Kindle Review – Kindle Fire Review, Kindle 4 Review

We need to start from somewhere so we’ll assume that Kindle sales in 2008 were somewhere between 240,000 Kindles sold and 600,000 Kindles sold, with the most probable figure being 500,000.

Taking that range as the starting point we’ll do three things -

1. Estimate the number of Kindles and Kindle 2s sold to date.  
2. Estimate the number of unique people and/or families that own a Kindle and/or a Kindle 2.  
3. Estimate the amount of revenue Amazon makes off of Kindle Book sales.

Sales estimates for Kindle 2 and Kindle 1

By end of 2008:

That would give us the following estimates for total Kindle 2s and Kindles sold so far -

1. Best Case: 865,000. Wouldn’t be surprised if Kindles sales are over a million.  
2. Most Probable: 700,000. This is the single figure to stand by if we had to choose a single estimate.
3. Worst Case: 370,000. Of course this is assuming TechCrunch’s estimate last year wasn’t correct.

The factors on which the estimates for 2009 sales are based are -

1. January sales were extremely low because of the lack of availability of the Kindle and people waiting for Kindle 2.
2. Despite the recession, the huge pent up demand for Kindle 2 meant a lot of activity and a lot of sales.  
3. Pre-Orders helped increase sales as they created two separate cluster points for high sales – the Feb 9th announcement date and the Feb 24th release date. 
4. Demand and interest in the Kindle held up for most of March 2009. It was however not as much as the peaks in February.

Number of Kindles that are Purchase Points

Starting with two assumptions -

1. We’ll assume that when a person owns more than one Kindle the purchase behavior is as if a single Kindle were owned.
2. We’ll also assume that when a family owns more than one Kindle, the purchase behavior is as if a single Kindle were owned.

Note: A lot of used Kindles were sold – presumably to new owners. This means we can be reassured that average number of Kindles owned by a person is very close to 1.

Here are the estimates for number of Kindles that function as independent purchase points -

1. Best Case:  Only 10% of Kindles/Kindle 2s are ruled out due to belonging to the same person or same family. Giving us 90% of Kindles/kindle 2s in circulation as independent purchase points. Best Case * Best Case Estimate = 778,500 Kindles are independent purchase points.
2. Most Probable: 80% of Kindle/Kindle 2s are independent purchase points i.e.  560,000 (using most probable sales estimates).
3. Worst Case: Only 70% of Kindles/Kindle 2s are independent purchase points i.e. 259,000 (using worst case sales estimates).

Kindle Book Sales Revenue Estimates.

We’ll assume a certain distribution of Kindle owners’ buying habits -

1. 20% of readers buying 10 or more books a month. 
2. 30% of readers buying 5 or more books a month.  
3. 30% of readers buying 3 or more books a month.
4. 20% of readers buying 1 or more books a month.

We’ll average it out to 6 books a month. We’ll also keep a more pessimistic, Steve Jobs style, 2 books a month figure for our worst case estimate.

Note: We are considering a single purchase point for cases when a person or a family has multiple Kindles, Kindle owners tend to be book lovers and buy more books, and we are basically disregarding subscription revenue. Given these factors the 6 books a month estimate isn’t overly optimistic. And the 2 books a month figure is impossibly low.  

Assuming an average price of $8, that’s $48 a month per Kindle owner in the most likely case. In the worst case, assuming just 2 books sold a month, we get $16 a month.

Let’s factor this into the figures we had for independent purchase points and we get -

1. Best Case – 778,500 purchase points and $48 a month. That equates to $37,368,000 in revenue per month.  
2. Most Probable – 560,000 and $40 a month (just to be on the safe side). That equates to  $22,400,000 in revenue per month. 
3. Worst Case – 259,000 and $16 a month. That equates to $4,144,000 in revenue per month.

The figure of $22.4 million per month in Kindle revenue is not an optimistic figure – it’s our most probable estimate.

Finally a bonus -
Projections for Kindle 2 and Kindle Textbook Edition Sales in 2009

Note: The case I’m totally disregarding is the kindle textbook edition becoming a runaway hit and racking up millions of units sold in 2009. This is because of the double threats of the tough economic environment and the threat of competitors being released later in the year. The Best Case is hardly a best case because of the dismal economic outlook.

That gives us end of year projections of -

1. Best case:  By end 2009, there will be 1.84 million Kindles (Kindle 1, Kindle 2, KindleText) in circulation. 
2. Most Probable: By end 2009, there will be 1.34 million Kindles in circulation.  
3. Worst Case: By end 2009, there will be 820K Kindles in circulation.

In terms of revenues -

1. The best case estimate is 1.84 million * .9 * $48 a month = $79.488 million a month in revenues.
2. Taking the most likely cases we get 1.34 * .8 * 40 = $42.88 million.
3. The worst case estimate is  .82 million * .7 * $16 = $9.18 million a month.

The assumptions used are -

1. Clubbing together sales estimates of Kindle 2 and Kindle textbook edition.
2. Recession will not get significantly better or worse this year.
3. Kindle Textbook Edition released in July and a huge jump in sales as a result.  
4. Holiday Season will be a decent one, and like most holiday seasons, account for the lion’s share of sales.  
5. Subscription revenue is small enough that we don’t count it. 

Closing Thoughts on Kindle Sales Estimates

The figures I’m going with as my best bets are -

1. 700,000 Kindles sold so far.  
2. $22.4 million per month incoming revenue from Kindle book and content sales right now.
3. $40-$50 per month per kindle owner/kindle family – both right now and at end of 2009.
4. 1.84 million (or slightly more) Kindles sold through end of 2009.  
5. Incoming revenue of $70 million+ per month (or slightly more) from Kindle Book and Content sales by end 2009.  

Filed under: kindle 2, thoughts Tagged: | kindle sales estimates, kindle sales outlook