Quote:
Originally Posted by Kali Yuga
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.
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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.