jose henrique guimaraes, acaiaca @ european digital distributors meeting madrid
TRANSCRIPT
THE BRAZILIAN eBOOK MARKET José Henrique Guimarães Founder and CEO – Acaiaca Distribuidora de Livros
::June::2015::
Today’s presentation
• Brazil
• The Brazilian Book Market
• e-books in Brazil – e-commerce / m-commerce, infrastructure and devices
– e-book content, numbers and sales
– Major players (retailers and distributors)
• Bottlenecks, Opportunities and Challenges
What is happening in Brazil ?
Brazilian Economy Overview
• World’s 7th largest economy
• Rank 56 on 61 in competitiviness research (IMD Business School – Switzerland)
• World Bank’s 2015 report:
“Brazil experienced a decade of economic and social progress from 2003-2013 in which over 26 million people were lifted out of poverty and inequality was reduced significantly” “… After having reached universal coverage in primary education, Brazil is now struggling to improve the quality and outcomes of the system, especially at the basic and secondary levels.” “To address the current macro imbalances and revitalize growth, the authorities have announced measures to reduce entitlements, cut discretionary expenditures and reduce Treasury’s support to public banks and the electricity sector, in order to reduce the fiscal deficit.” “… there is no immediate threat of an external crisis as Brazil has $360 billion of reserves (about 17% of GDP), and a solid financial sector.” “Brazil’s medium-term outlook will depend on the success of the current adjustment and the adoption of further growth-enhancing reforms. To achieve higher growth in the medium-term, raising productivity and competitiveness is the crucial challenge for Brazil.”
• GDP growth in Brazil has slowed from 4.5% in 2006-10 to 2.1% over 2011-14 and 0.1% in 2014.
• Inflation remains high, reaching 8.17% (IPCA-IBGE) in the past 12 months.
• Unemployment rates is growing and reached 6.4% in Apr, 2015.
• Basic interest rate (Selic) raised to 13.75 in June, 2015
• Average monthly income per capita: R$ 1,052.00 (average price of a book: R$ 30,00)
Brazilian Economy Overview
GDP Projection for 2015
Book Industry Summary – 2014
According to the Brazilian Book Chamber annual report, in 2014:
– Brazilian Publisher’s sales decreased 5,16 %.
– However, if government sales are excluded the result is a growth of about 1%.
– Government sales corresponds to 22.8% of the total market and equals 353 millions of Euros.
– Government sales + K12 = about 50 % of the Brazilian Market.
– eBooks sales account for 0,3 % of overall sales.
– In the last 10 years overall production grew 52 % in units (16% in R$)
• Trade books: 101 % in units (15% in R$)
• Religious books: 107% in units (42% in R$)
• STP books: 52% in units (62% in R$).
Besides eBooks accounting for only 0,3 % of the total market, individual reports from trade publishers suggests a market share from 8% to 12 % of sales for fiction books and between 3% and 5% for non-fiction books (when comparing books sales available in physical and digital formats).
Publishing Industry Overview – Print 2013/2014
Source: Brazilian Book Chamber
Description 2013 2014 Var.%
TITLES 62,235 60,829 -2.3%
New Titles 21,085 19,285 -8.5%
Re-prints 41,150 41,544 1.0%
NET SALES FROM PUBLISHERS (in Billions of Euros) 1.53€ 1.54€ 0.9%
Government 0.42€ 0.35€ -16.0%
K-12 0.37€ 0.41€ 10.6%
Trade, STP, Religion and others 0.74€ 0.78€ 5.6%
Brazil - 10th Largest Book Market
-
5.000
10.000
15.000
20.000
25.000
30.000
UnitedStates
China Germany Japan UnitedKingdom
France Italy South Korea Spain Brazil
27.400
15.342
9.536
5.409 3.875 4.401
3.110 2.974 2.708 2.239
Market Value 2013 - million Euros
Source: IPA
Printed Books Distribution Channels in Brazil (without government sales)
Bookstores 49.85
Distributors 20.10
Door to door 9.45
Super Market 3.26
Schools 2.50
Churchs and Temples 4.10
Export 1.05
Direct Marketing 1.32
Companies 1.43
Newsstand 1.95
Internet (Publishers Direct to market) 0.71
Private Libraries 0.11
Others 4.17
Total 100.00
Channel2014
(% share)
Source: Brazilian Book Chamber
e-commerce in Brazil
e-shoppers with at least one purchase (in millions)
• 49,2% of Brazilians, age 10 or older, have internet access (IBGE – PNAD 2012 ). Current population: 204 million people
e-commerce in Brazil
• Reading materials (books, magazines and subscriptions): 8% of total amount of orders. Tied in 4th position in terms of category (#1 fashion and accessories).
• Mobile sales (internet access without any apps): 9,7% of total sales in 2014 versus 2,5% in 2013, out of which 65% through smartphones and 35% via tablets.
• The estimated value of purchases done by Brazilians on international websites in 2014 is R$ 6.6 billion.
Online sales of consumer products
R$ 299,00 R$ 2.499,00 (16GB) R$ 3.499,00 (16GB)
• Kindle in Brazil (local sales): started in Dec, 2012
• Apple Stores: Feb, 2014 (Rio de Janeiro) & Apr, 2015 (São Paulo)
• Even though the whole book production chain (“from paper to the final product”) is tax-free, taxes still apply to e-readers in Brazil.
• Smartphone sales increased 55% in 2014 in comparison with previous year. Current total amount of operational units: 54,5 million units. Growth expected for 2015: 16% (IDC Brazil).
• Tablets: 156% increase in units sold from 2012 to 2013 (official 2014 data not available)
Mobile devices
Publishing Industry Overview – eBook 2013/2014
Retail – the strongest part of the book supply-chain in Brazil
• Considering all sectors, Brazilian retail is very efficient.
• B2W (Americanas, Submarino and other retail brands), “the Brazilian amazon”, accounts for approximately 24 % of total internet retail business and 5 % of book sales on retail. They belong to the 3G Capital Brazilian Group, owners of Interbrew / Budweiser, Burger King, Heinz and others.
• Like B2W, there are other strong retailers that are not focused on books (both physical and digital).
• eBook sales are concentrated among 6 big players in Brazil: Amazon, Apple, Google, Kobo, Saraiva (Brazilian) and Cultura (Brazilian).
• Independent books stores represent less than 1 % of total eBook sales.
The Big 6 eBook retailers
Besides having only 1 % of the printed book market, Amazon.com.br is the leader for eBooks in Brazil in Portuguese and in foreign languages. Operation started in 2012 for e-books and in 2014 for physical books.
Besides not having a BRZ store, Apple products are very popular in Brasil, mostly among A and B class individuals. The number 2 in Brazil have problems with pricing because of exchange ratio variation, mainly during this time of recession in Brazil.
They have a small structure in Brazil for books, but Android accounts for 90% of the current smartphone local market.
They are one of the first in Brazil with partnership with Livraria Cultura, but they lost some space recently to the other players. For physical books, they are very popular among heavy-readers, because they carry a huge catalogue. Besides the partnership with Kobo, they are not putting much energy in eBooks so far.
“The BRZ Barnes and Noble”,. They launched their own e-reader, called LEV, last year, but they don’t have a ecosystem like Amazon, Apple nor Kobo.
The Big 6 eBook retailers
19,08%
8,11%
4,84%
4,06%
3,05%
2,09%
53,48%
Saraiva Cultura B2W Leitura Curitiba FNAC Others
Source: estimate by Acaiaca Digital
Retailers market share in 2014
eBook Distributors in Brazil
Bookwire is a newcomer. The German company established a local office in Brazil at the end of 2014.
Acaiaca Digital is part of the Acaiaca Group, which was established more than 50 years ago and offers Distribution of books as well as Third Party Logistics Services for publishers of all sizes. Acaiaca is a major distributor in Brazil, both in Physical and Digital books.
Xeriph: also owner of the former e-bookstore Gato Sabido, they are an aggregator and do fulfillment for local bookstores as well. They were the first company to offer e-distribution of books in Brazil.
DLD is the number one in Brazil and they work as a dedicated distributor to seven major trade Brazilian Publishers. The company was created several years ago in preparation for global platforms arrival in Brazil (with whom they have a contract that limits the maximum discount that can be applied to ebooks)
• Brazil is still a “closed” economy in terms of external commerce and investment. Our economic policies in the last century was oriented for self-sufficiency, with a relatively low presence of foreign investments.
• Doing business in Brazil is very complicated, because of red tape, excessive laws,
complex taxation system and infra-structure issues. • The majority of Brazilian trade publishers are family owned companies and lack the
resources (money, know-how and others) required to make the transition from physical to digital books.
• Piracy is a important concern in Brazil.
• The language acts as a barrier for attracting foreign competition. • Since the market is “so protected”, publishers can be more conservative in their
decisions toward eBook sales.
Bottlenecks
• The Brazilian Government has been signalizing for the past 5 years that purchase of content will migrate soon from physical books to digital books. This will have a huge overall impact on the market.
• “Pure” e-readers may become tax free in the near future which would result in significant reduction on the current prices (around 50%)
• A fixed price law is in-transit through congress right now
• Metadata: local market currently lacks a standard (such as Onix).
• Convertion of publishers back catalog is still a challenge, mainly because: • Current costs (and pay-back estimates) and concerns associated with the
Portuguese language. A lot of content available only in PDF format. • Difficulties associated with securing the digital rights both national and
International(international contracts restricted to printed books.
Challenges and Opportunities
Conclusion There is still a myopic vision in Brazil about opportunities in the eBook market.
With a market about 0,3 % only of the total net sales, print and digital, the payback for eBooks production / conversion is considered too long for many medium and small publishers in Brazil. Therefore the back catalogs of Brazilian publishers are not being converted to digital on the necessary scale.
On the other hand, the whole digital market in Brazil is still under development and gowning exponentially: e-commerce (more than 20% per year), m-commerce (from 0% to 9,7% in 5 years), smarphones (55% last year). Many Brazilians still have to travel abroad to by e-readers / tablets / smartphones at competitive prices and/or make purchases in international stores that are not reflected on the local market numbers.
Therefore, if we consider e-books sales as the result of the following equation: Education (hability and willingness to read) + Purchasing Power + Infrastructure (Internet Access and Devices) + Content, we strongly believe that the ebook market in Brazil will grow significantly over the second half of this decade.
