Growth and Decline
The post last week considered the life cycle of markets, and how they grow, plateau and decline.
In growth markets, profits per player are high; as the market plateaus, profits decrease. In a decline phase, profits for the remaining players may be high, but usually there are a lot less players. In a declining market, the players will almost always be major international corporates.
However, in a growth market, it is normal to see a lot of start-ups. Drawn by the opportunity of profits and relatively low barriers to entry, smart companies can do well. In a growth market, there is a definite advantage to be small and nimble. Growth markets change rapidly and large corporates, being infrastructure heavy, can find it hard to compete.
Large corporates, being cash rich and highly aggressive, often lurk around the shoals of the growth market, snapping up clever smart start-ups, or creating little subsidiaries and sending them out into the wild west of the growth market, to see how they get on.
And that is exactly what we are seeing in the e-pub industry. Why? Because the e-pub industry is a classic case of a growth market.
The Wild West of Growth
The e-pub industry started quite small in 2004, when a new technology called an e-reader was introduced to the market. These e-readers took written content and digitised it; creating a virtual book. Slowly, readers moved to this new platform. New companies emerged, offering distribution services. Authors began exploring with putting their works on line. Companies developed offering print-to-digital services. And now, ten years on, Smashwords report double digit growth. The amount of books supplied in digital format is increasing at about 35 percent per annum.
And most of these books are from authors, publishing their own work.
If the number of books are increasing so rapidly, does this mean that earnings per author is also increasing, too?
Probably, earnings per author are not keeping up with the volume of product available. Writing is a tournament market, remember? However, I think it is safe to assume there will be a loose correlation between profit and product volume; the reason so many players are entering the market is because there is money to be made.
Large corporates are also entering the e-pub market. Corporates won't enter unless there's a reason; and this reason is always, always profit.
This suggests that profits per player are greater in the e-pub industry.
So in my quest for financial sustainability, shouldn't I just avoid trad. publishers, with their low profit opportunities, and go straight to e-pub? Wouldn't I be best just to publish my own work?
Well, not necessarily. Because in a tournament marketplace there is no such thing as a free meal ticket.
Costs and Risks
There are less controls in a growth market; controls take time to develop, and bureaucrats are slow to respond to change. This means that small players need to be careful; unscrupulous behaviour is highly likely, and fraudulent behaviour is possible. This is particularly evident in a technologically based industry like e-pub, where authors may not be that tech-savvy, and where suppliers can operate from multiple countries. Piracy is not the only behaviour writers need to worry about.
The e-pub market is based on technology and we have already seen that markets dependant on technology go through growth and decline cycles extremely quickly. This means that past behaviours which led to profits may rapidly out-date. Writers need to have wider skill sets now - it certainly helps if you have a grasp of the technology.
There is a high opportunity cost if e-pub. Time spent on organising formatting and distribution is time which a writer can't spend writing, and the writer will have to fund these activities themselves.
Reading is a personal experience, and quality is always important. So even if a writer can get a book out to market easily, in the end it's not quantity that matters; it's still quality and there is always a lead time to produce quality material. Self-publishing authors can't rely on advances or grants to fill this downtime.
In a crowded market, there is greater noise. How do readers find the quality material? For myself, I generally don't read self-pub work. Not because I'm snobby, but because I'm time-poor. If I read something from a trad publisher, I know it's been vetted by a panel of experts, edited professional and formatted correctly. I would rather pay more and read good material.
Which brings me to the next post: the rise of the hybrid author. Personally, I think this will be the way of the future.