Wednesday, December 28, 2011

Trends in the E-book Business

The following guest commentary was provided by Lori James at

We have participated in their site for several years and find them to be an excellent sales site. They also were the first site to set a standard royalty at 70-% of list price. Of particular interest is what they had to say about lack of sales for Digital Rights Management or DRM files.

TRENDS, by Lori James

At the end of every year, ARe completes a trend analysis based on our prior year’s sales experience. 2011 was a very successful year for eBooks in general and for,, and specifically. Although all websites realized an increase in traffic (we’re now receiving 5.8 million hits/month), we’re proud to announce that our flagship store, All Romance, has an Alexa rank in the U.S. of 6,330. On December 20, 2012, our 6,330 score outranked many of our competitors including (197,457), (39,397), (12,329), (27,973), (408,620), (15,032), (44,830), (24,415), and (15,964).

Some general highlights

# Total publishers in 2010 = Approx 4700

# Total publishers in 2011 = Approx 7600

# Romance titles in inventory 2010 = over 52,000

# Romance titles in inventory 2011 = over 65,000

# Total titles in inventory 2010 = over 315,000

# Total titles in inventory 2011 = over 395,000

# of staff in 2010 = 12

# of staff in 2011 = 15

Growth in customer base 2009 to 2010 = 215%

Growth in customer base 2010 to 2011 = 102%

Some buyer highlights

We’re continuing to experience triple digit growth in the U.S. and the bulk of our sales are to U.S. customers. We are currently selling in 202 countries.

Top ten markets: United States, Canada, UK, Australia, Germany, India, New Zealand Philippines, Malaysia, and the Netherlands.

Top ten U.S. markets: California, Texas, New York, Florida, Virginia, Georgia, North Carolina, Illinois, Ohio, and Pennsylvania

Female = 89%

Male = 11%

Some bookish highlights

Heat Rating = over 97% of sales are on books rated 3 or higher, of significance is that the 5 and 4 flame sales have see a combined drop of 4% over last year with most of the difference shifting to the 3 flame rating.

Sales Revenue DRM v Non DRM = 97% was for Non DRM titles for 2011

96% was for Non DRM tittles for Nov & Dec

File formats = PDF and ePub account for 85% of files downloaded. Next is PRC/Mobi at 14%, other file formats combined equal less than 1.

NOTE: We believe PDF, ePub, and PRC/Mobi are the “must have” formats.

NOTE: If you want titles to be readable on the Kindle via our Wireless Transfer program – we recommend you create PRC’s or Mobi’s. PDF’s do not lend themselves to reflow on that device.

NOTE: If you are not already in the ePub market, you NEED to get into it as soon as possible. The ePub has been accepted as the industry standard and we are seeing both publisher and device manufacturers embracing it as the standard. Some to the exclusion of PDF. The market share for PDF, which has long dominated the digital market, is shifting. Now is the time to start creating quality ePub files if you are not already doing so.

We have negotiated a special rate with, a file conversion service, for our publishing partners. You can contact them via their website for details. We receive no benefit, financial or otherwise, from your use of this service.

Romance remains, by far, our biggest seller. Although still popular, the overall market shares for gay fiction, multiple partners, BDSM, and interracial were all down 33 - 67% from 2010. The overall market share for erotica increased another 22% in 2011 and sales increased significantly for all of speculative fiction sub-genres. In rank order we saw growth in sales of Paranormal, Sci-Fi/Fantasy, Vampire/Werewolves/Shapeshifter books. In addition…the Contemporary seems to be making a comeback with a 17% increase following last years 55% decline.

In terms of which romance sub-genres owned the biggest piece of the pie in 2011, the top 10 are = Erotica, Vampires/Werewolves/Shapeshifters, Gay Fiction, Paranormal, Contemporary, Sci-fi/Fantasy, Multiple Partners, Interracial, Historical, Time-travel, Drama, and BDSM.

The most popular non-romance categories include General Fiction, Family and Relationships, Fantasy, Mystery, Sci-Fi & Fantasy, Thriller, Young Adult, Sci-Fi, Historical, and Non-Fiction.

NOTE: We realize that many books cross multiple sub-genres. We base our statistics on the category the reader selected prior to the purchase point. If it’s a M/M, Contemporary, Paranormal and they clicked on Contemporary prior to the purchase, then the sale goes to Contemporary.

A special note about DRM, the impact of agency, and piracy.

While ARe supports both the DRM and non-DRM business models, we advocate that publishers refrain from using DRM and provide open access – it’s what our customers overwhelmingly want. We appreciate and understand the concerns expressed about potential revenue loss due to piracy. We believe the best deterrent is to provide customers with easy access to appropriately priced content.

Tens of thousands of DRM titles were removed by what has commonly been referred to as “Agency” publishers in April of 2010. Data from Q1 of 2010 seemed to indicate DRM might have ended up being approximately 12% or more of sales in 2010, as opposed to the 4% that resulted. Although we certainly realized some lost sales due to the decrease in that inventory, data supports the fact that many readers simply found alternate content to interest them and accordingly shifted those purchasing dollars to non-Agency publishers.

The market share of DRM titles decreased further in 2011 to 3%. We attribute this to two factors: the decrease in overall market share of DRM inventory due to the loss of Agency publishers, AND buyer preferences shifting to Non-DRM publishers and Indie Publishers.

Agency Publishers returned to the site in early November. The DRM/Non-DRM market share split did improve during the subsequent two-month period of time (from 3% to 4%). We anticipate a 4-6% share in 2012, a far cry from what we believe we possibly would have seen without Agency interruption.

A special note about the timing of releases on ARe sites.

We know that several publishers purposefully delay releasing titles for distribution in an effort to increase the market share of titles being purchased directly from their own website where profits are higher. Readers who prefer to shop at All Romance find this very frustrating. If they discover a new release, come to All Romance to purchase it, and it’s not here…. What happens?

It’s a question we’ve been asking ourselves, and one included in our recent Romance Reader Survey. We currently have over 5,500 responses and have uncovered some interesting information.

Less than 17% of the respondents report they are purchasing the majority of books from a publisher's website. 83% report they are purchasing from a retailer of some sort (major or indie). If those customers are unable to find a book on retail site “A”, a few report they will check the publishers website, gaining the publisher potentially another 17%.

What happens to the other 83%?

They either ask retailer “A” for the title, which retailer “A” can't get, or they move on to retailer “B”, where they won't find it either, or they purchase something else, or they wait and make a note to check back.

So the question becomes… Is keeping that additional 17% worth losing the other?

If we look at the long-tail sales records for most books, they sell the most in the first 1-3 months when the authors and publisher are most heavily promoting it.

If we use a figure of 1000 books at $5 each - then the potential publisher gain at 100% of the revenue is an additional $850. But the potential loss of 60% of the 83% is $2490.

Do publishers who hold back on distribution come out ahead? We don’t think so. We would like to encourage publishers who have been delaying distribution to test pilot a simultaneous release strategy for Q1 of 2012 on ARe.

A special note about our Affiliate Program.

We have completed Beta Testing on our Affiliate Program, which we’d hoped to roll out right after the first of the year. We’ve identified some opportunities for improvement, particularly in the sign-up process, and therefore will be delaying the implementation. We want to thank everyone who has been participating in the program. As soon as the automated sign-up process changes are in place, tested, and approved, we will be able to offer Affiliate Contracts to any interested reader, publisher, authors…well, anyone. Affiliates will have an opportunity to earn a percentage of the total charge for any purchases made during a browsing session that was initiated using their Affiliate code. There will be a two-tiered payment system, one for General Affiliates and another for Exclusive Affiliates. Exclusive Affiliates are affiliates who have decided to make ARe their exclusive vendor of choice for digital books. Look for further details!

We will soon be presenting more results from the Romance Reader Survey along with some additional data based on sales experience at Digital Book World in New York. The presentation. Ladies First: Lessons from the Romance eBook Model. Hope to see some of you there!

Lori James


All Romance eBooks, LLC

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