Transcript: Measuring the E-book Market

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Data For A Global E-book Market
An interview with Rüdiger Wischenbart

For Podcast Release
Monday, January 23, 2012

KENNEALLY: The Global E-book Market – Current Conditions and Future Projections provides a broad survey of data on emerging e-book markets across Europe, and in two so-called BRIC countries – Brazil and China. The book is available as a free download from O’Reilly Media, and joining us on the line from Vienna is its author, Rüdiger Wischenbart. Rüdiger, welcome to Beyond the Book.

WISCHENBART: Hello, Chris.

KENNEALLY: Well, it’s a delight to have you join us, Rüdiger. We’ll tell people a bit about you. You’re a journalist and consultant specializing in culture, cultural industries, the book and book markets, literature and media. You have a PhD in German literature from the University of Graz, and served as Director of Communication to the Frankfurt Book Fair from 1998 to 2001. And you now run your own company, Content and Consulting, based in Vienna.

Along with the global e-book market from O’Reilly, you have researched and co-authored the Diversity Report 2009 and 2008, mapping translation markets and cultures across Europe, and a global ranking of the publishing industry initiated by Livres Hebdo, co-published by the Bookseller, Publishers Weekly, buchreport, and Svensk Bokhandel.

So, you’re a man who gets around the world, I think, and certainly around Europe. And you’ve been looking at this global e-book market. We are becoming familiar with our own e-book market in the United States, Rüdiger.

Tell us, first of all, as a kind of benchmark, the US is ahead of the game, if you will, and these other areas are kind of getting into the game just now? Is that about fair to say?

WISCHENBART: Yes, absolutely. You must assume that aside from the UK, European markets are at least three to four years behind the US now. And in the largest markets, such as Germany or France or Italy, e-books have become a reality in 2011, and before that, they have always been anticipated as a threat, as an opportunity. But it’s only now, since last year, that they have arrived.

KENNEALLY: And I think that’s an important point to stress, because in your book, you are reporting on actual data of one kind or another. This is not a bunch of forecasts. We’re really looking at what it looks like on the ground today.

WISCHENBART: Yes. Let me remind you that in all of those countries, the market share of e-books is below 1% of the market. But, that has been the case in the US as well, just a few years ago. And what we see is quite significant indicators pointing at rather significant upward swing.

And I have written and researched and reported, you mentioned, in late summer, early fall of last year, and now, I’m in the very process of updating my data on year-end Christmas sales. And particularly in Germany and in France, but also a little bit in other places, we very clearly see a few things supporting that thesis of the upward swing.

We saw that reading devices, as well as tablet devices, have been very, very popular Christmas gifts in Europe, and you could see in some places, right after Christmas, a surge in downloads of legal e-books and commercial e-books. Several platforms announced after Christmas, that December 25th, so the very day after the gifts have been unwrapped, have been the strongest day in e-book sales so far.

So, we have quite a significant environment now, that tells us that’s going to be a very strong development in 2012 as well.

KENNEALLY: Right. And though there have been e-books up to now, having the e-readers makes all the difference, because otherwise, the reader was forced – if that’s maybe not the right word, but could only get to the e-book at a laptop computer, occasionally on some kind of smartphone. But these dedicated tablets are really a critical piece of this.

WISCHENBART: Very much so. Now, the big question is, will it be more e-ink based reading devices, specialized reading devices, or will some of that or more of that move on the tablets? We cannot really say this so far. What we can say is that tablets have been very popular.

But let me remind you also that all of the major retail chains, at least those that have strong online platforms as well, have introduced their own reading devices. Amazon has walked into the European non-English language markets with localized language platforms and the Kindle only in the course of last year, for most – in Germany, it was in spring of 2011. In France, Italy, Spain, it was in the early fall of 2011.

And of course, that created also very much additional momentum, and you can see that people really started to take possession of all of this. And now we will see how sales behave.

KENNEALLY: Right. Now, you mentioned Amazon. Are the players generally the ones we recognize from the US, that would be Google, and Apple, and Kobo? Or are there others that we might not be familiar with?

WISCHENBART: No, you have a different pattern. At the moment, we see – or, the environment is very strongly characterized by the main local or national retail chains having prepared their act in 2011, or it started already in the winter 2010 to 2011, as all the infrastructure was put in place. And you have, for instance, in Germany, a platform called Weltbild, which has really been very aggressive in driving their online sales. You have another – the large – another one in Germany, the largest brick and mortar chain store chain, Thalia, which just a few days ago announced their earnings for last year, revealing that their brick and mortar sales were very modest, while online sales of (inaudible), as we speak of printed books purchased online, but that’s opening new habits on the reader’s side, and therefore, it’s certainly significant also to understand dynamics for e-books. And the online retail for printed books has been very strong in the last year on those platforms.

We have the same development that is taking place in France, where on the one hand, Fnac, the big online retail store, has announced very mixed results for last year, and will most likely even make redundant some of their staff. But at the same time, things indicate that online purchases of printed books have been very strong.

So you see that there is the Internet getting more and more a grip on how people look for books, and I guess that will also accelerate sales of downloads.

KENNEALLY: Right. Well, we are talking today on Beyond the Book with Rüdiger Wischenbart, the author of The Global E-book Market – Current Conditions and Future Projections, available from O’Reilly Media.

And you mentioned at the end there, Rüdiger, Fnac, and what’s happening in France. I read online that the President of France, Sarkozy, had a lunchtime meeting – leave it to the French to have a lunchtime meeting with the President – that brought together editors and booksellers, and they were in fact responding to what’s been happening in France. You mentioned the announcement of redundancies at Fnac.

And clearly, there’s a cultural aspect to this. This isn’t simply a matter of who’s up and who’s behind regarding technology adoption. But there’s a role here, in France and in other countries, for a kind of a cultural response to all of this, right?

WISCHENBART: Particularly in France, there is a big point of pride also that is involved. And in my research, after recent weeks and months, I get a very key message from one French colleague, who said, listen, it is true that in the past, we have been the pupils of the American masters. But we have come a long way ever since. And there are quite a few things that we have learned to do in a very professional way.

So you see also that the self-understanding, the self-consciousness of people has grown quite significantly, and those people want to take the future into their own hands.

At the moment, we have a few factors, however, that are making a difficult environment for e-books. One is very clearly VAT. In a legal situation that is perhaps difficult to understand to non-Europeans, at the moment, in quite a few places, e-books have a much higher VAT than the printed book.

KENNEALLY: Now, we should – Rüdiger, I just want to be sure for our audience in the US that’s not familiar always with the term VAT, that’s a kind of – well, it stands for Value Added Tax. It’s a sales tax, of a sort, on a product.

WISCHENBART: It is a sort of a sales tax, yes, but much higher, and if you have to take the case of Germany, for instance, a printed book comes with a sales tax, or a VAT, of 7%. But every non-reduced, non-advantaged good comes with a full 19% of this tax, which makes quite a bit of a difference if you have to add on a product 7% or 19%. But e-books, the same e-book for a title that goes for 7% in the printed version goes at 19% for the e-book. And that, of course, makes pricing very difficult.

Now, where does this come from? Because, in the past, Europeans wanted to encourage books, so they have fixed retail price legislation that avoids competing on the price of a book, but they also reduced this sales taxes for books, or in some places like the UK, even, there is a 0% sales tax on book, while you have a significant surcharge on other products.

And that is a difficult battle, but again, the French were the swiftest to say, that makes no sense. And since January 1st of this year, they had two pieces of legislation coming in, one saying the fixed book price applies also to electronic books, and the reduced Value Added Tax also applies to books.

In Spain, it’s a little bit similar in a more legal, more complicated legal environment. In Germany, it is still open, but people are struggling about this.

But you see, this is all the uncertainties of an only emerging market niche, and I am very, very certain that this current year will see a lot of these things being sorted out. So, adding more momentum to the development.

KENNEALLY: Well, Rüdiger, your book looks beyond Europe, of course, and in particular, to China and Brazil. And the situation there is very different indeed. What is the adoption like in China and in Brazil, and what are the specifics to each of those markets?

WISCHENBART: Well, Brazil is easier to explain, because there is just one very big difference that may shape the future for Brazil. Very much in different ways than, let’s say, in the rest of Europe or the US, because here, books have that very central role in the country’s ambition to get an emerging economy going, and that means, education, education, education. And therefore, the government is just about to enter new funding and new legislation to encourage state government money to go into developing digital devices, digital tools, digital content, and to bring educational materials onto the computer.

So, while you have a very modest beginning in Brazil, starting a normal e-book market with novels and other trade books getting digital, here also it starts to get along the same development lines as in other countries. You will have, I’m very much sure, quite an impact and quite an attractive environment on the educational side, and it is not a coincidence that several of the international, non-Brazilian players in the educational market like Pearson, came in and started joint ventures or put capital to acquire parts of domestic players in Brazil. So quite a lot of very interesting activity going on here.

KENNEALLY: And China? What’s the contrast there?

WISCHENBART: And in China – in China, we have really to take into consideration a lot of different parameters. Number one, it’s a huge market, driven by domestic demand. Not international is driving it, but really, the Chinese do their own thing. That means we have to look at how do Chinese read online, and that’s all different.

You have extremely popular online site where you can subscribe to read online as books come out. But it’s not just normal novels, it’s serial pieces, mystery, fantasy, all those things, all kinds of genre fiction are very strong. And it is, by now, a very established way for people, for authors to first bring out a book on the Internet on those subscription sites. And only when you have managed to create a huge community of your readers, a normal publisher would come up and say, listen, I want to buy the rights to turn your online story into a normal book, then the book will be printed, and most likely be on the bestselling charts. So you have here different habits.

The second thing is, Chinese read a lot on phones. And they also read long texts like books on their phones. So if you travel in an underground in Beijing or in Shanghai, you will be amazed by the number of people reading significantly on their commutes.

So here you see quite a few parameters that just differ from the main driving forces, as we see them in the US or in Europe. But it’s very thriving and very dynamic, and very exciting. And we will see where that goes from here.

KENNEALLY: And indeed, we will see where it is going, because next month, in February, at the Tools of Change conference in New York City, you’ll be updating the book. It’s available currently online from O’Reilly Media. But you’ll be including some new data, as you mentioned at the top of the program, from the year-end sales, and particularly around the Christmas sales. What other news can we expect to have in this new edition?

WISCHENBART: There will be two new chapters, one including a third emerging economy, and that is Russia. Very interesting, and very different environment, again. And there will be a new chapter on piracy, where I will look into what piracy is thought to be in markets such as Germany or France.

KENNEALLY: Well, we appreciate the global perspective that you have been providing us, Rüdiger Wischenbart. He is the author of The Global E-book Market – Current Conditions and Future Projections. You can find it online at the O’Reilly Media site.

Rüdiger, in Vienna, thank you so much for joining us today.

WISCHENBART: Chris, it was a great pleasure. Thank you so much for your attention.

KENNEALLY: Well, we’re glad to have you join us. We want to tell everybody, as always, Beyond the Book is produced by Copyright Clearance Center. You can like Beyond the Book on Facebook, find us on Twitter, and always, subscribe to the free iTunes podcast or on our own website, Copyright.com/beyondthebook.

Our engineer, as always, is Jeremy Brieske of Burst Marketing. My name is Christopher Kenneally. For all of us at Copyright Clearance Center, thanks for listening to Beyond the Book.