What is going on with e-books? The decline in trade e-book sales in the U.S. is certainly one of the big questions hanging over the publishing industry as publishers gather for the 2016 London Book Fair—through November 2015, sales of trade e-books were down almost 13% compared to the first 11 months of 2014, according to the Association of American Publishers’ monthly StatShot statistics. But even though the dip has gotten publishers’ attention, no one seems particularly alarmed.

“I am not concerned,” says Chantal Restivo-Alessi, chief digital officer and executive v-p of international for HarperCollins. “We have to remember there has been a model shift in the market, and the market is still absorbing that. There has also been an adjustment in price points, and an adjustment in consumer demand, as you would expect.”

Evan Schnittman agrees. Long recognized as a leader in digital publishing, the former v-p of sales at Hachette recently joined the Hatch Group, a New York–based venture support and development firm that focuses on helping startups in digital media. He says the dip in e-book sales is the sign of a book business that is starting to find balance. “It’s hard to look at parallels in the history of publishing, because each new format [i.e., trade paperbacks and mass market paperbacks] were self-contained. But e-books are not self-contained—they are about the device and the content. You cannot separate device sales from the sales of e-books. So the question you have to ask is, are we just now finding the natural level of e-book sales? Are we just now finding a more true level? Because we all know what happens when we first get a new device—we go a little crazy and buy lots of books.”

In a sense, 2016 presents something of a new beginning for e-books: court-ordered discounting on e-books stemming from the 2012 antitrust case in the U.S. has ended; publishers now have control over consumer e-book prices; and perhaps most importantly, there are no seismic changes looming on the horizon—no game-changing devices like the iPad, for example. Whereas a range of external factors affected the e-book market over the past five years, in 2016 the book market will be relatively unfettered for the first time since 2012. So what does that mean for the next wave of digital innovation in publishing?

“Originally, it was much more about ‘product,’ but now that is a given,” Restivo-Alessi says. “Today it is more about how many options we can create for consumers, and how many potential revenue streams we can create for our authors.”

The Next Wave

When asked about the state of innovation in publishing, digital entrepreneur and publishing consultant Richard Nash says the book business is approaching a “plateau of convenience.” And one reason e-book sales are in decline, he says, is that e-books simply don’t offer much to consumers beyond convenience. So what lies beyond? How do publishers move off this plateau of convenience? Nash believes the answer will be found in supporting new ways of reading, browsing, and discovery. And browsing, he suggests—the consumer’s playful, meandering, inefficient search through a physical bookshelf—may be the most important element of all.

One innovator who shares that belief is Peter Kay, an entrepreneur and former v-p of digital media at W.W. Norton. In 2015, Kay launched Ncvrs (pronounced EN-cov-ers), an app devoted to browsing and searching for books. Ncvrs has been described as the Tinder of books because, like the popular dating app, it enables users to swipe through a seemingly endless number of book covers, an addictive browsing experience, driven by impulsive, gut-level book love.

The good news for startups like Kay’s is that publishers in 2015 showed they are increasingly willing to try new things in the digital space. Of course, startup culture is volatile, and when it comes to innovation, failure is an option, and new ventures often switch or pivot their business models to address market realities, end up being acquired, or fail outright. And 2015 was no exception.

Probably the most high-profile startup failure of the year was e-book subscription service Oyster, which amplified criticism that the subscription model is not sustainable. However, the largest remaining subscription e-book service, Scribd, remains on track, and with some recent tweaks to its business model, Scribd CEO Trip Adler says the company is “growing according to plan.”

While success with bundling—combining print and digital content in sales—remains elusive, Shelfie, formerly known as BitLit, has also taken a creative step forward. Using the Shelfie app, users can photograph print titles on their bookshelves, upload the photo, and receive a list of discounted e-books editions of the same books, available for purchase.

Wattpad, the online writing and reading community founded in 2006, also continues to grow. Designed for a generation that does most of its reading on a smartphone or tablet, it has become a petri dish for studying the new habits of mobile readers, attracting more than 40 million unique visitors each month. Interestingly, Ashleigh Gardner, head of content for Wattpad, says that even though Wattpad members read stories on their phones, they “don’t see themselves as reading e-books—they’re following social media.”

In retail, Zola Books, an ambitious e-book publishing and recommendation site founded by literary agent Joe Regal in 2011, was forced to pivot away from its original plan to build a better e-book retail operation. The site is now focused on supporting microretail with its technology, an API called the Everywhere Store that enables retailers and others to set up e-book retail outlets on their sites with a few lines of code.

Just last month, the company closed a new round of funding. A similar startup, Hummingbird Digital Media, launched in August by wholesaler American West Books, also enables the sale of e-books and digital audio directly to consumers. And in late 2015, Aer.io—a service that allows publishers, retailers, and authors to sell print and digital books via their websites and social media networks—was acquired by the Ingram Content Group, an early investor, in a deal that also brought in Aer.io CEO Ron Martinez and the company’s staff. The deal will give Aer.io, (originally called Aerbook), access to Ingram’s 250,000-title CoreSource catalogue and give Ingram a new social media–optimized retail and marketing service.

One of the most interesting new players, meanwhile, is Serial Box, a new venture in serial storytelling, which counts former Penguin executive Molly Barton as a cofounder. Serial Box offers serialized fiction (in e-book and audiobook formats) developed and presented like a TV series. “We’re producing original serials, not chopping up content in order to serialize it,” Barton explains. “We see Serial Box as a network, not a platform.”

Behind the Screen

Much of the innovation in publishing, meanwhile, is not consumer facing. Schnittman points out that publishers and startups alike are working hard to up their metadata game, in an effort to get more books in front of readers, wherever they are on the Web.

At the 2015 Frankfurt Book Fair, for example, Neil Balthaser demonstrated his startup, Intellogo, a machine-learning engine that can parse a large body of work for complex themes, an advance that represents the bleeding edge of metadata practices. “Intellogo cracks open books, reads them, and understands them,” Balthaser explained. “It can understand concepts versus key words. We have trained it to understand things like characters, personality, writing styles, geographic locations, time periods.” Thus far, Intellogo can comprehend roughly 100 million different “insights” that can help publishers and retailers better understand their holdings and thus build better marketing and merchandising campaigns.

In a similar vein, Trajectory, a digital content distributor and software developer founded in 2011, recently unveiled what the company calls its Natural Language Processing Engine, a proprietary software platform that analyzes the language structure of a book to produce keywords and book recommendations. Using networked computers, the NLPE scans texts for language patterns and can chart up to 30 attributes of a book, including length, chapter, pace, intensity, mood, word type, and reader age.

An increasing array of powerful authoring and content creation tools are also emerging. A startup called PubCoder, for example, offers new software that enables creators to build powerful, top-level digital products cheaply, and quickly. “PubCoder is a tool that allows you to add animation, interaction, and other elements, everything you would expect to see on a tablet, and then to publish that work in any format, whether as an ePub3, as an iOS or Android app,” explains Enrico Gazzano, PubCoder’s cofounder. Using a simple, intuitive drag-and-drop template, elements that would take days of coding—and thousands of dollars—can be now pulled off in minutes.

What’s Ahead?

By now, you’ve no doubt seen the many headlines in various media outlets declaring that print is roaring back to life. It’s true: print was up in 2015, while e-book sales of the major publishers were down. It’s good news, for sure, that print sales are up. But the danger in media outlets trumpeting the resurgence of print over digital, publishers say, is the temptation to portray print vs. digital as a binary choice. The reality is more nuanced.

“E-books have a hard life,” Schnittman says. “If you look at the numbers, there is a limited range of where e-books really dominate. There might be certain people who will only read digital, or print, but most readers will read a variety of formats for different things.”

As 2016 marches on, publishers hope a rising tide of reading will lift all their boats—print, digital, audio (which also had a strong 2015 in the digital realm), and everything in between.

“You try to anticipate and you try to learn, because if you’re not participating, you’ll never learn and you’ll always be in catch-up mode,” Restivo-Alessi notes. “With every interaction and with every partner you learn something. And that’s good.”

Trade E-book Sales, January–November 2014 vs. 2015

($ in millions)

Segment 2014 2015 Change
Adult $1,191.3 $1,104.7 -7.9%
Children’s/YA $213.8 $102.3 -43.7%
Total $1,405.1 $1,225.0 -12.8%

E-book Sales, As a Percentage of All Trade Sales

2014 2015
23.5% 20.0%

Source: AAP, Statshot