The mystery behind the renaissance of paper books
When Jeff Bezos launched the Kindle e-book reader in New York 10 years ago, he declared that "books have undergone a high degree of evolution and are very suitable for reading, and they are difficult to replace." The founder of Amazon is right: this spring, it will open a bookstore in Manhattan, even though the Kindle has set off a digital reading storm.
There are signs of book revival everywhere today. Waterstones, a British bookstore chain, returned to profit last year after losing money for six years. Sales of paper books in the United States increased by 3%, while sales of e-books declined. Digital technology has not promoted the kind of revolution in the fields of music, television, and news in the publishing industry. We still like reading.
Books continue to be popular, and stories of traditional values that are generally hailed as warmth trumps cold technology. However, this is not the whole story. It can also be interpreted as a story of Amazon’s growth: if you lower the price, people will buy more, and if you raise the price, they will buy less.
Customers like the feel of paper books: The average American reads 12 books a year, most of which are paper books. But they also favor low prices and dislike the fact that e-books are relatively expensive. Take John Grisham's new bestseller "The Whistler" as an example. Its hardcover on Amazon this week is priced at $14.47, while the Kindle is priced at $14.99. .
This is the new reality: publishers such as Penguin Random House and HarperCollins often sell e-books more than hardcovers and paperbacks. Bezos no longer discounts best-sellers to $9.99 in order to promote the Kindle like 10 years ago, making e-books cheaper than paper books. Now it's the reverse: Amazon favors paper books.
In other words, we are not witnessing the revolution of book lovers to Amazon's digital hegemony, but Bezos changing his tactics. An analyst said that Amazon sold 35 million more paper books in the United States last year than in 2015, taking away more market share from its old rival, Barnes & Noble. The increase in sales of independent bookstores in the US by 2 million is only a minor number.
This confuses those who have witnessed the relentless battle between Amazon and major publishing houses over the past 10 years. Bezos is trying to subvert the publishing industry while publishers are trying to contain him. Bezos even let the U.S. government stand on his side: In 2012, the U.S. government filed an antitrust lawsuit against Apple and large publishers, accusing them of conspiring to manipulate the price of e-books.
But after struggling to fight for the right to the same pricing method for e-books and paper books, Bezos made concessions. Amazon signed a new agreement with publishers two years ago to restrict discounts on e-books, and then prices rose. Hardcover and paperback books are relatively cheap because Amazon has discounted them; e-books are expensive because they have fewer discounts.
This means that the industry has reached a competitive equilibrium after 10 years of disruption, and the main belligerent parties-Amazon on one side and five major publishing houses on the other-have reached a truce. They cannot formally sign an armistice agreement because that will trigger new antitrust actions, but it looks like an armistice, and the revival of paper books is part of their relaxation.
This is very wise for Amazon. The company invested in the launch and development of the Kindle, which now dominates the e-book market: Barnes & Noble has discontinued the Nook e-book reader, and the iPhone is used for other activities instead of reading e-books. As far as the promotion of Kindle with cheap e-books was concerned, there is no such urgency now, and it is rational to reap some profits.
The biggest advantage of e-books is that they have no physical weight and can hold a thousand books when traveling with a Kindle. But the vast majority of readers are not heavy readers. They may only read one or two books a year. For such readers, the advantages of e-books turn out to be disadvantages. Reading an e-book requires at least two steps: 1. You need a hardware device, such as installing an e-book reading software on your mobile phone or tablet, or buying an e-book reader (such as Kindle); 2. Buying an e-book; Reading a paper book requires only one step, and that is: buy a paper book.
Whether digital or paper, books have always been more stable than other types of media. Music has faced waves of disruption: first it was piracy, then people listened to singles instead of records, and finally people switched from buying to subscribing to services from providers such as Spotify. This is not the case with books. Douglas McCabe of Enders Research said: “We read books one book at a time, and each book can keep us looking at it for several days.”
Amazon and other companies have tried to change consumption patterns, such as turning publishing into a Netflix-type service. Nothing changed: Oyster, an e-book subscription service similar to Kindle Unlimited, went out of business in 2015. Most people still buy books one by one locally, and given that it is still the world's largest bookseller, Amazon is not in a hurry to abolish this model.
This equilibrium state also benefits publishers, who profit from e-books because they can easily provide digital versions of books and obtain higher profit margins. Now that Amazon has reduced its discounts on e-books, the pressure has risen: An executive estimated that if American publishers had to pay for more marketing and discounts themselves, they could spend an extra $100 million a year.
They should not relax and enjoy the truce: the share of the top 5 publishing houses in the U.S. e-book market has fallen from 46% in 2012 to 34% in 2015, as independent publishers and self-publishing writers have lowered their prices.
But for now, the revival of books is in the interests of Amazon, publishers, and readers. Mike Shatzkin of the consulting firm Idea Logical said: “It turns out that as long as people don’t suffer financially, they will like paper books.” Today, 10 years after launching the Kindle, Bezos is repaying Paper book.