Kindle Review – Kindle 2 Review, Books

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.