At the 2017 Frankfurt Book Fair, Penguin Random House CEO Markus Dohle offered an optimistic state-of-the-publishing-industry address at the fair's opening press conference. Below are Dohle's full remarks as written by Dohle in English, which he shared with PW (Dohle's actual talk in Frankfurt was delivered in German).
DOHLE: Margaret Atwood [who received the Peace Prize of the German Book Trade at the 2017 Frankfurt Book Fair] has said: “You’re never going to kill storytelling. It’s built into the human plan. We come with it.”
I agree with Margaret completely. And, in keeping with this idea, let me posit a thesis about trade publishing. The global book business is doing better now than it has been for the past 50 years, and perhaps even since its inception, and that was some 500 years ago.
I am certain that this idea will take many of my industry peers–and maybe some of you–by surprise. But there are five reasons for my optimism.
First, international book markets and territorial publishing continue to grow in most countries. Growth, though slow, has been in many cases continuous for fifteen years, since the digital transformation of the media industry began. This is true for most established book markets and for all emerging markets, which have exhibited higher, in some cases double-digit growth. We are one of the only physical media categories to experience overall revenue increases during the digital transformation that has occurred over the past decade-plus.
Second, we have relatively stable business models for selling and delivering print and e-books to readers. Amazon’s Kindle will be celebrating its tenth birthday next month. The Kindle launch in November 2007 marked a breakthrough for digital books in the mass market. The business model for e-books was “in flux” for some years, to put it mildly, especially in the large Anglo-American markets. After some disruption and a lengthy lawsuit in the U.S., we have had a widespread business model, in terms of media content, for the past two years. The Kindle launch ten years ago also positively affected the book industry’s ability to respond reasonably and successfully to piracy, particularly in the major book markets.
Third, we have achieved a healthy coexistence between print and digital books. Who would have imagined that, in 2017, we would be observing an 80:20 split among those formats globally? You might say that many so called “experts” predicted the split five years ago. But the split that experts and other observers were predicting was that 80% of all books sold today would be digital. Many were even predicting the death of print books.
Yet today’s reality shows that the relationship is exactly the opposite. Sales of the most popular e-books by traditional publishers have declined in the last three years in the major Anglo-American markets. In many European countries, e-book sales are stagnating; in emerging markets, revenue and sales are growing more slowly in the digital segment than expected. In fact, print books have experienced a veritable renaissance. This is having a massive stabilizing effect on physical retail. And we need to preserve a diverse retail landscape if we want to ultimately sustain the diversity of stories, opinions, and ideas in book form.
Just imagine that we now had a split of, let’s say, 50:50 between print and e-book sales. The book retail landscape would certainly look completely different, and would very likely be significantly smaller. Thus the strength of print books–and their continuous growth in some of our major markets–has been a stabilizing factor for the book business’ diversity and, with that, the entire book ecosystem.
Fourth, and another reason for my optimism, more people and demographic change. The planet’s growing population and the decline in illiteracy are increasing the number of potential readers we can reach worldwide significantly each year. Even today, we as Penguin Random House sell our books in more than 100 countries, particularly in the English language.
Let me give you two examples: India has a young, quickly growing population of 1.3 billion people; 10% of whom speak fluent English. This makes India the world’s second largest English speaking country, after the U.S. In fact, the number of Indian English speakers is approximately twice the population of the U.K., which is a major reason why we have had publishing operations in India for more than 30 years and why we continue to grow our business there.
Brazil and Mexico, two of our most important emerging markets, have a total population of some 300 million, many of them young. Combined, this makes these important, developing economies almost as large as that of Central Europe or the United States. And Brazil and Mexico are growing rapidly.
These examples show that markets, such as India and Latin America, demonstrate a growth potential for our business. At the same time, international e-commerce companies support us in distributing our titles in those markets which have a less efficient and extensive supply of bookshops.
And finally, fifth, books for children and young adults remain the fastest-growing category in most book markets over the last ten years. This is a very good indication that, despite a declining attention span among young people and competition from other media segments and from social media, we will be able to turn the younger generation into lifelong readers of stories in their longer form. Fact is, most of the global mega-bestsellers of the last 20 years have been books for young adults.
This year we will celebrate the 20th anniversary of J.K. Rowling’s Harry Potter. Harry, of course was succeeded by many other global phenomena, including the Twilight Series, Eragon, and the Hunger Games. Just today [October 10, 2017] we are publishing the new young adult novel by John Green Turtles All the Way Down, in the U.S. Green’s last young adult novel and movie tie-in, The Fault in Our Stars, sold almost 10 million copies in the U.S. alone.
Beyond that, brain researchers have discovered that reading in our younger years in long form and especially of print formats—and the resulting involvement in complex plots and characters—develops synapses in the brain that cannot be created by any other use of media or method of absorbing information. Reading stories in book form, and in print, therefore not only trains us to be empathetic, simply put, it also makes us smarter.
That said, and after all my optimism, let me pour a little cold water on the subject. Despite all the opportunities, our business is not without challenges. I have always emphasized that the essence of the industry’s digital transformation is not about format, and that it is best to remain agnostic about reader preferences. E-books are simply a new format, comparable to the introduction of paperbacks by Penguin’s Allen Lane in the 1930s.
The fundamental challenge posed by the digital transformation is the change from a B2B-oriented, publisher to bookstore publishing industry to one that is B2C-oriented (publisher to reader). In an online-dominated world, we publishers must become more reader-centric and we need to establish a direct connection with the reader. Given the way that the e-commerce market for books of all formats is developing and growing, we need a completely new approach to marketing books. We also have to be able to generate demand for our books directly, and at scale.
We have been saying for years that, in today’s digital world, we basically have to reinvent how we advertise and publicize new books. In 2013, here in Frankfurt, I already described this as “cracking the code of discoverability.” What that means is that in the future we must first, generate demand for new books directly with readers, and second, improve the visibility of our books, especially online.
And therein lies the true challenge: discoverability is the essence of the book trade’s digital transformation, not the format mix.
At the same time, opportunities for self-publishing and streaming books are growing. Traditional publishing houses and bookshops are not participating in either phenomenon in a scalable manner.
Today, 50 million book titles–including all formats and used books–are available from Amazon. Yes, you heard correctly: 50 million. We are drowning in titles, and yet all of us are thirsting for the next great story. Nonetheless, this challenge also presents publishers with an opportunity.
We stand for quality, and we perfect each product—both the content and the packaging—before we bring it to market. With that, we give our readers the orientation and promise of quality they need to make their way through this deluge of new, and often self-published titles.
In 2012, Malcolm Gladwell already brilliantly described this opportunity when he said: “In a world of infinite choice, it is the editor who is the king. Don’t give me more, give me less and make it good–and you will be in business forever.”
I am confident that we can engage with and ultimately master the challenges stemming from the digital transformation of the book industry. My optimism is based on the belief that telling and consuming stories will continue to remain important and attractive for coming generations. As Margaret Atwood has said, it is anchored in our DNA.
The audiobook business, which by the way has been posting double-digit growth for many years in numerous countries, essentially harkens back to telling and listening to stories around the campfire. This trend can be found among all demographic groups.
Furthermore, every good film and every good television series is based on a good story, and in most cases, those stories begin with a great book. Hollywood’s thirst for stories, from established studios as well as new players in the business—among them Netflix, Amazon and Apple, Hulu, Facebook and Google—has never been greater than it is today. And each iteration of a story as a film or a TV series increases sales of the original story, namely, in the form of the book.
Let me conclude by saying that our investment in and dissemination of multifaceted and diverse ideas and opinions is more important than ever before, especially today.
Penguin Random House invests $750 million in new stories every year. In the future, we as publishers, and the book industry as a whole, want to and must continue to fulfill our social responsibility. The written word in book form has not lost its importance for our social discourse and for the future of our democratic values and our basic social order.
Words, language and culture are more important than ever before, especially given the political situation around the globe. Margaret Atwood expressed it concisely: “War happens when language fails.” How true.
Ladies and Gentlemen, our mission as publishers remains unchanged. We want to shape the future of the book, and the future of reading for coming generations. If we succeed in this mission, then we, the book industry, will be financially successful, too.