What is $249.2 million in the publishing industry?
It's not Stephenie Meyer's sales last year, nor J.K. Rowlings' or even Stephen King's. To the best of my knowledge, it isn't the annual profits or CEO's salary of Random House, Simon & Schuster, or HarperCollins.
No, that figure was the grand total sales of paperback and hardcover books in America last year, according to a Newsweek infographic. By contrast, the Amazon (Nasdaq: AMZN) Kindle and its e-book rivals collected book sales of $29.3 million.
Don't take these figures at face value just because good old Newsweek says so, of course. The Association of American Publishers reports a grand total of $8.1 billion in trade paperback and hardbound sales last year, making Newsweek's annual claim look like a monthly figure. Still, it's not a massive market in light of the ubiquity of books -- and e-books still form the hottest commodity in the AAP report with a 177% year-over-year gain to $313 million.
Publishing is not the only consumer-facing market that gets a disproportionate amount of attention from most media in comparison to their economic importance. Viacom (NYSE: VIA) subsidiary Paramount recently made news by becoming the first Hollywood studio to pass $1 billion in gross receipts this year. Avatar was a runaway sensation, collecting $2.7 billion worldwide and $750 million domestically before you even start to count DVD and Blu-ray sales. The total movie market aims for $4 billion this blockbuster season. Meanwhile, Intel (Nasdaq: INTC) quietly sold $10.7 billion's worth of chips last quarter alone and Walt Disney's (NYSE: DIS) media and recreation empire churned out $10 billion of revenue -- a vanishingly small part of which came directly from box office receipts.
Whichever numbers you use, Newsweek says that you'll buy 3.3 times more books than before when you get a Kindle, and "only" 15% of e-reader users stop buying dead-tree product altogether. To me, that's not a low figure -- it's an auspicious start to a new era.
Should you stop thinking about e-readers as an investable entity because the total addressable market is so small? Well, no. Kindle is still the top seller in Amazon's entire inventory, and the hardware is worth its weight in Swiss chocolate at the very least. Content sales are accelerating at a furious pace now that the installed base has reached a tipping point, and in ten years those big, heavy paper artifacts on your shelves may look quaintly antique to your grandkids.
Just realize that the book market isn't all that big and adjust your expectations accordingly. The gold rush here is in supplying those hungry readers with the appropriate hardware to join the revolution. The next Warren Buffett will not base his empire on book royalties.
