By Sampo Timonen, Director, European Graphic Papers, RISI
HELSINKI,
Feb. 8, 2010 (RISI) -
MP3s have done it to CDs and the Internet is doing it to newsprint, so will e-books wipe printed books and magazines out of the markets?
Amazon has released their Christmas sales statistics: on Christmas day customers purchased more e-reader books than printed books for the first time ever in the USA. E-book sales have been supported by the strong sales of e-readers. Amazon's own e-book reader, Kindle, was their number one Christmas gift item. Did Santa bring you one? Kindle's market share is estimated to be around 60%, with Sony's Reader holding second place with about 35% of the market share. Forrester Research estimates that sales of e-readers will increase to approximately 6 million units in 2010 (up 100%) in the USA alone, and their 2009 estimates were just updated from 2 million units to 3 million units -- impressive.
And for the first time ever, more book-related applications were launched for the iPhone than game applications in September 2009. In October 20% of new applications for the iPhone were books (Source: Flurry Analytics). And this is just the beginning: the bookstore giant Barnes & Noble has just launched a new e-reader: Nook. Their electronic bookstore already offers over 1 million titles of e-newspapers, e-magazines and e-books. Apple released its latest gadget on January 27th, the iPad:a touch screen handheld computer with an e-reader, music and movie player, game console with 3G Internet in addition to normal laptop performance. Another gadget made to meet changing consumer habits and will put pressure on printed magazines
The customer is king, content is king. What are we talking about?
We are talking about changing the platform. People will not only continue to read in the future, but may possibly read even more because the reading and buying of books and magazines will be made easier through advanced technology: buy a new book in 60 seconds from a library of million titles, save up to 3,500 books on the hard drive, read 1,000 pages from an e-ink screen (reflective paper-like screen with 150 dpi) with a single charge of the battery. Technology will also make it possible to include music, pictures, animations and text to speech in the reading experience.
Changing the platform from paper to e-reader, mobile phone, tablet laptop or to some still unreleased gadget will happen. The question is how fast?
We can find an analogy in the music business. Vinyl records were the platform for playing music in the 1970s and 1980s. The market reached its peak with 1.1 billion records sold in 1981. The new platform of C-cassettes was changing the game. C-cassettes were small enough to be played in cars and when Sony came out with the portable Walkman in 1979, the market started changing rapidly.
C-cassette sales grew 13% on average during 1979-1988. The sale of vinyl dropped by 39% in the first five years after 1981, by 74% in 10 years and by 98% in 15 years. The quality of the recordings decreased from LP's to C-cassettes, but customers wanted the new portable format and preferred the ability to copy and record at home. C-cassettes had their heyday in 1989 with global sales of 1.54 billion records. Over the next five years, sales decreased by 12%, in 10 years by 45% and in 15 years by 76%. The new format, the CD, was growing at a double-digit pace in the 1990s. The price of CDs and CD-players kept the market booming for several years. The top selling year for CDs was 2000 with 2.45 billion CDs sold. The advantage for consumers was that CDs maintained the sound quality far better than C-cassettes or vinyl, the portability was similar to C-cassettes and offered the ability to skip from one song to another in just seconds.
MP3s and other digital formats of music began entering the market at high speed about 10 years ago. By 2005, the sales of CDs had decreased by 21% and by 2008 by 45%. Digital music has changed not only the platform, but also the whole business model. Sales of digital music have been growing in leaps and bounds, but based on the estimates of the International Federation of Phonographic Industry, 95% of the music is either shared for free or illegally. Illegal copying and especially online music sharing services like Napster made all new records free to technologically advanced consumers. Consequently, artists and record companies do not make their money by selling records anymore.
And the next generation is growing fast: music streaming services like Spotify or Lala will once again change the music market. Instant listening on the Internet with no downloading -- you won't physically own the copy of the record anymore, just access to the service. Youtube is a well-known example of streaming technology and similar services are available for movies as well (Voddler). Like Google, these companies will need lots of data centers and server halls in the future.
Is it possible that a similar kind of shift from one platform to another can also happen for paper? The Internet has done it for newsprint already. Newsprint demand fell by 16% in the first five years since its peak year of 1999 in North America. In 10 years demand has fallen 57%. Uncoated woodfree demand in North America has fallen by 33% since 1999. In Western Europe the market has matured during the last decade, and we estimate that newsprint demand in 2010 will be 24% below the peak year of 2000. If the analogy of the shifting platform materializes in the coming years, demand should decrease by 50-75% in the first 10 years after the peak year and by 75-98% in 15 years. That would mean that demand for uncoated woodfree in Western Europe would be only 2.3-4.7 million tonnes by 2014 (from a current estimate of 7.1 million tonnes) and only 187,000 tonnes to 2.3 million tonnes by 2019. Coated mechanical paper demand should drop to 144,000 tonnes to 1.8 million tonnes by 2022. Our current forecast seems very positive in this light. We are not saying that what happened to vinyl will happen to paper. But it is clear that building even larger production sites was not the answer for the vinyl producer's problems. And the positive news is that print will never die: the market for vinyl records has tripled during the past three years, but unfortunately the current market is 99.2% smaller than in 1981.
RISI Viewpoint by Sampo Timonen, Director, European Graphic Papers
This is an excerpt from a full story that is available in RISI's Pulp & Paper News Service.
