There are two very interesting things happening at the moment –
- Mark Mahaney is comparing the availability of New York Times bestsellers in the Kindle Store and in Apple’s iBookstore and using that to claim Amazon has a mere 10% price advantage and a very small availability advantage and that it’ll disappear over time.
- Certain people are claiming that Mark Mahaney is the biggest Kindle cheerleader and that his article signals the end of the Kindle.
Let’s start with the first.
During my time in Seattle there was a giant Borders a couple blocks away. It carried 95% of the New York Times’ Bestseller lists. There was also an airport convenience store (almost a 7/11) at SeaTac that used to carry 75% of the New York Times’ Bestseller lists.
Mark Mahaney would take those two numbers and arrive at the conclusion that the 7/11 is going to kill Borders. This is obviously an exaggeration – However, the analysis Mr. Mahaney uses is just as weak. He’s just lucky that Apple really is a huge threat to Amazon.
An actual Kindle Store vs iBooks Store Comparison
It is a disservice to do a narrow comparison based on bestseller lists. Let’s look at a more detailed comparison of range of books –
- New Books – Kindle Store has over 500,000. Apple has around 30,000.
- Public Domain Books – Kindle Store has 20,000. Apple has around 30,000. Both sell devices that can access the millions of free public domain books available.
- Random House – Only in the Kindle Store.
- Independent Authors – Beginning to arrive in iBookstore although they have to own a Mac to be able to submit their book (isn’t that a nice touch).
Next, here’s a more detailed comparison of price –
- Apple is the company that gave Publishers the leverage to raise prices from $9.99 to $14.99/$12.99. We shouldn’t forget this little fact when we compare prices.
- Agency Model 5 books – Same price.
- Most other books – Cheaper on the Kindle.
However, we can’t really compare on price because there are 30,000 new books in iBookstore and 500,000 new books in the Kindle Store. That means 470,000 books get left out.
Here’s the twist – This is a pretty poor comparison too. Ideally you want to take a person’s past reading history and use that to project what books they’ll end up buying over the next 10 years and compare the availability and pricing of those books (another projection).
For people who buy 1 book a year and it’s always a bestseller Mark Mahaney’s analysis is perfect. For people who read a lot it serves no purpose and, quite frankly, neither does my marginally better analysis.
Why Apple is still a huge threat
Mark Mahaney is still making a good point – There is a chance that eventually Apple will have the same range of books. That would probably mean books at $12.99 and $14.99 so anyone who wants cheaper books ought to side with the Kindle Store.
The Agency Model is a diversion – let’s get back to why Apple is dangerous. Apple is a huge threat on a few fronts –
- Their devices have Kindle Apps. Kindle for iPhone and Kindle for iPad mean you can access the much better Kindle Store on Apple devices.
- Their devices will also have the default iBooks App. That means that users will be shown this app much more and directed to this app much more. If Amazon loses its price and range advantage it’ll begin to lose iPad and iPhone owners.
- They have 5 big Publishers on their side who’ll do anything legal (plus a lot of illegal things) to block the Kindle Store’s rise to dominance.
We haven’t even talked about things like Retina Display and the NY Times’ Apple marketing group. Add on that Steve Jobs is a master of marketing and has trained nearly 100 million people to buy and unconditionally love his products.
Basically, if price and range are the same Apple people will always go with the Apple product. Even if the difference is 10% or 20% Apple people will still go with the Apple product.
There’s nothing stopping Apple from kicking Amazon out of the App Store
Perhaps the biggest trump card Apple have is that they can figure out a way to kick Amazon out of the App Store. They just did it to AdMob and pretty much nuked the $750 million Google spent to buy it.
Here’s what Apple are probably thinking –
- Let Publishers side with us hoping for $14.99 prices.
- Let Amazon and B&N make the iPad a better option for reading in the hopes of capturing our customers.
- Let’s become a viable reading option.
- Lots of people will buy us thinking they can get all the books they want and also use Kindle for iPad and Kindle for iPhone and B&N eReader.
- Then, we’ll make it a free market and let competition and smaller publishers bleed big Publishers to death.
- Then, we’ll start promoting iBooks as the default and let the power of the default take over.
- If that doesn’t work we’ll kick out Amazon and B&N and readers will be forced to use iBooks.
It’s the way any shrewd company would do it – Use existing brand names to strengthen your ecosystem and brand name and become the go-to destination. Then kick them out.
Publishers are making the exact same mistake newspaper publishers did with the Internet. They think they can take on hungry, desperate authors in a fair fight and they can’t. Worse, they think they can take on a free market and super-entitled customers who expect everything free and they can’t.
Apps in the App Store sell mostly for $1 and $2 with the occasional $5 and $10 apps and yet Publishers think they can undo all that training and sell books for $15. Publishers are going to go through exactly what newspapers went through and they’re going to wish for the days of $9.99.
Mark Mahaney is not exactly a Kindle cheerleader
Mr. Mahaney is most famous for revising his Kindle sales estimates every few months. Here are a few of the things he’s predicted or said –
- Attach rate of 1 book per Kindle per month.
- Oprah’s recommendation will not have any effect on Kindle Sales.
- His estimates in May 2008 for Kindle sales were 189,000 in 2008, 467,000 in 2009, and 2.2 million in 2010. He’s since revised them upwards a half a dozen times.
Don’t see how he’s a Kindle cheerleader – He’s had to revise his sales estimates for the Kindle half a dozen times and is pretty pessimistic about how many books Kindle owners buy.
Here’s a comment from Business Insider (courtesy KenC) –
If Mahaney of Citi is lukewarm, then Amazon and Kindle are really in trouble.
Essentially, Mahaney has been the Kindle’s biggest cheerleader, kind of how Gene Munster was Apple’s biggest cheerleader back when only he believed the iPod was going to be a hit for Apple and create a “halo effect” for its other products.
Well, Mr. Mahaney is only a Kindle cheerleader if constantly underestimating a product’s sales and lowballing the amount of follow-on sales it generates defines an analyst as being a cheerleader.
Back to Bestseller Lists
At the heart of all this dissent and Kindle hate is the same simple issue –
- People who hardly read refusing to acknowledge that other people read a lot and would want a device made especially for them.
The same applies to us readers too – we ought to understand that some people like shiny, flashy devices and there’s nothing wrong with that. The point at which it gets a bit galling is that owning such shiny, sexy devices predisposes their owners to berate devices that are not shiny and flashy or that Big Brother decides are not cool.
Why is having 200,000 apps a big deal and yet, when we want to compare bookstores, we look at only the hundred or so books on the New York Times bestseller lists?