Reviewing the impact of Kindle not supporting or supporting library books

The Kindle doesn’t support library books. It’s become a bit of a talking point, and is probably amongst the top 3 reasons people choose Nook and Sony Reader over Kindle.

This post is pure conjecture – It attempts to figure out the financial impact of supporting or not supporting library books.

There are a few things to please keep in mind -

  1. This post is all assumption. Only Amazon knows why it doesn’t support library books.
  2. This post does not deal with good or evil or what’s good for libraries or what’s good for customers. This is just a review/analysis of the impact of library book support on book sales.
  3. It’s a very detached look at things. So, if you feel very strongly about the feature, you might not like how the feature is treated – as simply an asset or a liability when it comes to selling eReaders and eBooks.

Let’s get started.

Three possibilities for Kindle and Library Books

There are actually three possibilities when it comes to adding support for library books to Kindles -

  1. Kindle doesn’t add support for library books.
  2. Kindle adds support for library books using some format other than ePub.
  3. Kindle adds support for library books using ePub.

The difference between the latter two might not matter much to customers who want library books, but it matters immensely to Amazon.

The 32% of people who want support for library books

Teleread says that some survey says that support for library books is important to 32% of people interested in eReaders. It’s an interesting sounding number so we’ll run with it.

In fact, our entire analysis is based on random numbers - the theory behind the analysis is far more important than any answers we arrive at.

What happens if Kindle doesn’t add support for library books?

Not very much.

Kindle 3 is a bit ahead of Nook and Sony Reader. Only 32% of people feel library book support is very important. The net result is probably that 8% to 16% of readers pick another eReader over Kindle because Kindle lacks support for library books.

It’s reasonable to assume that some portion of these people would not pick Kindle anyways. So the actual damage is probably 8%.

Amazon is losing just 8% of prospective eReader owners due to the Kindle’s lack of support for library books. 8% is not a huge loss. This becomes especially apparent when we consider what happens if Amazon adds library book support to the Kindle.

If Amazon adds Library Book Support in Kindle DRM format

Here are our assumptions about what happens when library book support is added to the Kindle -

  1. Amazon wins an extra 8% of customers. This is in addition to the 60% of customers already choosing Kindle.
  2. We also have X amount of existing Kindle owners. Let’s say that for 2011 we will have 10 million people buying eReaders, and that there are already 10 million Kindle owners.
  3. By adding library book support, Amazon gets 8% extra eReader sales which is 800,000 more Kindle owners.

However, it also suffers some losses – Those 10 million existing Kindle owners, and those 6 million new Kindle owners, now all get support for library books.

  1. Let’s say that earlier Kindle owners were buying 2.5 books a month, and then due to library book support the number goes down to 2 books a month. That’s 5 million to 8 million less book sales a month (because we have 10 million to 16 million Kindle owners). Average it out to 6.5 million per month and 12 months and we have 78 million book sales lost by adding this feature.
  2. Those extra 0.8 million Kindle owners presumably buy fewer books - They must value library book support so much because they need library books. Let’s say they buy 1 book a month. Over the course of the year that’s an average of 0.4 million people buying 1 book a month which translates to 4.8 million books.
  3. To sell an extra 0.8 million Kindles, and an extra 4.8 million books, Amazon is giving up 78 million book sales.

It’s an interesting exchange – Adding the feature leads to a loss of 73.2 million book sales. What does Amazon get in return? An extra 0.8 million people who are focused on library books. A company would have to be crazy to make this exchange.

Please note that this is a conservative estimate – It’s assuming that people buy only .5 less book per month once library book support is added. It could end up being much worse.

If Amazon adds Library Book Support in ePub format

This is the impressive one.

We use the same assumptions.

By adding support for library books, we capture an extra 8% of the eReader market which translates to 0.8 million extra Kindles sold in 2011. Let’s also assume another 8% sign up because they like ePub support. So we have 1.6 million extra Kindles sold. At this point everything sounds great.

Except, we’re just getting started.

The existing 10 million Kindle owners, and the 6 million new Kindle owners (the ones who’d buy a Kindle without library book support), get library book support and ePub support.

  1. Kindle owners end up buying only 1 book a month from Amazon, instead of 2.5 books a month. They have so many options – libraries, Google eBooks, Kobo, and so forth. It means 15 million to 24 million book sales lost per month. Average it out to 19.5 million book sales lost per month and factor in the 12 months of 2011 - we get a gigantic figure of 234 million book sales lost.
  2. The extra 1.6 million Kindle owners will benefit Amazon very little – they value library books and ePub highly, which suggests they will buy less from the Kindle Store. Let’s say it’s 1 book per month. That means an average of 0.8 million book sales per month which translates to 9.6 million book sales for the year.
  3. Amazon is selling an extra 1.6 million Kindles and an extra 9.6 million books – But it’s losing 234 million Kindle book sales.

That figure is stunning - If it adds ePub support and library book support Amazon probably loses 224.4 million book sales.

Worst Case for the three scenarios

The worst case scenarios are very telling -

  1. By not adding support for library books and ePub Amazon loses 1.6 million Kindle sales and 9.6 million book sales. It does, however, preserve Kindle book sales to existing Kindle owners and to new Kindle owners.
  2. By adding support for library books, but not ePub support, Amazon adds 0.8 million Kindle sales and 4.8 million book sales. It, however, loses a huge 73.2 million book sales to existing and new Kindle owners. It also sees the average number of books sold per month per Kindle drop from 2.5 to 2 – which affects it well beyond 2011.
  3. By adding support for library books and ePub, Amazon adds 1.6 million Kindles sales and 9.6 million ebook sales. However, it loses a gigantic 224.4 million book sales to existing and new Kindle owners. It also sees the average number of books sold per Kindle per month drop sharply from 2.5 to 1.

That third scenario is incredible – Amazon could literally blow up its ebook revenue stream by adding ePub support and library book support.

Please Note: This is all conjecture.

It would seem that Amazon isn’t adding library book support because it doesn’t want to lose .5 book sales per Kindle per month. It also doesn’t want to lose 73.2 million book sales in 2011. 

Amazon isn’t adding support for ePub and library books because it doesn’t want to go down from 2.5 books sold per Kindle per month to 1. It also doesn’t want to lose 224.4 million Kindle book sales in 2011.

The Myth that People will Support Amazon if it adds ePub and Library Book Support

Proponents of ePub and Library Book support will claim a few things -

  1. Users will thank Amazon by buying more books from Amazon. That’s nonsense – They are getting free library books. That is going to reduce their spending, not increase it.
  2. Users will choose Kindle store over other stores to thank Amazon for adding ePub support. Complete nonsense – Users will pick the cheapest store.
  3. Kindle sales will make up for lost book sales. We just saw that the lost book sales dwarf the potential gains.
  4. Support for library books will encourage and raise ebook sales. This is some sort of magic trick – to pretend that library book availability will somehow boost sales.
  5. ePub support will mean readers will buy more ebooks. Perhaps – However, it will also mean that they will buy their books from everywhere.

The average user will simply interpret it as something Amazon ought to have done, and will not really feel much obligation to stick with the Kindle Store. Users will get free books from libraries. Users will start checking every single ebook store each time they want a book. It will harm Amazon a lot.

The estimate that Kindle book sales will fall from 2.5 books sold per Kindle per month to 1 seems extreme – but it isn’t really. Not when new entrants will be doing all they can to steal sales. Not when different stores will have different prices and people will make an effort to save even 10 cents.

Amazon would have to be crazy to let absolutely any store sell books to Kindle owners. Support for ePub will enable exactly that.

Support for library books is a more nuanced decision. If Amazon feels the drop from 2.5 books sold per Kindle per month to 2 is acceptable – in return for gaining 8% or more of eReader sales – then it’ll add support for library books using Kindle DRM. If Amazon feels it’s not worth it to lose out on Kindle book sales to all kindle owners, just to cater to the 8% of future eReader owners that would pick Kindle only if it supported library books, then Amazon won’t add support for library books.

The only thing that would result in Amazon adding library book support is if the percentage of readers choosing another eReader over Kindle, due to the Kindle’s lack of library book support, were to rise dramatically from 8%. If it were to hit 15% Amazon would add library book support within a week or two.

30 Responses

  1. “If it were to hit 15% Amazon would add library book support within a week or two.”

    It still wouldn’t make sense for them to do so, using your framework–which I agree with.

  2. I’d love it if Kidle would support library books but if they don’t, I’ll continue getting them on my laptop and getting real books from the library. The Kindle is more convenient to use than my laptop but lack of library support wouldn’t, at least right now, push me to buy a Nook. Who knows about the future? But I love my Kindle.

  3. My husband asked me to send you this and since I can’t find a place to put general comments, I’ll post it here and hope you read it:

    “The guy on my team who rooted his nook and runs android on it, has loaded the kindle reader on it. So his nook runs android apps, ( wifi only ), plays movies well, and has the Kindle app on it for books as well as the “wild birds” crazy game.”

  4. From my personal experience:
    I own two Kindles myself (a DX2 and a 3).
    I bought 4 as gifts this Christmas.
    I steered my girlfriend towards one a few months ago.
    BUT, when it came time to buy her daughter one I advised her to get a nook since her daughter goes through library books like water.

  5. You didn’t mention one possible benefit of Amazon providing ebooks ePub format: selling ebooks to Nook, Sony Reader, Kobo, etc owners. The market for ebooks is not just Kindle owners; it’s ALL eReader owners. Amazon is missing out on ebook sales to owners of those other devices.

  6. What about the perspective of the library and its future buying decisions? If libraries continue to shift to e-books instead of print then that will drive more people to e-readers. Does kindle want the market produced by that shift?

    Also, there really is no difference between a library loaning a book and an individual loaning a book to friends — both are lost revenue to sellers. The fear is that it is electronic, but it is still the same thing.

    • Anne, agreed.
      eBook lending is severely restricted – once only, to only one person, for just 14 days.
      Contrast that with a library that lends non-stop.

  7. I think you are overlooking the effect that publishers as different as National Academy Press and Baen Books have found when they make ebooks available free: it increases sales. Whether it would have the same effect for Amazon, I don’t know–but the catch with free library books is that you don’t get to keep them. No one is going to buy every book they read first from the library–but most readers serious enough about reading to buy an ereader will wind up buying some of the books they buy from the library.

    Whether this effect would be strong enough to change the calculation for Amazon, I don’t know–but I bet they haven’t taken it into account at all.

  8. A hitch in the numbers…Existing Kindle owners would not have the functionality on their readers to get library books so they would either A) continue to buy Kindle books or B) buy a new Kindle adding to the Kindle sales.

    • It would just be a software upgrade. It’s very easy to add ePub support or support for a special library format – just like Amazon added PDF support.

  9. I believe this argument leaves out the library perspective entirely. Libraries are a fairly big revenue stream for books. I believe they can also be a big revenue stream for eBooks. Publishers do not refuse to sell books to libraries. They, in fact, court library sales. Ebooks are sold to libraries money and create a revenue stream. Just like with any book, popular titles will have waiting lists at libraries. Some people will put a book on reserve, some won’t wait and will buy it. Higher fees can be charged to libraries for “multiple copies.” Amazon just isn’t library oriented but it should wake up to the purchasing power of public and school libraries. Not to mention our reader’s advisory, summer reading, and overall advocacy of reading. We end up selling books!

  10. I love my Kindle but have almost stopped using it because I can’t use it w/ library ebooks. I tend to try then buy. So, if I like a book (particularly non-fiction) that I’ve checked out of the library, I’m much more likely to buy it for myself and/or as a gift for others. If I could check things out for my Kindle, I’d probably start buying newspapers again regularly for it as well as “keeper” books…

  11. I don’t see why a choice has to be made between Kindle, Nook and other reading devices just because of the library ePub lending format. I own a Kindle and a reader that works with library lending. There is no reason I can see that limits people to owning just one e-reader.

    A second note I would like to make is that library books quite often drive my Kindle purchases. In a few cases I want the book I read because it is worth a re-read. More often I have read a new author or series and use Amazon to pick up similar books. Libraries and bookstores are symbiotic not competitive.

  12. What about the assumption that if Kindle doesn’t open up to other formats, it will become an extinct proprietary technology? Kind of like beta-max? I think the openness that other popular e-readers are implementing puts a lot of pressure on Amazon to do the same.

    • Isn’t this open-ness a bit of a myth? I am sure that B&N use proprietry DRM for their sales. Thus no transfer to a competing device. Admittedly a nook for example will let you purchase ePub with Adobe DRM from other stores, but this is only a real benefit if this increases your choice or provides a better price. This has rarely been the case in my experience. Also, any provider that does not use DRM can be used on a kindle anyway.

      As a final note, here in the UK the only real choices are Kindle and Sony. None of the ePub Suppliers here e.g. Waterstones can even come close to Amazon’s prices or range.

  13. If Amazon wanted to support at least some library books on Kindle it would be trivially easy. Overdrive, the main provider of ebooks to libraries, has ebooks in mobi format. It’s possible to register the Kindle’s serial number with them and then after some file conversions put them onto a Kindle. They even expire properly on the Kindle after the pre-determined period.

  14. Kindle could allow TEXT Books as well as library books. Kids would love carrying all their text books in a Kindle and look at the sales Amazon could make through schools, libraries, and school libraries. Not to mention the civic duty to senior citizens of which many cannot afford to purchase books, but have received a gift of a Kindle, which seldom is used because of non-library capability.

  15. You are ignoring a basic point. The issue is not epub format. The real issue is the Adobe Digital Editions (ADE) DRM (copy protection) which is laid onto the epub and pdf formatted books from the Overdrive system.

    Amazon would have to pay Adobe license fees and those could be significant.

    They would also have to re-write the software to accommodate 2 different versions of DRM. My understanding is that both DRMs are coded to require exclusivity and that having 2 versions on one device will require some significant code revision. Software revision could be very expensive. I have no technical knowledge of either format of DRM personally, but this is one of the reasons suggested.

    Sony decided to change its DRM from its own proprietary format and many owners had to request Sony to convert all of their prior purchases. I believe this was because the device could not accommodate both DRMs. Maybe someone more familiar with the situation can clarify what happened/. This probably cost Sony $$$$$.

  16. [...] Reviewing the impact of #Kindle not supporting or supporting library books #ebooks via @msauers an interesting look at the possible cost impact of Amazon allowing library [...]

  17. [...] Reviewing the impact of Kindle not supporting or supporting library books [...]

  18. My husband bought me a Kindle for Christmas. As soon as I heard it is not compatible with checking out e-books from libraries, I wished he had gotten me a nook. I use my library and don’t buy a lot of books, only keepers I know I want. I still am sick about it…

  19. Ditto on textbooks…My daughter would love to get hers on a Kindle or Nook.

  20. I think Kindle sales will go down drastically because of their choice not to support libraries. Think how many Kindle users get free or very low cost books to read. 2.5 books per month is not realistic for most users I know.

  21. @Dawn – I believe you have until January 31 to return a Christmas gift Kindle. Please contact Kindle customer service and check, then you could get your Nook or Sony.

  22. Another item to consider – how much in sales is Amazon making through just their app. I buy a book a month to read on my iPhone – no Kindle required. The smartest thing for Amazon to do is to promote cross-platform/device sales. I thought that Amazon was originally losing money on the hardware end anyway.

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