Apple found guilty of conspiring to fix ebook prices, Karma smiles

While there are a lot of ‘I Love Apple’ and ‘I Dislike Apple’ based opinions, it’s quite easy to see, if we step back from our personal perspectives, that -

  1. The Agency Model would not have happened without Apple’s help.
  2. Apple, and in particular Steve Jobs, was quite happy to go around telling people how it has ‘ensured prices will be the same everywhere’. It takes a special type of hubris to say it on tape.
  3. The Agency Model led to a LOT of readers feeling the pain of either paying $13.99 or more for new releases, or having to wait 6 to 12 months for prices to reach below $9.99.

With that in mind, it is refreshing to see Apple found guilty of conspiring to fix ebook prices. Apparently, Apple’s ‘If we didn’t do illegal price collusion, then Amazon would have done it’ and ‘People at Amazon screamed and shouted, and were very un-gentleman-like’ defences didn’t work.

Paid Content points out that there’s a lot of HARD EVIDENCE the Judge used to make her ruling -

Cote also pointed to what she said was clear evidence that the conspiracy led ebook prices to go up:  ”two weeks of moving to agency [pricing led to an] increase of 14.2% for their New Releases, 42.7% for their NYT Bestsellers, and 18.6% across all of the Publisher Defendants’ e-books.”

Apple will, quite predictably, appeal. However, I really don’t see how it can win an appeal given there is an inordinate amount of evidence that Apple’s actions did, in fact, lead to higher book prices for customers.

A Blow in the Perception Wars?

Apple perhaps doesn’t care about ‘damages’. It does care about the perception. For Apple it’s ALL about the Perception Wars. Like the most popular girl in high school, it doesn’t really matter if she’s suspended. She just wants to make sure she was suspended for doing something ‘cool and rebellious’ that ‘stuck it to the man’ and not something tacky that hurt fellow students.

The new ‘Special Divisions’ VP at Apple, the former head of YSL, now has to work just a little bit harder to make sure the poor little rich girl still wins the Prom Queen crown.

Karma is calling

Remember how Steve Jobs (he still seems to figure rather prominently, doesn’t he) promised to wage thermonuclear war on Android.

Perhaps he should have shown the other cheek.

It seems Samsung won against Apple on some patent (probably for holding a device vertically with one hand (actually, it’s wireless related)) and on June 4th ITC banned the Apple iPhone 4 and the Apple iPad 2. The ban goes into effect in 30 days, unless the President overrules it (doesn’t he use a Blackberry? There goes that option).

Apple has asked for a stay, claiming it would do massive irreparable harm to Apple and to its wireless provider partners. Well, they should have thought of that before selling phones that could be held with one hand.

After all the drama and all the patents on things like rubber banding (yes, you can get patents for how scrolling a list ends, for the visual effect no less) it is poetic justice that it is Apple that might be forced to stop selling iPhone 4 and iPad 2.

Apple to control Music, Amazon to control Books – Apple’s Wishful Thinking

Wow! The DOJ’s Trial against Apple is the gift that keeps giving. Yesterday we found out that Apple claims 20% share of the ebook market, 100% growth in ebook sales in 2012, and 100 million customers of the iBookstore.

Today, we find out two big things (thanks to Eddy Cue, the senior most Apple executive questioned so far (SVP of Internet and Services)).

  1. Apple considered splitting Books & Music between Amazon and Apple. The key part from CNet’s coverage of DoJ vs Apple -

    Eddy Cue, Apple’s senior vice president of Internet software and services, who took the stand Thursday in district court in lower Manhattan, also said Apple considered splitting the market with Amazon in a setup where Apple would control the music market, while Amazon would monopolize books.

  2. Apple’s Eddy Cue pretty much admitted that ebook prices went up because of Apple’s deal with Publishers.

This is a bit of a surprise. On the one hand, Apple claims it did nothing wrong. On the other hand, their senior executives are admitting Apple’s moves led to higher ebook prices.

Apple’s Reality Distortion Field affects Apple Executives too?

Apparently, Mr. Cue got testy when asked what he thought about ebook prices going from $9.99 to $12.99 to $14.99. He didn’t think it hurt consumers. Here’s what he said -

“Our consumers were protected by my price points,” he said. “I thought we were going to treat our consumers very, very fairly.”

Wait a minute. Books were $9.99. Then Apple struck a deal with Publishers and caused prices to rise to $12.99 to $14.99.

Apple executives actually thought by doing this they were protecting consumers?

That’s some good Kool-Aid they’re serving at Apple’s SpaceShip One HQ.

Apple to control Music? Amazon to control Books?

The juiciest part of this entire conversation is this:

Apple considered splitting the market with Amazon in a setup where Apple would control the music market, while Amazon would monopolize books

Let’s get this straight – In the middle of a collusion/price-fixing trial, Apple’s most senior executive questioned so far, brings up the fact that Apple was discussing what would be an EVEN MORE ILLEGAL arrangement.

Amazon to control Books and in return Apple gets to control Music.

Bonus Points for using ‘control the music market’ and ‘monopolize books’. Let’s not leave any room for doubt, shall we.

This is just madness. Why on Earth would you mention this? Does anyone see any reason for Apple to mention it was considering this whole ‘Let’s collude with Amazon and split and monopolize the Music and Books markets’ idea?

It’s an interesting thought. There are probably all sorts of illegal arrangements and secret/silent partnerships that happen all the time. However, bringing up that you were considering it in the middle of a DoJ trial – that’s just amazingly foolish.

How would an ‘Apple to control Music, Amazon to control Books’ arrangement work?

Apple probably considered music very important for selling iPods and for maintaining its ‘coolness’. It perhaps thought Amazon valued books a lot because Amazon had the Kindle and a huge revenue stream from selling paper books.

Perhaps Apple was thinking about asking Amazon to end Amazon Music and/or channel it to iTunes. In return, Apple would channel iBooks to Kindle Store. The arrangement would work well. However, DoJ would come after Apple and Amazon. Perhaps it would be a secret deal where iBooks either stalls or Apple secretly promotes Kindle a ton. In return, Amazon would ramp down Amazon Music.

At this point, it seems pretty obvious that the DoJ needs to investigate how many of these ‘secret’ partnerships there are between the big technology companies.

Apple wanting to partner up with Amazon and secretly carve out monopolized markets for each other. Wow! Every day you learn something new.

Apple claims 20% of US ebook market – Kindle, Nook, Kobo confused

Apple has made a bold claim – Apple’s iBooks owns 20% of the eBook Market. From Paid Content -

Apple now holds about 20 percent of the U.S. ebook market, director Keith Moerer testified in court on Tuesday. Moerer also said that the iBookstore’s sales grew by 100 percent in 2012.

Well, lots of interesting information coming out of the Apple Price Fixing Trial. Publishers Weekly has a more detailed account.

Something doesn’t add up

Here are the various claims we’ve heard in recent times -

  1. B&N claiming 25% of the market.
  2. Kobo claiming double digits.
  3. Amazon supposedly having 80% - according to various Publishers and such.

That doesn’t square with Apple having 20% of the eBook Market.

If we have Kindle with 80%, B&N with 25%, Apple with 20%, Kobo with 10% and everyone else with 5% – That would mean these ebook retailers own 140% of the market.

Who’s lying? Or are they all just confused?

Apple claims 100% growth in 2012, 100 million customers, 20% market share

Let’s evaluate each of Apple’s claims -

  1. 20% of the US eBook Market. That would leave just 80% for everyone else. There’s little chance Amazon and B&N have less than 60% and 20%. Does that mean everyone else isn’t selling?
  2. 100% growth in 2012. This is quite possible. This is faster than the average yearly growth rate of 56% for ebooks. However, it’s possible – especially since a ton of iPads and iPad Minis and iPhones were sold in 2012.
  3. 100 million customers. Perhaps this is meant worldwide – Because it’s hard to imagine 100 million people in the US buying books or ebooks from Everywhere combined, let alone from iBooks alone.

The 20% market share claim, if true, suggests that perhaps Amazon’s share has dropped to the 50% to 60% range. It would also suggest that B&N’s share has dropped to the 15% to 20% range. The latter seems really unlikely since B&N did sell millions of eReaders and Tablets in 2012. The former seems even more unlikely – Amazon has been on a tear with Kindle Fires.

What about Kobo and its 12.5 million customers? What about Sony eReader? What about Google Books? What about everyone else?

If Apple is correct, the eBook Market might look rather different from what is generally assumed

The general, implicit assumption has been a market with -

  1. 70% market share for Kindle.
  2. 20% market share for Nook.
  3. 10% divided between Apple and Kobo and Sony and Google.

At least that’s what authors and Publishers and bloggers seem to imply.

If Apple is accurate, then it changes things a ton -

  1. 50% to 55% market share for Kindle.
  2. 20% for Apple.
  3. 15% to 20% for Nook.
  4. 10% to 15% divided between Kobo and Sony and Google.

The biggest thing it does is, it makes Nook very important. Because Apple could buy Nook and instantly get to 35% to 40% market share. It could then change its app store rules to kick out Kindle and get to 50%.

The other possible strategy is to focus on customers of good intent, willing to pay for quality books. Apple could round-up all the customers willing to buy $10 and $15 books and let Amazon and Nook have the $1 and $2 and free book readers.

The latter strategy is not a bad path to take. Amazon is already doing a good job of using ‘free and cheap’ to attract all the ‘books should be free’ people (Note: Not saying all Amazon customers are such, just that Amazon for some strange reason is fixated on these ‘books should be free’ customers). Let Amazon have them. Just focus on customers of good intent who don’t mind paying for quality books.

Of course, buying Nook and instantly doubling market share in ebooks would be even better. Perhaps do both.

It’s all very strange

Apple wouldn’t claim 20% in a Court of Law if it wasn’t 20%. B&N has to have between 15% and 25% – they’ve sold tens of millions of Tablets and eReaders. Kobo and Sony and Google must have 5% to 10%.

That leaves just 50% to 60% for Amazon’s Kindle. Which would mean that, contrary to the claims of Amazon owning 80% of ebooks, Amazon has 50% to 60% share and is very vulnerable.

20% market share for Apple’s iBooks is a lot more than I would have thought – especially since iBooks isn’t available on anything other than iPhone and iPad.

600 sales a day for #1 iPhone Paid Book App

The story of the current #1 Paid iPhone Book App includes -

  1. A Kindle focused app called Kindling, which Apple rejected.
  2. Making $700 to $900 a day from free public domain books.
  3. Lots of really cool optimizations and App Store secrets.

It also suggests that ‘iPhone is the future of reading’ is quite an exaggeration.

Amazing Story of the $700 a day #1 iPhone Book App, and the Kindle Angle

Kindling – An App for Kindle Owners that didn’t make it

Colin Plamondon and Joel of SpreadSong were initially making an app for Kindle owners (story courtesy Mixergy).

  1. It was named Kindling.
  2. It would let Kindle owners browse through a list of free books from Gutenberg and other free book sites.
  3. Users could then email the books of their choice to their Kindle (at the cost of 10 cents per MB) or to another email address and upload it to Kindle themselves.

However, things didn’t go so well -

  1. Kindling wasn’t approved for 4 months.
  2. Apple had concerns that since the app was using Amazon’s messaging system Amazon might pull the plug.
  3. Colin says it was a totally legitimate concern. He seems to take the delay and drama well.
  4. After 6 months (a week ago) the app got rejected.

Wait a minute – Weren’t we talking about the #1 Paid iPhone Book App?

Yes, and here’s the good part of the story – There was another app ;) .

Taking Free Books to #1 in Book Apps

At the end of June 2009, SpreadSong launched an App, called Free Books, that let users download and read any of 23,000+ free public domain titles.  

It was $1.99 and let users read public domain books.

  1. It started off slow, and SpreadSong were making $20 a day off of it for the first month. That’s 10 sales a day. 
  2. As various tweaks and improvements were made and some very smart marketing strategies were used (read the iPhone app marketing strategy guide from Colin) sales and sales rank improved.
  3. The Free Books App hit the Top 100, and then the Top 50, and then the Top 20.
  4. Which brings us to right now and its current status as the #1 Paid App in the Books section of the App Store.

#1 means $700 to $900 a day in revenue share for SpreadSong. That means 500 to 650 purchases a day.

Numbers, Figures and Magic – Sales of Book Apps

We finally get insight into what sales in the Books Section of the App Store are -

  1. The #1 app is getting 500 to 650 sales a day. This is from right now (literally – the interview was 21st December).
  2. The #4 spot gets around 400-500 sales a day.  
  3. The #10 spot gets approximately 250-300 sales a day. 
  4. The #20 spot gets around 100-150 sales a day.
  5. Weekend sales are much, much higher than weekdays.

That’s the first time we have a listing of what each sales position in the Paid Book Apps section of the App Store means.

It should also help dispel the confusion that book apps are bigger than games – the top game gets over 10,000 sales a day.

To be absolutely clear - The top-selling Paid Game sells more than the Top 20 Paid Book Apps combined.

Would people please stop claiming that Book Apps are taking over the App Store.

Free Book Apps sell a lot more (surprise, surprise)

The $1.99 Free Books App has sold 60,000 total units so far. Meanwhile, SpreadSong estimate that there have been between 2 million and 5 million downloads of the Kindle.

iPhone Analytics firm had estimated 3 million people reading ebooks on the iPhone so that range i.e. 2 million to 5 million is quite reasonable.

Kindle for iPhone, Stanza, and the B&N eReader App dominate the Free Book Apps list. Kobo is making its way up the charts.

SpreadSong are choosing Palm over Android

The next destination for SpreadSong is not Android.

  1. Colin talked about how people with Android phones don’t buy stuff. He basically mentions that there are a lot of open source people and that means low sales for Paid Apps.
  2. He’s heard that the top paid apps on Android earn just $500 to $1,000 a month. Perhaps this was for Book Apps.
  3. Meanwhile, Palm does well despite its miniscule market share because it has small business users and an audience that is much more likely to actually buy stuff.
  4. He’s heard that the top 3 paid apps on Palm are making $5,000 a month. Again, this is probably for Book Apps.

All that means that SpreadSong’s Free Books App is headed for Palm and not Android. This echoes what GameLoft is doing i.e. ditching Android.

In the works - Free Audiobooks App based on Librivox

SpreadSong’s next project is going to be an App that plays free audiobooks from Librivox. There is actually an app like this in the App Store already and it’s doing quite well – it’s currently #3.

Also interesting was one of their past projects, Book Blog, which took blogs and turned them into books you could read in order.

Let’s move on to analyzing all of this and some marketing tips from Colin.

App Store Insights

Top 10 Marketing, General Tips for iPhone Apps

Do read the post and if you develop apps do see the interview. These are 10 of the most interesting things -

  1. Consider focusing on topping a category chart and making $8K to $15K a month instead of the $100K a month stories the press like to focus on.
  2. It’s not ‘get rich quick’ – it’s slow consistent work with lots of improvements to the app, lots of tweaks, and so forth.
  3. The Top 100 overall list is dominated by companies with marketing budgets ($3K to $5K a day per app) and brand recognition. SpreadSong pointed out Red Laser as one of the exceptions.
  4. Always focus on out-converting the app in front of you. Reaching the Top 25 in a category is crucial.
  5. The App title, the app icon, and the price are the three critical elements you control.
  6. Pick a name that describes the product.
  7. The most important things, in order of achieving them, are to get into the Top 100, then to get into the Top 25, and then to get into the Top 4.
  8. The iPhone shows only 4 apps at a time so the top 4 spots are critical. 
  9. Use a description that includes the right keywords, keywords that you’ll get traffic from, and also include names of the top apps in your niche or apps that Apple advertises.
  10. Reviews are crucial to getting sales – the more reviews the better, the more good reviews the better.

Thanks to Colin for sharing this. It’s a ton of valuable data.

Perhaps iPhone isn’t the Future of Reading

iPhone might not be the future of reading

The top 20 paid iPhone Book Apps are -

  1. 7 public domain content compilations (including 2 audiobook compilations). All $1 to $2. 
  2. 4 Bibles or Bible Apps. 
  3. 6 comics.
  4. A game, a Love Dare flash cards app, and an iPhone manual.

There is not a single book in the Top 20 iPhone Book Apps.

  • That means, given on what Free Books sales tell us, there is no new book being sold on the iPhone selling 150 or more copies a day.
  • In fact you only have the 4 twilight books and a Vook amongst the Top 100 Paid iPhone Book Apps.
  • There are no other new books at all.

The grand ‘iPhone is the future of reading’ hypothesis is just that – a hypothesis.

People who paint the iPhone as the future of reading are misinterpreting

What are the numbers you keep hearing -

  1. 3 million ebook readers on the iPhone.
  2. More iPhone Book Apps than any other type of apps.
  3. iPhone Book Apps are the future.

Well, what’s the reality?

  1. Zero actual new books in the Top 20.
  2. Only 4 Twilight Books and 1 Vook in the Top 100.
  3. The #1 Books App is selling 600 copies a day and it’s all public domain titles.
  4. No new book is selling 150 copies a day in the App Store.

3 million people reading books on the iPhone and can’t get even a single book into the Top 20 Book Apps.

On the iPhone, except for Twilight, new published books may as well not exist.

Where does that leave us? Dependent on Kindle and B&N

The fact that no new books are selling means we are left with just three possibilities -

  1. iPhone owners are doing all their reading through Kindle for iPhone, Stanza and B&N eReader. 
  2. iPhone owners are only reading public domain titles.
  3. iPhone owners are not really reading much.

Regardless of which one it is, the key takeaway is that Publishers who think they can sell Books as Apps in the App Store are mistaken. It hasn’t happened so far and it might never happen.

Kindle Vs Apple Reader

We are seeing the beginnings of a Kindle Vs Apple Reader battle – the pipes and tubes of the Internet are abuzz with rumors that Apple has been approaching book publishers and promising a 70% cut.

Apple seem to have set their sights firmly on the Kindle and the associated revenue streams.

Amazon Kindle Vs Apple Reader – Is it going to be 2010′s main storyline?

Why would we think Kindle Vs Apple Reader even before the launch of Apple’s JesusTablet?

Because of two huge developments that might be linked -

Harper Collins, Hachette, Simon & Schuster start delaying eBook releases

First, we had Simon & Schuster talk about delaying some eBook releases by 3-4 months. Then Hachette jumped in.

Now, Crain’s New York reports that Harper Collins have jumped in too -

HarperCollins, which has already delayed the e-book of its No. 1 best seller Going Rogue, by Sarah Palin, will start to “window” e-book editions this winter, starting with five to 10 titles per month, a spokeswoman said.

HarperCollins also talk about releasing enhanced eBook editions that would be published at the same time as Hardcovers and priced the same i.e. hardcover prices.

Initially this seems to be all about Publishers trying to find ways to kill eReaders. However, consider the other big news this week.

Rumors of a $1,000 Apple Reader Tablet that gives Book Publishers 70%

This time it’s an analyst, Oppenheimer’s Yair Reiner, and he’s not shy about making big predictions -

  1. Apple is offering a 70% share to Publishers. Reiner goes as far as to say that Apple has been approaching US book publishers.
  2. Reiner thinks the Apple Reader Tablet will become Apple’s flagship product and will save the newspaper industry.
  3. Price point around $1,000.
  4. 10.1 inch touch screen - Low Temperature Polycrystalline Silicon LCD (like the iPhone).
  5. Apple will hit mass market production by February.
  6. A March or April release is possible.
  7. Reiner thinks Apple will be manufacturing 1 million Apple tablets a month.

One interesting tidbit is that Amazon offers publishers 50% and bumps it up to 70% if they give Amazon exclusivity.

All this is from Fortune via ZDNet.

Are the eBook delays and the Apple Reader release date linked?

Probably.

If Publishers feel they can promote the Apple’s Reader (aka JesusTablet) instead of the Kindle and get a 70% cut instead of a mere 50% cut, then their recent madness would make sense -

  1. Delay eBook releases and reduce the lead Amazon gets.  
  2. Hold off on lots of eBook releases and bring them all out with the Apple Reader.
  3. Force Amazon to offer a 70% cut too.

Amazon is in trouble if this happens – they have to pay Publishers a cut and also have to pay for bandwidth. Apple, thanks to the data plans that customers sign up for with their 2 year contracts, don’t have any bandwidth costs.

What do you think - Could we be in for a big battle between Amazon’s Kindle and Apple’s iWhatever?

Is 2010 going to be all about Amazon Kindle Vs Apple Reader and Publishers?

While Kindle Vs Nook is the flavor of the month there is a very high chance that everything changes with the arrival of an Apple Reader.

Here are the competing storylines for 2010, the Year of the eReader,   

  1. The Kindle being dominant.
  2. Kindle Vs Apple Reader. 
  3. Kindle Vs Nook.
  4. Kindle Vs Apple Reader Vs Nook Vs Sony.

My money’s on it being all about Kindle Vs Apple Reader (with Publishers on Apple’s side).

  • Nook is a solid entry – However, it has a lot of fixes and updates to do.
  • Sony seem to have lost their way completely.
  • The other new entrants don’t have enough trust with customers.
  • That only leaves the Apple Reader and Publishers desperate to fight Amazon.

The delay in ebook prices and Apple’s imminent Reader Tablet make sense together.

2010 is going to be the year of the eReader – whoever wins the Kindle Vs Apple Reader battle is going to win the war.

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