Amazon Kindle e-book downloads outsell paperbacks

[fjtorres]

Originally Posted by Kali Yuga

Because Amazon's managers know how to run a business.
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.
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The only problem this solves is "how will skinflints get their hands on new books?"

Correct on both counts.
Just because a customer can be identified for a product/service doesn't mean there is a viable business to be found in meeting that demand.
A good manager understands that some customers are best left unserved or, better yet, redirected to a competitor.

I find amusing the constant carping about the Kindle line's lack of epub, library, and ADE support; as if that were some kind of failing. It isn't. It is a design *feature*. Kindle readers and apps exist, first and foremost, to sell Amazon ebooks; not to meet the needs of readers whose appetite for content exceeds ther willingness to pay (to put it kindly). Making a good reader that sells at a good price is a means to an end, not an end unto itself.

The reason Amazon is so much more succesful than their competitors is because they are cherry-picking the ebook-buying market, drawing in those customers who don't mind buying most of their content and leaving the rest to their competition.

In the video game industry, which ebooks are starting to resemble, there is an important term that exemplifies the fact that not all customers are equally valuable to a platform holder: attach rate. At its simplest, this is the ratio of unit game sales divided by the number of unit consoles sold. This current console generation, the Nintendo Wii has clearly outsold the second place Xbox 360 in total number of consoles sold, yet the 360 regularly ranks way higher in total game sales and has recently been generating more game software revenue than the Wii and Sony PS3 combined. This is due to a combination of factors but it is mostly due to the Xbox managers' relentless focus on marketing the 360 as a gaming platform for serious gamers. Where the Wii drew in buyers who hadn't previously owned game consoles and Sony drew in buyers interested in the PS3 as a bluray player, Microsoft drew in a disproportionate share of buyers who's primary interest was gaming and routinely bought 8-10 or more games a year. In simple attach rate terms, the average Xbox owner has bought 9+ games per console while Sony and Nintendo buyers average more like 6 games. And this in an industry with healthy used and rental businesses on the side.

If Amazon ebook unit sales are outpacing their pbook sales it is because Kindle buyers buy a lot of books, not just because they've sold a Lot of Kindles. (Though it surely helps.) If there were any kind of reliable tracker of ebook and reader sales it would clearly show that Kindle has a higher attach rate than any of its competitors because it doesn't support library access and because you don't need a Kindle to buy and read Kindle books.

It is all to easy to focus overmuch on the Kindle hardware and forget that Kindle is also software. And even easier to forget that the real focus is the books. Amazon management is doing exactly what they set out to do: sell ebooks. Everything else is secondary or irrelevant.

[Maggie Leung]

Originally Posted by fjtorres

Correct on both counts.
Just because a customer can be identified for a product/service doesn't mean there is a viable business to be found in meeting that demand.
A good manager understands that some customers are best left unserved or, better yet, redirected to a competitor.

I find amusing the constant carping about the Kindle line's lack of epub, library, and ADE support; as if that were some kind of failing. It isn't. It is a design *feature*. Kindle readers and apps exist, first and foremost, to sell Amazon ebooks; not to meet the needs of readers whose appetite for content exceeds ther willingness to pay (to put it kindly). Making a good reader that sells at a good price is a means to an end, not an end unto itself.

The reason Amazon is so much more succesful than their competitors is because they are cherry-picking the ebook-buying market, drawing in those customers who don't mind buying most of their content and leaving the rest to their competition.

In the video game industry, which ebooks are starting to resemble, there is an important term that exemplifies the fact that not all customers are equally valuable to a platform holder: attach rate. At its simplest, this is the ratio of unit game sales divided by the number of unit consoles sold. This current console generation, the Nintendo Wii has clearly outsold the second place Xbox 360 in total number of consoles sold, yet the 360 regularly ranks way higher in total game sales and has recently been generating more game software revenue than the Wii and Sony PS3 combined. This is due to a combination of factors but it is mostly due to the Xbox managers' relentless focus on marketing the 360 as a gaming platform for serious gamers. Where the Wii drew in buyers who hadn't previously owned game consoles and Sony drew in buyers interested in the PS3 as a bluray player, Microsoft drew in a disproportionate share of buyers who's primary interest was gaming and routinely bought 8-10 or more games a year. In simple attach rate terms, the average Xbox owner has bought 9+ games per console while Sony and Nintendo buyers average more like 6 games. And this in an industry with healthy used and rental businesses on the side.

If Amazon ebook unit sales are outpacing their pbook sales it is because Kindle buyers buy a lot of books, not just because they've sold a Lot of Kindles. (Though it surely helps.) If there were any kind of reliable tracker of ebook and reader sales it would clearly show that Kindle has a higher attach rate than any of its competitors because it doesn't support library access and because you don't need a Kindle to buy and read Kindle books.

It is all to easy to focus overmuch on the Kindle hardware and forget that Kindle is also software. And even easier to forget that the real focus is the books. Amazon management is doing exactly what they set out to do: sell ebooks. Everything else is secondary or irrelevant.

Well said.

[queentess]

Originally Posted by fjtorres

In the video game industry, which ebooks are starting to resemble, there is an important term that exemplifies the fact that not all customers are equally valuable to a platform holder: attach rate. At its simplest, this is the ratio of unit game sales divided by the number of unit consoles sold. This current console generation, the Nintendo Wii has clearly outsold the second place Xbox 360 in total number of consoles sold, yet the 360 regularly ranks way higher in total game sales and has recently been generating more game software revenue than the Wii and Sony PS3 combined. This is due to a combination of factors but it is mostly due to the Xbox managers' relentless focus on marketing the 360 as a gaming platform for serious gamers. Where the Wii drew in buyers who hadn't previously owned game consoles and Sony drew in buyers interested in the PS3 as a bluray player, Microsoft drew in a disproportionate share of buyers who's primary interest was gaming and routinely bought 8-10 or more games a year. In simple attach rate terms, the average Xbox owner has bought 9+ games per console while Sony and Nintendo buyers average more like 6 games. And this in an industry with healthy used and rental businesses on the side.

I've owned all 3 of these devices, and the 360 is the only one I still own. Wii got the boot when the games failed to mature (though I admit that Boom Blox was more fun than I expected), but my parents, my grandparents, my in-laws, and several of my young cousins (younger than 10) all own Wiis. But, as you note, these are not the demographics that buy games. The PS3 games just don't grab me. Meanwhile, Xbox 360 continually puts out games I want to play, and so I buy them.

It's fascinating stuff, how a system can be a commercial success (I can't speak to profits), but the recurring revenue stream just isn't there. Amazon nailed it with it's hardware and tie-in store.

[ProfCrash]

I could very easily see paying to belong to a Netflix for books type thing. Get the book through them, read it, and if I like it buy a copy if I think I'll re-read it. Well worth $10 a month to me as long as they have the type of books that I would read.

We have all three graming systems. I play the Wii, my Hubby plays the PS3 and XBox. He has been using the PS3 pretty exclusivly for the last couple of months due to a racing game that came out.

[SleepyBob]

Originally Posted by fjtorres

I find amusing the constant carping about the Kindle line's lack of epub, library, and ADE support; as if that were some kind of failing. It isn't. It is a design *feature*. Kindle readers and apps exist, first and foremost, to sell Amazon ebooks; not to meet the needs of readers whose appetite for content exceeds ther willingness to pay (to put it kindly). Making a good reader that sells at a good price is a means to an end, not an end unto itself.

It certainly is a failing of the Kindle device, from a consumer point of view. Anything that your product is inferior at, compared to the competitors' products, is a failing. It may be intentional, and it may be designed to boost sales of another another product (i.e. ebooks), and it may even be successful at it. But that doesn't mean it isn't a failing of the product being sold.

The Nook's shorter battery life isn't a feature - it's a failing, plain and simple. It's a failing caused in part by a design decision to have a color touch screen, which is a feature, but it's still a failing of the Nook. Just as Amazon's decision not to support epubs and library lending. You can claim that it's a sound business decision on Amazon's part, but it is still a failing of the Kindle product.

[jocampo]

Originally Posted by ProfCrash

We have all three graming systems. I play the Wii, my Hubby plays the PS3 and XBox. He has been using the PS3 pretty exclusivly for the last couple of months due to a racing game that came out.

Off topic, but what game ... I do also have PS3, and love it!

[ProfCrash]

Grand Tourismo. Before that it was Madden Football. He was playing Red Dead Redemption in the XBox with Madden Football.

[HarryT]

Originally Posted by SleepyBob

Just as Amazon's decision not to support epubs and library lending. You can claim that it's a sound business decision on Amazon's part, but it is still a failing of the Kindle product.

I must disagree. Amazon's goal is to sell E-BOOKS, not Kindles. The Kindles are just a way to get people to buy e-books, but Amazon don't care if you read their e-books on a Kindle, a PC, a Mac, an iPad, an Android phone or tablet, a Blackberry, or whatever. Letting the Kindle read ePub books would entirely defeat the purpose of the exercise, which is to bring business to Amazon's e-book store.

[jocampo]

I quote myself, from another thread:

I personally do not see lack of ePub support as a problem, giving the case I don't read fiction or novels (at least not much) but IT books; most IT books are only found at Amazon or O'reilly, so the ePub format is irrelevant to me.

I had a Nook 1st gen and even when it's an ok device, I was not able to find my IT books directly from B&N. In order to avoid the extra step of breaking DRM, converting, etc, I decided to buy a Kindle instead and can't be happier. I don't visit public libraries, don't miss that and don't need it, so ePub means nothing to me. Of course, that could be totally different for other users; that's why I usually suggest avoid the "format fixation syndrome" and validate the reader purchase based on the kind of books you like and are willing to buy or lend.

I am more concerned with the DRM stuff than the ePub vs azw thing. Without DRM protection most users could buy from any store without being worried about formats at all, Calibre does the conversion in 60s.

Buying an ebook should be a free decision, and the DRM protection, in my opinion, goes against that.

[fjtorres]

Originally Posted by SleepyBob

It certainly is a failing of the Kindle device, from a consumer point of view. Anything that your product is inferior at, compared to the competitors' products, is a failing. It may be intentional, and it may be designed to boost sales of another another product (i.e. ebooks), and it may even be successful at it. But that doesn't mean it isn't a failing of the product being sold.

"The consumer point of view?"
Which consumer?
Are you proposing that all consumers are interchangeable? Have the same needs, same tastes, same biases, same budgets?
Or are you proposing that products be designed to meet the needs of every last possible potential customer, include every last feature that any potential competitor might conceivably throw up on a specsheet?
Is a Porsche Cayenne failing because it doesn't offer the fuel economy of a Honda Fit or the manure-hauling capacity of a Dodge Ram? Is a Tesla failing because it offers a single speed transmission instead of five, six, or eight gears?

The beauty of open and competitive markets is that they allow for diversity in design and variety in features so that individual consumers get to choose for themselves what matters to them, what is useful to them, and not be stuck with whatever some "expert" somewhere decided was "necessary" and what was a "failing".
In open and competitive markets it doesn't take long to find out how many consumers think touchscreen UIs are more valuable than wireless access and how many are willing to pay for both; how many prefer grayscale eink and extreme battery life to color and hours of battery life, or vice-versa; how many care about annointed standards, how many care about library access, and how many prefer standalone devices that don't need a PC to acquire books.

So far, the open and competitive market seems to think the Kindle is anything but a failure and it is saying there is room for more than one vision of what an ebook reader should and shouldn't do.
Which is great, because the way things look right now, if there were only room for one ereader product in the market, that one product would more likely be a Kindle than a generic ADE reader.

Kindle is not going to magically vanish overnight anymore than Google or Apple or Microsoft is going to vanish. If anything, the Kindle ecosystem is on the ascendancy and headed for ubiquity.
Sometime this summer (if not sooner) Amazon is going to crow about selling more ebooks than print books combined; sometime this calendar year they'll announce they've sold tens of millions of Kindles worldwide. Anybody irritated by those posibilities had better stock up on antiacid.

[Catlady]

Originally Posted by HarryT

I must disagree. Amazon's goal is to sell E-BOOKS, not Kindles. The Kindles are just a way to get people to buy e-books, but Amazon don't care if you read their e-books on a Kindle, a PC, a Mac, an iPad, an Android phone or tablet, a Blackberry, or whatever. Letting the Kindle read ePub books would entirely defeat the purpose of the exercise, which is to bring business to Amazon's e-book store.

And I'm back to my standard lament--if Amazon wants to sell e-books, why won't they sell them to me now that I've bought a non-Kindle?

I really do understand why Kindle doesn't support epub. It makes business sense. But I cannot understand why Amazon doesn't SELL epub.

[Fbone]

Originally Posted by Catlady

I really do understand why Kindle doesn't support epub. It makes business sense. But I cannot understand why Amazon doesn't SELL epub.

My guess is Amazon doesnt want to pay Adobe $0.22 for each DRM download.

May sell fewer Kindles going forward.

Prevent confusion dealing with multiple vendor devices on same account.

Not be able to Whispersync.

[vaughnmr]

And maybe they don't want to have to deal with the nightmare drm provided with Adobe ADE.

[ProfCrash]

Originally Posted by Catlady

And I'm back to my standard lament--if Amazon wants to sell e-books, why won't they sell them to me now that I've bought a non-Kindle?

I really do understand why Kindle doesn't support epub. It makes business sense. But I cannot understand why Amazon doesn't SELL epub.

And I go back to my lament, why doesn't BN, Kobo, and Sony sell Mobi? Clearly they don't want my dollars.

[fjtorres]

Originally Posted by vaughnmr

And maybe they don't want to have to deal with the nightmare drm provided with Adobe ADE.

Not everybody gets nightmares from dealing with ADE. But, yes; it does happen.

I suspect the lack of epub support by the Kindle ebookstore (as opposed to the reader or app) may be because in the ADEPT ecosystem the quality of the user experience is not *entirely* determined by Amazon; with Kindle, Amazon is entirely responsible for solving any problem the user has, whether it be due to hardware, software, or content issues. Tying your brand to a competitor's product and putting your reputation at the mercy of your competitor's user support--which is known to be... not-as-comprehensive--is not something a smart manager willingly does.

To put it another way: some of the issues faced by some ADEPT DRM buyers are due simply to the fact that nobody is *solely* responsible for solving *every* problem. The hardware vendor is only responsible for the hardware; Adobe only cares about activations and authorizations, and the bookstore only responds to content issues. The better hardware vendors *will* try to solve as many of the interaction issues that arise as they can but if the issue turns out to be due to a failing in the ADE app on the PC side they have no choice but to pass the buck. Conversely, some issues are due to inconsistent implementations of Mobile ADE on the device side which is something Adobe has no control over so they too have to often pass the buck.

With Kindle, there is no buck-passing possible.
Amazon can be quite draconian when dealing with customer misbehavior and, yes, like any organization composed of humans, they screw up from time to time. But they do understand that their *long-term* survival is tied to customer satisfaction. The unavoidable reality is that Amazon could never *guarantee* the *same* level of satisfaction to ePub customers.

On a more prosaic side, there is the simple reality that Amazon selling ADEPT ePubs adds value to competing products and, worse, a competing ecosystem. Amazon is betting that *in the long term* it is better to forgo any extra revenue from ePub sales than to rake in short term sales from propping up a competitor. Factor in that the Kindle back-end systems are Amazon owned and operated and that there are few if any licensing fees and royalties due on the ebook format or DRM, and add in the larger installed base of Kindle book buyers, and the economics of ePub book sales becomes even more marginal to Amazon in the short term. Simply put, there likely isn't enough money to be made in ePubs to offset the strategic cost of propping up a competitor. (Microsoft, for one, has long made about as much money off Macintoshes as Apple through its sales of Office so their infamous $200 million loan to Apple in its darkest hour wasn't just about staving off the antitrust regulators. But it sure has come back to haunt them, no?) As a rule, it is safest to let competitors sink or swim on their own.

A third consideration: as the recent press release made clear, Amazon's operates on *very* lean profit margins. On their $10 billlion in sales in Q4/2010 they netted under $500 million in profits. That's in the 4% range. Because of their recent investments in updating their infrastructure, the state of the economy, etc, they just warned their expected profit margins could fall into the 2% range. Well, guess what? on a $10 ebook, Adobe's flat fee of 22 cents works out to 2.2%. On cheaper books (~80% of the Kindle store catalog) that would wipe out their profits. Amazon may or not be selling ebooks at a loss as their competitors claim but odds are that selling ADEPT ePubs is not going to be adding much net to the bottom line.

To make it work Amazon would have to either:

1- price ePubs higher than azw's and whether the "gouging" complaints of the second-class customers
2- explicitly break out the Adobe "tax" and deal with the wrath of Adobe
3- eat the Adobe "tax", in effect paying to support their enemies *and* face the risk of attracting the attention of the trust-busters and Brussel-crats for what could be plausibly be portrayed as predatory pricing and monopolistic behavior
4- introduce and license a new (fourth!) ePub DRM scheme under their control and face the same regulatory threats as eating the costs of ADEPT

Right now, for a consumer, choosing the Kindle ecosystem or the ADEPT ecosystem (or the Fairplay one, for that matter) is a matter of trading off the design features of each system and picking the one they'll live with for the forseeable future. Whichever ecosystem they choose they face the *exact same* choice of DRM lock-in vs (theoretically) breaking the law to DeDRM their purchases. If they stick to the letter of the law, lock-in to Adobe (or Apple) in no different from Lock-in to Amazon. Alternately, if they choose to break DRM the format of the store content becomes irrelevant.

Amazon selling ePubs offers little if any benefits to Amazon and few if any benefits to consumers since it only benefits those that think ePub is internally magical *and* refuse to DeDRM their ebooks. Not a particularly big market, really.

Really, folks, one size doesn't fit all.
And multiple (well-supported) formats are not the end of the world.
The only reason why anybody would care overmuch about Amazon supporting ePub is if they find the ePub ecosystem "defficient" when compared to the Kindle value equation and we all know that it isn't, right?