Digital media present intriguing growth opportunities for book publishers, but in some instances digital media may interfere with certain market channels. Developing digital marketing strategies requires a great deal of thought. It is important to resist the temptation of “digital millennialism” and assume that “If it’s digital, it must be good.” If not managed carefully, putting books into digital form may actually erode sales.
Let’s take a look at audiobooks. For the book publishing industry, audiobooks are one of the few areas of genuine growth. Let me qualify my terms. By “book publishing” I mean consumer or trade books in the developed world and the U.S. in particular. By “growth” I mean industry growth, not the success of a particular title or format or even of any individual publisher. The book industry thus defined is mature, but the audiobooks segment is only in its adolescence. Audiobooks are growing because they reach a new market: people who want to read books but can’t because for any of several reasons they cannot use their eyes. Among these reasons: visual impairment; a desire to “read” while driving a car; a desire to “read” while working out in the gym, walking the dog, or jogging–any number of reasons when the eye must give way to the ear.
It is thus unfortunate that digital technology may serve to diminish sales of audiobooks in some channels, though I think that digital audio is likely to help build the market overall (think of audiobooks on wireless phones). In the library sales channel, however, digital audio may cannibalize some sales. This is because the combination of audiobooks on digital compact disks and the iPod will drive up usage of audiobooks in libraries, putting downward pressure on demand for purchases in retail outlets (including online bookstores).
Some background. The audiobook industry developed very differently in the trade and institutional market. Trade sales have largely been of abridged titles published by the very same publishers that publish the corresponding print books; library sales are more likely to be for unabridged titles, and in libraries a new group of publishers, led by Recorded Books, Inc., has sprung up. I would add, though I have no hard evidence of this, that trade sales seem slightly tilted toward younger (though not youthful) listeners, and those listeners include a higher proportion of men than institutional listeners (more likely older and female). All this is changing now, however, as the characteristics of the two channels are converging. The convergence is significant in that the two channels, which were formerly complementary, are increasingly rivalrous.
A peculiarity of audiobooks is that the analogue format (books on tape) is still very strong, though analogue media has virtually disappeared for music (partly offset by resurgent sales of LPs among passionate music buffs). Tape works well for audiobooks because tape creates a good bookmark. Try it and you will see. I listen to audiobooks on tape, on CD, and on an iPod and have found that tape is still the most convenient (CDs are at the bottom).
So step into your time machine and enter a public library 4-5 years ago, where you seek the audiobook section. There you have a selection of unabridged books on tape, with a trifling number of CDs. You decide to check out a title, take it home, and begin to listen. If you listen an hour or two everyday, you might finish a book in two weeks. I suspect most listeners take longer. When they are done, they return the tape to the library, check out another, and repeat the process.
Of course, the library may not have a desired tape on the shelf. With every instance of circulation taking two weeks or more, from time to time the patron cannot find what he or she wants and turns instead to a local bookstore or perhaps to Amazon. More recently some patrons turned to Audible for downloads. The library, in other words, is not a comprehensive source of supply in part because the time it takes to listen to an audiobook restricts the utility for other patrons of the library’s inventory.
With digital CDs, abetted by an iPod, the library’s inventory is likely to experience higher utilization. Consider this example. A patron goes to the library and checks out one, two, or more audiobooks on CD. Arriving home, the patron rips the CDs to a computer and synchs with an iPod. The next day the CDs are returned to the library, where other patrons in due course check them out–and the cycle repeats. The inventory utilization drops from two weeks or more to as little as less than one day. The need to shop at the local bookstore or online has been diminished a bit. Thus libraries carrying digital media potentially compete with other sales channels and cannibalize some sales.
If this became widespread, it could not stand. In time publishers’ compensation for audiobooks in libraries will likely parallel that for videos at Blockbuster and Netflix, with payment to publishers being linked to the frequency of rentals. (Seth Gershel made this point to me concerning audiobooks several years ago.) Or other marketing schemes can be concocted, probably including switching the firm sale of a tape or CD to a library to a subscription-based model–anything, that is, that restrains sales cannibalization.
Another implication of the change to digital CDs in libraries is that more trade publishers will want to control library sales directly, the better to manage the cannibalization issue. There are signs that this is already happening. Trade publishers will also be more aggressive about acquiring the rights to unabridged audio, rights that at this time are sometimes retained by literary agents, who then forge a license directly with a library audio publisher. The growing competition between trade and library sales for audiobooks will thus spawn a consolidation of rights ownership under a single brand manager–that is, the originating publisher of the book.
This is not to say that publishers should not publish audiobooks; it is not to say that audio should not be in digital form; and it certainly does not mean that publishers should forsake libraries. What it does mean is that the digital edge cuts both ways, and that publishers have to think strategically, with an eye toward the longer-term implications of new tactics. The time to introduce Blockbuster-like pricing is not after the horse has been stolen from the barn but before the barn gets built.
The moral of this tale is that profitable strategy is neither digital nor analogue; it is not about whether information should be free or paid; it is not about what is cool; and in its winning form by definition it cannot be what everyone else is doing. Profitable strategy is about identifying new markets and creating new value. Digital audiobooks can lead to a winning strategy, but without a thoughtful strategy, digital media giveth and digital media taketh away.