Superstars and Outsiders in Online Markets: An Empirical Analysis of Electronic Books

Recent rapid growth in electronic book sales has raised a critical question for publishers and book stores: do e-books cannibalize or increase print sales? In this article we compare the best-selling titles sold on in print orelectronic (Kindle) formatsduring the period from November 2007 to July 2010.

Using econometric methods, we find that the cannibalization of print sales by e-books is more likely to occur for superstar titles written by successful authors. However, we find that a new segment of successful electronic titles that are not best-selling in print format emerge; these books would probably have been unpopular without the new Kindle store and therefore this new distribution channel has expanded the market. We refer to these titles as digital outsiders. The latter are characterized not only by lower prices but also by older release dates. They also include titles that are only released in electronic format. We then argue that electronic books increase the market viability of old print releases.

Finally we identify a category that we call “print preferred”of books that are top sellers in print but not as e-books for reasons of color, graphics, or the need to navigate non-linearly, a style to which the current generation of e-book readers are not well adapted.