• Print

Yes the iPad is sexy, but global sales are the real ebook growth news

Literally from the first day we started selling downloadable ebooks from oreilly.com (first just as PDF, then later adding other formats like EPUB) the bulk of those digital sales have come from outside the U.S. The breakdown has been remarkably consistent, and we’ve now seen it repeated in new channels like the iPhone App store. While the iPad and other devices garner most of the media attention around ebooks, neither iPad nor Kindle are yet readily available in many of the markets where we see consistent sales of English-language ebooks.

A recent look at the latest numbers underscore the tremendous growth in digital book sales, but they also don’t tell the full story. Early this year I posted how our 2009 ebook sales were up 104% on 2008, which itself was more than 50% up on on 2007:

Now barely a third of the way into 2010, we’ve just about beat 2009 full-year revenue, and at the current run rate we’ll end up about 200% up for 2010:

oreilly_downloadable_ebook_revenue

Here’s the geographic breakdown for all of our iPhone app sales, which have remained consistent at roughly 55% non-US sales:

geo_sales

The first question many within O’Reilly asked about these numbers when I first shared them on an internal mailing list is whether these sales are coming at the expense of print sales. Is there some cannibalization of people buying ebooks instead of print books? I’m sure there is. Then again, to the extent that those customers buy that ebook direct from us (and oreilly.com is by far our biggest downloadable ebook channel), I personally prefer that to a print sale, because it’s a relatively profitable one, even priced less than the printed book (because there are much lower direct costs associated with printing, shipping, and distribution). While it’s still true that the bulk of the cost of producing and selling a book are in the product development and marketing (rather than the individual unit cost of manufacturing), strong digital sales give us that many more units over which to amortize those often substantial fixed costs.

Everything I’ve seen so far says to me that the market for digital books is growing (particularly overseas) and the flexibility we have on pricing for promotions (like our deal of the day) is converting impulse buyers (both foreign and domestic) and rewarding them with immediate and flexible (DRM-free) access.

So what’s driving those strong numbers for English-language books overseas? I have a few theories, including:

  • Something that used to be very expensive (with shipping charges) now seems reasonably priced, and can be had immediately, without waiting days or weeks.
  • English is the default language for business and technology, which means it’s becoming the default “second language” in most business and technical contexts. In the past two years I’ve talked with developers from Scandinavia, China, Russia, Italy, and Brazil, and all of them consume (and want more access to) O’Reilly books in English.
  • Just as the printing press greatly expanded the reach of printed material (at the same time it “de-valued” the manuscript by several orders of magnitude), the mobile web is expanding the reach of digital media into new hands that would not otherwise have access to the information in print or on a PC.

I’ve linked to it a few times before, but I can’t recommend enough Mary Meeker’s deck from last fall’s Web 2.0 Summit for a data-driven look at the global growth of the mobile web, including a look at what it means for media companies.

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  • Michael R. Bernstein

    Andrew, can you subdivide the volume of sales bars by the discount percentage?

  • Andrew Savikas

    I can’t provide that kind of detail publicly, though as I said in the post, oreilly.com is by far our biggest channel for downloadable ebooks, where there is no discount.

  • Storysmith

    Another publisher ‘gets it!’ Baen science fiction has been offering DRM-free ebooks in multiple formats for years (webscriptions). Their authors echo the comments that the field is growing and by taking care of customers (and fans) first, profits will grow significantly each year.

  • AngryCustomer

    While we are on this topic, probably you guys already figured out that international sales aren’t as big as they should be, and the motive is very simple:

    You aren’t accepting people’s money!

    Let me explain. I went to O’Reilly’s store do buy a book, but I didn’t see any information about payment methods. So, I need to fill two forms including my personal information (I typed false information because I am not willing to pass you my real data only to see the payment methods supported), and after a few pages I can confirm my suspect.

    You are only accepting credit cards.

    People living outside the United States also have credit cards, but what they usually don’t have is INTERNATIONAL credit cards, which have a higher yearly fee.

    So, you could be wondering what would be the right payment methods to support. My advice is to follow companies that already have experience collecting payments from people that don’t have credit cards, and these are Gaming companies.

    So just copy what Habbo Hotel and similar successful international games are using. Another good company to copy is Skype.

  • AngryCustomer

    I almost forgot.

    PayPal is not a viable alternative because they also require an international credit card to create an account. Go figure…

    Here where I live, in Brazil, the low entry payment method is called “Boleto Bancario”, which is something with a code bar that you can print at home or in a cybercafe and pay in several places, including the super market.

    There are online payment companies that process this for third parties so you don’t need to worry about the details.

    Other popular methods are _national_ supermarket credit cards.

  • Brian Ahier
  • Michael R. Bernstein

    “I can’t provide that kind of detail publicly, though as I said in the post, oreilly.com is by far our biggest channel for downloadable ebooks, where there is no discount.”

    Actually, you *do* give discounts for downloadable ebooks on oreilly.com, if you know where to look, and pretty steeply too.

  • Jose

    I am a software developer living in Spain and I totally agree with your post: I am buying many more books than before because they are cheaper (as I don’t have to pay for shipping) and I can have them faster (as I don’t have to wait for shipping) and I am buying them at oreilly.com because, even though I could get them cheaper at the kindle store I rather be able todownload the drm-free books in different formats.

  • York

    What does this post have to do with the iPad? Is it added in the title and one sentence just to attract attention? Lame.

  • Jeremie C.

    Dude, if by reading the title you thought the post was about the iPad then you are a waffling idiot.

  • Joris Witteman

    @AngryCustomer:

    Down here in the Netherlands no credit card is required to create a PayPal account. Maybe PayPal (or some other popular payment gateway) just hasn’t matured in your country yet.

    Also, down here in the NL, credit cards definitely work worldwide by default. It’s called MasterCard.

  • Andrew Savikas

    @Michael — yes, we do offer discounts and promotions (like the “deal of the day” I mentioned in my post). I thought you were asking about “discount” as it’s used in the book trade to mean the amount a retailer pays the publisher for a book (typically around 50% of the cover price). While many ebook resellers have mirrored that model, others are adopting what is being referred to as the “agency” model, which is really just the App Store model of the store taking a percentage of the sale price set by the seller.

  • Michael R. Bernstein

    Andrew, I’m not particularly interested in what percentage a retailer takes or the difference between that and the discount they offer to the buyer. I’m just interested in how the discount affects sale volume.

    If nothing else, can you share any data on what effect the discounts have on sales from oreilly.com (instead of across the entire industry)?

  • Andrew Savikas

    @Michael — Our “ebook deal of the day” promotion has been very successful, as was our Earth Day “buy N get N free” offer, but overall most purchases of ebooks (or other products) are not discounted.

  • Norm DeValliere

    Interesting. I can claim credit for part of this, due to your ebook deal of the day. The price point makes it painless to scratch an itch, and I have expanded my interests a bit in the process.

    And in cases of thicker, heavier books – like the Head First series – a physical book has significant drawbacks.

    The multiple formats and lack of DRM are deal makers as well.

  • Joe Walking

    Living in the UK I am in one of those minor markets that has not yet got the iPad this device will change the ebook market for ever. It is to early to know by how much

  • Mattias Winther

    I live in Sweden, but almost all the books I buy are in English. Especially when it comes to computer books, my impression is that relatively few people buy non-english versions of these books because they have to wait for a translation. That might be fine in the case of Harry Potter, but when reading a book about some web technology, chances are the translation is outdated by the time it comes out.

  • Heidi Allen

    it will be interesting to see the effect of ebooks on digital piracy and torrenting sites. These seem to be ever on the increase and so whether we are talking about print or ebooks, selling something which can increasingly be got for free will be a challenge.

  • Stephen

    Heidi,

    I suspect the effect of cheap, drm free ebooks on digital piracy sites will be to reduce them.

    Most people who post to these sites are doing it for the recognition in their peer group. You get more credit for scanning a paper book or cracking DRM than you do for loading a book you can get for free or reasonably priced elsewhere.

    There is some evidence of this. Books that are available as drm free ebooks show up on these sites much less often than drm crippled or paper only books, which require more work to add.

    And it’s not hard to sell stuff that has illegal free versions out there. Most customers don’t want to feel like a criminal, so if you make it easy enough to get a legitimate copy, they will. There’ll always be some who’ll take the free, but you can minimise them.

  • Virgil Fuqua

    I set up my paypal account with a bank account. They confirmed it by depositing a few pennies into the account, and then taking out the same. This confirmed the bank account. I live in the USA.

  • Gel

    What is driving the sales is simple – There is an ENORMOUS untapped market outside the United States.

    I find it incredible that US Publishers believe a market of 200 Million set against a market of 5.2 BILLION will earn them more.

    The fact is that many people now have access to International Credit Cards, Paypal or other payment services.

    In countries outside the United States you simply cannot get a lot of the books that you may want to read.A local distributor will only import from the US the most popular books,or what they believe will sell quickly.

    So with the introduction of eBooks and eReaders book lovers finally had an opportunity to purchase books that they have always wanted to read,but could never find anywhere for sale.

    This is not lost print sales (although I can’t understand why that should even matter), these people would NEVER HAVE BOUGHT the books otherwise, because they simply have no access to them in their own countries. Some people do not want to go through the hassle of ordering and shipping books through Amazon overseas.

    It does, however, feel like a slap in the face (at best) when Non US customers find that many of the latest titles and bestsellers are restricted for sale and download only in the United States.

    There are 228,287 fiction books for US sale, there are only 145,743 fiction books for Latin America/Caribbean sale. This is just one example of the huge disparity.That’s a difference of over 82,000 books, and you can bet it includes bestsellers and the most popular and widely read titles.

    We pay more for books on Kindle, we pay more for the Kindle/Nook/iPhone/Blackberry devices…and yet we are not able to purchase the latest best sellers over the internet on Amazon.com, Ebooks.com, Apple Store etc. To some it reeks of discrimination and prejudice, and all the publishers and eBook sellers get painted with the same brush.

    This has to change. There should be immediate international availability of all eBook titles everywhere in the world. (movies and games too, but that’s another topic).

    When that happens I am sure you will see your sales increase even further and that graph for US Sales will be a very small slice in comparison.

  • Chris

    It would be interesting to see you capture metrics for predominant device used to read eBooks to track platform use. There’s a wealth of information in metrics you’re not currently tracking but probably should.