Storming the gatekeepers: Digital disintermediation in the market for books

•Digitization has reduced the costs of producing books.•The number of new books published has increased substantially.•Quality unpredictability means that growth in the number of new titles can lead to the introduction of some highly appealing products.•Self-published works make up a growing share of commercially successful works.

Digitization is transforming the market for books. Lower marginal costs have reduced prices by 10-15% in the past four years, and digitization has given creators the ability to circumvent traditional gatekeepers and publish their work directly. The number of self-published works has grown by almost 300% since 2006 and now exceeds the number of traditionally published works. While e-book data are not systematically available, we are able to document that falling prices have increased consumer surplus by $2-3 billion per year. Given the inherent difficulty in predicting the ex post appeal of creative products at the time of investment, a growth in available new products can substantially expand the appeal of available products. Using bestseller lists in conjunction with title-level data on physical sales and our best estimates of e-book sales, we document that many self-published books have substantial ex post appeal to consumers. Works that began their commercial lives through self-publishing began to appear on bestseller lists in 2011 and by 2013 such works accounted for a tenth of both bestseller listings and estimated unit sales. In romantic fiction, self-published works account for almost a third. These changes challenge the role of gatekeepers while benefiting consumers.