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Old 07-21-2010, 10:15 AM   #16
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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.
All too true.
However, history has shown that for emerging product categories it helps when there is a flagship brand that will draw in the mass market.

Much as it grates on the abA (anything but Amazon) crowd, Amazon is the public face of the ebook reader business, not Sony, not Nook, not anybody else. They get the benefit of the doubt from "ordinary" (non-hobbyist) customers, they take the flak of the infuriated nay-sayers. Its actually business as usual.

The Amazon press release has certainly done its intended job; stir a lot of comment before their expected financial report, and also remind the investment community (the real target of these PR documents) that Kindle is making money for Amazon. (Remember how their stock got downgraded after the Nook price cut?)

To me there are but two significant factoids in the whole release:

1- That ebook sales volume exceeds hardcover volume *at Amazon*. No mention of dollar amount, no implication that hardcovers are dying. Rather that ebooks are a real market unto itself. It's not for hobbyists or gadget afficionadoes; it is a mainstream product at Amazon. Other vendors will have to speak for themselves *if* they can.

2- The Patterson breakdown. Those are significant numbers. First, because they add up to big money (see above). Second because they leave individual competitors in the dust. And, precisely because the ebook market is still a small part of the overall business it calls into question the long term viability of competing ebookstores. Patterson (and the other cited authors) are mainstream authors. We're not talking genre fiction, but the heart and soul of the recreational reading market. And 80% of his sales have come from Amazon. This is a significant number because an 80-20 split among alternatives is a common feature of many markets. Network effects tend to drive customers to dominant players in a given market, and the competitors tend to consolidae around a viable alternative. In this case what we're seeing is a partitioning of the market into two camps , Amazon vs ePub, just as the subscriber TV market is split between wired vs satellite, PCs into Windows and Unixes, etc.

Amazon is not necesarilly going to hold on to 80% share of ebook sales indefinitely but there is nothing on the horizon to suggest they can't, either. (If anything, the coming wave of cheap Android webpads suggests they might actualy *grow* their share.) The thing is, Amazon can afford to see their market share erode as long as they're making money and, thanks to the Price-fix regime, their margins are set at a pretty hefty level. eBooks make money for Amazon and they are going to continue to make money for them.

The problem lies in the second camp; the horde of ebookstores committed to Adobe ePub. They're caught in a bind: on the one hand they are competing against each other for a minority share of a still small business while at the other they are stuck with a price-fix regime that doesn't allow them much manuevering room for competition. They all sell the same product to the same customers at the same price. They can't go after Amazon customers, they're walled-off. They can't go after Apple iBook customers (However many those may be). They can only go after Nook, Sony, and second tier "open" hardware customers. Worse, ADE is supposed to (at some point) enable B&N DRM for non-B&N readers. And B&N has already shown they are willing to license their client software to other ebook reader manufacturers. Adobe/B&N ePub is becoming a generic product for generic readers supplied by generic bookstores.

No differentiation.

Add it all up and it becomes clear that at some point there is going to have to be a consolidation of Adobe ePub ebookstores. And B&N has the inside track. Oh, and (someday) Google is coming.

For all the focus on Kindle hardware, the real story for the next year or so is going to be on the bookstore side, I think. An outright war for the other 20% of the market.
There's a shakedown coming and it won't be pretty.

I'm not sure Agency pricing is guaranteeing an Amazon victory but it sure looks like its going to kill a lot (if not most) of the smaller ebookstores.

Last edited by fjtorres; 07-21-2010 at 10:20 AM.
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Old 07-21-2010, 10:55 AM   #17
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Excellent points fjtorres!

One question to really consider now, given these figures, is: what would happen to the ebook market if Amazon began offering ePub format books, and followed B&N's supposed plan for enabling their DRM for other readers, and enabled Kindle DRM for non-Kindle readers?
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Old 07-21-2010, 11:03 AM   #18
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'm not sure Agency pricing is guaranteeing an Amazon victory but it sure looks like its going to kill a lot (if not most) of the smaller eBook stores.
Weird.
One the the reason involved for fixed pricing in France is to protect the small bookstore against the can make big rebate ones.
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Old 07-21-2010, 12:15 PM   #19
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Weird.
One the the reason involved for fixed pricing in France is to protect the small bookstore against the can make big rebate ones.
Protectionism only works in closed markets; the US ebook market is open and active.

In a competitive environment *mindshare* matters, company visibility.
Everybody knows who Amazon is, who B&N is.
When you have a horde of generic me-too vendors none can stand out. Amazon and B&N aren't just ebook resellers, they are content sellers of pbooks and other forms of media, and are established brand names. Why go to a generic vendor when you get the same product at the same price from a known quantity?

And then, there is the fact that both Amazon and B&N are moving into the publishing business as an *alternate* way to differentiate their catalogs from the me-too generics.

Finally, there is the disturbing side effect that the price-fix scheme has incentivized retailer-level exclusivity contracts. Amazon has inked several deals for excusive content. With 80% of the market they can easily make it up to select authors in (sightly) higher royalties.

Between in-house published content and select exclusivity deals, Amazon and B&N both can make a compelling case that they should be the buyer's first stop when looking for ebooks. More often than not, the first stop will be the last stop.

Nothing weird about it; it's just the half-baked nature of the Agency Model. The Price-Fix Five are a big part of the market but they are not all of it. Not by a long-shot. Alternatives exist. And as long as alternatives exist, protectionism of ebooks is a lot like censorship on the internet: all it does is send the traffic elsewhere.
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Old 07-21-2010, 01:28 PM   #20
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One question to really consider now, given these figures, is: what would happen to the ebook market if Amazon began offering ePub format books, and followed B&N's supposed plan for enabling their DRM for other readers, and enabled Kindle DRM for non-Kindle readers?
Well, no: it's not a question that requires much consideration, actually. Amazon is simply not going to offer ePub DRM content on its Kindle platform or to its customers. It has no incentive to do so and much incentive NOT to do so. Right now, buying from Amazon is a breeze: one format. Why complicate this with Beta, VHS, HD DVD and Blu-ray?

I am struck by Debbi Mack's experience with her first novel, Identity Crisis. According to her blog, she's sold 5,600 copies on Amazon (all Kindle) and 84 on Smashwords, the supposed friendly home of indie publishing. JA Konrath made a similar comment about selling on Amazon ... his books are really moving: he claims 5,000 copies of his books sold on Amazon in the first 18 days of July and a hefty 70% royalty rate.

The only segment missing out on Kindle ebooks are libraries, almost all of whom use the Overdrive system and mainly offer DRM ePub. It's not hard to believe Amazon's business development folks are working hard to get Kindle ebooks on offer there as well. With that in place, ePub becomes pretty much just another format without a key differentiator.
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Old 07-21-2010, 07:59 PM   #21
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System is still too fragmented. Since everyone (agency and indie) charge the same price no matter which webtailer you use the only consideration is format and website loyalty.

I still want just a couple of sites that provide access/links to all ebooks. Maybe one for agency and a couple for indie/self publishing. Maybe the BN/Fictionwise and PubIt combination will work for me.

I dont like having to check a dozen or more sites for ebooks. Waste of time and a big turn-off. Thus near-all-encompassing Amazon dominance.
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Old 07-22-2010, 01:07 AM   #22
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It's not hard to believe Amazon's business development folks are working hard to get Kindle ebooks on offer there as well.
Last I saw Overdrive supported Mobi DRM for library ebooks.
(Still do; http://www.overdrive.com/resources/m...ats/eBooks.asp)

If Amazon cared about library use, they could easily assign a parallel Mobi PID to Kindles; they just choose *not* to.

Since Kindle is intended as a storefront first and foremost its unlikely they'll go out of their way to support library users. Similarly, Amazon doesn't care about ePub enough to go out of their way to kill it. If anything it offers them antitrust insurance.

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Old 07-22-2010, 09:13 AM   #23
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Maybe they want to do the lending themselves. amazon.com is already offering video on demand. why not branching out to lending ebooks? 2$/book for a two-week period of reading. Deductible if you decide to buy it after all. Or a 10 $ monthly flat.
If there is a device provider who has control over the content on said device, it's amazon.
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Old 07-22-2010, 11:38 AM   #24
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The Patterson numbers to me are blown away by the announcement that Larsson has hit a million ebook sales as well--with only three books and in far fewer years. Patterson has been around since Gutenberg.

Clearly Amazon has pretty much won for now.

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Old 07-22-2010, 01:32 PM   #25
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I've never thought the iPad would hurt kindles other than the dx. I'm fairly certain that there are more kindle books sold for the iPad than iBooks.

Thing is, we have no idea because Amazon doesn't publish sales numbers. Even their latest tidbit doesn't tell us much. Are we talking about just any 99 cent book or are apples being compared to apples. What is the sales ratio of hardback to ebook for those that are both sold on Amazon.

The iPad will sell close to ten million this year and 25 million by the end of next year. It's going to be the dominant ereading platform even if the individual iPad reader doesn't read as much as a eink device owner per device. There are just going to be far more people with ipads and forth coming android tablets.

Amazon and B&N will likely be the dominant book sellers in those devices. Sony better get it's act in gear and get a reader app on these platforms.

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Old 07-23-2010, 02:16 AM   #26
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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?
Not any time in the near future, I'm sure. Amazon has said its ebook sales now exceed hardcover, but refuses to say how they compare to paperback, which typically sell far more than hardcover.

Several points to ponder:

1. Amazon customers are, by definition, more tech savvy than most, more willing to go high tech; they aren't a representative sample of the reading population in the US.

2. Despite all the press Kindle and ebooks have been getting of late, I venture to say the vast majority of book purchasers still haven't heard (or have barely heard) of ebooks, don't know what an ereader is, and likely can't see the point in any case. Having to plop down hundreds of dollars for a device that allows them to do what they can do for free makes little sense to most dollar-concious folk.

3. Remember that, as big as Amazon is, a) it still only acounts for 10-15% of all book sales in the US, b) its ebook sales are only a single-digit percentage (Amazon won't say, exactly) of that 15%, and c) that 5% of 15% represents some 80% of all ebook sales in the US. Overall, ebooks still account for 3% or less of the total market.

3) The only way Amazon can afford to sustain its prices on ebooks long-term is by forcing publishers out of the picture entirely. Which is what, apparently, Amazon hopes eventually to do. But that depends in part on capturing enough of the market to be able to force a sea-change. Doing that is far less of a sure bet for Amazon with Apple and Google (who are no competitive slouches themselves) entering the market.

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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".
First, I believe authors generally collect around 15% of cover price on hardcovers -- that'd be $3.90 for a $26 retail book. That said, I think I heard something about Amazon offering authors 70%. On a $9.99 ebook, it'd be a better deal; at $4.99, not so much.

Second, I don't see a self-published ebook (even by a first-tier) author making the NYT bestseller list any time soon. Marketing (and we all know how publishers game bestseller lists) is still key to the big numbers, and self-published authors have nothing but word of mouth. Of course, Amazon's vision for ebooks may mean the end of blockbuster authors. Whether that's a good thing, who can say?

That said, I have a hard enough time reading King now. God forbid I'd have to slough through a King story that hadn't been lovingly caressed by an editor's axe. There are very few authors who can stand on their own without the benefit of good editing (JK Rowling and Dan Brown make that eminently clear), and rare is the author who could afford to pay for editing out of his own pocket.

--Nathanael

Last edited by Nathanael; 07-23-2010 at 02:24 AM. Reason: Added comment about marketing and bestseller lists
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Old 07-23-2010, 02:40 AM   #27
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The iPad will sell close to ten million this year and 25 million by the end of next year.... Amazon and B&N will likely be the dominant book sellers in those devices.Lee
With five of six major US publishers already onboard at the iStore I think it's way too soon to count Apple out. All Apple has to do is make it easier for iPad owners to shop at the iStore than at Amazon, and Kindle iPad sales are far from guaranteed. iPad owners still have to download and install the Kindle app, and, as the browser wars demonstrated, that's can be a serious disadvantage.

Question for Kindle-reading iPad owners: how easy is it to get Amazon content on your iPad?

--Nathanael
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Old 07-23-2010, 08:06 AM   #28
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Several points to ponder:
--Nathanael
Your reality just doesn't seem to be the same as the world I live in. There are so many half-thruths and heavily opinionated statements in what you say that I get the impression you are a publisher employee... One thing is for sure, somehow Amazon really pissed you off!
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Old 07-23-2010, 10:32 AM   #29
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Question for Kindle-reading iPad owners: how easy is it to get Amazon content on your iPad?

--Nathanael
It's so easy I can do it, despite being tech feeble. Loading apps on iPad also is easy. I have six or seven book apps on iPad and can easily switch among them, as well as buy books from them.

Ease of use is why I went with a Kindle, then an iPad. I bought a Sony after the Kindle, and returned it because I found it a pain. There are lots of Kindle users with very little tech know-how. That's a huge part of Kindle's appeal.

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Old 07-23-2010, 11:29 AM   #30
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Question for Kindle-reading iPad owners: how easy is it to get Amazon content on your iPad?

--Nathanael
Pretty easy.From my computer (or iPad/iPhone) I can browse the Kindle store, find a book, and send it to my iPad/iPhone immediately.

Amazon has a real edge with their Kindle store right now; selection, discoverability, price, and convenience.
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