My year-end waste of time: Predictions for 2012

I've decided to participate in one of the most potentially embarrassing annual blogging rituals: Predictions for the coming year. So, for what it's worth, here are my predictions for 2012, in no particular order:

eBooks and Publishing

• Both the European Commission's Directorate for Competition Law and the U.S. Justice Department will file suit against Apple and five of the "Big 6" trade publishers (Lagadere's Hachette publishing group, News Corporation's Harper Collins, Holtzbrinck's Macmillan, Pearson's Penguin Group and CBS' Simon & Schuster) for eBook price-fixing under the agency pricing model. Bertelsmann's Random House most likely won't be charged, because it joined in agency pricing long after the other five publishers. All the companies charged will strongly deny any conspiracy to fix prices, but they'll all eventually agree to a consent decree (and the European equivalent) before the cases go to court. The settlement will require Apple and the publishers to make cash payments for consumer damages, and the agency model will be discarded. eBook distribution will go back to the wholesale model.
• There's also a possibility that the U.S. government and European Union will use the antitrust litigation as a lever to force the Big 6 to make their eBooks available to libraries on commercially reasonable terms. Currently, only Harper Collins and Penguin make their titles available for library lending, and both companies impose significant restrictions.
• eBook sales in early 2012 will follow the same pattern as the last few years--there will be a huge burst of sales in January and February as millions of consumers who received eReaders and tablets as holiday gifts stock up on titles. However, the year-to-year growth rate in eBook sales will drop, due both to the increased share of eBooks as a percentage of all book sales and higher prices from the Big 6 publishers.
• Even though the growth of eBook sales will slow, print sales will continue to decline. Independent booksellers in the U.S. won't pick up the slack from the closure of Borders, nor will they make big strides in increasing their overall share of U.S. book sales.
• The Big 6 publishers' pricing policies will continue to encourage sales growth for smaller publishers and self-publishing authors, as consumers experiment with less-expensive titles and find that many of them are just as good as titles from the top publishers.
• While the number of titles from medium, small and self-publishers continues to grow, the Big 6 will continue to cut back on the number of titles that they release, focusing even more on pre-sold authors and titles, series and backlist titles that are reissued with a variety of value-adds.
• The "eSingle revolution" (short eBooks, no more than 50,000 words and typically 30,000 words or less) will grow, with more conventional book publishers offering titles. In addition, more media companies from other fields (magazines, broadcasting, cable and the web) will enter the eBook market with eSingles, either by themselves or in partnership with established book publishers.
• $99 will become the top-end price for dedicated eReaders sold in the U.S.; someone (probably Amazon) will go to $49-$59 for an entry-level model. The ad-supported/no-ads issue will become moot, as consumers show that they're perfectly happy with a cheaper, ad-supported eReader.
• The tablet market in 2012 will look very much the same as the market at the end of 2011: Apple will continue to dominate the high end of the market, with two lines of tablets: A new "iPad 3" (although I'm not sure that'll be its name) at the current iPad 2 prices, and the existing iPad 2, possibly with fewer storage and broadband options, at $100 or so below its current prices (for example, $399 for a 16GB model). At the low-end, a variety of tablets will compete in the $149 to $249 range, led (at least for the first few months) by Amazon. I wouldn't at all be surprised to see Barnes & Noble drop prices of both the Nook Color and Tablet by $50, to $149 and $199 respectively.

Cameras & Camcorders

• We're almost certain to see new cinema camera models from Canon in 2012. The prototype cinema camera based on the EOS body will be launched, as well as at least one new model in the C3XX range, with improved electronics including auto-focus, auto-aperture and auto white balance and 10-bit log output. The new EOS model could be announced as early as NAB in April, and the new C3XX model is likely to be shown at IBC in September.
• Panasonic's AG-AF100/101 is getting a little "long in the tooth", so I expect a refresh of the model in time for NAB in April. I also expect the GH3 to be announced in the first half of the year.
• Given all of Sony's 2011 EVIL, DSLR and camcorder announcements, I don't expect any big announcements from Sony in 2012.
• AVCHD 2.0 (also called AVC Progressive) will become ubiquitous on all new cameras and camcorders supporting AVCHD.

Motion Pictures

• We'll see major consolidation at the U.S. movie studios, like what we've already seen at Paramount, with even deeper cuts. Studios will become even more conservative about which titles they greenlight for production, continuing to focus on remakes, series and pre-sold titles (very much like the big publishers). This risk minimization strategy will lead to even more boxoffice and home video revenue declines.
• Online movie rental services such as Netflix and Amazon will continue to increase their share of home video revenues, but what could have been a huge win for Netflix will be a much more competitive market, due to Netflix's self-inflicted wounds from 2011.
• Studios will rethink the value of 3D given audiences' rejection of the format, and will put more effort into using 3D well on a smaller number of "event" titles. That means that 2D-to-3D conversion, which has never worked well, will go away. Studios will have to come to grips with the fact that 3D, like Blu-Ray before it, will not be their financial savior. Even well-done 3D won't save movies that audiences don't want to see.
• UltraViolet, the "online digital locker" system supported by most of the major studios, will fail to get significant market share, although the studios won't give up on it in 2012. Consumers will find it too hard to use, not worth the effort and not a compelling reason to go back to buying DVDs and Blu-Ray discs.
• With an handful of exceptions, independent films will reach audiences through VOD and online streaming services, not through theatrical exhibition or sales of physical media.

The eSingle revolution

No, I'm not talking about online dating services or individual music tracks. eSingles are short (usually 30,000 words or less) eBooks, most often non-fiction. Amazon calls them Kindle Singles (hence the eSingles name); Apple calls them Quick Reads. There have been printed short stories and novellas almost since the birth of Gutenberg's printing press, but short non-fiction books haven't fared as well, especially in retail bookstores. There's an implicit connection in consumers' minds between the length of a book and its value: A thin book is simply worth less money than a thick one.

The manufacturing costs of books--printing and binding--are affected much less by the number of pages in a book with a given page size than they are by how many copies are printed and bound at a time. A 300-page book costs more than a 100-page book, but nowhere near three times as much. If consumers are predisposed to pay more for a bigger book, that makes the bigger book more profitable than a smaller one. The result is that publishers set word- and page-count targets for their authors that are intended to create bigger, higher-priced and more profitable books. In turn, the books are often padded out with unnecessary information--case histories, sidebars, interviews, etc., that may be interesting but that don't really contribute to the core value of the book. In other words, filler is added to increase the page count.

eBooks have changed how consumers perceive books, in that they no longer judge books by their cover (or, in this case, their size), and instead pay more attention to other factors: The author, subject and reviews. This has enabled eSingles to become viable. Seth Godin's The Domino Project, for example, publishes short non-fiction eBooks that are either primarily motivational or that focus on a single topic. Italy's 40Kbooks is bringing the same approach to fiction. Magazines and newspapers are publishing eSingles that either feature compilations of previously-published articles or new works; The U.K.'s The Guardian newspaper, for example, recently published an eSingle explaining how it broke the News International phone hacking story.

eSingles are generally less expensive than full-length eBooks--for example, they're typically priced between $1.99 and $7.99 at Amazon. Their short length means that they can be written, edited, designed and released much more quickly than full-length titles. That means that they can be more current than full-length titles from the "Big 6" trade publishers, which often take a year or more to get from submission of the manuscript into the hands of consumers as a printed book. Also, both writers and publishers can spread their risks across far more titles; a writer could potentially write and publish as many as four eSingles a year, vs. one full-length title.

Another factor in favor of eSingles, especially for self-publishing authors, is the aggressive royalty that they can get. Amazon, for example, will pay as much as a 70% royalty on each eBook sold, depending on the price and whether or not it gets exclusivity. Given that the Big 6 typically pay only 12% to 15% of the wholesale price to authors, self-publishing authors can make significantly more per copy, even at a much lower sales price.

Here's an example:

$19.99 eBook sold on agency terms (30% to reseller) = $13.99 wholesale price
15% author's royalty (before exclusions and deductions) = $2.10 per copy

$6.99 eSingle sold exclusively through Amazon with 70% royalty = $4.89 per copy

In this example, the author/self-publisher will have to pay all the costs of copyediting and design, but will still end up making substantially more money. That's why I believe that authors will gravitate to eSingles, non-conventional book publishers will embrace them, and "old line" publishers will be forced to respond.