Past the point of no return
Publishers have at last realised that they need a strong bookselling sector, Tim Godfray writes.As I write this, a couple of weeks before the London Book Fair opens, I find the state of the UK book trade pretty depressing. The latest figures from Nielsen BookScan for the Total Consumer Market (TCM) show that sales of printed books during the first 12 weeks of this year are 10.1% down on the same period in 2011. Indeed, the year-on-year figures since 2009 show a continual decline.
But this minus 10.1% excludes ebooks, and publishers in 2012 have been reporting some staggering increases in digital sales - albeit from a pretty low base. Even so, if ebooks had been factored into the TCM figures, we would still have seen a decline in the sales of printed and ebooks overall - but at a lower level, around 3.5%. I know that negative figures are also being reported by non-book retailers, but you hope that in a recession books do better than most other commodities - sadly, it no longer seems to be the case.
In broad terms, independents seem to be doing better than the chains, and Amazon and the other internet booksellers are faring better than the traditional bookshops. High street and campus booksellers now regard Amazon as their main competitor. The Office of Fair Trading calculated that Amazon had a market share of between 70% and 80% in the online bookselling sector, and that assessment was made before Amazon announced it had sold more than one million Kindles at Christmas.
Consumers tell our members that they often buy Kindles unaware that subsequently they can buy ebooks only in Kindle format from Amazon's Kindle store. We would like Amazon to cease using proprietary software, to adopt the epub format and to move to full interoperability - thus permitting other booksellers to supply content for the Kindle reader.
Booksellers want to have the opportunity to compete fairly. At the moment, it seems to be somewhat one-sided. Particularly if you consider that Amazon has registered its business in Luxembourg, enabling them to supply ebooks to UK consumers at 3% VAT, whereas a bookseller selling ebooks from the UK has to supply at 20% VAT. This gives a massive competitive advantage to Amazon.
Brave new world
In 2006, the Booksellers Association (BA) commissioned a report from Martyn Daniels entitled Brave New World. It was a visionary piece of work at the time. He said: "It will not be a question of 'if' digitisation will have an effect on the general book market, but 'when'. What we do not know is what will determine the 'tipping point' and when that change will happen. But what we can say with certainty is that when the internet first appeared on the horizon, few booksellers took the development very seriously and a number of the bigger booksellers now bitterly regret their previous policies. So BA members are urged to start putting together a digital strategy, if they haven't done so already; certain developments are going to take place very quickly."
Well, the tipping point for ebooks has come, and it has come fast. Consumers are now going into bookshops to ask for ebooks. All but the largest bookshops are finding it hard to supply ebooks at reasonable margins. At present, there are only two options for most independent booksellers to sell ebooks to consumers: through Gardners' Hive or by becoming a Google Affiliate to sell Google eBooks. There are concerns over the latter, because booksellers fear that they could well lose the customer to Google after the initial transaction. So because of structural problems in the sector, more business is being lost from the high street and the campus to the large internet booksellers. [Google has since announced that it is to terminate this affiliates scheme - Ed.]
Publishers are concerned about this as well. A few years ago, publishers were quietly going "hell for leather" to supply consumers direct with their digital products, thus aiming to bypass the bookseller, in order to make a greater margin and collect consumer data.
But there has been, I believe, a serious re-think among the leading UK publishing houses. There is a real concern that if shop windows go, consumers will find the "discovery" element in selecting a book that much harder - and publishers' sales will suffer. More importantly, they will be left with no proper diversity in the marketplace - just with a small number of very large book retailing customers who will call the shots.
Publishers now recognise that their bookshop partners need more help and support, and accept that new ways have to be tried. The basic financial model governing the way in which publishers and booksellers do business with each other has not really changed since 1957 - when the last version of the Net Book Agreement came into operation. But the bookselling world of today is light years away from the trading environment of 1957. New financial models have to be tried and tested by publishers, with both parties recognising that the only ones that are going to work and stick are those that bring benefits to both publishers and booksellers.
In the last six years, the number of BA members has fallen alarmingly. Traditional booksellers - and indeed the Booksellers Association - have had to face a myriad of challenges. Nevertheless, there are some encouraging signs. In the US, the number of independent booksellers in membership of the American Booksellers Association has increased - the first time in a very long period. Despite the fallout from the closure of Borders, I still find this surprising, because with digitisation more advanced in the States than over here, you would have thought that the trading environment would be even more competitive than it is here. And I never cease to be amazed by the resilience of so many of our members.
There are lots of different parties who will influence how the book retailing sector unfolds during the next few years. Consumers, of course - and the BA has produced POS to urge book buyers to help keep bookshops on our high streets. But also IT developers in Silicon Valley; global retailers; national and local government; and the competition authorities. But to my mind the publishers have more influence than all these others put together. As copyright owners of a unique product they are in a powerful position. They have played a considerable part in determining how the bookselling sector has developed to where it is in 2012. Publishers have to consider how vital booksellers are to them during the next stage of the book trade's development and to work out ways in which diversity can flourish.
I think the Rubicon has been crossed.
In the US, in the UK and in Ireland, there's now an awareness by publishers that they need good booksellers. The more difficult part is working out ways in which greater support can be given - to mutual benefit. But publishers, by temperament, are creative individuals and not a bit above risk taking.
And some risks do have to be taken if the bookselling sector is to survive. I am optimistic that we will see positive changes in the near future.
Tim Godfray is CEO of The Booksellers Association of the UK & Ireland
This article first appeared in the Publishers Weekly/BookBrunch London Show Daily