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.

The Lost Symbol will be a dollar sign

The Da Vinci Code sold more than 81 million copies worldwide. Dan Brown’s new book, The Lost Symbol, will be released simultaneously in hardcover ($16.17 at Amazon, a 46 percent discount) and for Kindle ($9.99) on September 15th. Five million paper copies of the book will be printed, one digital copy will be encrypted several million times. Likewise, Sony is certain to offer the book at the same price or lower in its e-book store, taking its losses on The Lost Symbol to drive sales of its Reader devices.

What we will witness is a test of how far hardware vendors will go to increase unit sales of their respective devices. Since Random House will collect between $12 and $13 per copy from digital channels, the hit to Sony and Amazon’s top-lines will be substantial. Each will pay millions to keep The Lost Symbol at the top of their device’s bestseller list. The symbol lost in all this hoopla will certainly be a dollar sign, but it may result in greater uptake in e-book formats generally and, perhaps, a “winner” among the current dedicated e-book readers.

The Lost Symbol is the title that could make or break the current generation of e-reader devices, firming up reader’s investment in the platform and format in which they read digital books. I don’t think that Dan Brown’s latest will sell millions of Kindles on its own, but it will be the title that converts some readers to Kindle or Sony Reader. Both Sony and Amazon see royalties paid on this book as a sunk cost they expect to recoup from hardware sold. If the hardware revenues don’t follow, this book may convince one or both of them that dedicated e-readers aren’t the best business.

If there are approximately 3 million Kindle-compatible devices (Kindle hardware and iPhones running Kindle for iPhone) and some 500,000 other dedicated e-reader devices, as well as perhaps six million other software-only readers installed, electronic sales of The Lost Symbol could account for up to five million copies, matching the first print run. That will be a huge accomplishment.

However, because e-reader hardware is still too expensive for most consumers, e-book sales will likely be slower than print sales after the initial release, especially when paperback editions appear. The key market to watch then will be e-reader application installs on smartphones and computers. Since e-book applications that run on phones and PCs carry little migration cost, we can expect to see an explosion in sampling of reader apps if digital copies of The Lost Symbol are going to pace paperback sales. The only possible channel through which The Lost Symbol could continue to sell 50 percent of total copies sold in digital format is e-readers on phones and PCs.

In the long run, the economics of reading will drive adoption of common formats not incompatible e-reader hardware. I’d be very surprised if Dan Brown’s next book isn’t offered in a single digital format—most likely ePub—that can be read on any device or in any e-reader application. By then, Kindle will be compatible with ePub, because Amazon’s goal is to grow share of books sold, not just to be a e-reader hardware vendor.

Global and U.S. advertising spending plunges in 2009

For anyone hoping to refinance publishing on the back of advertising, it may be the best of times to sell a new medium to advertisers, but it is the worst of times for advertising.

Nielsen reported this week that ad spending globally dropped 7.9 percent in the first quarter of 2009. U.S. ad budgets declined by a record 12.7 percent and growth in Chinese advertising, which has been consistently strong since the beginning of the economic meltdown, shrank to only 2.5 percent year-over-year.

All traditional media, from newspapers and magazines to TV and radio, showed marked declines. U.S. magazine revenue shrank by 22 percent; newspaper advertising revenue was down by 15.6 percent. Charts and more here.

Springer’s e-book efforts paying dividends in tight economy

Springer Science and Business Media, one of the largest scientific and business publishers in the world, is pushing hard into the e-books market, the Financial Times reports. The company’s main goals are lowering price with electronic publishing and to ensure titles are available ubiquitously, according to Cynthia Cleto, Springer’s global product manager for e-books told the FT.

Notable in the article is the fact that academic publishers are seeing much higher sales rates in e-books as a percentage of total sales than trade publishers, who typically see sales of e-books accounting for three percent of annual revenue. Budget constrained libraries and universities are opting for electronic formats to save money.

The FT characterizes Springer as “ahead in [the] academic e-book market” with 22,500 titles available in e-book formats though there are no comparative statistics offered for other publishers. Along with other publishers, Springer is calling for a standard format for e-books so that it can publish for many platforms with one format.

Excerpt II, The Book Ends

Continuing where we left off the other day….. This segment, which is going to be torn apart and used in other ways, shows how quickly any writing on the e-book market ages.

Why Kindle is the early leader

As of this writing, in March 2009, e-books have limited network connectivity. The most forward-looking implementation of networking in an e-book reader is Amazon’s Kindle, a somewhat elegant, often clumsy device that, in my opinion, is poised to dominate the first-generation of e-book adoption. All that the network in the Kindle enables is electronic distribution and backing up of annotations added to a book consumed using the device. Called “Whispernet,” the Kindle network, which is provided by Sprint, with wireless delivery priced into the cost of individual books sold by Amazon.com, is an excellent first step because it eliminates several steps that other devices require before purchasing a book, including finding and paying for wireless connectivity. But because the Kindle remains a tightly controlled proprietary format—the books that people buy on the device today do not augment reading with connections to other readers, the author or communities of experts or critics that can extend the experience of reading—it remains an unattractive option for many, particularly those who would rather read one of the half million or more books available for free from archive sites such as Project Gutenberg and Google Book Search. Nevertheless, with the introduction of Kindle for iPhone in March 2009, Amazon has made its book format, which is based on HTML and a digital rights management technology owned by Amazon, the de facto choice for authors or publishers wishing to reach the largest possible audience with a book for sale.

Many who read this will object. Open standards, open formats such as ePub, and a variety of devices will be raised as alternatives to Amazon’s Kindle and the format of Kindle e-books. Unfortunately, I’m relatively old and have seen too many ideal products fall before the good-enough and mundane and that succeeds in reaching a critical mass in the marketplace, to think that individual features and benefits of ideal products will drastically change the developing audience for books on the Kindle. Business success is defined by the ability to sell something and culture has always demanded that creative work be compensated in order to sustain the creator—patronage was the primary compensation model until 250 years ago.

The Kindle has not locked up the market for all time, only for the foreseeable future because it offers all the new books available on any other reader or in any other format, while providing an even wider choice of titles through conversion and a relatively simple form of reader annotation with synchronization across multiple copies of a given book. There are still many shortcomings to the Kindle, but they’re the same shortcomings as competing devices, such as the Sony Reader and iRex Iliad, while Kindle does some things better than competitors. That is just good enough at a early adopter’s competitive price, in light of Amazon’s vast reach in the marketplace, to make it the device and format of choice at this time. Later in the book, I’ll explore the many devices and formats in greater detail, pointing to features and opportunities that will disrupt the e-book market in the future.

By Christmas of 2008, by my calculations based on conversations with Amazon executives and booksellers, Amazon had sold 379,000 Kindles (it’s an odd figure because they gave some away) and, because of production shortfalls had back orders for an additional 50,000 to 60,000 devices, which were delivered shortly after the Kindle 2 was introduced in late February 2009. After Kindle 2 shipped, the company sold approximately another 220,000 units for a total sold as of late April 2009 of about 655,000.  [As of July 1, 2009, I estimate the total sales of Kindle 1, Kindle 2 and Kindle DX is 754,000.]

It was the addition to Amazon’s market of the iPhone platform, in a Continue reading

Noted News & Opinion, June 16, 2009

Global entertainment and media spending will reach $1.6 trillion in 2013, according to PricewaterhouseCoopers annual industry projections, AdWeek reports. The U.S. media industry will not match growth in the rest of the world, increasing only 1.2 percent annually, compared to the global rate of 2.7 percent, reaching $495 billion in 2013. Digital revenues are predicted to grow from 17 percent of the market today to 25 percent, for a total of $124 billion annually, four years from now. Bad news for magazines and newspapers, where revenues are expected to continue to head south.

Surprise, Jeff Bezos doesn’t like the Google-Author’s Guild settlement. But he won’t say why, according to CNET: “We have strong opinions about that issue which I’m not going to share,” Bezos is quoted as saying during the Wired Business Conference. “There are many forces of work looking at that and saying it doesn’t seem right that you should do something, kind of get a prize for violating a large series of copyrights.” The article also suggests that Bezos said Kindle sales now account for 35 percent of paper book sales, which I believe is a misinterpretation of what he said, as I discussed yesterday. What he appeared to say was that when a book is available in paper and on Kindle, 35 percent of the sales are in Kindle format.

Author Jeff Matthews suspects Google’s good for writers. He’s fond of Google Books as a research tool, as I am, then relates an interesting story about discovering why his grandfather won a medal in World War I through a book scanned by Google. It’s a touching story and is completely valid with regard to out-of-copyright books, but that kind of title isn’t what the Google-Author’s Guild covers. I have a different opinion, but I found Matthews’ story compelling.

S&S e-books venture is doomed. Author Anthony Policastro (Absence of Faith and Dark End of the Spectrum on Kindle), writing on his blog, argues that Simon & Schuster’s announced distribution deal with Scribd will fail because the pricing strategy is wrong. “Most people won’t even pay even $10 for an eBook,” Policastro writes. “The reason is that they do no perceive the value the same as the printed version.” I disagree, not because of the price point, but because the e-book as it is today is no improvement over reading a book and, in many ways, diminishes the reading experience. Someday, readers will pay more than the Jeff Bezos price ($9.99) for a book, because it will be a portal to new experiences through reading. But Policastro is right about S&S’s pricing strategy: If they want to succeed on Scribd they must compete on price, going below Amazon’s pricing.

Mitch’s Perspective: Today’s e-books have been positioned as less valuable than a mass market paperback. That needs to change, which means the features and services associated with the e-book have to change, for the better.

Amazon would be boycotted, if Science Fantasy publisher has a say. Antellus, a publishing company operated by its only author, Theresa M. Moore, has complained that Amazon is slow to respond to publishers experiencing problems with its DTP publishing platforms’ management of ASINs and and associated accounting systems. She also says Amazon should be faster in its deployment of a color Kindle. While the former may be a real problem, condemning Amazon for a “seller agreement, which allows Amazon to modify and/or sell books from its suppliers in whatever format it chooses at its own discretion,” which is key to providing book buyers archival access to titles without having to renegotiate rights each time it updates file formats, and failure to be the first to deliver a color reader diminishes the force of her arguments.