What's really behind the decline in brick & mortar bookstores?

This morning, Bloomberg Television covered yesterday's resignation of Barnes & Noble CEO William Lynch and subsequent management reorganization. Bloomberg showed a bar graph of the decline in the number of bookstores in the U.S., and said that Amazon was responsible for the decline. Yes, Amazon played a part, but there are other reasons that are at least as important:

• The decline in the number of bookstores began in the 1980s, when Barnes & Noble's and Borders's superstores decimated independent booksellers.
• U.S. book sales started declining years before the 2007 introduction of Amazon's Kindle and the 2008 Great Recession. People are simply spending less time reading books.
• eBooks from Amazon and other retailers have cannibalized sales of print books. In other words, eBook sales haven't increased total U.S. book sales revenues--they've only slowed the rate of decline.

So, you've got three factors responsible for the decline in the number of bookstores:

1. Price competition, which was used by Barnes & Noble and Borders to kill off a large part of the U.S. bookstore industry even before Amazon was founded in 1995 (but which Amazon has certainly used to its advantage.)
2. Declining book sales, which pressures all booksellers but puts the most pressure on retailers that don't have other product lines to fall back on for revenue.
3. eBooks, which generally aren't sold in brick & mortar bookstores (although they could be.)

The New York Times takes yet another dump on Amazon

The New York Times' David Streitfeld is at it again. Last FridayThursday, the Times published an article written by Streitfeld that charges that Amazon is using its "monopoly" on book sales to increase prices. The bottom line was that Streitfeld claimed, using completely anecdotal evidence, that Amazon is increasing prices on some academic and small-press print titles; eBook prices are unaffected. How many titles are affected, and the average price increase, either in dollars or percentage, Streitfeld didn't say. He lists price changes for less than ten out of several million titles.

Even if Streitfeld is correct, and Amazon is generally increasing prices on academic and small-press print books, there are at least two reasons why they'd do so that have absolutely nothing to do with abuse of Amazon's market share:

1. The company is compensating for the costs of stocking slower-moving titles. Unlike eBooks, print books take up warehouse space, and have to be physically picked from shelves, packaged and shipped. A slow-selling title takes up space that could be used for a faster-selling title or a completely different type of merchandise. That space has a cost, and the cost is allocated on a per-copy-sold basis, whether or not Amazon passes it on to consumers. Amazon may simply be passing that cost onto consumers in the form of lower discounts.
2. For the reason stated above, Amazon may be considering not stocking some of these low-selling titles and instead buying them from distributors as orders are received, which would increase its costs. (This was the way that Amazon first started business.) By raising prices now, Amazon can gauge the impact on demand and change course if needed.

One other point: If you prefer not to buy an academic or small-press title from Amazon, you can always get it from Barnes & Noble or an independent bookseller. If they don't have it in stock, they can order it for you from Ingram, Baker & Taylor or an academic distributor. However, I can almost guarantee you that you'll pay the publisher's list price.

Now, just three days laterThe following day, Streitfeld and the Times came back with another article that makes an even more ridiculous allegation: Amazon's pricing model makes it impossible for customers to determine the "true" price of its books. He says that book prices will be "determined by demand and perhaps by whim." I thought that we lived in an free economy where supply and demand determines prices, and that the law of demand is a good thing. Apparently, according to Mr. Streitfeld, I'm wrong. Consumers should accept whatever prices are set by vendors and buy their goods and services, no matter what the price. Silly me.

Streitfeld also claims that Amazon's pricing policies are now "a radioactive topic with some vendors." For that claim, he uses two publishers as examples: The University of Chicago, which refused to answer because its pricing policies are proprietary, and Melville House, which has had a long and very public adversarial relationship with Amazon. Streitfeld suggests that the University of Chicago Press's refusal to discuss the subject is because of fear of retaliation, but it could equally be due to the fact that most companies that sell through distribution don't discuss their pricing policies. For example, Apple is happy to discuss the retail prices for its devices, but ask it how much it charges Best Buy for those products, Best Buy's retail markup on their wholesale cost, or its reaction to Best Buy's pricing policies, and all you'll get is a stony silence. In addition, discussing pricing can be seen as signalling, which can be of benefit to competitors and can also be used to fix prices. But, apparently, Mr. Streitfeld didn't think that those alternate explanations were plausible.

Let's go back to Streitfeld's original argument, that consumers are unable to determine the "true" price of books sold by Amazon. In my experience, Amazon always shows the suggested list price set by publishers for both print books and eBooks, as well as its price and the discount (if any.) Shipping costs are clearly visible when you place the order, and can be adjusted based on speed of service. (Amazon Prime members generally pay nothing for shipping if they're willing to accept two business day service.) Even sales taxes are fairly simple from the consumer's point of view: If you live in a state where Amazon collects sales tax, Amazon will calculate and add the tax to the order. If Amazon doesn't collect taxes in your state, they don't add them to your bill, and it's up to you to determine whether or not your state requires you to pay the sales tax separately. How does any of this obscure the "true" price of books? I know what the publisher has set as its suggested list price, what Amazon charges, the discount off the list price, the shipping cost and (in some states) the sales tax.

I'm going to use two terms that reporters and editors don't like to see, especially in relationship to themselves: In my opinion, David Streitfeld is a hack. There is absolutely no way to read his articles as anything other than what they are: Hatchet jobs on Amazon. Even when he does manage to speak to someone at Amazon, he turns their response into a reinforcement of his argument. I'm not even sure what Mr. Streitfeld's job is at the New York Times. Is he a reporter? If he is, his articles fail any reasonable test of objectivity, and should never make it to print. Is he the Times' columnist in charge of dumping on Amazon? If so, he's doing a great job--but his column should be on the editorial page or in the Op-Ed section, not in an area of the paper where readers expect hard news.

Obama's victory spells bad news for Apple, Macmillan and Pearson

Historically, Republican administrations have been far less aggressive in prosecuting antitrust cases than Democratic ones. Had Mitt Romney won last night, it's likely that the eBook price-fixing case against Apple, Macmillan and Pearson would have been settled on terms far more favorable to the companies, or would have been dropped altogether. That may have been one reason why the three companies refused to settle with the U.S. Justice Department--they thought that they could get far better terms by waiting a few months for a Romney administration. However, with President Obama's reelection, the Justice Department will continue to pursue its case, and will almost certainly make settlement on the same or similar terms as Hachette, HarperCollins and Simon & Schuster a condition for approval of the Penguin-Random House merger. All of this makes a settlement by Macmillan much more likely. At that point, Apple won't matter, because all of the Big 6 will be prohibited from accepting Apple's terms.

In a move that surprises no one, the Book Industry Study Group endorses EPUB 3

In a move that surprised absolutely no one, the Book Industry Study Group has endorsed EPUB 3. The actual endorsement amounts to little more than a solicitation for new members for the BISG and IDPF (International Digital Publishing Fourm, the industry group that created and manages EPUB):

"ISG encourages organizations interested in the advancement of EPUB 3 to become members of both IDPF and BISG in order to work directly with those creating the standard and developing best practices."

The reality is that companies that join the two groups now are going to have virtually no influence over EPUB 3--and the specifications are public, so there's no real benefit to spending thousands, or tens of thousands, of dollars to join. (Yes, I'm suggesting being a "free rider".)

In addition, EPUB 3 is less a standard than a suggestion: The IDPF doesn't require that companies implement the complete specification, nor does it prohibit implementation of proprietary extensions--which is why Apple, Barnes & Noble and Kobo all have their own proprietary multimedia extensions to EPUB 2.X. Also, Apple hasn't endorsed EPUB 3, and isn't likely to do so.

eReaders are great for casual readers, not so great for highlighting and notes

The Atlantic has an essay about the state of eReaders written by Alan Jacobs, an English professor at Wheaton College. Here's a summary:

• Both eReaders and tablets are making it easier to read at night, with front lights (eReaders) and dimmable backlights (tablets). 
• E Ink displays on eReaders are still far superior to LCD displays on tablets when it comes to glare. 
• The contrast of eReader displays has improved considerably. 
• eReaders have limited typeface options and do a poor job of handling kerning and spacing. (A large part of the problem is EPUB, which emphasizes dynamic page flow to the detriment of just about everything else.) 
• Highlighting and annotation, which are very important for literature studies, are all but impossible with eReaders. The trend to replace dedicated keyboards with on-screen keyboards has made annotation even more difficult. On the other hand, tablets handle highlighting and annotation much better, although they still have some quirks. For example, it's impossible to extend a highlight across a page break on the iPad (although it can easily be done on Nook and Kindle eReaders.) 

The bottom line is that eReaders and tablets are generally improving for general reading, but for engaged reading, there's been little improvement, and in some ways eReaders' capabilities are moving backwards.

Pearson's First-Half 2012 results

Pearson has reported its first-half 2012 financial results; here's a summary:

• North American educational sales were £1.022 billion, up 9% year-over-year; adjusted operating profits were £62 million, up 35%. (Net margins were 6.1%) 
• International educational sales were £724 million, up 13% year-over-year; adjusted operating profits were £73 million, up 16%. (Net margins were 10.1%) 
• Professional sales were £180 million, up 2% year-over-year; adjusted operating profits were £9 million, down 65%. (Net margins were 5%) 
• Penguin's worldwide sales were £441 million, down 4% year-over-year; adjusted operating profits were £22 million, down 48%. (Net margins were 5%) 
• Educational digital platform registrations were up 30%. 
• Penguin's eBook revenues were up 33% and now represent almost 20% of the publisher's revenues. 

Simba Information: Waterstones' deal with Amazon will be "...one of the biggest screw-ups in the history of book retail"

Book Business has an interview with Simba Information Senior Analyst Michael Norris, whose company just published its Trends in Trade Book Retailing study. Norris reiterates something that I've been saying for a while: eBooks aren't growing the publishing market--they're just cannibalizing print sales. Further, print sales are falling faster than eBook sales are growing, so at best, eBooks are slowing the market's overall rate of decline.

Norris says that Barnes & Noble's relative success in the eBook business has a great deal to do with its stores, and with its promotion of Nook hardware and accessories in those stores. He's puzzled by B&N's decision to break its Nook business away from the rest of the company--and even more puzzled by Waterstones' decision to partner with Amazon for Kindle eReaders and tablets. Norris compared Waterstones' deal to Borders' disastrous decision to outsource its online eBookstore to Amazon, and said "...I’ve really got to hand it to companies like Amazon, they know how to kill a competitor and make it look like suicide." He added, "It’s going to be one of the biggest screw-ups in the history of book retail."

When asked what book retailers that sell eBooks can do, Norris said "I urge every retailer who does sell ebooks to buy one of their own ebooks and then buy the same or similar ebook from Amazon, then think...about what kind of experience is going to make people come back. "

Polaris Library Systems to resell 3M's library equipment

3M has signed Polaris Library Systems as a reseller of its automated materials handling, RFID and SelfCheck systems for libraries. It's an expansion of the companies' previous deal, in which Polaris integrated the 3M Cloud Library eBook Lending Service with its OPAC. The deal suggests that 3M may be offering OPAC vendors a more extensive business relationship, which could give it a leg up over OverDrive.

Rakuten deals with bad reviews of the Kobo Touch by deleting them

The Digital Reader reports that Rakuten's launch of the Kobo Touch in Japan isn't going quite as expected. Despite the company's "Kill Amazon" chest-beating a few weeks ago, actual customers aren't thrilled about the Kobo Touch eReader. Reviews on the website gave the eReader an average rating of 2.96 out of 5, and reviews were fairly equally split between four stars and one star. I'm using the past tense because Rakuten took the entire review page off its website. Reviews of the eReader complained about "...crashing setup of kobo desktop application, very limited offer of Japanese books, unresponsive touch screens, poor customer service, etc."

To be fair, the Kobo Touch has only been on sale in Japan for a week, and there are almost always problems at launch. However, the Kobo Touch isn't a new product--it's been shipping for more than a year. Rakuten may have believed that its dominance of the Japanese eCommerce market would allow it to quickly build comparable dominance of the country's eBook market. However, if they don't fix the problems with the Japanese-language Kobo Touch quickly, what's more likely is that they'll either kill the domestic eBook market or hand it to Amazon.

Author Sylvia Day is Penguin U.K.'s 'erotic...sensation'

Any sentence that combines "Penguin" and "erotic sensation" is likely to create cognitive dissonance. Nevertheless, The Bookseller reports that Penguin says that Sylvia Day's Bared to You has sold 50,000 paperbacks and another 50,000 eBooks in the U.K. Even though it's an erotic potboiler and the cover art copies Fifty Shades of Grey, Penguin U.K. CEO Tom Weldon said "This is not copycat publishing. In a digital age, this is giving readers what they want straight away."

Are we on the path to bookless libraries?

David Bell writes  in The New Republic that the New York Public Library's plans to put millions of print books into storage and close branch libraries weren't driven by the digitization of books (Bell writes that there are more books available more quickly on an iPhone than at the NYPL,) but that the changes are inevitable given budgetary pressures and the rise of eBooks. Here's a summary:

• The NYPL's Central Library Plan calls for transfer of millions of books from the stacks of the main branch to a facility in New Jersey, from which it will take at least 24 hours for them to be delivered back to NYPL's branches. In addition, some nearby branches will be closed and consolidated with the main library in the updated Schwarzman Building. New library head Anthony Marx claims that the physical consolidation of nearby branches into the main library will save as much as $16 million, or the equivalent of adding 50% to the library's endowment. 
• The NYPL's acquisition budget has shrunk 26% over the last four years. 
• Marx is developing a program whereby New York City public school students will be able to order print books from the NYPL system and have them delivered to their schools within 24 hours. 
• In a few years, all cell phones will have Internet access. eReaders and tablets are improving quickly. While there are some good reasons to maintain print collections for research purposes, in the long run, the combination of shrinking financial resources and device improvements will dictate replacement of print with eBooks in libraries. However, this transition will most likely take 20 to 30 years. 
• Digitization efforts by groups such as the Digital Public Library of America (DPLA) will supersede the sloppy and often inaccurate job done by Google--for example, 325 books in Google's collection that mention Woody Allen have their publication dates listed as being prior to Allen's birth. 
• The functions of libraries are still necessary, even in a world of eBooks: Providing research assistance, developing access portals for online content, organizing special programs and exhibitions, building both general and specialized collections, and screening out inaccurate and inappropriate content. 
• It's inevitable that most, if not all, of these functions will eventually be available over the Internet, but there are many things that public libraries are uniquely suited to offer, as Bell writes: "Now, even as books and periodicals are increasingly available elsewhere, there is more and more public demand for other forms of interaction: lectures and seminars, tied to online courses and readings; authors’ appearances; book groups; exhibitions of art works and films; study centers hosting fellows who contribute to public discussions." 
• These changes could lead some to conflate libraries with Internet cafés, but Bell writes that cafés were places of serious public discussion in 17th- and 18th-century London, Paris and Amsterdam.

Germany's PaperC raises money to fund development of HTML5 eReader

GigaOm reports that PaperC, a German eBook retailer, is trying to raise from €50,000 to €100,000 through a crowdfunding site in order to transition to a HTML5-based platform. PaperC allows users to purchase eBooks by the page, chapter or entire title, and plans to offer a monthly subscription program giving members unlimited access to the company's entire collection. The company currently has 120,000 registered users and distributes titles from more than 100 publishers.

PaperC is working with German crowdfunding site Innovestment to raise funds to launch PaperC.com, a new platform that is based on HTML5, instead of the current PDF-based platform. They've developing their own HTML5 eReader and PDF-to-ePub converter.

Book Fairs are still a big part of Scholastic's marketing efforts

The Wall Street Journal reports that Scholastic's book fairs are still working for them. The fairs have been critical for launching several popular series, including "Goosebumps," "The Baby-sitter's Club" and "Captain Underpants." Book fair revenue increased 3% to $288.1 million for the first nine months of the current fiscal year, and rose 10% from 2007 to 2011. Al Greco (not to be confused with El Greco,) a professor at Fordham University, said that even though Scholastic has had great success with series such as "The Hunger Games" and "Twilight," the company's book fair business faces challenges from eBooks and brick & mortar booksellers such as Barnes & Noble, along with rising shipping and delivery costs. To that end, Scholastic is heavily promoting its new Storia eReader at book fairs, such as the recent one at the Nest, a K-12 school in Manhattan, whose PTA hosts a Scholastic book fair twice a year.

Business Insider iPad usage survey

Business Insider has done a survey of more than 2,200 iPad users to find out how they use their tablets. Here's a summary of the findings:

• Most respondents (almost 47%) use their iPads two to five hours a day on average. 
• 64% of respondents say that their iPad usage has increased since they first got their tablets. 
• iPads are quickly becoming users' primary computers. In the November 2010 survey, almost 71% of respondents said that a laptop or desktop was their primary computer, vs. 29% who said that their iPad was their primary computer. However, in the new survey, only 53% say that they use a laptop or desktop computer most often, vs. 47% who use their iPads most often. 
• Respondents said that they spend 41% of their personal computing time using an iPad, vs. 25% for a laptop computer and 17% for a desktop. (They also said that they spend 17% of their time using a smartphone.) 
• 71% of respondents say that they read eBooks on their iPads. 
• Apple's iBooks format has become the most popular eBook format for survey respondents, with 51.3% preferring it, vs. 36.5% for Kindle format and 12.2% for other formats. (In the November 2010 survey, the Kindle format was most popular, by 50% to 42.4% for iBooks and 7.6% for other formats.)
• iPad owners have little interest in tablets from competitors; only 10.4% are interested in the Google Nexus 7, and 5.5% are interested in the Kindle Fire. 
• Only 30.2% of current iPad owners have any interest in a smaller iPad. 

Reviews of six eTextbook platforms

On The Textbook Guru blog, Jeff Cohen has reviewed six eTextbook platforms: Chegg, CourseSmart, iBooks, Inkling, Kindle and Kno. Cohen doesn't pick a "winner," but he does a good job of reviewing the pros and cons of each platform as they relate to eTextbooks. Here's a brief summary:

• Chegg: Based on HTML5, has a built-in "Ask a Question" feature for getting more information from experts, and its purchase and usage models are based on how students actually use textbooks. It's biggest downside is that it's online only and requires an Internet connection at all times. 
• CourseSmart: It allows both online and offline access to eTextbooks. Individual pages, along with highlights and notes, can be shared with classmates and instructors. Up to ten pages from any title can be printed. However, CourseSmart only rents eTextbooks, and they're disabled at the end of the rental period. It only has one level of zoom and no multimedia features.
• iBooks: It brings Apple's ease-of-use and user interface design to eBooks. eTextbooks can include 3D models, embedded video and interactive quizzes. There are also virtual study cards that contain chapter-specific glossary terms. iBooks eTextbooks work both online and offline. The biggest downside is the still-limited number of eTextbooks available for the platform. 
• Inkling: Works on the iPad and in some HTML5-compatible browsers. Allows students to purchase eTextbooks by the chapter or by the entire book. Supports online and offline reading. Video, audio, interactive and 3D content can be incorporated into the eTextbooks. Notes can be shared with other students. The biggest drawback is a strict returns policy. 
• Kindle: Has the most flexible rental and returns policy--eTextbooks can be rented for 30 days and extended as needed, or returned within the first seven days for a full refund. The "X-Ray" feature gives the definitions of important words, phrases and names, and visual diagrams of where they're used in the text. The biggest drawback is that most eTextbooks don't use Kindle Format 8, so they're black & white only, with no 3D, animations or video, and very limited audio support. 
• Kno: Supports iPads and HTML5 browsers, but not all titles work in both eReaders.  eTextbooks can be returned within 15 days, so long as the user hasn't gone past the first 20% of the book. Notes, bookmarks and annotations can't be transferred between platforms--for example, notes made in the HTML5 version can't be accessed when the eTextbook is opened in the iPad eReader. Cohen found that Kno's beta "Quiz Me" feature, which turns sections of the eTextbook into fill-in-the-blanks quizzes, didn't work properly. Some images were left out due to copyright restrictions. 

U.S. book sales estimates from the 2011 BookStats report

Publishers Lunch reports that the AAP and BISG have released "headline" figures from their 2011 BookStats statistical survey of U.S. book sales, ahead of the release of the complete report next week. Here's a summary:

• The total US book publishing business accounted for $27.2 billion in sales in 2011, down 2.6% from $27.94 billion in 2010, although unit sales increased by 3.4%. 
• Trade sales of $12.52 billion for 2011 were down from $12.59 billion in 2010. (Publishers Lunch subtracts religious sales from trade to make the numbers consistent with the AAP's reporting practice.) 
• eBooks became the largest-selling format for adult fiction, comprising 31% of dollar sales and increasing from $585 million in 2010 to $1.27 billion in 2011. Trade eBook sales increased from $838 million in 2010 to $1.97 billion in 2011. eBooks accounted for almost 16% of all trade sales in dollars, and eBook unit sales increased 210% to 377 million units in 2011. 
• Children's and Young Adult books were the "fastest-growing category" in 2011, with sales of $2.78 billion, up 12% from $2.48 billion in 2010. 
• Brick & mortar sales declined 12.6%, due in part to Borders' bankruptcy and closure. Publishers' direct sales to bookstores (not through distributors) were $8.59 billion. Direct sales to online retainers grew 35% to $5.04 billion. Direct publisher sales to consumers were up 58% to $1.11 billion. 
• All numbers in the report are estimates, since actual source data accounts for only 61.4% of the total. Publishers Deluxe's Michael Cader details his concerns about the accuracy of both the BookStats figures, which are estimates, and the AAP's new StatShots reports, which are based on actual numbers from 1,149 publishers and distributors--but not Ingram, National Book Network, and others. 

New Blurb plug-in for InDesign creates eBooks

Blurb, which specializes in self-published photo books, has updated its plug-in for Adobe InDesign to support creating fixed-format eBooks for the iPad. The plug-in creates layout templates for any of Blurb's supported print sizes, as well as the iPad. However, eBooks created by the Blurb plug-in are sold through Blurb, not Apple's iBookstore, which means that they don't use Apple's iBooks format (EPUB 2.X with proprietary extensions.)

Getting more out of interactive whiteboards in classrooms

Edsurge has a post by Ben Stern that gives five ways to get more value out of interactive whiteboards in K-12 classrooms. Several of the recommendations have direct or indirect bearing on eBooks:

1. Go beyond the board's accompanying software: Instead of limiting themselves to the software that came with the whiteboard or that's sold by the whiteboard's vendors, teachers should think of their whiteboard as a big touch-sensitive PC that they and their students can play with during class. (eBooks work very well with interactive whiteboards, at a fraction of the cost of most dedicated whiteboard software.) 
2. Bring the outside in: Anything on the Internet can be brought into the classroom through an interactive whiteboard. Stern suggests using the U.S. Debt Clock for economics discussions, 3D Toad for walking students through a dissection, Google Earth for taking a virtual walk around the Colosseum, and Google Art Project for viewing great works of art. 
3. Combine the interactive whiteboard with web apps: Let students collaborate with the teacher and classmates via the web. Stern suggests Chatzy for private backchannel conversations, and Socrative as a free alternative to the SMART Response clickers for getting student responses. 
4. Don't use it all the time: Use the interactive whiteboard when it makes sense for the students, not just to demonstrate that you're using it. 
5. Let the kids use it: Even though students have powerful computers in their pockets in the form of smartphones, they love to use interactive whiteboards. Let them use them, along with the same tools that teachers have for making presentations and getting questions from their peers. 

Scholastic to release 50th Anniversary "Clifford the Big Red Dog" titles as eBooks and apps

In time for the 50th anniversary of the "Clifford the Big Red Dog" series, Scholastic will publish Normal Bridwell's Clifford Collection this September, a set of six Clifford titles published between 1963 and 1977. In Spring 2013, the company will publish Clifford's Birthday Party and a new book, Clifford's Bedtime Story. Both the Clifford Collection and Clifford's Birthday Party will be published simultaneously in print, eBook and Spanish versions. In addition, more than 20 Clifford books will be made available as eBooks for Scholastic's Storia eReader.

Scholastic will also publish Clifford's Big Birthday App for iOS and Android in September. Both versions of the app will be priced at $0.99.

Are eBook sales taxes the next target for cash-strapped states?

Now that more states are getting Amazon to agree to collect sales tax, SmartMoney reports that their next target may be digital media, including eBooks. Deloitte forecasts that U.S. eBook sales will reach $3.19 billion by 2015, an amount that's very enticing to state and local governments. Nearly half of all states already collect sales tax on some digital content, but the rules vary by state. For example, Idaho, Kentucky, Vermont, Washington and Wisconsin collect sales tax on eBooks, digital music and movies. Texas, Arizona and Maine also do so by defining digital goods as "tangible personal property" subject to sales tax. Florida exempts eBooks from sales tax, but not digital movies or television shows. New Jersey collects sales tax on digital content, but not apps.