Kindle Review – Kindle 2 Review, Books

There are two very interesting articles out today -

1. Peter Kafka at MediaMemo talks about how the variable pricing at iTunes (selling songs for $1.29) actually slowed down the growth rate of music sales (to be fair there may be lots of other reasons that contributed). 
2. Matt at Gizmodo talks about how Publishers are refusing to agree to Google’s ‘We’ll give you 63%‘ plans for Google Editions and also refusing to allow copy and paste.

As Publishers flex their muscles (which appeared out of nowhere making you wonder if Mr. Conte and BALCO were involved) you have to wonder exactly what will happen when the iPad arrives in March and eBook prices are pumped up to $14.99.

Considering the Possibilities – A $14.99 World

Publishers make out like Bandits and keep control

There are a few possibilities that would make Publishers happy -

1. $14.99 ebooks sell just as much as $9.99 ebooks were selling (or even more) and Publishers feel they have sustainable prices and that in the long term their profits will be higher than if they had stuck with $9.99. 
2. $14.99 ebooks sell enough to bring in as much as unsubsidized $9.99 ebooks would have. Publishers are still pretty happy. 
3. eBook sales die out due to $14.99 prices and customers go back to paper books. This is actually the best case scenario for Publishers and we’ll see more moves by them in this direction.

So if $14.99 eBooks succeed or fail miserably Publishers have managed to achieve their desired outcome.

Publishers slow down the rate of growth of eBooks

This may be the likeliest outcome.

There are some cases in which $14.99 will neither be a victory nor a failure for Publishers. It’ll simply give them more time by slowing down the growth of eReaders and eBooks.

1. If $14.99 ebooks lead to users choosing paper books a bit more often.
2. If $14.99 ebooks mean users start waiting for prices to come down to $9.99.
3. If $14.99 means ebook sales decline a bit and ereader sales decline a bit.

Any of these scenarios would, in effect, give Publishers a ton of time.   

Publishers start losing sales to smaller Publishers and indie authors and piracy

These are the scenarios that Publishers seem not to have thought through -

1. Readers start reading less. 
2. Readers switch to Publishers that have eBooks at $9.99.
3. Readers switch to smaller Publishers and independent authors.
4. Readers start pirating ebooks.

Here Publishers would be in trouble. Not only would they be losing sales and credibility – they would also strengthen their enemies.

What are the probabilities of each scenario with $14.99?

That’s an exceedingly tough question and we’ll only know for sure when the $14.99 price goes into effect in March.

Here are some rough estimates (gut feel based on people’s responses) that are probabilities for each case – so they don’t add up to 100. A probability of 20% means that 20% of people are likely to do something.

People are very likely to do multiple things so predicting the net total impact is very hard.

1. Readers start pirating eBooks – 25%. 
2. Readers start reading less – 5% to 10%. 
3. Readers switch to $9.99 Publishers – 50%.
4. Readers switch to smaller Publishers and Indie Authors – 25%. 
5. eReader sales decline – 40%. 
6. eBook sales decline – 30%.
7. Readers switch to paper books – 30%.
8. Reader wait for prices to come down – 50%.
9. eBook sales die out – 10%.
10. Readers buy just as many books – 20%.
11. Readers buy almost as many books – 15%.

The conclusion is really surprising -

Publishers are quite likely to come out ahead. Some of the more probable outcomes are very beneficial to Publishers -

Readers buying $14.99 books. Readers buying paper books instead of ebooks. eBook sales slowing out or dying. eReader sales declining.

What would really hurt Publishers is if lots of alternate sources for books sprang up at $9.99 and lower prices. That would require -

1. A few of the Big 6 to stick with $9.99. 
2. The New Generation of Publishers (like Amazon Encore, ORBooks and Open Road) to really take off.
3. Smaller Publishers and Indie Authors really step up.

Publishers have made their move late but not too late. There still isn’t enough traction and most importantly the alternate sources of content just don’t produce enough high quality books.