Why Japan's Rakuten Is A Hidden Contender In The Ebook Market


Quick, name a massive ecommerce company with an outsized share of the ebook market across the globe.

If you didn't come up with "Amazon," I don't know why the rock you're living under doesn't have wi-fi. Chances are, however, that you can't name the one company with the second-largest share of the ebook market. Here's why surfacing that company is tougher than it looks, and why that company might be the Japanese ecommerce company Rakuten.

First, let's discuss the oft-overlooked data point that makes all the difference when determining how many ebooks are being consumed: Digital distribution to libraries. The two ebook-tracking watchdogs used by most as a benchmark for industry statistics — Nielsen BookScan and Bookstat (formerly known as Author Earnings) — both focus on units sold. As a result, they don't take digital libraries seriously. Rakuten OverDrive, a digital management service for publishers, libraries and schools, isn't represented in the latest Author Earnings numbers on the download numbers for Amazon, Apple iBooks, or the Barnes & Noble Nook, which stand at 406 million, 44 million, and 19.4 million, respectively. OverDrive's numbers? 225 million total digital downloads, representing 155 million ebooks and 68 million audiobooks. Granted, the OverDrive numbers are from 2017 and the Author Earnings report uses 2016 data, but OverDrive's numbers are still above all but Amazon by a wide margin. Nielson, meanwhile, counts a book sold to a library as a single sale — no matter how many downloads it goes on to earn.

Mark Williams of industry watchdog The New Publishing Standard debuted this insight in a January post. "Other digital libraries also reported downloads in the millions," he notes in the article. "Hoopla, for example, saw over six million downloads in 2016, while Odilo reported 'tremendous growth.' [...] Yet the Author Earnings Report completely ignores them. There is not a single mention of OverDrive or digital library downloads in the last Author Earnings Report, covering the year 2016. which attributed 440 million ebook sales to Amazon and just 44 million to Apple."

It's worth noting that one additional hitch makes the numbers difficult to compare: OverDrive's downloads are checked out of libraries rather than sold retail, so they don't represent the same monetary investment from customers as do iBook or Nook ebooks. But this makes OverDrive's exclusion from Author Earnings reports more puzzling, Williams argues, as the same report includes the non-retail downloads from Kindle Unlimited, Amazon's all-you-can-read subscription service.

When I reached out to Williams for a comment, he shared a dour view of the book industry's sparse data and its library-book-sized blind spot: "By conveniently ignoring OverDrive’s 225 million digital downloads while including estimated values for Kindle Unlimited subscription downloads, we are given not only a distorted picture of the units and value of the digital market, but more importantly a very distorted view of the wider level of engagement with digital books. Close to a quarter billion ebook and audiobook downloads, all of which are bringing in revenue for authors and publishers even if the readers are not paying directly, are shunted aside," he told me.

Audiobooks are another sector that OverDrive excels at: Author Earnings' February 2017 report claimed "about 50 million" audiobooks are sold across all retailers annually in the U.S., but less than a year later, OverDrive reported 68 audiobook downloads. Once again, the numbers aren't apples-to-apples, but Williams thinks they represent the future of ebooks: "As more and more readers understand that the ebooks they buy are actual just licences to read, and that they never 'own' the ebooks they supposedly are buying," he says, "so more will ask what advantage there is in buying from a retailer rather than getting the exact same product for 'free' from a library."

Rakuten owns both OverDrive and Kobo, a Toronto-based ebook company that's also overlooked by U.S. audiences, thanks to its smaller U.S. stature and larger roles in other markets such as Canada, Netherlands, and the Philippines. But OverDrive is the main reason Rakuten is a power player, according to Williams.

“Rakuten offers strong, customized programs around the world that are designed to best serve the needs of each market, based on a deep understanding of its stage of adoption of digital reading,” Yoshi Yamada, Rakuten Group EVP and Media & Communications Company President, tells me. “By working with over 33,000 publishers to provide diverse content directly to readers with Rakuten Kobo and by promoting and celebrating reading within more than 38,000 libraries and schools with Rakuten OverDrive, we’re enjoying double digit year-over-year growth and look forward to contributing to the growth of the global eReading space.” If Williams is correct, they're also enjoying their underappreciated position as a massive player in the international ebook and audiobook market.
