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Codex Group: Ebooks to Level Off at 30% of Publishing Revenues, With Caveats

The question used to be when — not if — ebook revenues would comprise 50% or more of all book publishing revenues in the U.S. With growth in ebooks slowing to a pedestrian 41% in 2012 to grow to 23% of U.S. publisher revenues, “if” is back in the mix.

“50% just doesn’t seem doable based on usage dynamics and reader statistics,” said Peter Hildick-Smith, founder of The Codex Group, a book-publishing data firm, speaking at the Evangelical Christian Publishers Association Leadership Conference in Nashville.

A respected observer of trends in the publishing industry, especially concerning device ownership, book-buying and reader decision-making, Hildick-Smith believes that ebook revenues will top out and plateau at 30% of all book publishing revenues. It was once thought that ebook revenues would reach 50%, 80% or even 100%.

“It will be 29% in 2014 and 30-to-70 percent will be the persistent level,” he added.

If Hildick-Smith’s prediction proves true, it could be good news for bricks-and-mortar retail booksellers, book printers and packagers and publishers, most of which still derive the vast majority of their revenues and profits in the print-book infrastructure in which they’ve invested heavily.

Physical booksellers have struggled to make money on the ebook revolution. Barnes & Noble has mostly lost money on its Nook Media business and independent booksellers have only recently started to sell devices and ebooks through a new deal with Kobo — to mild results in the early days.

Book printers, packagers and distributors obviously do less business the fewer physical books that are purchased.

And publishers have large staffs devoted to creating, distributing and selling physical books — staffs that support a large base of revenue and profit. Further, while the profit margins are often higher for ebooks, the sheer amount of dollars that a publisher is able to take in as profit from the sale of a single hardcover unit often exceeds the take on the sale of an ebook.

Hildick-Smith’s prediction came with several caveats:

1. Stable physical retail environment: If Barnes & Noble collapses or shelf space continues to decline, the percentage of revenues from ebooks could increase.
2. Book prices don’t collapse: Ebook prices for many of the best-selling books continue to fall. If book “anchor prices” (what consumers generally expect to pay) for ebooks decrease enough, ebooks could grow past 30%.
3. Independent authors don’t experience exponential growth over the next few years: If indie authors take away enough business from retail bookstores and at relatively lower price points, it could accelerate both caveats one and two.

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