Media Trend Outlook E-Books on the Rise
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Media Trend Outlook
E-Books on the Rise
The white paper “E-Books
on the Rise” provides
an overview of current
developments and future
prospects of the e-book
market in Germany,
Belgium and the
Netherlands.Media Trend Outlook Published by PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft (PwC) By Werner Ballhaus, Kristin Lulei, Dr. Anastasia Hermann, Jheroen Muste, Rajendra Sitompoel, Eddy Dams and Sophie Claessens May 2014, 20 pages, 5 figures, softcover This material may not be reproduced in any form, copied onto microfilm or saved and edited in any digital medium without the express permission of the editor. This publication is intended to be a resource for our clients, and the information therein was correct to the best of the authors’ knowledge at the time of publication. Before making any decision or taking any action, you should consult the sources or contacts listed here. The opinions reflected are those of the authors. The graphics may contain rounding differences. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. © May 2014 PwC. All rights reserved. In this document, PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
Table of contents
Table of contents
Introduction..............................................................................................................4
E-books: a market overview......................................................................................5
The users’ perspective: consumer survey..................................................................7
The experts’ view....................................................................................................12
The e-book market in five years: a look ahead......................................................... 16
Sources...................................................................................................................19
Contacts..................................................................................................................20
Media Trend Outlook 3Introduction
Introduction
It has taken quite some time, but now E-books are finding increasing accept Special thanks go to Rita Bollig, director
e-readers are rapidly becoming part of ance among European consumers. In the of Bastei Entertainment at Bastei Lübbe,
everyday life in continental Europe. The past year, turnover generated by Geert Decock, e-publishing manager at
share of e-books in the total revenue of electronic fiction books in Germany has Lannoo, and the International
the book market is small, but all signs nearly tripled, fully offsetting losses in Publishers Association (“IPA”) for
point toward growth: publishers, the print segment. While for the presenting their perception of the
especially the bigger ones, now also Netherlands and Belgium turnover market and its prospects in their guest
offer a large part of their new releases increased over 50% and 55% respec pieces.
and backlisted titles in digital form and tively. Examples from the US and UK
are creating an attractive range of show how this market may develop over I wish you an enjoyable and informative
product offerings around digital books. the long-term – in these markets more read.
E-readers now offer good technical than 20% and 15%, respectively, of
quality at consumer-friendly prices and turnover in the book market in 2012 was
as a result of increasing tablet sales, generated through e-book sales. In
more casual readers have access to Germany, as well as in the Netherlands Werner Ballhaus
books in electronic form. Simpler and Belgium, the digital transition in Head of Technology,
purchase and use of e-books also fuel the book market is proceeding at a much Media and Telecommunications
demand. slower pace, with e-book market shares Germany
still below 10%. Nevertheless, we expect
In the course of the consumer survey we that the share of overall turnover
conducted for this study, we discovered generated by e-books in consumer book
that Germans, Belgians and the Dutch segments will consistently rise and by
are now not only well aware of e-books, 2017 will reach around 16% in
but for the most part also receptive to Germany, 15% in the Netherlands and
the new technology. In Germany, more 22% in Belgium.
than half of respondents read e-books
either occasionally or regularly; and In addition to an analysis of the current
53% stated that even though they will market environment, this white paper
continue to read printed books, they will contains the results of our consumer
also give electronic books a try. On the survey and presents our forecasts of how
other hand, less than 33% of the the e-book-market will develop through
Belgians are familiar with digital books. 2017.
Nevertheless, 60% of them would
attempt to read an e-book in the future.
In the Netherlands, about 60% of
consumers have never purchased an
e-book– nearly the same portion of
respondents wants to try digital book
versions.
Media Trend Outlook 4E-books: a market overview
E-books: a market overview
E-readers are becoming better In 2012, the consumer book market During the past two years, e-readers
in Germany posted turnover of have become increasingly differentiated
and cheaper, and the selection €4.8 billion and was thus the fourth- in terms of functionality and price.
of e-books is growing. But is largest market worldwide. The Dutch Whereas prices for e-readers were still
it possible for the market to consumer book market had a volume well in the low to average three-figure
offer even more? of €560 million and consumers in range in 2010, popular models now are
Belgium spent about €220 million on available for as little as €59.
consumer books. However, the share
of total turnover generated by digital The introduction of Apple’s iPad
book sales is still small: in Germany for represented another milestone in
example, a mere 3% of turnover in the the market for digital books. Tablet
fiction segment was generated from computers offer significantly more
e-book sales in 2012. Nevertheless, in functions than e-readers and are thus
all three countries, after an initially a good option for casual readers –
slow start, the e-book market is gaining resulting in a significant expansion in
momentum. the potential audience for e-books in all
three countries.
In Germany the conditions for solid
growth in electronic book sales have Players in the traditional book market
been established over the past several have reacted as well: bookstore chains
years. Offerings of e-books in the are offering e-books on site, online or
German language have multiplied, via app, operate their own distribution
and the selection of reading devices in platforms, and market their own
the German market has expanded on devices; a large share of German
a continuous basis. On the other hand, publishers have likewise made the
the limited offer of e-books in Dutch investments necessary to be able to
and Flemish remains one of the most supply all relevant distribution channels
important market blocking factors in with e-books. Several bookstore
Belgium and the Netherlands. chains joined efforts with Deutsche
Telekom in 2013 and introduced the
There are the large internet retailers Tolino Shine to the market in association
who initially got the ball rolling: with a sales platform by the same name.
Amazon introduced the first e-reader In Belgium, bookstore chains mostly do
to gain great public awareness, the not offer e-books directly through their
Amazon Kindle, in the US in 2007. The own website, but prefer to use third
Kindle also has had a decisive impact on party distributors as Bol.com and
the e-reader in market in Europe. It was Proxisazur.be. An exception is
introduced in the German and French Standaard Boekhandel, who has its
markets in 2011, followed by the Dutch own website. Furthermore, the Flemish
and Belgian markets in 2013. government, in collaboration with Boek.
be and Bibnet, is currently developing
In Belgium, we see an uptake of the sale its own digital platform, which will be
of e-books in 2013 although the market called VEP or Flemish e-book platform.
is not as evolved in comparison to the
UK or US. In comparison to 2012, the
number of people who read e-books in
Flanders doubled in 2013.
Media Trend Outlook 5E-books: a market overview
Most e-books are offered in the open operated by the German Publishers
format EPUB, Apple’s iBook format or and Booksellers Association, has also
Amazon formats MOBI, AZW and Kindle supplemented its product range with
Format 8. PDFs and text formats such its own lending systems. Divibib, a
as DOC, TXT and RTF are of almost no collaboration between German digital
relevance to today’s reading devices. libraries, offers members a virtual
EPUB3 has been placed on hold for borrowing system for e-books via
some time and is now enjoying greater libraries participating in the “Onleihe”
distribution; this format permits the system. In this model, the publishers
realisation of enhanced e-books that receive revenue generated by the
include additional material such as sale of licenses. In February 2014, a
graphics or animation. new service named Readfy started in
Germany offering a free, advertising
The primary sales model for books funded e-book flat rate for 15,000 titles.
continues to be retail sales even in the Although this platform does not yet have
digital environment. Files that have any books from the biggest publishers,
been purchased are downloaded to the surge of consumers on their website
the user’s hard drive or added to the on the launch day far exceeded the
purchaser’s virtual bookshelf, from power of their servers and clearly
where they can be transmitted to a illustrates the interest for such kind
reading device. of services. In Belgium, the currently
being developed VEP will also allow
However, other business models the possibility to lend e-books. In the
based on flat rates or rentals have also Netherlands, Yindo launched their
evolved. Amazon provides its paying library subscription platform in 2011
Prime members a lending library which will soon be followed by the
system. In Germany Skoobe, a platform Dutch publishing group WPG Uitgevers
maintained by publishing houses, offers in partnership with the Flemish
unlimited access to its online e-book publisher Lannoo.
library based on a tiered subscription
rate, which includes various additional
options based on the subscription
plan. Libreka!, the e-book marketplace
Media Trend Outlook 6The users’ perspective: consumer survey
The users’ perspective: consumer survey
Why are more and more Consumers in Germany, Belgium Consumers in Germany are more
and the Netherlands are familiar familiar with e-books than Dutch
readers across Europe with e-books, and many have already and Belgian users
becoming interested in experienced reading from electronic More than 56% of the online users
e-books? What reasons keep devices. In expectation of continued surveyed in Germany have already read
others from reading books on growth in demand, publishers are an e-book; in the Netherlands there are
digitalising their title portfolios 10% less e-book readers (percentage
electronic devices? Will and publishing many new releases wise), but still nearly half of online
e-books replace printed books directly as e-books. But who actually users, who have experienced e-book
for regular readers? And are reads e-books, and how often? From reading. In Belgium, only one third
there any differences between the consumers’ perspective, which of the consumers surveyed indicated
arguments speak in favour of the use they have read an e-book at all. In all
e-book-usage in Germany, of e-books, and which arguments countries we see that younger users are
Belgium and the Netherlands? speak against their use? And are there significantly more familiar with e-books
We have taken up these business models other than retail sales compared to users above the age of 45.
points. of electronic books that resonate with This discrepancy between the countries
consumers? is also backed up by the statement that
52% of consumers in Belgium do not
In order to find answers to these read e-books and do not intend to do so
questions, we surveyed more than in the future – on the other hand only
1,000 online users in Germany, as well 19% of Germans surveyed agree with
as more than 500 online users in both that statement.
the Netherlands and Belgium. The
survey was conducted among users Fiction e-books are bought more
between the ages of 18 and 65 and frequently than professional or
referred to their use of e-books and educational ones
their experiences with e-reading devices Print books continue to be sold in
during the winter of 2013/2014. significantly higher numbers than
their electronic counterparts in all
three countries. In general we see that
German customers are more active book
“I do not read E-Books and do readers and buyers – both for printed
and electronic books. Of the consumers
19.4%
not intend to read them in the
future”: Consumers who agree surveyed, 38% buy five or more printed
in Germany
fiction books per year. Around 14% of
consumers placed five e-books or more
into their virtual shopping carts, and
an additional 19% bought between one
39.9% in the Netherlands
and four e-books in the past 12 months.
In the Netherlands, nearly one in five
consumers have bought fiction e-books
and 15% paid for non-fiction electronic
reading.
51.8% in Belgium
Media Trend Outlook 7The users’ perspective: consumer survey
Most e-book buyers are in the Fig. 1 Number of books bought in last 12 months
18-30-year-old age group: among these
younger consumers in Germany, 30%
Non fictional
purchased at least one fiction e-book 37.1% 19.4% 12.0% 5.0
Germany
in the past 12 months; this percentage
is 22% in the Netherlands and 18% in Non fictional
30.2% 15.6% 10.5% 4.2
Belgium. An interesting tendency can Netherlands
be observed among female consumers Non fictional
30.9% 14.0% 9.1% 4.5
both in Germany and the Netherlands. Belgium
Women seem to follow the new e-book Fictional
37.5% 36.7% 18.7% 13.8%
trend to a lesser degree compared to Germany
male consumers: whereas women are Fictional
more active buyers of fiction printed 27.6% 23.0% 12.4% 6.3
Netherlands
books than men, this is not reflected in
Fictional
the purchase of e-books. 28.5% 24.9% 8.0% 4.5
Belgium
Tablets are used more frequently 1–4 printed 5+ printed 1–4 e-books 5+ e-books
for e-book reading than dedicated
e-readers
Surprisingly at the first glance, we see
the PC as the most frequently used
device for e-book reading – a finding Fig. 2 What devices do you use for e-book reading?
that is particularly true for Belgium,
where more than 36% of consumers
read e-books on their PC. A possible PC GER 15.1% 20.0%
explanation could be that occasional
e-book readers – for example people PC NL 18.6% 11.4%
who read an e-book once or twice a
year for professional or educational PC BEL 25.2% 16.1%
purposes – tend not to buy an extra-
device to that end and just read it Smartphone GER 15.8% 15.5%
on a PC screen. Consumers in the
Netherlands are using their tablets
Smartphone NL 15.4% 7.6%
particularly often as e-reading devices –
one in five consumers uses a tablet at
least once a week for e-book reading. Smartphone BEL 10.5% 7.6%
As opposed to this, avid German e-book
readers prefer to reach for their e-reader E-reader GER 15.9% 12.0%
devices than their tablets.
E-reader NL 11.2% 7.2%
The more e-books are accepted among a
population, the more specialized devices E-reader BEL 6.4% 5.6%
are used to read e-books. We see this
pattern in more active usage of e-readers
Tablet GER 14.9% 14.6%
in Germany (28%) versus Belgium
(12%). We assume that many heavy
readers of e-books switch from other Tablet NL 20.0% 11.6%
devices to an e-reader after a certain
period of time. One quarter of the Tablet BEL 14.0% 11.1%
respondents in Germany, as well as 21%
in Belgium and 15% in the Netherlands, intensive usage occasional usage
plan to purchase an e-reader in the near
future.
Media Trend Outlook 8The users’ perspective: consumer survey
Space-saving is the most important respondents mention this advantage via an e-reader, also speak in favour
argument in favour of e-books – of e-books. In Germany, 50% of of e-books. The latter is particularly
missing the real-book feeling is the consumers praise the light weight of important for Dutch users. The ability to
main reason against it e-books, while in Belgium this factor adjust the display, for example in terms
For many consumers in all three does not seem to be as important as for of font size and additional features,
countries, space-saving is the key example environmental friendliness is highlighted by consumers from
argument in favour of the purchase (an argument in favour of e-books for Germany in particular, as they may have
and use of e-books. Three quarters 48% of Belgian respondents). Ease more experience with e-books and their
of respondents from Germany and and speed of purchase, as well as the functional benefits.
around one-half of Belgian and Dutch ability to access extensive libraries
Fig. 3 In your opinion, which of the following arguments speak in favour of/against the use of e-books?
Advantages Disadvantages
Purchase of an
expensive
system
I want to have a
Save space in
real book in my
the library
hand
Can not be
Digital books are
stored in a
lightweight
library
The purchase is Electrical power
simple and easy supply
The price is The handling is
advantageous too complex
Access a broad The purchase is
digital library complicated
Customise the The offer of
display and e-book titles is
reading too limited
E-reader
Additional
systems can be
features
damaged
I can not lend my
Environmentally e-book nor buy
friendly or sell second
hand books
80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 %
Belgium Netherlands Germany
Media Trend Outlook 9The users’ perspective: consumer survey
The desire to browse through the followed by free download (32%) and Whereas many users surveyed are (still)
pages of a “real” book continues to be an online presence of a traditional unlikely to want to read e-books in the
the strongest argument against the bookselling store (30%). One out of five future, a majority of the respondents
use of e-books. The required purchase e-book buyers from Germany purchase agree with the statement that although
of an expensive reading device and e-books from app stores, compared they will primarily read print books in
the inevitable dependency on battery to 18% of Dutch and 13% of Belgian the future, they want to give e-books
life scare away users as well. One- respondents. a try as well. In the Netherlands,
third of consumers in Belgium (and Germany and Belgium, around 38%,
around a quarter in Germany and the The majority of the consumers say 31% and 23% of consumers respectively,
Netherlands) are bothered by the fact “I am reading a book” and doesn’t expect that they will read more e-books
that e-books cannot be re-sold or passed differentiate whether printed or than print books in the future. Only
along. By contrast, a limited selection electronic a minority agrees with the statement
of titles, cumbersome operation and a Most people who read e-books become that since they bought their e-reader
complicated buying process play only familiar with e-book reading and they they read fewer printed books – but
a secondary role in the perception of do not see it as a special occupation. in Germany half of the respondents
consumers. The majority of them describe e-book stated they read more books in total
reading as “I am reading a book” with since purchasing an e-reading device.
Even though ‘low price’ is a clear percentages of 67%, 62% and 58% in Although a large part of the group that
argument in favour of buying e-books Belgium, the Netherlands and Germany was interviewed seems to be engaged
for only a minority of users (29% in respectively. These figures confirm in e-reading, they also concede that the
Germany, 19% in the Netherlands and that for the largest majority of the complicated and restrictive mechanisms
18% in Belgium), most consumers customers a book, whether printed or of copy protection can deter people from
expect e-books to be offered at prices electronically, remains a book. In other using them.
(considerably) lower than those of the words, the product itself is important
least expensive print edition of the same for the customer and not the type of
book. While German consumers overall distribution. This is especially true for
seem to be most price-sensitive, only young consumers.
20% of them are not willing to pay for
an e-book at all. In Belgium and the
Netherlands the general willingness to
pay is lower, as respondents not wanting
to pay for e-books at all amounts to 35%
and 29% respectively.
One striking finding concerning the of users believe that prices for
source of e-book downloads is that of
those consumers who have actually
bought e-books, 56% of consumers in
the Netherlands and as much as 68% in
45% e-books should be considerably
or very much lower than those
of the print editions
Belgium have downloaded e-books at no
charge. In Germany most respondents
buy their e-books from “a leading
14%
of users believe that an e-book
online dealer” (60% of e-book buyers), should be somewhat less
expensive than the print edition
of users believe that an
9% e-book should be the same
price as the print edition
Media Trend Outlook 10The users’ perspective: consumer survey
Fig. 4 To what extent do the following statements regarding e-books E-book rental as a promising
apply to you? business model
At present, the vast majority of e-books
“agree” and “strongly agree” are bought at (online) retail locations.
However, in the view of consumers –
I read more books
especially those who already have
since I have an 50% experience with e-books – that does not
19% need to remain the case. Around half of
e-reader system/ 14%
tablet. the users surveyed in Germany (27% in
Belgium and 18% in the Netherlands)
would like to rent e-books. A flat-
In the future, I will read 31% rate option for unlimited access to an
more digital books 37% electronic library is of interest to four in
than printed books. 23%
ten consumers as a whole.
I will continue to read With regard to the price consumers
printed versions but 53% evaluate as fair for buying a monthly
58% e-book subscription, the survey shows
would also try digital 60%
versions. divergent results for the three countries.
In Belgium, consumers are not willing
to pay any price higher than €5. Dutch
As I have an e-reader/ 24% consumers believe that a price of less
tablet system, I read 24%
than €5 is cheap but when the price
fewer printed books. 16%
increases to €6–€10 the majority
replied that they are not willing to buy
Complicated and
the subscription anymore. Finally, in
restrictive mechanisms 44% Germany a monthly subscription rate
of copy protection are 36%
39% below €10 would likely be accepted by a
reasons not to use
majority. However, in the price range of
e-books.
€11–€15 there is also a large percentage
Germany Netherlands Belgium that considers the subscription to be
well priced.
31% of consumers would
like to rent e-books
42%
would be interested in a flat-
rate subscription for unlimited
access to an electronic library
Media Trend Outlook 11The experts’ view
The experts’ view
What happens after the By Rita Bollig, A basic prerequisite for this type of
Managing Director at Bastei storytelling is that authors are willing
apocalypse? Or: telling stories Entertainment (Germany) to transfer an extensive rights catalogue
in the digital age1 to the publisher for a reasonable fee
I had my first experience with e-books so that the publisher can avail itself of
in the early 2000s, and to be honest, a broad value chain in an innovative
this experience was everything but and straightforward manner: from
promising. At the time, we licensed the “simple” EPUB to multimedia
several titles for the “Rocket E-Book apps, audio books and “read + listen”
Reader”. However, commercial success versions – a combination of audio
was elusive, and the device disappeared book and text developed in-house – to
from the market. Nevertheless, the seed publishing a print book. This mixed
had been sown, and when in 2010 the calculation enables projects to be
opportunity arose to become involved financed sustainably; in the best case
in this segment again and to assume the product range will be adapted to
a managerial role at a department other media segments as well. The latter
dedicated to e-publishing, I was has for instance been planned for the
immediately full of enthusiasm. project “Coffeeshop”, which is being
adapted for a film or TV series. For this
Digital media offer a wide variety of reason, an additional requirement is for
opportunities to establish direct contact authors to have the ability to envision
with the reader, and it is an essential different means of exploiting their
function of a publishing house to listen content from the very start.
and to discover through listening
which products can give added value Having fun when creating content
to customers who are interested in new and the need for a sustainable revenue
possibilities for reading. model go hand-in-hand. This is the
only way to ensure that additional
A product that is of great importance to investments can be made in a project. In
us is the serial novel, which consists of addition, everything needs to be right
short episodes that are quickly available from a content standpoint; the product
and help consumers to pass the time in has to work flawlessly and intuitively;
an entertaining way. So, the decision to and it has to be free of technical bugs
design new serial novels and series for and needs to be reasonably priced too.
the digital age was logical. Yet, you have to keep in mind that the
decision as to what is a reasonable price
is not made by the publisher; instead
you need to be in tune with the market.
“Digital media offer a wide variety
This means that when making your first
of opportunities to establish direct
calculations you need to ask yourself up
contact with the reader, and it is an
front what the potential customer will
essential function of a publishing
perceive as a reasonable price.
house to listen and to discover through
listening which products can give added
value to customers who are interested
in new possibilities for reading.”
1
he complete article is available for download (in German) at:
T
http://www.luebbe.de/Presse/Specials/Id/1641386/2013_09_03/Ein+Werkstattbericht+aus+der+Abteilung+Bastei+Entertainment#subtab=2
Media Trend Outlook 12The experts’ view
This results in different prices for with different means of exploitation in
different product segments. Our prices mind, we needed to learn that for our
for e-books are around 20% below the new product – the app – telling a story
price of the reference product (book); was not even critical.
episodes of our series may be purchased
starting at €0.99. The app segment is As a publisher whose very core revolves
very price-sensitive, and you can hardly around “storytelling”, we should be able
place a product priced higher than to take a step back when looking at new
€2.69 – unless you also offer in-app media forms and ask ourselves: what
purchases. Yet, investments needed for actually makes a product successful in
developing apps are still high, so finding this segment? One quickly realises that
a topic that enables high unit sales is the real competitors are not necessarily
critical. For example, in the “books” other publishers but can be found in
category, children’s apps are especially the gaming and animation segments,
successful. to name just two examples. This also
means that one needs to grapple with
Although Bastei Entertainment has the relevant technologies, because
tried many new approaches when good programming work is the basis for
designing digital products, we have successful apps. This means that authors
for the most part still remained true not only come into contact with the staff
to the traditional, linear method of of a publishing house, but also with
storytelling. However, when you, as a designers, developers and people who
publisher, concern yourself with new take care of digital product marketing;
aspects of storytelling (trans- and cross- colleagues from other segments
medial or interactive), you are entering (film and game) also participate in
unknown territory. For example, in the workshops. All this ensures high levels
case of the “Das Supertalentier” project of creativity that in turn need to be
which we initiated with our colleagues harnessed and represent a challenge
at Boje-Verlag and which was designed from a product management standpoint.
Nevertheless, even if telling a story is
no longer the focus of some segments,
providing entertainment still remains
the main goal and fiction publishing
houses have always been good at
that. Entertainment is and remains
important – or as our publisher says:
“We want to entertain!”
“Investments needed for developing
apps are still high, so finding a topic
that enables high unit sales is critical.
For example, in the ‘books’ category,
children’s apps are especially successful.”
Media Trend Outlook 13The experts’ view
Why there should be an equal domain: a reduced VAT rate is levied on The second given is that the applicable
braille books and the standard VAT rate VAT is determined by the country
VAT treatment between paper is applied to audio books (in Belgium), of the buyer. This is more or less the
and e-books whilst the content is the same. current starting point with the new
VAT B2C place of supply rules as of
By Geert Decock, e-publishing
We also see that inequality in other the 1st of January 2015. However,
manager at Lannoo (Belgium)
formats: for instance books that come that treatment puts the digital formats
with a CD (which contains a digital at a disadvantage, as it is far from
Apart from the fiscal definition, there
copy of the book), in principle need to obvious what the country of the buyer
is currently no real, correct definition
be split-up for VAT purposes, whereby a is in a digital world! Such an approach
of the word “book”: “A book is a printed
reduced VAT rate is levied on the book opens the door to a new kind of trade:
item, sometimes illustrated, bearing a
and the standard VAT rate is applied electronic post-boxes. This can hardly
title and intended to reproduce the work
to the CD. The CD has partly the same be said to be a solution – neither for
of the mind of one or more authors...”,
content as the book, however the layout companies nor customers: Companies
or, in short: a book is a work (content)
is different, which is necessary for the will experience a higher cost of
but then fiscally always taking the
reader’s convenience. compliance as they need to determine
form of printed matter. That was the
where their customer is established
definition of what a book is in France on
Geographic content is another telling and subsequently need to take care of
30 December 1971.
example. The geographic content of our possible VAT obligations in different
Lannoo productions (eg, an atlas) are member states. On the other hand
Books convey knowledge and are, on
subject to a reduced VAT rate if printed customers will still be confronted with
that ground, part of the essence of
but to the standard VAT rate when the fact that paper books and e-books
anyone’s existence, just like the right to
provided on DVD: in the Netherlands are subject to different VAT rates as the
water. Books are content ambassadors of
such printed products are subject to a latter can differ between member states.
the right to culture and education. In 43
standard VAT rate.
years’ time, however, that content has
VAT differences obstruct the normal
undergone a true (r)evolution without
Clearly, there is a need for consistency course of an economic system in many
the fiscal definition being revisited.
here. In my view, there are two ways to different ways. Large groups can avail
Technology has enabled the use of
address the issue: either the principle themselves of favourable regimes via
digital forms in addition to print. The
that needs to be upheld is that everyone other countries without actually fleeing
visually impaired also have the right to
has the right to culture and education, to tax havens. Such groups are usually
education and, thanks to the invention
in which case all parties actively international players, outside Europe,
of audio books, access to culture and
involved in “spreading” culture and that, bit by bit, are getting a grip on
education has been able to take a
education should qualify for a reduced one of the essential aspects that make
big leap. Big? Yes, but not in the VAT
VAT regime. By “actively involved”, I Europe what it is today: patrimony. The
mean that it is that party’s core business, position of local players needs to be
including bearing stock-related risks restored here. This has nothing to do
and actively promoting content. In other with globalisation. Culture, the cultural
words, websites that generate a large patrimony, is one of the few things
part of their earnings via, advertising that, just like language, are typical of a
for instance, are not included in this country.
reference. Not choosing this path
corresponds to signalling that not Bringing everything under a low VAT
everyone has equal rights. regime is, I think, the only least invasive
solution, both administratively and
technically, because the value used for a
reduced VAT rate is the same in almost
any country. Besides, a favourable VAT
„VAT differences obstruct the normal course
regime is also bound to improve the
of an economic system in many different
economy’s health and increase sales.
ways. Bringing everything under a low VAT
The level of tax earnings will thus
regime is, I think, the only least invasive
remain similar to what it was before.
solution.Plus, by applying a reduced VAT rate,
Plus, by applying a reduced VAT rate, we
we also give back the right to access culture
also give back the right to access culture
and education.“
and education.
Media Trend Outlook 14The experts’ view
Discriminatory VAT/GST As an example, in the EU, the EU VAT market, in general, and especially in
Directive 2006/112/EC allows the the non-English and small-language
treatment between printed application of reduced rates to “books markets. In the new digital environment
books and e-books needs to on all physical means of support”, eg, where consumers expect lower prices
stop e-books sold on CD-ROM or USB sticks. and authors ask for a ‘larger share of
However, other e-books delivered via the pie’ (royalties), the application of
By IPA2 and PwC Belgium digital downloads remain excluded and standard VAT/GST rates adds additional
cannot benefit from a reduced VAT rate, financial pressure on publishers.
The International Publishers Association thus maintaining an unwarranted and
(IPA), an international industry obsolete discrimination. In addition, this discrimination in VAT/
federation, along with PwC Belgium GST treatment runs directly contrary to
and the Global PwC Indirect Taxes Legislative developments in some EU numerous initiatives to promote digital
Network3, carries out a yearly global member states, in particular France and literacy. For example, in a number of
survey on the application of VAT/GST on Luxembourg, aim at abandoning this countries educational reform initiatives
printed books and e-books. illogical and archaic distinction between frequently involve the introduction
e-books delivered on physical media and of digital technology into classrooms
From this survey it can be concluded e-books delivered via digital download. and other learning environments.
that several countries in Europe, the It is our view that, as the VAT Directive Discriminatory VAT/GST regimes often
strongest book economy, are lagging does not mention ‘the carrier’ of a book, provide a significant financial incentive
behind in applying an equal VAT the applicable VAT rate is to be analysed for schools to continue with printed
treatment to e-books. While many from the consumer’s perspective in line textbooks.
countries have seized the benefit of with previous CJEU judgments.
exempting or permitting reduced rates Finally, this different VAT/GST
on e-books, several countries in Europe This will be a test for EU legislation, in treatment disproportionately affects
and in Latin America still need to amend particular because the EU Commission persons with print disabilities. They
their legislation in favour of an equal started an infraction procedure against often have no choice but to choose the
VAT treatment to e-books. both France and Luxembourg for their more accessible digital book, which is
use of the reduced VAT rate on e-books. subject to a higher VAT/GST rate and is
In the EU-27, 59.3% of the member Next to that, another interesting Finnish therefore often more expensive.
states continue to apply the standard CJEU case “K Oy” (C-219/13) is pending
VAT rate to all e-books, but only 31.3% before the CJEU court that could lead We hope that governments all over the
of the 16 Latin American states surveyed to more insight as to VAT treatment of world acknowledge this urge for equal
apply their standard VAT/GST rate to all books on “other means of support”. treatment, so that VAT will no longer
e-books. form a barrier for the uptake of the sale
This obsolete distinction is likely to hold of e-books.
The discriminatory VAT/GST back the development of the e-book
treatment of printed books and e-books
continues and this in violation of the
OECD’s guidelines and benchmarks4
recommending a non-discrimination
policy and the application of concessions
„The discriminatory VAT/GST treatment of
to e-books. As e-book consumption
printed books and e-books continues and
expands rapidly in the global English-
this in violation of the OECD’s guidelines
language market and begins to take hold
and benchmarks. This obsolete distinction
in other countries, this issue is becoming
is likely to hold back the development of the
increasingly urgent.
e-book market.“
2
epresented by José Borghino (borghino@internationalpublishers.org), Policy Director.
R
3
PwC refers here to PricewaterhouseCoopers Tax Consultants bcvba/sccrl, which is a Belgian member firm of the global network of
PricewaterhouseCoopers International Limited (“PwC IL”), all members of which are separate legal entities (herinafter also referred to as “PwC Firms”).
A member firm does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible
or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. For
more information visit us at www.pwc.com or www.globalvatonline.pwc.com.
4
http://www.oecd.org/tax/consumption/36177871.pdf.
Media Trend Outlook 15The e-book market in five years: a look ahead
The e-book market in five years:
a look ahead
Stabilization of technical The rapid spread of tablets and by digitalisation in general, an increased
electronic reading devices has resulted affinity for digital media on the part
infrastructure, consolidation in increasing momentum in the German, of consumers and increasing levels
and internationalisation, new Dutch and Belgian e-book markets. For of experience with these media. For
market actors, more refined publishers, entering the e-book business Germany, we expect that turnover from
rental models, and finally a is no longer a voluntary choice but a e-books in the fiction segment, including
necessity. In Germany, the bigger part children’s books and young adult
constantly changing selection of new releases and around 80% of literature, will exceed €850 million by
of e-books: all of these topics backlisted titles of the large publishing 2017 – which corresponds to an average
will occupy the market in houses are available on the relevant annual growth of 43%. In the fiction
the coming years and ensure e-book-platforms. Publishers are looking segment, the share of revenue generated
to benefit from the growing interest by electronic books will increase from
further growth. in electronic books on the part of 3% in 2012 to 16% in 2017 in Germany
consumers. This interest is being fuelled and reach 15% in the Netherlands and
nearly 22% in Belgium.
Fig. 5 Turnover from e-books in the consumer segment
in millions of €
852
675
521
396
286
144
81
48 42 37 55 44 51
3 8 24 8 12 12 19 19 24 28 31
1 2 0 1 4 3
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Netherlands Belgium Germany
Turnover in the fiction segment
which will be attributable to
22%
e-books in 2017
in Belgium
16%
15%
in Germany
in the Netherlands
Media Trend Outlook 16The e-book market in five years: a look ahead
For a vast majority of users, e-book New actors in a changing market to the reduced VAT rate of 6% and
reading becomes familiar and is not The production and distribution of e-books are subject to the normal VAT
perceived as a special occupation. e-books is changing the book market rate of 21%. The difference in VAT
More than six out of 10 e-book users and entails new challenges and treatment between printed and e-books
surveyed mention e-book reading as changing conditions. We expect that originates from the EU VAT Directive
“I am reading a book”. These figures large players will claim large shares of and forms a barrier for the uptake of
confirm that for the largest majority of the market for themselves by bundling sale of e-books. However, many EU
the customers a book, whether printed services and through enhancing the member states do not agree with this
or digital, remains a book. In other relevance of their product range. differentiation and do not want to lose
words the product itself is important Continuing internationalisation of the the momentum in the e-book market.
for the customer and not the type of market will be promoted by the virtual Certain member states have therefore
distribution. elimination of delivery and border also acted upon this and also allow
charges and will increase competitive a reduced VAT rate for e-books. The
Establishing a solid pressure on content providers. German government recently included
infrastructure for e-books Companies which have previously not in a coalition agreement the intention to
In the coming years, an e-book operated in the industry are recognising defend the equal treatment, by applying
infrastructure will be created the need for new market structures a reduced VAT rate to both printed and
comprising reading devices, content and, for example, are emerging as electronic books, on an EU level. The
providers and platform operators which, service-providers for the publishing current government in Belgium seems to
on the whole, will be more uniform and houses. In addition, the significance be in favor of equal treatment between
complete than is currently the case. of self-publishing will increase – in print and digital publications. It will be
This will be achieved both by efforts particular through platforms such as important that this position is defended
at consolidation and collaboration Amazon’s Kindle Direct Publishing. This by the next government (according to
among market participants, as well as will compel established publishers to the elections in May 2014) also on an
by standardisation of and increasing expand their offerings related to author EU level. Without a doubt, a reduction
flexibility in formats. The advanced support in order to convince potential in the VAT rate applicable to e-books
EPUB3 format has good chances of self-publishers of the additional value of would provide additional momentum to
becoming the standard for e-books. In their services. the e-book market and increase margins
these times of increasing mobility, the earned by the publishers.
availability and accessibility of digital Potential reductions in VAT and
offerings on mobile devices are of new business models promising Market players have their sights
critical importance. Access to e-books additional growth on new business models
stored in the cloud is possible anywhere In Germany and the Netherlands, books, At present and for the foreseeable
and at any time via cooperation with regardless of whether analogue or future, retail sales represent the primary
mobile operators. In addition, the digital, are subject to price maintenance distribution model for electronic books.
expansion of mobile data networks and arrangements which allow limited At the same time, the overwhelming
increasing confidence in cloud-based discretion where price is concerned. majority of publishers are offering
services in general are creating the However, the legislature has made a e-books at prices lower than those for
foundation for e-book rental models. distinction between print and electronic print books – despite the higher VAT
books with regard to their taxation: rate; many publishers are offering
whereas physical books are subject to price discounts of 20% and more. The
the reduced VAT rate of 7% in Germany trend points clearly to the continual
and 6% in the Netherlands, e-books decline in e-book prices. Most publishers
are subject to the normal VAT rate of surveyed by the German Publishers and
19% and 21%, respectively. In Belgium, Booksellers Association in 2013 expect
in principle printed books are subject increasing price differences between
print and electronic books in the coming
years.
Media Trend Outlook 17The e-book market in five years: a look ahead
Even in light of these expectations, we extras in the case of non-fiction
believe that alternative business models, books, cookbooks and travel literature
as have already become established in generally offer greater benefit for the
other forms of digital media, will be of consumer and create a potentially
increasing importance. For example, greater willingness to pay for this
the initial chapters of e-books, or even content than is the case for novels and
entire books, may be offered for free classic literature for example.
as a trial using a freemium model,
or flexible payment models may be The integration of books into online
used for additional chapters in a serial systems will further simplify linkage to
story. The fact that the small file size other digital media. In this process, the
of e-books allows them to simply and publisher assumes the role of content
quickly be transferred to reading promoter and markets book contents
devices likewise makes them well suited in other media formats as well, either
to rental models. The e-book file may, independently or within cooperative
as is the case at Libreka! for example, relationships. Connections to online
be offered in exchange for a one-time, games or videos, and the addition of
direct payment and locally saved to the social media links or fan communities,
reading device. In addition, there are permit stories to be told via different
models such as Divibib’s Onleihe-System channels in a more tailored manner.
where the user merely needs to pay a fee
for a library card and where borrowing Conclusion
the books is even subsidised by the state. The time has not yet come for print
Other providers are focusing not on books to be viewed in the same category
providing e-books as a file that may be as vinyl records: a collector’s item for
saved locally but rather as a file that can aficionados. The overwhelming majority
be accessed via an Internet connection of books sold over the next five years
as needed. This is the absolute opposite will continue to be printed and bound.
of print book ownership, as the user However, e-books will become a fixture
pays a monthly fee and may generally in the media mix of consumers in
read as many of the e-books available Europe.
through the Internet as he or she wishes.
The actual providers of the content are Users who already have experience with
paid on the basis of the number of times e-books appreciate their benefits. By
their content is accessed. 2017, we expect that turnover generated
by e-books in Germany, Belgium and
If these types of models increase in the Netherlands will rise to nearly €1
popularity, we believe that only a billion. This corresponds to a 16% share
few large providers will be successful of total turnover in the fiction segment.
in the market. In such cases, many Thanks to the increasing availability of
market players – in particular small electronic reading devices and growing
and medium-sized publishers – will be acceptance of digital media in general,
in a difficult position during pricing we assume e-books could largely replace
negotiations and will be compelled to their print counterparts for everyday
reconsider their pricing policies. reading, for example for commuters or
readers of paperback books.
The publisher as content promoter
The addition of colour, set typography, In order to participate in this growth,
multimediality and HTML has local market players will need to pool
tremendously expanded the possibilities their resources when competing against
for e-books. In the future, enhanced global players. In addition, publishers
e-books will increasingly force their will need to place greater focus on their
way into the offerings of download content-related competencies and not
platforms. However, investments in only consider different book forms for
multimedia e-books need always be good stories but also different media
based on a view of the added value for formats.
consumers. For example, additional
Media Trend Outlook 18Sources
Sources
PwC (2013a)
Global Entertainment and Media Outlook: 2013−2017
PwC (2013b)
German Entertainment and Media Outlook: 2013–2017
PwC (2013c)
Entertainment & Media Outlook for the Netherlands 2013–2017
PwC (2012)
Tablets im Fokus – wie die Nutzung von Tablet-PCs den Markt für E-Publishing
verändert (Tablets in focus – how the use of tablet PCs is changing the market for
e-publishing)
Börsenverein des Deutschen Buchhandels (2013a)
Buch und Buchhandel in Zahlen 2013 (Books and book trade in figures 2013)
Börsenverein des Deutschen Buchhandels (2013b)
Das E-Book in Deutschland 2013 (The e-book in Germany 2013)
International Publishers Association
Global Survey on Books & E-books: Europe, Latin America and Canada
(report update 2013)
Media Trend Outlook 19Contacts
Germany About us
Our clients face diverse challenges,
Werner Ballhaus strive to put new ideas into practice and
Tel. +49 221 981-5848 seek expert advice. They turn to us for
werner.ballhaus@de.pwc.com comprehensive support and practical
solutions that deliver maximum value.
Kristin Lulei PwC helps organisations and individuals
Tel. +49 221 981-2320 create the value they’re looking for.
kristin.lulei@de.pwc.com We’re a network of firms in 157 countries
with more than 184,000 people who
are committed to delivering quality in
assurance, tax and advisory services.
Netherlands Tell us what matters to you and find out
more by visiting us at www.pwc.com
Jheroen Muste
Tel. +31 88 792-5373
jheroen.muste@nl.pwc.com
To be continued.
The series “Media Trend Outlook”
Rajendra Sitompoel
has other topics ready for you.
Tel. +31 88 792-6497
rajendra.sitompoel@nl.pwc.com
Belgium
Eddy Dams
Tel: +32 9 268 8220
eddy.dams@be.pwc.be
Sophie Claessens
Tel. +32 3 259 3169
sophie.claessens@be.pwc.com
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