According to the Publishers Association, e-book sales in the UK have grew rapidly in 2011. Digital sales were up 54%, of which consumer e-book sales rose by 366% (I think these refer to revenues, not volume figures). On the other hand, the combined sales of digital and physical books decreased by 2% to £3.2bn, while average book prices fell by 1.3% (compared with a 2011 annual UK inflation rate of 4.47%). The release says: “All digital formats encompassing ebooks, audio book downloads and online subscriptions accounted for 8% of the total invoiced value of sales of books in 2011, up from 5% in 2010.”

It would be good to know how much of that average price decline is due to the change in the mix towards cheaper e-books – I suspect most, if not all. On the face of it, the decline in volume of sales is small, and not bad for a flat economy.

The e-book story becomes ever more interesting from a competition perspective. Who would have thought Microsoft would be welcomed as riding to the rescue to increase competition in the market for e-reading? That’s what its new deal with Barnes and Noble seems to offer. The DoJ has Apple’s ‘agency’ model in its sights, with the case it has brought against Apple and five publishers. These vigorously reject the accusation.This follows an EU probe launched in December.

The competition issues are fascinating; this is an industry with a small number of giant publishers and two retailers, not lacking in market power, with proprietary devices and control of the customer relationships. Even outside e-books, the publishers feel under pressure because of the market power of the supermarkets, one of the main outlets now for physical book sales.

When I sat on the Competition Commission panel that gave the go-ahead a few years ago for Waterstones to merge with Ottakars, publishers made the argument that they needed two high street, bricks and mortar chains to be able to bring new titles to the public. We felt then that Amazon would provide competition, as it did. But anyway, if the publishers were concerned about the decline of independent book stores, they could have opted to give bigger wholesale discounts to those stores, enabling them to compete with the supermarkets and online sellers. Or alternatively, they could have refused the deep discounts they were asked for by the supermarkets and Amazon; after all, readers would still want to get their hands on the next Harry Potter or Dan Brown. But instead, the publishers decided the current profit margin from sales through independents mattered more. It didn’t seem a sensible strategic decision, and the big publishers are reaping the whirlwind now they face a substantially concentrated retail market.

Actually, publishing seems to have responded much better than the music industry to the online challenge. They are innovating in terms of formats and enabling e-reading. If I were still a competition regulator, I’d be looking at e-reading standards and interoperability as well as the pricing model. And I’d have the Google Books Settlement questions, still on the FTC’s radar, at the back of my mind as well. The lesson of history is that when the titans of an industry, having been slugging things out among themselves, get mired in anti-trust cases, the coast is clear for a nippy start-up to enter the market in an unexpected way. It’s going to be fascinating to watch this one unfold.

There has been lots of interesting commentary on this case. This Ars Technica article has useful links. Here’s an analysis from The Verge. Here is Wired. This FT analysis has links to other stories on the issues. And a round-up from Indie Book Spot.

John Naughton’s column in The Observer today cites one of my favourite recent books, Timothy Wu’s [amazon_link id=”B004DUMW4A” target=”_blank” ]The Master Switch: The Rise and Fall of Information Empires[/amazon_link]. The column’s subject is the possibility that the internet as we know it has come to the end of the road of innovation, and is being locked down by large businesses through an insane IP regime and patent wars, strangleholds on infrastructure and (for most information companies) dysfunctional business models. Naughton writes:

“The biggest curb on innovation is the fact that the technologies that might serve as the springboards for next-generation surprises are increasingly closed and controlled.”

It is, he suggests, the culmination of one of the cycles of innovation and ultimately control identified in Wu’s book. His key point is this: “Industry structure…is what determines the freedom of expression,” (p155, hardback edition). These issues of competition and market power are not minor matters in markets so intimately linked to the power of ideas and thought.

Serendipitously, I also read this week a terrifically interesting article from (a new to me discovery) the Hedgehog Review, Why Google Isn’t Making us Stupid … Or Smart. It starts with a description of the intellectual debate about the effects of books. Leibniz turns out to have been the Nicholas Carr of that discussion: “the horrible mass of books keeps growing.”

Author Chad Wellman concludes:

“As we saw with Enlightenment reading technologies, knowledge emerges out of complex processes of selection, distinction, and judgment—out of the irreducible interactions of humans and technology. We should resist the false promise that the empty box below the Google logo has come to represent—either unmediated access to pure knowledge or a life of distraction and shallow information. It is a ruse. Knowledge is hard won; it is crafted, created, and organized by humans and their technologies.”

The key word in that last sentence may be ‘organized’ – the commercial and political structures we place around the information technologies determine what we know.

[amazon_image id=”B004DUMW4A” link=”true” target=”_blank” size=”medium” ]The Master Switch[/amazon_image]

An advance copy of Peter Marsh’s forthcoming [amazon_link id=”0300117779″ target=”_blank” ]The New Industrial Revolution: Consumers, Globalization and the End of Mass Production[/amazon_link] has landed on my desk, and it looks tantalizing. This dreary grey constant rain (known as a drought here in southern England) has sent me to the new Donna Leon novel, [amazon_link id=”0434021601″ target=”_blank” ]Beastly Things,[/amazon_link] for some comfort reading, but as soon as I’ve read that I’ll turn to the Marsh book.

Paging through it, I spotted a chart showing the share of world manufacturing output accounted for by the leading industrial economies. The proportions are:

China 19.4%, US 18.2%, Japan 10.9%, Germany 6.1%, Italy 3.1%, Brazil 2.7%, S Korea 2.6%, India 2.5%, France 2.4%, UK 2.3%

It was a bit of a surprise that the UK featured at all, so much do we talk down our manufacturing sector, and also that we fare as well as France, where they obviously talk up manufacturing instead. I would have expected S Korea to rank a bit higher. Italy is another surprise, ahead of France and the UK by a bit. Russia is striking by its absence, a resource-based economy. Indonesia and Turkey are presumably climbing fast from a low base. Anyway, I’m looking forward to reading it.

[amazon_image id=”0300117779″ link=”true” target=”_blank” size=”medium” ]The New Industrial Revolution: Consumers, Globalization and the End of Mass Production[/amazon_image]

With election day approaching next week in various parts of this country, and fascinating (in different ways) campaigns under way in France and the US, I started reading [amazon_link id=”0691154082″ target=”_blank” ]How to Win an Election[/amazon_link] by Quintus Tullius Cicero. This is a rather lovely book, a letter of advice to the famous Cicero from his down-to-earth brother. It has the Latin text opposite a translation by Philip Freeman, and is the perfect size for reading in those suspended moments on the campaign trail.

It is extraordinary how little politics has changed since 64 B.C.:

“The most important part of your campaign is to bring hope to people and a feeling of goodwill toward you. On the other hand, you should not make specific pledges, either to the Senate or the people. Stick to vague generalities.”

“If you break a promise, the outcome is uncertain and the number of people affected is small. But if you refuse to make a promise, the result is certain and produces immediate anger in a large number of voters.”

There is some disarmingly cynical advice on every page. No wonder brother Marcus won the election by a landslide. A highly commended self-help book for all candidates.

[amazon_image id=”0691154082″ link=”true” target=”_blank” size=”medium” ]How to Win an Election: An Ancient Guide for Modern Politicians[/amazon_image]