookstores that have a
strong presence in inner-city locations and Device manufacturers that are active in the
• Cafes, lounges, coffee shops
are able to transfer this to the Internet European market would be well advised
enjoy a good starting position in this • A place where customers can relax and to learn from the successes in the United
respect. browse books at their leisure States. The Kindle and Nook are easy to
operate, with Internet access, integrated
Rethink integration of the value chain – or As the digital environment becomes more shops, eInk screens, and pages that turn
enter into co-operations important to readers, bookstores that rapidly.
emphasize their real-world advantages
Despite the delayed launch (the Nook has Manufacturers for European devices
will remain relevant, retain customers, and
only been available on the market since should consider partnerships with leading
target new revenue streams.
2010), Barnes & Noble has successfully mobile network operators and online
established a position against Amazon. 2.3 Online Stores stores. These devices may be distributed
As a result of its own reading device, to customers either in a proprietary or
Barnes & Noble has been able to at least Competition posed by global players
requires a multiplatform strategy in a branded format. In addition, active
partially compensate for the decline in market communication is also of crucial
physical bookstores, although the company The outlook is rosy for national online importance. The market has so far been
had to close one of its largest New York bookstores, but there will be challenges. passing by the most important target
City locations, along with other stores The primary hurdle is competition from group.
throughout the country. But within a short international major players. To respond,
11 PwC: From paper to platform: transforming the B2B publishing business model, 2009.
32 PwC
Methodology
3 Expert Interviews
Experts of leading publishing houses
(special interest books and the mass
market), intermediaries, online stores,
device manufacturers as well as a
telecommunication company were
included in the survey for the study.
PricewaterhouseCoopers PricewaterhouseCoopers
(2010a) (2010d)
Global Entertainment and Media Outlook: Entertainment and Media Outlook for the
2010–2014 Netherlands: 2010–2014
PricewaterhouseCoopers PricewaterhouseCoopers,
(2010b) International Publishers
German Entertainment and Media Outlook: Association (2010)
2010–2014 VAT/GST/Sales Tax rates: Global survey on
books and electronic publications
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Turning the Page: The Future of eBooks 35
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