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 -
- This post is all assumption. Only Amazon knows why it doesn’t support library books.
- 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.
- 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 -
- Kindle doesn’t add support for library books.
- Kindle adds support for library books using some format other than ePub.
- 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 -
- Amazon wins an extra 8% of customers. This is in addition to the 60% of customers already choosing Kindle.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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 -
- 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.
- 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.
- 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 -
- 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.
- Users will choose Kindle store over other stores to thank Amazon for adding ePub support. Complete nonsense – Users will pick the cheapest store.
- Kindle sales will make up for lost book sales. We just saw that the lost book sales dwarf the potential gains.
- 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.
- 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.