Headline 2010: e-Reader device failure

The market knows best, right? Markets are bloody paths to progress. At this writing there are approximately 52 e-reader devices coming to market in the next 12 months. Fifty-two different devices coming to market (Here’s what I wrote about Steve Jobs’ approach to reader devices when there were just 45 e-readers on the horizon). Creative, the maker of MP3 players and computer audio cards, is the latest to announce their impending arrival, Zii MediaBook.

This is the definition of “glut” becoming reality. We can see a glut of e-readers coming and there’s no waving off the Kamikaze piloting most of those e-readers toward the deck. Will they blow up the fuel supply needed to get the next generation of e-reading off the ground? No, but the coverage will likely make it sound like e-reader failures mean e-book failure.

With excessive abundance comes failure, and that spectacular conflagration of hardware products, unfortunately, will dominate the headlines in this market next year as many, indeed most, of these devices are pulled due to lack of sales. They are ridiculously expensive for a market where the vast majority of customers buy one book or less a year—more than 180 million Americans don’t buy a single book in any year.

Many hardware makers will retreat and e-books, not the glut, will get the blame.

Today’s dedicated e-readers sell for roughly 10 times the price of a new hardback book. Most people don’t buy hardback books, so for argument’s sake, let’s say the average price paid for a book by the 120 million Americans who buy a book each year is $12. Amazon Kindle2 and Barnes & Noble’s Nook, both of which sell for $259, cost as much as 21.6 books, which suggests they break the book-buying budget for most people. I don’t want to suggest there is a magic price for reader hardware, because we’ll see some of the new e-readers announced this year selling for $59 next year, because retailers cannot get rid of them. That is a result of fierce competition, but leave it to the press and bloggers to turn the whole process into a mandate on e-books, not the expensive hardware.

This isn’t a horse race, but a complex evolutionary event, that cannot be reduced to headlines. Consider: “T. Rex extinct, world awaits silence of lifelessness” would have made the papers, if dinosaurs had had their Gutenberg.

Yet, it’s a short step from “people don’t want e-readers” to Continue reading

Updating Kindles-sold estimates: 1.072 million

Based on Amazon CEO Jeff Bezos’ comments on the third quarter results for the company, Kindle sales are accelerating. Bezos is quoted: “Kindle has become the #1 bestselling item by both unit sales and dollars – not just in our electronics store but across all product categories on Amazon.com. It’s also the most wished for and the most gifted.”

Working from my previous estimate, 783,000 as of July 1, and building in unit volume growth of 60 percent—sales revenue gains in electronics in the U.S., $217 million higher in the first three quarters of 2009 than in 2008, seems to be driven heavily by Kindle sales—I estimate Amazon has sold 1,072,000 Kindles as of Sept. 30, 2009. That would be 289,000 Kindles sold during Q3.

Kindle books come to the PC

kindle-for-pc-tcg-coming-soon._V229480704_Platform expansion is the logical counter to new competition at the device level. Amazon, facing the introduction of BN.com’s Nook and other e-readers this week, has announced it will support reading of Kindle books on Windows 7, Vista and XP Service Pack 2 PCs in November.

The application offers a few enhancements compared to the Kindle device, including a larger number of font sizes and the ability to adjust the number of words per line and zoom capabilities on Windows 7 PCs, as well as supporting cross-device synchronization of last page read, bookmarks, notes and highlights.

Customers can sign up for an email alert that the software has been released at the Kindle for PC page. I’ve been predicting this for a while, and am not at all surprised to see it come two days after the Nook announcement. It will not be surprising, either, when Kindle books are available on the Mac.

It’s all about making the customer library accessible across devices, so that Amazon—and BN.com, etc.—can keep a customer over the long term.

All in a week’s brutal competition.

B&N’s Nook: Weirdly unrevolutionary

In addition to this posting, please visit this clarifications posting to get the whole picture.

It would be nice to say, as Matt Miller has, that the e-book and e-reader market was revolutionized today. It simply got more interesting. A careful reading of the $259 Nook’s features, and the comparison offered by B&N to the $259 Amazon Kindle 2, reveals that, while it packs a lot of new ideas, Nook is a combination of innovation and the extraordinarily conventional.

Highlights:

  • Two screens, one 3.5-inch LCD for navigation and purchasing and a six-inch E-Ink display for reading;
  • Virtual keyboard via the LCD display
  • ePub and PDF formats supported;
  • Free 3G connectivity when shopping via BN.com;
  • Sharing of books, across Nook, smartphones and PCs;
  • Wi-Fi built in, but with strange limitations at launch(see below);
  • Synchronization of location, notes and annotation across multiple devices;
  • Audio is supported, though only MP3; Audible books not supported.

There is much I like about this device, but I am not at the announcement today, where I would be asking a lot of questions I have not seen answered in any coverage, so far. Here, with the apparent downsides first and foremost, is what is known to me at this moment.

An e-reader designed to get you into the physical Barnes & Noble store. This, and the question of how to get non-BN content onto the Nook, represent the most backward features of the Nook. When you visit a B&N retail store, you’ll receive offers and, soon, the ability to read some e-books in their entirety while in the store. Everything deleted below, while part of this critique has been clarified and extended in this posting.

There, however, is the rub.

I’d pointed out before that wireless services for browsing the 500,000+ titles available for free through Google Books, a notable feature of the Nook, probably wouldn’t be supported over the built-in 3G wireless service. It isn’t. You’ll need to download and synch the Nook with your PC, via a USB connection, to move any content not sold by BN.com onto the device. From there, it gets bizarre.

According to The New York Times’s Motoko Rich, the built-in Wi-Fi networking works only inside Barnes & Noble retail stores:

With the market for electronic readers and digital books heating up by the day, Barnes & Noble sought to differentiate itself with the wireless feature that consumers can access in any of the chain’s 1,300 stores. Outside of the stores, customers can download books on AT&T’s 3G cellular phone network. (emphasis added)

A review of the BN.com tech specs for Nook adds the caveat that free wireless service is available “from Barnes & Noble via AT&T.” Note that they are saying you get free wireless service when buying or browsing Barnes & Noble, not when accessing other sites or services. Put this and the quote from the Times together and you get: Free 3G service anywhere, when buying from BN.com. Free Wi-Fi in Barnes & Noble stores, but no Wi-Fi connectivity outside, where you can shop wirelessly on BN.com.

Comments from riffraffy in TalkBack point to this section of the Nook FAQ, which I read but still find very vague, since they refer only to travel and Wi-Fi:

Q. Can I use my nook while traveling abroad?

A.Yes, when you travel abroad, you can read any files that are already on your nook. You can connect to Wi-Fi hotspots that do not use proxy security settings, such those commonly used in hotels, and download eBooks and subscriptions already in your online digital library. You cannot, however, purchase additional eBooks and subscriptions.

Q. Will new issues of eNewspapers and eMagazines be downloaded to my nook while I’m traveling?

A. Yes, if you are traveling in the United States, or if you are abroad but connected to a supported Wi-Fi hotspot, new issues are delivered to your online digital library in both cases. When travelling abroad without Wi-Fi access, new issues are not downloaded to your nook (automatically or manually).

Two things:

In the first answer, they specifically say that you cannot purchase eBooks or subscriptions over an international Wi-Fi connection. That suggests it is not a fully functioning Wi-Fi connection. Maybe because you are connecting from overseas, maybe not. If you had full Wi-Fi access and a valid BN.com account, what should stop you?

What is a “supported hotspot” in the second answer? If they mean an AT&T hotspot, my concern remains.

I wrote that I hoped I was wrong. I think the language here and in the announcement is strangely vague (having seen a lot of strangely vague FAQs turn out to bear bad news) and would have liked to be present at the announcement to ask.

UPDATE: Paul Biba, who attended the event, added this to his report, which seems to answer clearly the question whether the Nook provides ad hoc Wi-Fi access:

Wifi can only be used in store for events and in store content. Plan to open up later on.

B&N should enable ad hoc Wi-Fi access at launch, or disclose more clearly that it will not be available in order to avoid disappointing all the people who are expecting to be able to use Wi-Fi at home or elsewhere not served by an AT&T Hotspot. To do otherwise would be doing damage to the credibility of a very impressive piece of engineering.

The rest of the content you want to put on the Nook will have to be downloaded via a PC and synched to the Nook. That’s a step back from what the promise of built-in Wi-Fi would lead a buyer to expect—particularly because Nook is advertised as providing access to 500,000 Google Books titles that, in fact, aren’t accessible through the device, but must be synched.

I hope I am reading this wrong or, that if this is correct, B&N changes the Nook to support ad hoc Wi-Fi access to Google Books. It would be a blunder, forcing readers into retail stores when we want to get away from them, into virtual stores with much broader inventories.

UPDATE: Google Books, per the updated posting here, can be downloaded free of charge over 3G and Wi-Fi connections.

Synching is cumbersome and, frankly, what keeps most people, the non-early adopting masses, from using dedicated e-readers. The popularity of smartphone e-reader Continue reading

Google Editions defies digital economics

Google today announced it will enter the e-book distribution business with a service, Google Editions, which will sell electronic copies of as many as 500,000 books offered by traditional publishing houses. The service is amazing, because the company has found a way to increase the retail distribution cost of e-books relative to paper books. Think about this—the zero cost copy of an e-book will be the basis for Google keeping substantially more, as a share of list price, to deliver a Google Editions e-book through a third-party retailer than buying directly from Google.

It may seem attractive to retail partners, which will purportedly include Amazon, Sony and Barnes & Noble, but even they’ve got to be scratching their heads about the added overhead Google built into its pricing scheme. An e-book purchased from Google Editions will list for the same price as the same book offered by a publisher through Amazon or Sony, for example, and Google will pay the publisher 63 percent of the list price. But, if the book is purchased in Amazon Editions format through Amazon or Sony, publishers will only get 45 percent of the list price.

Google said it will share the additional 18 percent with the retailer, though “most” of that 55 percent reportedly will go to the retailer. My guess is that by “most,” Google means the retailer will get 25 percent and Amazon 20 percent, or some approximation of that split. This seems a concession to make sure the Google Editions format books are carried by retailers.

Let’s break that down. For a bestseller, which the market has decided should be priced at $9.99, the publisher will earn $6.29 when Google Editions sells a copy. When that same Google Editions e-book is sold through a third party, the publisher will earn only $4.49. Intermediaries increase their share of revenue, even though they’ve taken on no inventory risk.

Publishers get 63 percent for selling directly and 45 percent for a Google Edition book sold through a third-party retail site. It defies all the economic logic of digital distribution. The likelihood that Google will really get more e-books from publishers on those terms compared to those offered by Amazon, Sony or Barnes & Noble to the same population of publishers strains credibility. But, we shall see.

More bad news: DRM

While the Google Editions e-books will be readable in a browser, they will not be unencrypted. Google makes clear that books will come with DRM, because they have created a way to let readers access files when not connected to the Net but without the ability to share those books with others. Books will be tied to a Google account, just as GMail, Google Docs and other services.

The retailers, all of whom have introduced proprietary e-readers and, except for Sony, which offers ePub formatted e-books, should be Continue reading

Cheaper Kindles will seed more digital libraries

Amazon today lowered the price of its U.S. Kindle 2 to $259. It also announced an international version of the Kindle 2 for $279—globe-trotting customers are paying more for a more capable radio, but it’s still $20 less than Kindle 2 was yesterday. The price of e-reader hardware is definitely trending downward. If you imagine the profits from an ever-less expensive Kindle converging with the rising costs of selling Kindle bestsellers below cost, the model makes no sense, unless the purpose of the business is to create digital libraries.

With 45+ dedicated e-reader devices on the market, Amazon absolutely must lower its prices aggressively over the the next year to maintain its market share. But, here’s the question: To what end is Amazon driving e-reader pricing downward? Kindle still delivers a much better buying and reading experience than any of the currently shipping e-readers. Sony’s Daily Reader will be comparable, but it will not be out for another month or more. Next year, Plastic Logic, among others will have a Kindle challenger with built-in wireless purchasing features, too.

AmazonBestcostsRemember that Amazon is still losing money on every bestselling book sold through its store. The company pays publishers about $3.60 more than the list price for a bestseller when sales costs are factored into the expense. If each Kindle accounts for just two bestseller sales, the cost of supporting 3 million Kindles in the market rockets past $20 million (see chart, right, which looked better in Excel. The scale should be 50,000 to 3 million, though this logarithmic curve makes the point that every Kindle sold adds to Amazon’s bestseller costs at $3.60 per title sold).

The goal, at this point, is to get more people invested in a Kindle, or, more precisely, a digital library. It’s more than format lock-in, Continue reading

The Lost Symbol’s e-book sales to date: 100,000

Early evidence, in the form sales figures from The Lost Symbol publisher Doubleday, reported by Silicon Alley Insider, suggests that e-book sales, while explosive on the first day after the book was released, remain relatively small overall. Doubleday says that 100,000 of the two million copies sold so far are e-books. That’s five percent, which means people did not buy e-readers to buy the book, and that smartphone applications weren’t an extraordinary contributor to sales.

So, of the approximately 1.6 million dedicated e-book readers in the market, plus the approximately 3.1 million smartphones with e-reader applications, Dan Brown’s new book sold to two percent of the installed base. That may simply mean that the book isn’t the major hit that was expected. I still think that over time more e-copies will be sold than hardbacks, but paperbacks are the editions that will earn any profits Doubleday finally collects.

A book evolution, not revolution

We often hear arguments that the age of the book has passed or that, with the advent of e-books, the book is doomed. It makes good copy, just as populist-sounding charges that publishing is “corrupt” does, but none of these arguments recognizes the human cultural tradition that we build on rather than destroy. Is it true that no one listens to radio now that television has reached 50+ years of use? No, we remix our attention and what is valued. Books, both paper and digital, will live side by side.

I write this because of two Fast Company pieces of the last 24 hours, one of which I helped edit for my good friend, Marcia Conner, the other reporting on the possibility that Dan Brown’s The Lost Symbol could sell more copies in digital form than hardcover. I am sure The Lost Symbol will sell more e-copies than hardcovers over time, if readers don’t find they are disappointed by the book—it’s virtually assured, just as cheaper paperbacks outsell hardbacks. The important question is whether e-book versions of The Lost Symbol will cannibalize hardback sales or be additive. Only a few weeks time will answer this question, as the initial hype wears off and sales become more “normal.” Based on pre-orders, the book has been in Amazon’s best sellers list for 150 days; all those copies were delivered in the last 24 hours. Currently, The Lost Symbol is #1 in both Amazon’s book and Kindle stores. Shortcovers is reporting its biggest sales day in its short history, exceeding its previous one-day sales by 100 percent.

Fast Company‘s Kit Eaton dissects Stephen Windwalker’s claim that e-books will outsell hardbacks, based on day-one figures that are largely guesswork. Eaton suggests that while Kindle sales may be strong, it doesn’t mean that e-book versions of The Lost Symbol will outpace hardcovers. With one million copies sold after such an intense marketing Continue reading

Reading Steve Jobs: Why 45 e-reader devices don’t make a market

Thomas Jefferson hacked bookstands for partial continuous attention

Thomas Jefferson hacked bookstands for partial continuous attention

As I develop the coverage here at BooksAhead, I have decided that trying to break news stories about e-reader devices doesn’t add a lot of value for the reader, especially when there are few differentiating features or functionality. Way back in the early 90s, when a new Ethernet interface card for the Mac—I was networking editor at MacWEEK—it became clear that an occasional summary article covering all the recent releases would be more useful than many individual articles announcing yet another Ethernet card.

However, sometimes a real breakthrough would come along, and that would get an individual article. The most important change in the early networking card market was something subtle and largely unheralded: The addition to writable ROM chips to cards eliminated the need to return a card when its software was defective. Yet, for several years, Ethernet card developers hesitated to include EPROMs in their products. Once they did, new features proliferated, such as Simple Network Management Protocol (SNMP), because cards could be updated in response to changing technology rather than having to be replaced. It sounds trivial, yet it made a huge difference.

The e-reader device market is looking a lot like the Ethernet card business back then: It’s a developing commodity market. Price is becoming the only differentiator, but the functionality is still very limited compared both to books and what e-books could be. The action will soon turn squarely on format and networking of documents, just as the Web became relevant when the browser changed hyperlinks from navigating between documents to navigating within parts of many documents.  Two hundred years ago, Thomas Jefferson designed a bookstand for reading several titles to accommodate the limitations of books (the idea is older, but Jefferson’s is one of the most elegant solutions to the problem). Readers want to use books and the knowledge and enjoyment they contain, not just consume them.

I’ve been doing a lot of thinking about this issue since I wrote about the ePub standards maintenance process beginning a couple weeks back. There are huge business opportunities in the Continue reading

Sony Reader goes “Daily” with Kindle competitor

During its previously scheduled product launch of the Sony Reader Pocket ($199) and Touch ($299) Editions today, Sony dropped its would-be Kindle-killer on the market, a $399 AT&T 3G-enabled Reader called “Daily Edition” that will ship in time for Christmas, if an e-book reader is on your last-minute shopping list. This Christmas, it may very well be.

Does 7-inch Daily Edition, which sells for $100 more than the 6-inch Kindle 2, bring enough oomph to the market to make it a must-have for the holidays? The answer will depend entirely upon whether Sony’s move to ePub format and close embrace of Google Books, which can be downloaded free through its online bookstore, will tip the buyer’s decision in favor of Sony. While it is a 3G-enabled reader, comparable to the Kindle and its WhisperNet service provided by Sprint, the Sony Daily Edition will not allow Web browsing, which the Kindle does, according to various sources, notably Publishers Weekly.

The Sony press release suggests that there might be an upgrade path to full Web connectivity: “There are no monthly fees or transaction charges for the basic wireless connectivity and users still have the option to side load personal documents or content from other compatible sites via USB.” I have queried Sony PR about what “basic wireless connectivity” means and whether there will be options for additional service. It isn’t entirely clear that Google Books will be downloadable over the air or only via PC download—since there is no revenue to support 3G downloads, this needs to be clarified.

Unlike the Kindle, the Sony Daily Edition offers handwritten note entry (stylus included with the system) and built-in links to local libraries, which can “loan” electronic copies for up to 28 days through the Overdrive.com library collections service. A social network for discussing literary. And the devices will be available at physical retail outlets, including Best Buy and WalMart, making it easier to try than the Kindle.

Amazon is prepared to counter the perceived accessibility of Sony’s ePub strategy by both opening the Kindle readers to ePub and making its proprietary format readable on a wider range of devices. Sony may have the cheapest e-reader with the $199 Pocket Edition (sans wireless connectivity), but this still looks like a fight that is going to be waged on Amazon’s terms.