Three Generations of Kindles
Image via Wikipedia

Monday, Amazon announced that sales of its Kindle reader have tripled since they discounted the price from $259 to $189. And while there’s no way to extrapolate units sold because Amazon won’t reveal their base sales figures for the Kindle, it sounds impressive.

But the most impressive part of the announcement is that during the past three months, e-book sales outpaced hardcover book sales by a ratio of 143:100. In the past month, that ratio increased to 180:100. As Amazon put it:

Over the past three months, for every 100 hardcover books Amazon.com has sold, it has sold 143 Kindle books. Over the past month, for every 100 hardcover books Amazon.com has sold, it has sold 180 Kindle books. This is across Amazon.com’s entire U.S. book business and includes sales of hardcover books where there is no Kindle edition. Free Kindle books are excluded and if included would make the number even higher.

Why not include paperback sales? Because those have been trending downward for quite awhile, so comparing e-book sales to them would have been quickly called out as misleading. Meanwhile, because of Amazon’s aggressive discounting of hardcover books, their sales have been stable or trending upward, allowing for a more meaningful comparison.

Whether the combination of trends has resulted in more books being sold by Amazon isn’t clear. But the trend toward e-books continues unabated.

Demand for e-readers is high. Amazon feels an inflection point has been reached:

We’ve reached a tipping point with the new price of Kindle — the growth rate of Kindle device unit sales has tripled since we lowered the price from $259 to $189.

And it’s not just the Kindle. Recently, Books-a-Million sold out of Sony Readers after lowering the price to $99. With Barnes & Noble having led the charge by dropping the price of its Nook reader to $199, it seems the mass market for e-readers might have finally arrived. Then we have the amazing sales numbers surrounding the iPad, another e-reader, joining the iPhone as a place where people can read books without paper.

How fast is change happening for publishers, bookstores, and authors? In a recent post, Mike Shatzkin speculates that within five years bricks-and-mortar bookstores will lose significant marketshare, falling from today’s 72% rate to around 25%. While “bookstores” remain open and available, the signs of the marketshare drop are apparent to anyone who has recently been inside one, only to find it cluttered with clothing, knick-knacks, snacks, and sundries:

Shelf space for books is probably dropping faster than the number of stores as book retailers look for other items to keep their customers more satisfied and give those items space previously devoted to books. And shelf space available for publishers who don’t own bookstores is dropping faster than that because Barnes & Noble, the leading provider of bookshelf display space, is aggressively sourcing their own product both to improve their margins and to develop proprietary product not available to their competitors.

As bookstores empty out of books and continue their decline into becoming mixed retail shops, readers will probably only be driven more quickly into e-book shopping — where more titles are available immediately at lower prices.

Personally, I’ve watched in amazement the past couple of months as my own e-books have been selling rapidly through Amazon’s store. In April, I decided to lower the price of my first novel to $0.99 as part of a pricing experiment — other authors I know had claimed that it really drove sales and increased royalties. Given that my third novel is about finished, it seemed like a good time to move some e-books for the first novel, in hopes that would spur interest in the second and third.

Sure enough, starting in June, sales of my e-books took off, with my first book cracking the Top 1,000 on Amazon’s tally of paid e-books a few times and sales only building as the weeks went by. Most interestingly, despite the very low price, I’m making more in royalties from the e-book sales than I did off the print during a similar period, even comparing sales to the 2009 holiday season, when this same book was picked as one of the Top 10 Books for the Holidays by IndieReader.com, a designation that drove both in-store and online sales of the print.

Even though the royalty per-sale for the e-book is 1/3 the royalty for print, the low-price/high-volume aspect of e-books has been a pleasant surprise. I’ll be able to buy more than a few nights’ worth of pizza with this total.

But is it a blip? Will e-book prices rise as the novelty wears off, as print sales no longer pad publisher margins, and as authors demand a larger share? Will demand taper off?

The months or years during which e-books and e-readers penetrate the reading market will shake up book publishing, book selling, and authorship in ways that will fundamentally change our definitions of each of those terms.

Buckle up. We’re just about at the top of the first hill on this roller coaster ride that will collapse familiar distinctions like paperback and hardcover, decimate publisher pricing schemes, and level the terrain from one favoring production and distribution advantages to one favoring marketing advantages.

Enhanced by Zemanta
Kent Anderson

Kent Anderson

Kent Anderson is the CEO of RedLink and RedLink Network, a past-President of SSP, and the founder of the Scholarly Kitchen. He has worked as Publisher at AAAS/Science, CEO/Publisher of JBJS, Inc., a publishing executive at the Massachusetts Medical Society, Publishing Director of the New England Journal of Medicine, and Director of Medical Journals at the American Academy of Pediatrics. Opinions on social media or blogs are his own.

View All Posts by Kent Anderson

Discussion

22 Thoughts on "E-book Sales Beat Hardcover Sales at Amazon: Tipping Point or Fluke?"

‘Why not include paperback sales?’

Why not indeed: I don’t know about the US, but in the UK paperbacks outsell hardbacks by more than 10 to 1. Compare
http://entertainment.timesonline.co.uk/tol/arts_and_entertainment/books/article4304959.ece and http://entertainment.timesonline.co.uk/tol/arts_and_entertainment/books/article4304971.ece

[For those who can’t be bothered, avg sales of PB top 5 = 27k, avg sales of HB top 5 = 1.38k]

Maybe the numbers look worse for Amazon and their newly discounted toy if they include paperbacks…

But are paperback sales increasing or decreasing? That’s the metric of interest, not ratio to hardcover.

Oh Kent, taking another oddly convoluted press release from Amazon at face value? For shame. Basically, there’s very little factual we can draw from these vague pronouncements (a better analysis here, and I love Publishers Lunch’s headline, “Amazon Inches Closer to Releasing Kindle Stats That Actually Mean Something”).

First, a correction to your first paragraph: as noted later in the article, Kindle sales have not tripled. The rate of growth of sales has tripled since the price cut, not sales themselves.

I’m in agreement with the previous commenter, they’re comparing eBook sales to hardcover sales because it makes them look more favorable. If they came out with a press release that said “eBook sales still dwarfed by paperback sales” they wouldn’t have received the same coverage, would they?

To really understand what’s happening here, we’d need real numbers, something Amazon has refused to release. What is the actual revenue they’re generating from eBooks? If they sell hardcover books for $15-$25 and most of the eBooks they sell are like yours and cost 99 cents, which is a bigger profit center?

If Amazon is the sole outlet in the entire world for Kindle books, is it surprising at all that they’re selling lots of them? How do Kindle eBook sales fit in with worldwide eBook sales and worldwide book sales?

Why did Amazon release this information separately from their earnings report due out Thursday?

Make no mistake, the eBook market is growing rapidly, but I’m hesitant to draw many firm conclusions from Amazon’s stubborn refusal to offer up any real proof. The most interesting thing I can see here is that the real inflection point in eBook sales did not come when the Kindle price dropped, it came a few months earlier than that. What happened about 3 months ago to coincide with it? The release of the iPad. That’s clearly driving a lot of Kindle book sales and points to a future with Amazon as the dominant eBook seller, Kindle as the dominant platform but not the dominant device seller or device itself. Their “read anywhere” strategy appears to be paying off.

Note — I didn’t take it at face value, but used it to elaborate on other evidence and other people’s observations, including my own observations drawn from sales of my own e-books. Shame rejected!

Other posts I’ve read speak at length about what to compare (revenues [problem: price increases on lower volumes can squeeze more money out of a dying market], paperbacks [problem: comparing sales rate changes would have been called out as unfair because paperback sales are slowing while Amazon pricing has hardcover sales rising], and overall e-book market [problem: not Amazon’s responsibility]). What is interesting is that three years into a real e-book market, growth is accelerating.

All of the things I mentioned are relevant and important for Amazon’s argument. They’re trying to convince customers and publishers that the Kindle is a vibrant, growing and reliable platform. Unfortunately, their cherry-picking of statistics and convoluted presentation makes that argument a weak one. One reads their press releases and immediately asks, why don’t they just tell us what’s happening, what are they trying to hide? Steve Jobs was roundly ripped for his use of statistics in the Antennagate presentation this week, but he looks like a paragon of openness compared to Bezos. Why has no outrage been directed at him? Is it that we’re just used to Amazon’s snake oil salesman shenanigans when it comes to the Kindle?

Number of paperbacks sold versus number of eBooks sold is relevant here and was deliberately omitted. Yes, they did talk about rate of sales growth, but they also talked specifically about raw numbers of books sold (“for every 100 hardcover books sold during the last month, the online store sold 180 eBook versions”). This has resulted in nearly every headline covering the press release to announce that eBooks are outselling hardcovers (examples here, here, here, here, here, here, here, here, here, and here), not announcing anything about sales growth rates. If they included paperback sales and talked about how far behind Kindle book sales lag, the headlines would not have been as sexy. Ditto any hard data on revenue, assuming hardcovers are still producing much more revenue due to higher prices.

Is it really interesting or surprising in any way that in a 3 month period where you massively increase your customer base that sales levels increased? The 3 million iPads sold alone would double the number of potential Kindle customers. Add in the price drops for the Kindle hardware itself and the release of the Android version of Kindle and, no surprise, more customers means more sales. As I said in the previous comment, the interesting thing to me is the viability of the Kindle platform on other devices, not the sales growth by itself.

One other interesting prediction this week from Joe Wikert, who suggests that since Amazon had to cut the price on the Kindle device, they’re making less money from hardware sales, and that means eBook prices are likely to increase.

Note: I link to the Joe Wikert observation about e-book price increases in the post.

Sorry, my bad, didn’t follow that link. But I took Wikert’s article to be more about Amazon’s business model rather than having anything to do with publisher margins, reader novelty or author royalty demands. He’s talking about Amazon’s profits.

Amazon originally set things up so the Kindle would be both the iPod and the Kindle Store would be the iTunes store, and they’d profit from both hardware and book sales. Now it’s looking more like their primary profit center is going to be the latter and their hardware is going to be a niche product, and due to price competition, a less-profitable one. Will they make up for the drop in hardware profits by increasing eBook prices?

I am less concerned with scrutiny of corporate press releases and more concerned with the reality that I am reaching readers in amazing ways through the Kindle. And, no, ebook prices will not rise, they will fall–and dramatically. This is the Golden Age for authors and readers.

Scott Nicholson
http://www.hauntedcomputer.com

That to me is what’s so maddening about Amazon’s approach to PR. If Kent’s experiences and your experiences are typical, then Amazon has the data to show that this is a viable way of publishing, an excellent method for authors and readers to reach one another. Instead, we get convoluted statements that for every 32 hardcover cookbooks sold on a rainy third Tuesday of each month, 52 Kindle edition detective novels were sold to left-handed customers whose middle names include the letters R, Z or X.

And if there are pricing trends, one way or another, that data is there as well.

Regardless of the back and forth nitpicking, I think it’s fair to say that if anyone had predicted three years ago when the Kindle was introduced that in 2010 Amazon would be selling more ebooks than print hardcovers, they would have had very little company and David Crotty would have blasted them back to the stone age. But now it’s evident that despite what many skeptics said about the ebook market, it has clearly exploded and is expanding rapidly. This is one more piece of evidence, along with others which Kent recounted above. And far from refuting this basic point, the Guy LeCharles Gonzalez post Crotty linked to ends with the same basic conclusion.

We don’t know for sure why Amazon plays these games with its Kindle sales data. There are certainly valid competitive reasons for not disclosing sales while there’s also Steve Jobs’ theory that it’s to cover up for poor results. But it’s beside the point at this point.

One final addendum: I don’t quite know what to say about providing links to Publisher’s Lunch lobbing its twisted & illogical refutations from behind the safety of their paywall but it is annoying. The only bit on this Amazon release I’ve seen, excerpted on the open Gonzalez post, compared the number of James Patterson ebooks sold in the past three years (or less) to the number of James Patterson books sold in the past three plus decades worldwide. That’s worse than any of Bezos’ machinations.

I’m more than happy to eat crow if Amazon can provide any actual data to prove I’ve been wrong. Sadly, there’s little in this PR exercise to analyze other than Amazon’s sales techniques. I was trained as a scientist, and as a group, we’re very data-centric. We don’t believe wild claims until we see the proof. Here’s some counter data from my employer, using Bezos’ style of presentation. We have 5 books currently sold in the Kindle store. Looking at 2010 year to date sales, for every 1 Kindle edition of these books sold, we sell 12 paper versions. More importantly, for every $1 in revenue brought in from Kindle sales, print sales of these books bring in $45.

No one doubts that eBook sales numbers are growing rapidly. The problem is in declarations that they’ve already overtaken the market when in reality they’re still in single digits as far as % of sales go. It’s all a bit reminiscent of a recent president standing in front of a banner reading “Mission Accomplished”.

I wouldn’t paint myself as anti-eBook. My real (non-blogging) job is the transition of a long-running print book program into electronic modalities likely to prove more attractive to customers. I have been strongly critical of Amazon, particularly for their late night stealth book erasing debacle, their clumsy attempt to bully an industry and most often, I’ve suggested that single-function eReaders are at best a niche market. If you really believe that this press release marks a watershed moment, then that latter point is proven–it took the iPad, the iPhone and Android to make the market work, rather than the Kindle device. Had you said to me three years ago that when the Kindle software goes onto another company’s hugely popular device that sells more in 3 months than the Kindle sells in those 3 years, and when their software goes onto more than 100 million multi-use smart phones, then you’ll see 1.8 99 cent eBooks sold by Amazon for every 1.0 $25 hardcover, I’d likely have agreed that it was certainly possible.

You’re looking for reasons why Amazon should release some hard data. Here’s a few:
1) customer confidence: many customers are still likely sitting on the fence, afraid to buy a product that might turn out to be the betamax of eBooks. If Amazon has such overwhelming dominance of the market and can prove it, wouldn’t this help increase consumer confidence and increase sales?

2) publisher relations: Amazon wants to push publishers into doing business the way Amazon sees best. If they truly own this market, proof of that would give them much more power to get their way. Think of Steve Jobs’ stubborn refusal to budge when the iTunes store had no competition.

3) Apple’s stock price. Apple is fairly transparent with their sales numbers, and these releases prove how incredibly successful their devices have been, driving the company’s market cap through the roof. Do you think Bezos is deliberately trying to keep his company’s stock price down?

And if we’re keeping score on past predictions, one should note that all of this happened despite the agency model being in effect, which a certain someone predicted would lead to reduced demand (comment 3 here):

It’s certainly getting harder for those of us like myself in the agency-pricing skeptics camp to maintain that the price hikes reduced demand for e-books.

Or perhaps this prediction:

Macmillan and soon a couple of other of the big six have just renegotiated their own special deals. How exactly does this help your press? Not at all. It is not “directly beneficial” to your company because those terms don’t apply to your company

Those terms do, in fact, apply to my company, having read Apple’s iBookstore contract, as those are exactly what they’re offering.

Just a brief reply as I know you always like to get the final word in every SINGLE comment chain.
1. I was wrong about the impact of agency pricing.
2. You have been wrong about the popularity of ebooks and the Kindle ecosystem. Remember when you were comparing Kindle to HD-DVD and PlaysForSure? And what about Apple yanking all ebook app competitors? By the way, the Kindle app for iPhone has been around since March 2009.
3. The argument was whether AMAZON would let you use the agency model, not Apple. What terms are getting from Amazon? And how do your sales in the iBookstore compare to Kindle sales?

Well, the SK is one of my homes on the internet, I’m here every day and ready to respond. Plus, if Wikipedia has taught us anything, it’s that the most persistent author defines reality, not the most accurate author.

On point 2, there goes that “Mission Accomplished” banner again. Let’s see, the Kindle launched in November 2007, making it all of 32 months old. HD-DVD was codified as a format in 2003 and was phased out in 2008, giving it a lifespan of 5 years. Plays For Sure hit the market in 2004 and was phased out in 2008, again, giving it longevity beyond that of the Kindle to date. I may very well be wrong on this subject but it’s still far too early to tell.

I do stand behind my prediction though–I think the future eBook market will follow the music market in that we’ll eventually see an end to the vast array of proprietary formats and DRM’ed silos. Kindle as a stand-alone format is likely doomed (just like HD-DVD), and Amazon’s DRM lock-in is also doomed in the long run (just like Plays For Sure). The Kindle Store is likely to thrive and Amazon will be a big player in the market, but that’s a separate issue. Are you suggesting that the market is going to accept DRM and silo-ing of content over the long haul?

I don’t believe I ever suggested Apple would disallow competing eBook readers in their App Store. If you can find it, I’ll admit I was wrong, but I don’t recall that being my thinking. What Apple has done is give themselves a selective advantage by allowing in-app purchasing for iBooks. The other bookstores make you leave the app and go to a browser (to avoid having to pay Apple’s 30% commission on sales). Where I was wrong was that so far, this doesn’t seem to matter to book buyers the way it matters to music buyers. For music buyers, the in-app low barrier purchasing is a big factor in iTunes dominance and Amazon’s weak second place finish. So far it doesn’t seem to be hurting the Kindle store, though I’m not sure if this is because the hurdle doesn’t matter to book buyers or because Apple has done such a lackluster job with their own iBookstore. Amazon’s “read anywhere” strategy is likely a big factor as well, as Apple’s eBooks can only be read on iPhones and iPads, limiting their potential market. Then again, Apple’s only been in the market for 3 months, so it’s far too early to declare winners and losers.

The Kindle App for the iPhone has been around since March 2009, and it’s been instrumental in the Kindle Store’s success. Once again, more factual backup for my assertion that multi-use devices are a bigger market and a more important focus than the niche occupied by single-use devices.

As for point 3, the question was whether the competition in the marketplace would improve the terms offered to publishers everywhere, and that certainly has happened as Amazon indeed did make their offer much better after Apple joined the fray. You’re right in that they aren’t offering the agency model to smaller publishers, but again, it’s likely only a matter of time. Their current deal is only applicable for a small fraction of the books we publish (science histories and the like that we can afford to price at $9.99 or less). For nearly our entire catalog, we’re not going to bother with the Kindle store because the terms don’t work for small-market high-value content like we publish for our specialized market. Can’t give you any comparison between Kindle and iBook sales as of yet as we’re not yet in the iBookstore, still going over the details. But they do offer price flexibility without a penalty. If your price exceeds $14.99, Apple does allow themselves the ability to not accept the book in the store if it so chooses, but if they allow it in (and a $240 print lab manual is likely to command a price beyond $14.99 as an eBook), then the same terms apply as with all other prices. This makes them a vastly preferable reseller compared to Amazon who drastically change the terms if the price exceeds $9.99. Whether they’ll be able to generate any significant revenue for us is, of course, another question that it’s too early to answer.

Kindle is a great reading device, but after a year of helping promote Amazon’s business plan, I am severely curtailing my licensing of Kindle ebooks. Yes, licensing, not purchasing. This may sound churlish, but frankly I’ve had it with paying $9.99 or $2.99 or whatever to license what most often amounts to a one-time reading of an ebook. If I can’t own the ebook, in some form or the other — share it in a limited way; bequeath it to my heirs and assigns and pets — then Bezos can jump in the lake. This is a business model that for me has no future…

Okay, this explains why this announcement was made separately from Amazon’s earnings report, which was apparently disappointing (despite growth in sales and profit). They were looking to get some positive PR before the bad news dominated the discussion.

The fact that I am buying my 2 year old granddaughter iPad books instead of the off the shelf variety should say something.

Now if some of these companies would remove the software they have attached to their ebooks I would be able to check them out from my local library also! It seems that most ebook downloads from public libraries will not yet work on iPads or Kindles. Because a handful of holdouts will not take off the cookie that “returns” the book after a designated amount of time. How silly.

Comments are closed.