Digital Sales Are No. 1

Some of the largest education publishers say that most of their sales and revenues are from digital products. Both McGraw-Hill Education and Cengage Learning are releasing financial information for 2015 that backs up that claim.

This shift to digital would represent a major milestone for the industry, but there are questions about how publishers define “digital sales.”

According to Carl Straumsheim of Inside HigherEducation, digital sales at Cengage can mean selling access to a digital product, but also selling an e-book, a textbook bundled with online components, or digital supplementary material. McGraw-Hill also counts bundles, but only reports the portion of the sales value of the digital component. Pearson does not differentiate between digital and print sales.

Publishers have even started promoting themselves as providers of digital course material because it sounds better than saying the firms are still driven by print, according to management consultant Joseph J. Esposito. He added that digital course materials give publishers a way to sell directly to students, lowering their costs and subsequently textbook prices.

“No college publisher likes to talk about this because they don’t want to alienate the retail channel, which they need right now,” Esposito wrote in an email to Straumsheim.

Digital Textbooks Growing, But Slowly

Does the future of higher education textbooks lie in digital? If so, then that future’s still a ways off, according to data gathered by Verba, which developed software allowing campus stores to let their customers view competitors’ prices on course materials.

Jared Pearlman, co-founder of Verba, shared the findings of his company’s data-gathering in the session Data-Driven Strategies for Course Materials at CAMEX 2015 in Atlanta, GA. Verba tracked actual textbook purchases made by students through the Compare software and found that sales of e-books doubled in the past year, but still only accounted for 2.42% of total textbook sales.

“Digital is still too expensive but, overall, we’re seeing some changes in the marketplace,” Pearlman said. Those changes may bring prices down.

In cases where students have a choice between a used print book or an e-book, about half the time the used book is cheaper than the digital, he noted.

Most academic e-books are available only as rentals. On average, a digital rental is five times more likely to cost more than a print rental, Pearlman said. As a result, print rental “outperforms digital by seven-and-a-half times,” he said.

But there’s a potential game-changer in the works, according to Pearlman: inclusive access pricing, also known as academic content licensing, subscription model, text with tuition, course-fee model, and 100% sell-through model. This involves providing each student with digital access to the required textbook for a fee, which may be folded into tuition, that’s discounted from the usual retail price because the publisher and store are guaranteed sales for the entire class.

Apple Not Worried about iPad Sales

The iPhone 6 produced record sales for Apple during the fiscal quarter that ended Dec. 27. The iPad failed to impress, however, with unit shipments falling by around 4.5 million in 2014 over the total shipped in 2013.

At the same time, Apple still sold more than 21 million iPads in the quarter and first-time-buyer rates remained strong. Apple CEO Tim Cook reported at a recent press event that about 50% of iPad buyers in the United States, Japan, and the United Kingdom were first-time customers, adding that rate is more than 70% in China.

Cook also noted that user rates are six times higher for iPads than its nearest competitor. He said iPad usage, measured in web browsing, is more than 70%, while 80% of e-commerce on tablets is being done on iPads.

In addition, no other tablet-maker can claim it shipped more tablets than Apple during the holiday season. The company also sold nearly four times more iPads than Mac desktop computers in the most recent quarter, according to a report in InformationWeek.

Apple tops Christmas Tech Gift List

College students told a Chegg survey they wanted electronic devices for Christmas and most said they preferred an Apple product. The mobile analytics firm Flurry found they most likely got what they wished for.

Flurry looked at activation statistics from Dec. 19-25 and found more people fired up an iPhone, iPad, or a new iPod than all other devices combined. Apple accounted for 51% of the new activations, with Samsung coming in a distant second with about 18% during the six-day stretch.

The iPhone 6 and 6 Plus probably helped spur the Apple dominance, according to Flurry, which reported a more than 300% increase in new activations of large-screen smartphones during Christmas week over the same period in 2013. The iPhone 6 topped the list of new devices activated and the iPhone 6 Plus was in the top five.

Flurry also found there were 2.5 times as many apps downloaded on Christmas day than in any December day leading up to the holiday. Apple iTunes and App Stores, along with the Google Play Store, were slow to respond during the Christmas-day rush because of the heavy volume.

“If Christmas is a bellwether for the year ahead, we should expect strong performance from iOS devices and a continued shift to the once-derided phablet form factor,” wrote Jarah Euston, vice president, analytics and marketing, at Flurry. “This was the year that time spent on mobile finally eclipsed TV and the data shows that we are spending this time in more apps than ever.”

E-Book Sales Pattern Hard to Decipher

Sales of e-books may be leveling off as more consumers switch to tablets, which allow users to access a variety of content, not just e-books. Or at least that was the conclusion of Rough Type blogger Nicholas Carr, who has recently been taking some heat for his analysis.

Based on sales figures supplied by the Association of American Publishers, Carr thought he spotted a trend: slowing growth in e-book sales, signifying that e-books are reaching a plateau with the public. The decelerating sales appeared to coincide with the acceleration of tablet sales. Carr speculated tablet users were pulled away from e-books by all the other things they could do with their devices.

David Ulin, in the Los Angeles Times’ Jacket Copy blog, thinks Carr makes some good points about tablets and how people use them. Ulin himself admits to being distracted by other options when he’s reading on a tablet.

But the AAP took issue with Carr’s interpretation of its numbers, pointing out that last year’s e-book sales were inflated by The Hunger Games series. This year there hasn’t been a similar phenomenon in the book world. Minus The Hunger Games, the year-over-year e-book growth is much higher and doesn’t seem to correlate to tablet sales.

Blogger/author Nathan Bransford agrees. “Everyone needs to stop fixating on YOY percentage growth. Even at a steady rate of overall growth, percentage growth inevitably goes down because it’s starting from a bigger base. It’s simple math,” he says, adding that the AAP sales figures don’t count self-published e-books sold directly.

It’s also possible that tablet buyers are still acquiring and reading as many—or even more—e-books as ever, but just not purchasing them outright. AAP tracks only sales, but e-book rentals are on the upswing, too, mostly for digital textbooks. Public and campus libraries are stocking more e-books for borrowing and report rising interest in e-book loans.

And then there are thousands of e-book titles available for free downloading. Some are classics in the public domain; others are distributed by authors, speakers, entrepreneurs, and organizations.

Window Shopping Goes High-Tech

Digital services agency United Future has developed a system that turns a retailer’s storefront into an interactive, touchscreen shopping experience. The company believes the technology will attract more customers, particularly tech-savvy ones such as college students, and increase sales.

The system uses a touch-sensitive film attached to the storefront glass, along with a projector and laptop. The touchscreen display can be customized for each retailer, who can change information displayed on an hourly basis if they choose.

The shopper uses the window touchscreen to drag and drop apparel items onto mannequins sized to fit their personal measurements. Customers can then complete a purchase through QR codes linked to secure store web sites. United Future is trying to enhance the system to enable payments using a smartphone by tapping on the glass.

“Our product extends the shelf by helping educate the consumer and bringing the retail floor to life,” Scott Holmes, president of United Futures, said in an article for a National Retail Federation publication. “That, to me, is the future of where retail is headed: toward more experiential shopping. We must connect across all retail channels to succeed in the future.”

Change is coming to E-Book Market

The Department of Justice recently filed a motion asking that its settlement with Hachette, HarperCollins, and Simon & Schuster in its e-book pricing lawsuit be approved in federal court. No surprise there.

If accepted, sometime around the middle of September, retailers will be able to set their own prices for e-books, at least from the three publishers in the settlement.  The settlement allows the agency-pricing model that came under DOJ scrutiny to remain, but the provisions of the settlement make anything resembling the current agency model highly unlikely.

While the settlement allows retailers to set the sales prices, publishers can prohibit discounts on their books. That provision comes into play when the total sales of a year exceed the margin the retailer has earned, according to an analysis of the agreement in The Shatzkin Files.

However, the article also points out how easily that discount prohibition may be sidestepped. For instance, a retailer such as Amazon may choose to cut e-book prices way below its costs during a specific time frame, such as the upcoming holiday season, figuring to make up the margin over the next nine months. In the meantime, other publishers who may still be clinging to the agency-pricing model may have to lower its prices just to stay competitive.

Which is exactly what many in the bookselling industry feared all along.

Publishers optimistic about year ahead

According to this month's edition of Book Business Magazine publishers expect the online retail channel for books to continue to expand this year for both print and digital. Brick-and-morter booksellers are perceived to be at something of a disadvantage as we pass the point where over half of all books are now sold online. At least one of the publishers within the educational space reported that as much as 45-56 percent of their revenue now comes from digital products (including journals and other products beyond textbooks, but even the latter has seen growth). There seems to be a consistent view forward that sales will be increasingly on mobile devices, and that digital content sales will grow rapidly, and will see the introduction of a number of new formats and variations, including more custom possibilities, over the next few years.

See the current issue for a range of other interesting stories.