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Old 07-20-2010, 01:08 PM   #1
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Did the Agency Pricing Model + Kindle Apps => Amazon Victory?

Yes - I was one of the many voices bewailing the Agency Pricing Model imposed upon Amazon by the major publishers, and have browsed drop-jawed at some of the current asking prices for ebooks at Amazon and other ebook venues.
And yes - I have opposed both Amazon's proprietary ebook formats and DRM.
And yes - I have slogged though all those announcements of "Kindle Killers"

But after reading the latest news release from Amazon regarding ebook sales, Kindle sales, etc. - and the eclipse of hardback sales by ebook sales - and the overwhelming sales performance of major authors on Amazon - I began to see that a combination of factors is virtually guaranteeing Amazon's success in the ebook sales market - regardless of exclusionary DRM, exclusionary format, etc. These are:

1. Imposing agency pricing on all ebook retailers removes the ability of individual stores to offer pricing deals, membership rewards, or any perks that could differentiate it from other retailers, or attract buyers to it. The market largely becomes one of buying from the store that carries titles for your reading device. If there are no pricing breaks available in the independent or multi-format stores, why buy outside of Amazon and go to the trouble of de-DRMing, file conversion, etc? Especially given the track record of Amazon Customer Service and the depth of the Kindle books store?

Speaking of DRM & exclusionary formats:
2. Amazon's reading apps now gives you the option to read your Amazon ebooks on virtually all phones, PCs, Macs, iPads, iPhone, etc. The old arguments of "What is Amazon stops making Kindles?" or "Why should you have to buy a Kindle to read ebooks from Amazon?" become largely irrelevant. For average (non-techie) readers - does DRM really matter anymore if they can read their books on any or all of their digital devices?

The only remaining problem from DRM/exclusive formatting is the inability to move Amazon books onto other ereaders. How important is this?

Speaking of which
3. The blanketing of the ebook market with Kindles - esp. in light of the recent price cuts/price wars in the 6" screen models. Amazon was the only manufacturer to meet all Xmas orders in 2009. Amazon is progressively going global. The recent Woot sell-out of Kindles allegedly moved thousands of units. Warehouse deals on refurbished units sell out in less than a day. Can any other manufacturer really match this ability to provide readers in these quantities at a comparable low price?
Plus - with the launch of the DX Graphite - Amazon continues its focus on improving the reading experience itself, still focused on the page.

But what about the Apple challenge?
With K4iPad, K4iPhone, etc - is there really a challenge?
The launch of the iPad hasn't killed the Kindle.

What about the Google challenge?
With K4Android, etc. - is there really a challenge?

No - I'm not a covert Amazon agent. But the latest round of news set me thinking as to the long term effects of all the events in the past year or so that were supposed to "teach Amazon a lesson" or impact Amazon's sales. Seems to have produced just the opposite effect.
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Old 07-20-2010, 01:53 PM   #2
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I don't think the forced increase in ebook prices increased ebook sales. It may have shifted some of those sales to Amazon from other retailers, but as a general rule, as prices go up, sales go down.
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Old 07-20-2010, 02:00 PM   #3
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why buy outside of Amazon and go to the trouble of de-DRMing, file conversion, etc?
Having an e-reader other than a kindle ? And non kindle e-reader are more common than kindles
And unless they move with ePub, propose the kindle on the "local" website....

I can install kindle app on my phone i guess, didn't bother. As I said on an other topic, reading for long on anything else than an e-reader.

Nah, Sony won the war when they ditched their proprietary crap to get to epub, and they do sell outside US
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Old 07-20-2010, 02:07 PM   #4
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Not sure about the Agency model, but the Kindle Apps and the fact that Amazon is fighting hard to maintain their position as the Coca Cola of eReaders is working well. The Kindle still has cachet. In fact, I'd say it has as much as the iPad in its market (with the understanding that the iPad and Kindle markets do overlap a little).

At this point I'd say as the Kindle goes, so goes the eReader market.

They really need to get the dang things in brick and mortar stores, though, and not just non-functioning models running a demo loop.
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Old 07-20-2010, 02:14 PM   #5
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They really need to get the dang things in brick and mortar stores, though, and not just non-functioning models running a demo loop.
I would say the most important for now is "international". And yes, brick and mortar shops, there's a reason sony and bookeen rules the market in france.
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Old 07-20-2010, 02:17 PM   #6
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I wonder if we are starting towards the tipping point, where ebook sales are going to start to overshadow pbook sales? And, if so how much longer it will take before the whole industry shifts and the big publishers find their best authors moving to "self" publishing?

I mean, how many books will people like Steven King or James Patterson need to write, where the ebook copies outstrip the pbook copies before they say, "Screw the publishers and their giving me $0.70 a copy, I'll get it up on Amazon without them and take $3.00 a copy".
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Old 07-20-2010, 02:44 PM   #7
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"Screw the publishers and their giving me $0.70 a copy, I'll get it up on Amazon without them and take $3.00 a copy"
More like : Screw the publishers, let's make my website
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Old 07-20-2010, 05:39 PM   #8
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Originally Posted by HamsterRage View Post
I wonder if we are starting towards the tipping point, where ebook sales are going to start to overshadow pbook sales? And, if so how much longer it will take before the whole industry shifts and the big publishers find their best authors moving to "self" publishing?

I mean, how many books will people like Steven King or James Patterson need to write, where the ebook copies outstrip the pbook copies before they say, "Screw the publishers and their giving me $0.70 a copy, I'll get it up on Amazon without them and take $3.00 a copy".
However for many that would still be shooting themselves in the foot. Publishers do a lot more for them, such as editing the book, making sure it get into the appropriate stores, etc. Plus many of their contracts stipulate that the publishers have the rights for publishing paper and ebooks. The authors are then stuck in a situation where they would have to sever ties with their current publisher, and self publish, or stay where they are. Even if they leave, and try to go somewhere else, most publishers have the same basic terms, especially the ones large enough to support authors of the size that you suggest.
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Old 07-20-2010, 08:59 PM   #9
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"Amazon's reading apps now gives you the option to read your Amazon ebooks on virtually all phones, PCs, Macs, iPads, iPhone, etc. The old arguments of "What is Amazon stops making Kindles?" or "Why should you have to buy a Kindle to read ebooks from Amazon?" become largely irrelevant. For average (non-techie) readers - does DRM really matter anymore if they can read their books on any or all of their digital devices?"

Yes, you can read Amazon ebooks on about anything except the device you most want to read them on...your own, non-Kindle ereader! I don't really care if I can read it on my phone, toaster oven or my dog's backside. I want it on my Kobo!

When it came time to commit to a VCR format ages ago, I had a choice: Buy Beta tapes that only played on Sony Betamaxes, or buy VHS tapes that played on everybody else's machine. I think it's telling that Sony has gone with the more-nearly-open ePub format. Maybe they learned a hard lesson that Amazon hasn't.
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Old 07-20-2010, 09:15 PM   #10
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I don't think so. Amazon is winning and has been winning because they've focused on a few key times-- The largest collection of books and price. They also focus on making their kindle an excellent reading experience.

As for the Apps, they have helped a lot, I'm sure a lot of sales are not made from the Kindle ownsers. However B&N where the first. After having acquired FictionWise they had access to all of the platforms eReader was ported to and they did not waste any time branding their name on all the different platforms.

I also strongly believe that is why Amazon started making Kindle apps for all of the devices. With B&N having access to millions of users, vs Amazon K1 & K 2 base B&N was in a much better position to win the book war.

The last point, and kind of implied already, is Amazon is very agile, and adjust to the market very quickly.

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Old 07-20-2010, 09:38 PM   #11
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Publishers do a lot more for them, such as editing the book, making sure it get into the appropriate stores, etc.
I'm sure you could put a price on good editing, and I'd bet that for someone like SK or James Patterson it would be a drop in the bucket compared to the returns from $3.00 a copy.

As for getting it into the appropriate stores...we're talking about ebooks here, so I doubt it applies.
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Old 07-20-2010, 11:42 PM   #12
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poohbear_nc notes: the agency pricing gambit didn't kill Amazon ... it killed most of Amazon's competition ... which was probably not the intent. Although, come to think of it, the agency pricing cartel wasn't about increased competition, but price fixing, right?

poohbear_nc notes: Amazon's multi-platform reading apps makes its DRM somewhat irrelevant because, like DVD and Blu-ray encryption, it becomes seamless to the end-user. People "may not like it", but if it doesn't get in the way for the real world outside of Mobileread, it's not a problem.

poohbear_nc notes: Kindle ereaders have "flooded" the market, keeping up with 2009 Xmas demand, turning up in some bricks and mortar stores (Target), and wacky deals at Woot and refurbished models snapped up and sold out. Every one of these devices will need to be fed ... with more Kindle ebook content.

Yup ... Amazon is certainly in a strong position moving forward, and probably stronger as a result of the price fixing by publishers worried about loss of hard cover revenue without appreciating the bigger picture. But Amazon does and probably will reward shareholders, ultimately, with its consumer centric vision and market execution.
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Old 07-21-2010, 12:05 AM   #13
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Quote:
Originally Posted by Worldwalker View Post
I don't think the forced increase in ebook prices increased ebook sales. It may have shifted some of those sales to Amazon from other retailers, but as a general rule, as prices go up, sales go down.
Given many of your other posts, Worldwalker, I am surprised you don't take the next step. "Fine. Charge $14.99 for the latest ebook. I'll spend $14.99 ... but on three other books at $4.99. With so many books to choose from, I can afford to wait until the the $14.99 comes down in price. Life is short. I'll read something else in the meantime."

In others words, as prices go up, consumers find alternatives to their dollars. Sales only go down for the items viewed as "too expensive". The publishers catering to high end will see lower sales; the value conscious publishers will benefit.

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Originally Posted by EowynCarter View Post
Sony won the war when they ditched their proprietary crap to get to epub, and they do sell outside US
Hmmm. Ok. But I think you'd be hard pressed to find any facts to prove your argument. Other than lowering prices of existing inventory, Sony has taken no significant steps to expand its product line, e-book store, or territory in 2010. And this has been a very busy year for the category. In fact, the evidence suggests Sony is treading water and may even abandon or sell off the entire ebook division.

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Originally Posted by HamsterRage View Post
I wonder if we are starting towards the tipping point, where ebook sales are going to start to overshadow pbook sales? And, if so how much longer it will take before the whole industry shifts and the big publishers find their best authors moving to "self" publishing?
Amazon made no claims that ebooks were threatening pbooks. As several others have rushed to point out, ebooks represent a tiny fraction of pbook sales. That's not going to change soon.

It is possible a handful of "best authors" may ditch their "big publishers" ... greed turns up everywhere. Publishers fulfil very important functions in the book industry eco-system and are not likely to be replaced. But publishers also will need to evolve their business models to survive and thrive.

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Amazon is winning and has been winning because they've focused on a few key times-- The largest collection of books and price. They also focus on making their kindle an excellent reading experience ... The last point, and kind of implied already, is Amazon is very agile, and adjust to the market very quickly.
Well put. Amazon's market execution, and agility to adapt as needed, is only matched by its larger vision of where the market will be before it gets there. The moment Amazon figured out that Kindle was a platform and not a device, and that books were sold on the basis of interaction with other readers ... hence the insistence on user reviews and always on 3G capability ... they took the lead. No one else, not even Apple, has so many pieces in place. Amazon's single-minded focus on outstanding customer experience -- in the sales process, in returns, in hardware design, in integrating mutli-platforms -- is a corporate asset that will provide great advantage over many other market players in the days ahead.
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Old 07-21-2010, 01:28 AM   #14
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Hmmm. Ok. But I think you'd be hard pressed to find any facts to prove your argument.
I was speaking of the e-reader market. Nah, sony don't sell much books here. Still, probably a bit more than Amazon.
Amazon is winning the e-reader war, that's only valid for the US. Get out people ! There is a vast world outside the US.
And e-books ? Here in France most people don't speak English, they want to read in French. And unless you're going freebies / PD only, you'll need a reader that support ePub with DRM.
Until such a point amazon gets moving with making partnership with the french publishers, sell kindle and ebooks on amazon fr rather than amazon.com... They won't sell much ebooks here.

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Sony has taken no significant steps to expand its product line, e-book store, or territory in 2010
Because Amazon did ? Not really.
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Old 07-21-2010, 08:32 AM   #15
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I'm not sure what "victory" means, especially since in general I tend to think that competition benefits everyone from the punters to the publishers to the writers. One company holding 70% market share is not always a bad thing, but it's not necessarily a good thing -- even for the company who's got it, if their revenues suck wind and everyone targets them as a result of what they need to do to hold a high market share.

I don't think agency pricing had a big effect here. Without it, Amazon would have continued to subsidize ebook sales in order to capture / maintain market share.

Although I don't mind DRM, in part due to the ability to read DRMed content on a variety of devices, I don't think this will mollify the anti-DRM crowd. In many cases they are opposing DRM on principle rather than practicalities.

Re: Apple, IMO they're not really much of a competitor, at least not yet. Amazon blows them away in terms of sales presentation and execution, not to mention they have 15 years of experience and sales data in the book biz, plus a branding advantage. However it does give Amazon a big competitive advantage over Apple (but not B&N et al) as iBooks will be limited to iPads and iPhones.

More critically, Apple makes its money off of devices; the content largely exists to drive hardware sales, and constitutes a small fraction of Apple's revenues. Amazon, on the other hand, planned from the start to make money from both content and hardware and have them both drive revenues. Thus Apple doesn't really care if people buy iBooks or Kindle books, as long as they buy iPads.

Also, some analysts are recognizing that the iPad is not necessarily an ereader replacement, more a complementary device. My expectation for awhile (and I suspect Amazon's as well) is that the "casual" reader will be happy with a tablet, but those who read extensively (and buy more books, thus driving a disproportionately large amount of revenue) will want a focused device with a better reading experience.

So, I'd say it's the totality of the Kindle experience and Amazon's skills at execution (not all of which is positive, of course), as well as a few structural quirks and branding, that will keep them a big player for a long time.
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