Stores include – Best Buy, WalMart, Target, Staples, Sam’s Club, RadioShack, Office Depot.

It’s all very puzzling.

The Madness of the Retailers?

It’s absolutely inexplicable to me that stores like Best Buy and Target and WalMart would sell Kindles and accelerate their own demise. Do they not realize that Kindle Fire is a direct connection to Amazon.com? That Kindle and Special Offers will end up eroding the sales of the retail stores?

With B&N we can rationalize that perhaps all these retail stores can’t think that far ahead. However, with Amazon – it should be obvious what’s happening.

Here’s what BestBuy’s senior VP says -

“We are excited to work with Amazon to provide consumers the opportunity to touch, test, try to buy the Kindle Fire in all Best Buy and Best Buy Mobile stores nationwide,” said Wendy Fritz, senior vice president of Computing at Best Buy. “The Kindle Fire and other new products in the Kindle family will be some of the hottest gifts this holiday season and we are delighted to offer these devices as part of our ever-expanding tablet and e-reader selection at Best Buy.”

She might as well say -

We are getting tired of selling all these electronics. So we though we should let Amazon get a direct connection to our customers and shift them over to buying from Amazon.com.

The strangest store on the list is WalMart.

Isn’t WalMart supposed to be Amazon’s mortal enemy?

My understanding was that WalMart sees Amazon as a major threat and has started WalMart.com in part to address this threat.

Why then, is WalMart strengthening Amazon?

WalMart is literally selling its customers mini-Amazon stores. That its customers will carry everywhere with them. It’s incredibly shortsighted and hard to believe.

Target’s One-Stop-Shop Strategy

The irony -

“Target is offering the new family of Kindle devices, including the Kindle Fire, to ensure Target is a convenient one-stop-shop for all of the season’s must-have gifts,” said Nik Nayar, vice president merchandising, Target.

Target wants to ensure its the one-stop-shop. So, what does it do? It starts selling its customers mini-Amazon Stores that will, in future years, be the one-stop-shop for these customers.

How is all of this not painfully obvious?

Perhaps there’s something I’ve missed.

How does it help retail stores to build up Amazon? How does it help them to accelerate the trend to online and mobile shopping? Are they really not concerned that people will start doing their shopping through Kindle Fires and at Amazon.com?

It makes zero sense. To sell some extra devices this holiday season, all these retail stores are going to sell away their customers to their most dangerous competitor?

Here’s the tweet – AP on Steve Jobs.

Here’s an article in the Chicago Tribune – Steve Jobs.

It’s unfortunate that after reviving Apple and taking iPhone and iPad to huge success, Steve Jobs didn’t get very long to enjoy his victories. 56 is way too young.

Briar Dudley’s Blog in The Seattle Times has the scoop -

A beta test version of the service now being offered by the Seattle Public Library and King County Library System, which are letting people select and place holds on Kindle versions of books.

“We launched yesterday,” said Marsha Iverson, spokeswoman for the county library.

Early reports seem to suggest it isn’t very smooth. The one thing that seemed annoying is advertisements to buy books on the last page of the checkout process. Free Library Lending with Special Offers?

A Seattle Law Firm is saying that 5 Publishers and Apple ‘colluded’ on ebook prices and ‘increased their profits illegally’ and forced Amazon to ‘abandon its pro-consumer discount pricing’.

Perhaps a more appropriate claim would be – Publishers were desperate and totally incapable of competing technologically, so they used Apple to bring about ‘The Agency Model’. Apple was happy to play along as it knows that it’s competing with Amazon for all sorts of digital product sales and it feels that people should be buying Apple products instead of products from anyone else.

It’s great to see someone contest the Agency Model pricing on legal grounds. There’s absolutely no way $15 and $17 new ebook releases are anything but price collusion.

Here are a few juicy snippets from the Press Release (It’s embedded in the article at the above link) -

… publishers believed that Amazon’s wildly popular Kindle eReader device and the company’s discounted pricing for ebooks would increase the adoption of ebooks, and feared Amazon’s discounted pricing structure would permanently set consumer expectations for lower prices, even for other eReader devices.

Apple simply did not want to enter the ebook marketplace amid the fierce competition it knew it would face from Amazon and its discounted pricing … So instead of finding a way to out-compete Amazon, it decided to choke off competition through this anti-consumer scheme.

Berman pointed out that The Kite Runner, for example, costs $12.99 as an ebook and only $8.82 as a paperback.

This is beautiful.

While it’s obvious that Amazon was doing cut-throat pricing as much for itself as for customers, it is us customers who got hurt the most due to the Agency Model.

Kudos to the law firm for correctly going after the Publishers and Apple, for pointing out that ebooks should cost less than paper books, and for pointing out cases where ebooks now miraculously cost more than paper books.

The Class for the Lawsuit includes any consumer who purchased at least one ebook priced above $9.99 since the advent of the Agency Model. If this succeeds, and don’t see why it wouldn’t, then the Evil 5 Publishers are going to really, really regret the Agency Model.

There’s more information related to the case at the Law Firm’s website –  Evil Agency Model and the Lawsuit. It seems to be a pretty big and successful Law Firm with lots of big cases and settlements.

UK Publishers & Libraries struggle over eBook Lending

The key details -

1. Libraries are asking Publishers to allow ’1 ebook, 1 loan’ lending like OverDrive enables in the US. Assuming this means that a library that buys two copies of an ebook would be able to make two loans in parallel - And then the number of loans over time would be unlimited.
2. Hachette, Simon & Schuster, Faber, and Quercus are among Publishers declining to agree. Penguin and Lonely Planet have agreed. HarperCollins has agreed but is considering imposing a 26 loan limit (same as what Harper Collins US has done in the US).
3. The Society of Chief Librarians has said that Publishers’ baseline position on library ebook lending is of very limited practical use for readers using libraries.
4. OverDrive declined to comment on whether Amazon-OverDrive library book lending would be coming to the UK.

It’s interesting how badly libraries are being treated by everyone (especially the Government) in the UK.

Penguin’s eBook Sales double in Q1, 2011

Penguin saw its Q1 ebook sales in 2011 double from the year-ago quarter. Its CEO is predicting that eBooks will make up 4% of Penguin sales in 2011 (up from 1% in 2010). Didn’t know ebooks were such a tiny part of the market in the UK (1% is almost meaningless).

Misleading Headlines about the iPad and Books

This is strange.

1. Simba Information did a survey and everyone’s reporting the same headline – iPad users may not become book readers.
2. How interesting. Until you read the actual statistics – 40% of iPad owners have not read a book on it. Why on Earth would Simba Information not focus on the fact that 60% of people who own an iPad have read books on the iPad?
3. It reminds us of the time when Steve Jobs made his famous ‘no one reads any more’ comment – 40% of people in the US did not read a single book last year. Like lemmings the entire Press jumped on ‘how no one reads any more, 40% did not read’ instead of realizing that 60% of people do read books. Perhaps Steve Jobs trained them so well that they still haven’t realized 60% is more than 40%.

Another interesting finding – Women outnumbered men as ebook buyers. You can buy the entire report for $3,250 at the Simba Information website. Of course, that will only get you an online download. If you also want a hardcopy, you have to shell out $600 more. Such a Publisher thing to do.

Agents expect Escalators in eBook Contracts to become the norm

Lots of juicy details from the UK (good news for authors everywhere) -

1. Agents have already negotiated escalators into some eBook contracts.
2. Escalator = Royalty Rate changes based on the level of sales.
3. Agents think it’s one way for Publishers to compete effectively against upstart digital publishers.
4. Agents don’t expect the current ’25% of net receipts for authors’ ebook contracts to survive much longer.
5. Apparently, the Big 4 Publishers in the UK (whoever they are) are not yet including escalators. Agents are confident that despite the ups and downs escalators are bound to appear.

Publishers, not surprisingly, declined to comment.

The Kindle and the Nook have seen some interesting recent developments, as has the iPad. Let’s take a look.

Kindle 3 will be sold in AT&T stores starting March 6th

TeleRead has the scoop on Kindle arriving at AT&T stores. Chris Meadows points out that the Kindle will be the only product there that won’t come with a soul-mortgaging contract.

There are lots of interesting aspects to this -

1. What is AT&T getting? Data Charges, perhaps a selling fee of 10%, one extra product to offer. It’s a win-win deal for both parties.
2. AT&T has over 2,000 stores. That’s a massive increase in retail footprint for the Kindle.
3. It’s the first dedicated eReader offered in AT&T stores.

Definitely a big win for Amazon. Perhaps much more so than for AT&T.

The $200 Nook Color sale

Yesterday, or perhaps the day before, there was a $200 sale for the Nook Color. Missed it completely. It’s really interesting – At $249 the Nook Color is a steal. At $200 it’s daylight robbery.

Update: Nook Color Sale is on until 8 am PST on March 3rd, 2011. Use coupon: CBARNESDD at checkout. It seems to have sold 6,542 Nook Colors so far.

Makes you wonder what’s going on at B&N – $40 million to promote the Nook, the end of the Nook black and white (though Nook WiFi still continues), this $200 sale on Nook Color.

B&N is either being super aggressive because Nook Color is turning out to be a real winner, or because its survival depends on eReaders and eBooks now - Perhaps both.

Business Insider talks about 26-year-old indie author ‘making millions’

Living up to its reputation of stellar journalism Business Insider talks about Amanda Hocking’s success in the Kindle Store and throws in as much hyperbole as it can.

However, there is a lot of truth underlying the claims that she is making millions.

1. Guardian wrote that Amanda Hocking sold over 450,000 titles last month.
2. Her Switched trilogy got optioned for film by the co-writer of District 9. This was in mid February.
3. BI mentions that she is selling over 100,000 copies a month. This is probably since November 2010.
4. While she gets 35% for books priced at $1, she does get 70% for books she prices at $2.99. In either case, multiplying it by a few hundred thousand is pretty good.
5. She’s building up her brand. In the coming decimation of the books industry it’s going to be very valuable – perhaps more so than 35% of $450,000.

You know what’s infinitely amusing about all of this – Publishers don’t see any of the money. Nothing from the book sales. Nothing if the book gets made into a movie.

By virtue of being the store that’s making some indie authors very successful the Kindle Store is becoming the default option in authors’ minds.

There are two qualifiers to keep in mind – Only a few indie authors are going to see this kind of success, and there are only a certain number of spots in the Top 100. With Amanda Hocking and John Locke taking up 5 spots each, and with all the Published authors, and all the other indie authors, it’s not going to be easy to replicate what Hocking and Locke are doing. Very possible, but very difficult, and now might be the only window of opportunity. By 2012 it might go from the realm of the difficult to the realm of miracles.

Random House switches to Agency Model

It probably has a lot to do with Random House wanting to be in Apple’s ecosystem. Here’s what Random House had to say about selling its soul to the Devil -

“We are making this change both as an investment in the successful digital transition of our existing partners and in order to give us the opportunity to forge new retail relationships.”

It is rather fitting that we cover this news right after the news that Amanda Hocking sold 450,000 copies of her books in February and got her series optioned for film by a legitimate Hollywood writer (even if District 9 was the most pointless SciFi movie of all time).

iPad 2 arrives tomorrow

March 2nd is rumored to be the announcement date of the iPad 2. Not much to say as there will be 5,000 sites talking about how important it is to the future of the human race that everyone buy an iPad 2.

March is turning out to be much more exciting than January and February. It just might save us from death by boredom.

Let’s start by looking at what’s happening with Borders (thanks to Paul Story for the update).

A World Without Borders

Salon writes about Borders filing for Chapter 11 bankruptcy protection -

1. Borders plans to close 200 superstores, out of its 642 total stores, over the next few weeks.
2. It plans to operate normally. Yeah, right.
3. It will receive $505 million in debtor-in-possession financing from GE Capital and others to help it reorganize.
4. It supposedly has $1.28 billion in assets and $1.29 billion in debts.
5. It owes $41.1 million to Penguin Putnam, $36.9 million to Hachette Book Group, and so forth.

It’s interesting to hear the Borders President’s take on why Borders had to file for bankruptcy protection -

Borders Group Inc. President Mike Edwards said in a written statement that cautious consumer spending, negotiations with publishers and other vendors and a lack of liquidity made it clear Borders “does not have the capital resources it needs to be a viable competitor.”

Even more interesting is Salon’s take on why Borders is in so much trouble - 

big-box bookstores have struggled as competition has become increasingly tough as books become available in more locations, from Costco to Walmart, online sales grow and electronic books gain in popularity.

Borders also suffered from a series of errors: failing to catch onto the growing importance of the Web and electronic books, not reacting quickly enough to declining music and DVD sales, and hiring four CEOs in 5 years without book-selling experience.

It points out that at the peak of its success Borders had 1,249 stores under the Borders and Waldenbooks names.

It’s going to be down to 442 in a few weeks. Plus there’s no guarantee Borders is going to get through Chapter 11 bankruptcy and re-emerge as a viable company.

Mike Cane points out Apple’s next move

As people are busy pretending that Apple does not intend to extend its 30% tax to apps like Kindle for iPhone and Hulu, a few things are worth keeping in mind -

1. There are already unverified comments claiming that an Apple PR spokeswoman has confirmed that the 30% cut applies to Kindle for iPhone.
2. Why wouldn’t Apple do this?
3. Do you think Steve Jobs likes the fact that his beautiful iBooks is getting destroyed by both Kindle for iPhone and Nook for iPhone?

Of course, the real moves are yet to come.

People who think a 30% cut sounds terrible should read Mike Cane’s prediction on what Apple’s next move will be. It’s one of those ‘painfully obvious once you read it’ things -

The iPhone was the seed that unleashed everyone’s creativity. Goddamn it, he’s owed — no, entitled to — more than 30% for showing them all The Way.

Why should all of those other inferior tablets cash in?

..

Why should they have the same apps?

Why can’t Apple’s iOS devices be the only one to have to those apps?

And that’s when it all comes together in Steve Jobs’ greedy mind: Exclusivity.

Do read the entire post. It’s beautiful. It’s also exactly what’s going to happen in a year or two if Apple keeps picking up momentum.

The Third Alternative for Kindle for iPhone

While people pretend that the ‘allow in-app purchasing and give us a 30% cut’ rule will never apply to Kindle for iPhone let’s consider Amazon’s options if that happens -

1. Option 1: Leave the iPad. Not a good option.
2. Option 2: Allow in-app purchases and give Apple 30%. Please note that there are claims that apps won’t be allowed to mark-up in-app prices and that they must be the same as prices outside. So fantasies of listing ’30% higher due to Apple’ within apps will remain just that.
3. Option 3: Don’t allow purchasing via the iPhone.

The third option is, in my mind, the best option. Let people buy elsewhere and read on the iPhone. It’s a big loss but it’s a LOT better than giving Apple 30% or leaving the iPhone and iPad.

Goldman Sachs upgrades B&N’s stock rating because of Nook Color

Goldman Sachs has upgraded B&N from ‘Sell’ to ‘Neutral’ and put a price target of $19 on the stock. This follows Credit Suisse’s January upgrade of B&N stock to ‘neutral’ . That upgrade was motivated by Borders’ troubles -

At that time, analyst Gary Balter calculated that Barnes & Noble could add $1 billion in sales following a liquidation of Borders’ nearly 700 stores.

Goldman Sachs feels BN.com and Nook have gained significant market share and will become more profitable businesses as costs come down. It thinks Nook is far more significant than the possible death of Borders -

According to Mr. Fassler, more important than brick and mortar gains is the strength of Barnes & Noble’s e-business. He calculates that BN.com now has a 27% share of the e-book market, to Amazon’s 58% and Apple’s 9%.

The Nook has 22% of the e-reader market, compared with the Kindle’s 67%. According to the report, the Nook color e-reader, introduced in October, generated 64% of the company’s hardware sales in the most recent quarter.

Mr. Fassler also predicts 2.4 million Nook sales this year, and 3 million Nook sales in 2012.

He’s way wrong – The Nook Color is going to sell at least 5 million units in 2011, and perhaps as many as 10 million. People have already gotten Android 3.0 (Honeycomb) running on Nook Color and B&N has a Nook App Store planned that will provide apps for people not adventurous enough to hack their Nook Colors and run stock Android on them.

The very interesting angle here is that B&N might be able to strike a balance between digital and physical and survive as the last remaining retail book chain. Perhaps, just perhaps, there will be enough demand for actual bookstores to keep B&N’s stores alive and kicking.

Is this supposed to be impressive?

Nieman Journalism Lab talks about how well one of the Kindle Singles releases is doing -

And if you’re wondering what being a top-10 Kindle Single gets you in terms of actual sales: In the first two weeks of its availability in the Singles Store, the piece sold more than 1,900 copies, Tofel says.

Neiman Journalism Lab claims a 70% cut. My understanding is that there’s only a 35% cut for items priced under $3. Let’s consider both possibilities.

At a time when Kindle Singles got the most publicity they ever would, in the first 2 weeks of its release, a top-10 Kindle Single (top 10 amongst Kindle Singles) earned either a 35% or a 70% cut of the 99 cents sale price on each of 1,900 sales.

That’s either $665 or $1,330.

The Singles publisher points out the lack of viability -

“The money will be nice, but even if you multiply the eventual sales of this by ten — and multiply that by 20 — it still doesn’t turn into enough money to float our boat,” Tofel notes.

Except the ‘multiply by 10 and then multiply by 20′ part is all make-believe. Amazon is promoting Singles heavily and launch time is when a release usually does best.

That $1 Single is competing against Alone by Lisa Gardner at $1, indie books at $1, Stieg Larsson at $5, and lots of other heavyweights. It’s just not going to be able to compete.

You can get the Kindle software update with real page numbers at the Amazon Help page. There are instructions on how to install it. Please note that this software update is only for Kindle 3 and Kindle WiFi.

Here’s what Amazon has to say about it on their blog post about the Kindle Page Numbers feature -

 Real Page Numbers – Our customers have told us they want real page numbers that match the page numbers in print books so they can easily reference and cite passages, and read alongside others in a book club or class. 

Rather than add page numbers that don’t correspond to print books, which is how page numbers have been added to e-books in the past, we’re adding real page numbers that correspond directly to a book’s print edition.

We’ve already added real page numbers to tens of thousands of Kindle books, including the top 100 bestselling books in the Kindle Store that have matching print editions and thousands more of the most popular books.  Page numbers will also be available on our free “Buy Once, Read Everywhere” Kindle apps in the coming months.

Funny how Amazon fires a shot at Nook and Sony Reader with the little ‘how page numbers have been added to ebooks in the past’ snip. Actually, it’s strange – Nook books do seem to use real page numbers or something like that. Sony definitely adds page numbers for some books. Perhaps someone with more experience using Nook and Sony Reader can chime in.

Kindle Page Numbers – The Details

Let’s see -

1. Only available for Kindle 3 and Kindle WiFi owners. 
2. Currently available as an ‘early preview’. You can download it now or wait for whenever it’s no longer an early preview.
3. These are real page numbers corresponding to the page numbers in real books.
4. ‘Real’ Page Numbers have already been added to tens of thousands of Kindle books. This is such a perfect opportunity to make fun of Amazon’s love of vagueness. We have added an unspecified number of page numbers to an unspecified number of books. These are real page numbers as opposed to unreal page numbers. With real page numbers you can never tell exactly how many books have them.
5. Page Numbers will soon be available in books read using Kindle Reading Apps.

This is a hugely important feature, and Amazon adding it increases the gap between Kindle and other dedicated eInk eReaders.

How much of a difference do Kindle Page Numbers make?

Well, let’s consider the missing features that come up more often than ‘a lack of page numbers on the Kindle’ when people are choosing which eReader to buy.

1. Library Books.
2. ePub.

That’s it. Nothing else comes to mind.

Page Numbers are probably the 3rd or 4th biggest reason people were choosing a rival eReader instead of the Kindle. Now, Kindle has ‘Real’ page numbers and it’s increased the gap between it and Nook and Sony Reader.

In fact, some estimates and surveys claim that 40% of books bought for the iPad are through the Kindle for iPad app.

Well, Apple might be getting tired of that.

Sony’s iPhone eBook App gets rejected

Courtesy Peter Craine at the official Kindle forum we find out that Sony’s iPhone app just got rejected -

Tuesday’s New York Times reports, “The company [Apple] has told some applications developers, including Sony, that they can no longer sell content, like e-books, within their apps, or let customers have access to purchases they have made outside the App Store.

“Apple rejected Sony’s iPhone application, which would have let people buy and read e-books bought from the Sony Reader Store…

Wow. That’s a really big move by Apple.

Details on Apple’s new Rules

The New York Times has the details on Apple’s new approach to eBook Apps.

1. It seems that ebooks bought outside the app store will not be allowed into apps. 
2. Sony’s iPhone App has definitely been rejected.
3. Apple has said that all in-app purchases will have to go through Apple.
4. NY Times points out that Amazon might get affected.
5. Analysts think this shift suggests Apple wants to make more money from its platform.
   

   “This sudden shift perhaps tells you something about Apple’s understanding of the value of its platform,” said James L. McQuivey, a consumer electronics analyst at Forrester Research.

   “Apple started making money with devices. Maybe the new thing that everyone recognizes is the unit of economic value is the platform, not the device.”

This is nothing short of a disaster for Amazon and B&N. Both are seeing very healthy ebook sales through their reading apps. A large portion of that is sales through iPhones and iPads. If those disappear, or begin to get taxed, it would be really tough for B&N and Amazon to profit from ebooks sold to iOwners.

Why would Apple do this now?

Three possibilities spring to mind -

1. Apple was only allowing these ebook reading apps to sell iPads. Now it feels iPad is powerful enough to stand on its own. 
2. Apple is getting serious about iBooks and wants to turn it into a solid revenue stream. It probably feels that iBooks can’t take off until Kindle and Nook apps are handicapped.
3. Apple really does intend for iPad 2 to be more of an eReader/Reading Tablet. It wants to make sure that reading apps from other companies can’t piggyback on iPad 2.

Whatever the reason for Apple’s new stance, it’s a rude awakening for Amazon and B&N. A painful lesson that if you don’t control the device, you can get kicked out at a moment’s notice.

What could Amazon and B&N do?

Perhaps they could offer Apple a 10% cut. Perhaps they could put more energy into Reading Tablets – B&N is already doing this with Nook Color. Perhaps they could stir up readers, and get them to protest – though that is unlikely to work.

There’s not very much Amazon or B&N can do. They are at the mercy of Apple.

If Apple really does force Kindle and Nook Reading Apps to pay a toll, it’ll prove, once again, that there is no such thing as a free lunch. That you have to build your own direct channels to customers.

The Book Wars have well and truly begun.

Amazon took note of that and changed the name of its DTP platform (that’s Digital Text Publishing or something) to Kindle Direct Publishing. That’s still 1 word too many – We couldn’t really have Kindle Indirect Publishing, could we?

However, it’s a great change.

Consider the difference to a normal author who is not well-versed with technology -

1. In the first case he hears: To publish on the Kindle go to the DTP platform website. DTP stands for digital text platform and that makes zero sense - Digital Text and Platform are both confusing. It makes it sound like the author would need to learn Python or Jaguar or something to publish.
2. In the second case he hears: To publish on the Kindle use Kindle Direct Publishing. That’s so much better. Even better would be Kindle Publishing.

In parallel with the name change Amazon extended 70% royalties to books sold to Canadians.

The name change might not seem like much but it’s going to make a big difference in authors’ likelihood of trying it out. Of course, the 70% cut is the real star – as it keeps expanding worldwide its importance and impact will keep increasing.

Kobo gets a placement in The Office

An episode of The Office had a product placement for the Kobo eReader.

It had a beautiful scene where the sales lady at a bookstore asks Darryl whether he would like to try out an eReader. He replies that he can’t touch eReaders because he works in the paper industry. She mentions that it can hold thousands of books and his response gets bleeped out.

He ends up buying one and hiding it from his fellow officemates (at a skating rink no less).

Found two things really interesting -

1. That Kobo was the eReader used instead of Kindle or Nook. That strongly suggests a product placement. 
2. That some of the blogs reporting on it are referring to it as a Kindle. The association ‘Kindle = eReader’ is so strong that despite a Kobo being featured, people are interpreting it as a Kindle.

Reminds me of this study that found that when the #2 product in a market does a lot of advertising, the sales of the #1 product go up more.

A Kindle Book Lending Site gets hacked, A new one about to get launched

One of the multitude of Kindle Book lending sites got hacked yesterday. It’s called Books for my Kindle. Makes you wonder why Amazon doesn’t just add an in-Kindle app for lending. Perhaps due to the bandwidth costs.

BookSwim, which is a Netflix style book renting site, has mentioned that it’s going to launch a Kindle lending site. It’s a decently large website and it could probably start off by marketing the service to its existing customer base. Makes you wonder when Good Reads will launch a proper service to support Kindle and Nook lending - it seems to be the site best-suited for supporting and encouraging lending of ebooks.