eReader embraces Kindle Store pricing

When Barnes & Noble bought Fictionwise they got two ebook stores as potential weapons against the Kindle Store – Fictionwise.com and eReader.com.

The eReader.com division of Barnes & Noble today sent out an email (scoop courtesy JKOntheRun) to members announcing some drastic price cuts –

  1. No eBook Priced over $12.95. 
  2. All New York Times Bestsellers for $9.95. 
  3. All new ebooks for $9.95 or less.  
  4. They also have 15% rewards on purchases.

This basically matches the Kindle Store with the additional benefit of eReader’s $12.95 price limit and the 15% reward on purchases.  

Really good for Kindle Owners and readers in general

Its good for Kindle Owners because Amazon can’t get complacent on pricing.

Its really good for Kindle Owners and book readers because –

  1. Its implicit support for Amazon’s $9.99 price-point.  
  2. It testitifes to the huge advantage pricing was giving Amazon.
  3. At a time when big companies like Google were talking about letting Publishers determine prices, eReader.com realizes the ground reality (since its already selling ebooks) and is forced to price books low.

It really is a big positive that multiple stores now have lower ebook prices. In effect, Barnes and Noble and Amazon are both supporting the $9.99 price point.

Is this a threat to Amazon and the Kindle Store?

  1. Well, the 15% rewards scheme is a bit scary. However, 15% isn’t enough to take the hassle of using your PC for downloads.
  2. The $12.95 upper price limit could become a rallying point for claims that Amazon is pro-publisher.
  3. One big plus for Amazon is it doesn’t become the isolated example of a retailer standing up against Publishers’ demands for higher prices. Less chance Publishers can boycott it if Barnes and Noble are jumping in too.
  4. Amazon could gets undercut by companies to the point that it can’t cash in on the Kindle’s success. 
  5. Alternatives to the Kindle will be able to compete better because they can use eReader.com’s books.

 Overall, it isn’t much of a threat. However, if more and more companies start jumping in at $9.99 book prices, Amazon will be forced to come up with other competitive advantages.

Kindle Vs iPod – Kindle Content Revenue 10 times?

Please go to my Kindle vs iPad review post if you’re looking for a Kindle vs iPad comparison.

While many people would argue the Kindle is no iPod, there is one area where they would be right in the exact opposite way they intended. Let’s review the revenue streams the iPod and the Kindle have from content sales.

For the purposes of this discussion we’ll leave out the iPhone.

How many songs does an iPod owner buy?

We’ll review different data-points that give us an idea of iTunes song purchases per iPod –

Feb 2007 – 22 songs per iPod sold.

Steve Jobs himself in a ‘Thoughts on Music’ post (Feb 6th, 2007; supposedly based on a Forrester Research Report) –

Let’s look at the data for iPods and the iTunes store – they are the industry’s most popular products and we have accurate data for them. Through the end of 2006, customers purchased a total of 90 million iPods and 2 billion songs from the iTunes store. On average, that’s 22 songs purchased from the iTunes store for each iPod ever sold.

March 2008 – 33.33 songs per iPod sold. 

  1. In June 2008, the iTunes Store topped over 5 billion songs sold. This is from the June 19th, 2008 Official Apple product release.
  2. A Wikipedia estimate (based on numbers from Apple Earnings Releases) lists Total iPods sold through March 2008 at 150 million. That gives us a straight 33.33 songs sold per iPod (we don’t include April, May, June iPods since they’re so new).

January 2009 – 30.5 songs per iPod sold. 

  1. In January 2009, Apple released news that they had sold 6 billion iTunes songs.
  2. From Apple Earnings releases we can see that sales of iPods through end of 2008 were 196.7 million. That gives us a straight 30.5 songs sold per iPod.  

Growth Rate of downloads is not accelerating

Another key data-point worth reviewing is that the number of songs downloaded has not accelerated with iPod sales –

  1. Jan 2008 – 4 billion threshold. 
  2. mid-June 2008 – 5 billion threshold 
  3. early Jan 2009 – 6 billion threshold.

There’s a chance iTunes song sales might be stabilizing at around 1 billion songs downloaded per 6 months.

Figures for iTunes song sales per Ipod

We arrive at two figures –

  1. March 2008 and Jan 2009 figures indicate 33 songs are sold per iPod. 
  2. 2 billion songs sold in 2008 and 162 million iPods sold by June 2008, indicate an annual rate of 12.5 songs sold per iPod.

We’re talking about $1 songs (let’s average it out).

How many books does a Kindle owner buy?

Mr. Bezos’ Disclosures

  1. That kindle owners buy 2.7 times what they used to (in terms of unit sales). This was in mid-2008.
  2. That for books in both editions, 35% sales are of the Kindle edition. This was post Kindle 2.

Our Reader Poll

  1. Kindle purchase budgets – 16% had $10-$20, 23% had $25, 21% had $50, 11% had $100, and 11% had unlimited.
  2. 16% only got free books.
  3. That still translates to $44 a month (approximating that people with an unlimited budget spend $150).

This is of course a small sample size.

What Analysts Think

We want to make sure we aren’t too accurate so –

  1. Mark Mahaney thinks the attach rate will be 1 ebook  per month. 
  2. Cowen & Co’s Jim Friedland lists an attach rate of 1 ebook a month too.  

Actual Kindle Owner Figures

  1. Books on the Knob actually has her budget up and she spends $38.95 per month –

    Month             No. of Books            Total Cost                 Per Book
    January               59                            $83.47                      $1.41
    February            43                             $29.97                      $0.70
    March                  32                             $33.44                      $1.05
    April                     22                             $13.11                      $0.60
    May                      34                              $34.79                    $1.02
    Totals                 190                             $194.78                  $1.03

  2. For me, 11 $1 books and 27 normal books for $223 in 4 months. That’s 9.5 books per month and $56.8 per month.

Interestingly, that averages to $47.85 – remarkably close to the reader average of $44.

What are best guesses for Kindle Figures?

  1. Worst case is 12 $9.99 books a year per Kindle. That’s $120 per year and 12 books per year.
  2. Best Case is what you, the users, stated as your budget – $44 a month. That’s  $528 per year and let’s say 52 $10 books a year.

Note: From now on, for simplicity we’ll assume purchases are in the form of $10 books. Its simpler than saying 50% $10 books and 25% $4 books and so forth.

  1. Split those figures in two to get a most probable figure of 30 books per year and $300 per year ($25 a month).
  2. Now, let’s say that every purchase is shared between 2 Kindles to get 15 books per Kindle sold every year and $150 revenue.

This is a super conservative estimate. You’ll notice it’s nearly as low as 1 book a month and matches analyst estimates.

Even Steve Jobs would agree we couldn’t get any more pessimistic than book lovers reading just 1 new $10 book a month.

Contrasting Kindle and iPod Content Revenue Streams 

 Kindle vs iPod –

  1. Number sold per device per year – Kindle is 15 books per year. iPod is 12.5 songs per year.  
  2. Revenue per device per year – Kindle is $150 per year. iPod (again we’ll be generous) is $15 per year.

Note that for simplification we’re saying it’s 15 $10 books.

That translates into this rather interesting statistic – each Kindle generates 10 times the content revenue that an iPod does. This is in the very conservative case.  

Let’s Review Our Assumptions about Kindle and iPod Revenue

  1. That Apple’s figures can be relied upon. Since the iPod sales figures are from earnings releases and iTunes song sales figures are from Apple Press Releases they ought to be correct. 
  2. Readers of this blog represent Kindle Owners and aren’t wildly skewed towards heavy book readers. Wait a minute – isn’t that the typical kindle owner profile?
  3. That every 2 Kindles share one account. This is a huge reduction in kindle revenue just to be on the safe side.
  4. Only book purchases are accounted in Kindle purchases. Again, this weighs against the Kindle.
  5. Less than 20% of Kindle owners are in the category that never buy books.
  6. We have not considered that iPods are in year 7 of their development while Kindles are in year 2.
  7. We’re assuming that ALL iTunes sales are to iPods.

Almost every assumption favors the iPod. We still get Kindle generating 10 times more revenue per device.

Even if you halve the consevative analyst estimate of 1 $9.99 book a month, you get $60 a year – 5 times what every iPod gets you for song purchases.

So everyone who thinks the Kindle is terrible compared to the iPod, you’re right – the Kindle is no iPod.

Declutter Your Bookshelf

This Guest Post on using the Kindle and other means to declutter your bookshelf is courtesy Lorie Marrero, author of the bestselling Clutter Diet Book and Blog. More details on Lorie at the end of the post.  

Clutter Diet Blog Clutter Diet Blog

Declutter Your BookShelf

If you are reading this, you are most likely a Kindle owner and therefore a bibliophile—a book lover. Before the Kindle came along, you probably amassed quite a collection of books throughout your life, and you may be short on space. Here are five ways you can scale down the stacks:

  1. If you buy on the Kindle, buy only on the Kindle (or your preferred eBook reader). The Kindle is one of the best clutter-reducing devices—imagine the saved space of one slender device over 1500 physical books! Try to avoid adding to your storage space problems by also buying a hard copy of the book. If you don’t know how to highlight and take notes on the Kindle, take a moment to read the user guide and find out how easy it is to annotate your digital books.
  2. Release your books into the wild. Take books you no longer want that are cluttering up your shelves, register them on BookCrossing.com, and leave them around in public places for other people to take. That’s right, just leave your books on park benches, in hotels, in coffee shops… People that find your books can look them up on the BookCrossing site and see what their journey has been. They will see a label or handwritten note with a unique serial number, and the person who found it can log in and write about where they found the book and whether they liked it, etc. And if the book is special to you, you can find out what has happened to it and see how your generosity has helped others. It’s “catch & release” for books!
  3. Go to a used bookstore to sell your books. Resist the urge to take “store credit” for the books instead of cash—try to prevent more books from coming in.
  4. Donate your books of a specific subject to a special organization. If you have a lot of books about history, donate them to a local historical association. If you have a lot of biographies about women leaders, donate them to a school for girls. Don’t, however, get so stuck on finding the perfect home that you delay the donation for too long. Your public library is terrific for most general donations and helps many people.
  5. List your books for sale as “Used” on Amazon.com or eBay. If you don’t have time to monitor the sales and make shipments, see if you can delegate this project to an assistant or even a neighborhood teenager in exchange for a commission on the sales.

Overall, be selective about the books you keep as they do take up a lot of space. Remember that you can almost always get access to books again at your local library, so there is no need to try to create a full library of your own forever!

BIO:

Professional Organizer Lorie Marrero is the author of The Clutter Diet: The Skinny on Organizing Your Home and Taking Control of Your Life, which hit #8 on Kindle’s nonfiction list in January 2009. The Clutter Diet Blog has been in the top ten bestselling overall subscriptions on the Amazon Kindle since September 2008, and is #1 in the Lifestyle category. Lorie is the creator of ClutterDiet.com, an innovative program allowing anyone to get expert help at an affordable price. She has been a spokesperson for Microsoft, Brother label makers, and FedEx Office, and she is a sought-after expert for national media such as CNBC, Good Housekeeping, WGN News and Woman’s Day.