Kindle Review – Kindle 3 Review, iPad Review

This post reviews the possibility that TBI Research and Rory Maher’s sources are right -

Several publishers and distributors tell us that Amazon is currently selling upwards of 90% of all e-books sold. 

We’re considering the US market here so please keep that in mind.

TBI Research and Rory Maher on Kindle’s potential 90% market share

Let’s quickly look at the conclusions Mr. Maher arrives at -

This is critical.

If Amazon continues to command such market share, Kindle will rapidly become the standard e-book format. 

Bottom line: Amazon’s early 90% share of the ebook market is a huge competitive advantage.

He also has very interesting (and in my mind reasonable) insights on DRM and the price wars -

On DRM:

We have heard from various sources that Amazon is not opposed to backing away from its DRM policy since it doesn’t want to annoy consumers. 

However, for now, consumers appear oblivious to the DRM restrictions since they are all buying e-books on Amazon and reading them on Kindles.

On the Price Wars:

Most publishers we spoke with said that if Amazon were to maintain share of anywhere from 50% to 70% of the e-book market, they would concede it has gained enough share and momentum to cause them to cave on price negotiations with Amazon

Some (most) of us probably have a visceral reaction to this news – There’s no way Amazon have 90% eBook share.

However, let’s see what factors and evidence point in this direction and what evidence points in the opposite direction. Note that we have no hard evidence so this is all analysis and reviewing probabilities.

Reasons Kindle having 90% market share is far-fetched

These can be broken into two categories.

Higher Probability Factors 

1. All projections hint at 60% or so Kindle market share (by the way, my analysis doesn’t agree with these projections). That would mean 60%, or at most 70%, share of the eBook market-place for Kindle.
2. The sources from TBI research were a self-selecting group. Perhaps Publishers more dependent on Amazon are more nervous and more likely to answer questions. 
3. Lots of people consciously avoid Amazon. They seem to be a very vocal and reasonably sized group and it’s unlikely they make up just 10% of ebook purchases.

Insert your own high-probability factors here.

Reasons we think Amazon doesn’t/shouldn’t/couldn’t have 90% market share

There are a ton of potential reasons here -

1. The Kindle is not open. 
2. It has DRM.
3. Some people avoid Kindle.
4. Some Kindle owners avoid the Kindle Store.
5. Publishers like Baen and O’Reilly are not being considered. 
6. Only a few Publishers were asked and they just happen to favor Amazon.

Your reasons why Amazon couldn’t possibly be doing so well will vary based on what you believe and what you want to happen.

Let’s switch to the other perspective.  

Reasons Kindle having 90% market share is not far-fetched.

In a way the Kindle is a great lesson in how to -

1. Get the most valuable customers. 
2. Get customers of good intent and leave out customers of bad intent.

Please treat this as an approximation – There are obviously some really valuable customers the Kindle loses because of its approach.

The Kindle would have 90% market share if it managed to get the most valuable customers i.e.

• The 10% of customers that account for 60% of purchases.
• The next 30% of customers that account for 30% of purchases.

Did the Kindle really manage to get the top 10% and the next 30% of customers?

Here are reasons why Kindle having 90% eBook market share isn’t totally unrealistic -

1. Amazon created a product for people who read a lot.  
2. Amazon.com already had a lot of the top 10% and the next 30% of customers.
3. The savings and convenience of $9.99 prices and 60 second downloads is most acute for people who buy books all the time.  
4. The Kindle tends to increase how many books people read and buy.
5. The Kindle removes all the hassle i.e. for people who love to read and don’t mind paying a reasonable price Amazon’s service is perfect.
6. By not being open Amazon weeds out a lot of people who believe in openness and free. These people are sometimes less likely to pay for books.
7. By having a closed format with DRM Amazon loses out on lots of people who like to liberate and share eBooks.
8. By not having support for Library eBooks and not including 1 million free Google Books Amazon loses out on people who want to survive on free eBooks.

If we forget right and wrong and good and evil and filter people into two main categories -

1. People who will buy a lot of books at $9.99 and not worry about sharing and free books.  
2. People who want to share and share across devices and get ebooks from the library and want everything free and open.

No matter what your beliefs – The first group is way, way more valuable in terms of paying money for eBooks.

As a business you could and should focus on the first.

The Kindle is the only eReader focusing on customers of good intent

Contrast the Kindle with its competitors –  

1. The Kindle has 20,000 or so free books and 15-20 free books a month. It also has 398,000 books total. Free is 5% of the Kindle Store.
2. Sony and Nook have over a million free books from Google and support for free library books and a couple hundred thousand paid books. Free is 83.33% of the other eBook stores.
3. The Kindle weeds out – people who want to share eBooks for free, people who want library ebooks, people who want open formats. Perhaps 10-20% of those are high volume customers. The rest probably aren’t.
4. With its low prices the Kindle appeals a lot to people who buy a lot of new books.

The devices themselves attract a particular type of customer.

Just like the iPhone is better to sell Paid Apps on than Android, the Kindle is better to sell eBooks on than Nook and Sony Reader.

The Kindle makes it really easy to -

1. Buy Books.
2. Read Books.

At the same time it makes it impossible or very difficult to -

1. Share eBooks freely. 
2. Read library eBooks.  
3. Use Kindle eBooks on other eReaders.
4. Access the one million free Google Books.

All things being equal customers who want the latter features will buy less eBooks.

90% is not totally crazy

There are lots of possibilities here -

1. Amazon might have most of the 10% (very good customers) that make up 60% of eBook purchases. 
2. Amazon might have most of the next best customers i.e. the next 30% that accounts for 30% of purchases.
3. Amazon might have more than 60% eReader market share.
4. Amazon’s lower prices (Nook just started matching it recently) make it the clear #1 choice for people who buy a lot of eBooks. 
5. Amazon’s wireless delivery (again, it’s only December when the feature was matched) make it the clear #1 choice for people who want their ebooks easily and conveniently.

Think about it from the perspective of people who buy a lot of books and Amazon hits all the right buttons -

1. Low $9.99 price.
2. Largest range of new books.
3. 60 second downloads.
4. No distractions in the form of 1 million free books. 
5. No worrying about format and transfers and conversions and sharing eBooks.

If you just wanted to read a lot of the latest books at a reasonable price you’d be OK with the Kindle.

What happens if Kindle really does have 90% market share

If Amazon has 90% market share in eBooks the things that TBI Research talks about are all pretty likely -

1. It is a huge competitive advantage. 
2. eBook revenues will become huge for Amazon. 
3. Kindle format will win.
4. DRM will stay – especially as customers seem not to know and might not care while publishers and authors do know and do care.
5. Publishers will cave on price negotiations.

The article states that Publishers are willing to wait two years to cave on prices.

In a strange twist Apple iSlate and eReaders that are free and open are Publishers’ great hope of saving them from the tyranny of $9.99 prices and same day eBook releases.

eReaders and eBooks are twisted and complicated markets and Amazon and/or Apple taking over might not be a bad thing. If eReaders end up fighting each other Publishers just get back all the power.