Amazon hints at ebook inflection point, continues to confuse on Kindle sales

Amazon announced some very impressive numbers on Kindle book sales and some predictably vague details on Kindle sales. It’s hard not to get the feeling that it really, really doesn’t want to give out any details on Kindle hardware sales and at the same time wants to put an end to the ‘iPad has killed the Kindle’ nonsense spread by people who don’t really read.

Not sure why Amazon wouldn’t wait till its Earnings Release on Thursday to talk about Kindle and Kindle Book sales figures.

Kindle Sales Growth Rate is Accelerating, Kindle selling more every month

It’s like a chart of Kindle growth rates with nothing on the Y axis. We know sales are improving but nothing beyond that.

Amazon still coy and vague about Kindle Sales figures

While everyone is oohing and aahing, and to be fair there is a lot worth marvelling at in today’s Amazon Kindle news release, it’s hard not to notice that Amazon continues to be vague about exactly how well the Kindle has been selling. For example, we now have a very vague idea that Kindle sales are increasing –

Kindle sales increased each month in the second quarter, the same period that Apple began selling the iPad, 

… the growth rate tripled after Amazon lowered the price of the Kindle from $259 to $189 in late June …

Some news sites are already tripping over the ‘growth rate tripled’ part and writing that Kindle sales tripled. Growth rate tripled could mean absolutely anything – Perhaps it went from 100% to 300%, perhaps it went from 10% to 30%.

Here are Mr. Bezos’ exact words –

Today, Amazon.com announced that Kindle device unit sales accelerated each month in the second quarter–both on a sequential month-over-month basis and on a year-over-year basis.

“We’ve reached a tipping point with the new price of Kindle–the growth rate of Kindle device unit sales has tripled since we lowered the price from $259 to $189,” said Jeff Bezos, Founder and CEO of Amazon.com.

That acceleration each month is easily explained by the release of the Kindle 2.5 upgrade, a price cut from $259 to $189 on the Kindle 2, the release of a new $379 Kindle DX, and the availability of numerous refurbished Kindles at really cheap prices. The acceleration in sales serves only to prove that the iPad hasn’t killed the Kindle (and probably not killed other eReaders either).

Beyond that it only says that Kindle sales have increased – The ‘tripled in growth rate’ part is rather vague and it could mean absolutely anything.

The fact that sales are more than they were last year isn’t even worth mentioning – last year the eReader market was just beginning to explode, the Kindle was at $299, the Kindle DX wasn’t out until June, and there were no $109 and $139 refurbished Kindles.

Amazon’s simple message about the Kindle

Basically, Amazon is sending a rather simple message –

The Kindle is alive and kicking though we won’t tell you how hard.

We did better than last year – which should be a given.

We did better each month – which should also be a given.

The growth rate tripled – This way we can indicate things are going well without revealing any figures at all.

The iPad didn’t kill us. The Nook price-cut didn’t slow us down.

In typical Amazon Kindle press release style they’re doing this without mentioning exactly how many Kindles have been sold.

Kindle Book Sales knock it out of the ballpark

Amazon are much more transparent when it comes to Kindle book sales and prove beyond a doubt that the ebook inflection point is well behind us and might have passed us as far back as December 2009.

  1. Kindle books are outselling hardcovers on Amazon.com. This excludes free Kindle book downloads (the remaining numbers exclude free Kindle book downloads too).
  2. For the last 3 months there have been 143 Kindle books sold for every 100 hardcover books sold at Amazon.com. For the last month the ratio has been 180 to 100. 
  3. Kindle book sales growth has beaten the industry wide numbers – which includes beating the industry-wide 207% growth in ebook sales for the first 5 months of 2010. Amazon sold over triple the number of ebooks they sold in the first 6 months of last year in the first half of this year.
  4. Out of James Patterson’s 1.14 million ebook sales 867,881 were Kindle books. That’s 76.13%.
  5. 4 more authors have sold more than half a million Kindle books – Charlaine Harris, Stieg Larsson, Stephanie Meyer, and Nora Roberts.

If you’re a Publisher you have got to be wondering what you’ll be doing in a few years. If this growth rate for ebooks persists Publishers are going to start dying out by early next year.

Amazon even take a jab at the Agency Model by pointing out that 510,000 of the 630,000 books in the Kindle Store are at $9.99 or less.

Amazon’s simple message about the Agency Model

Again, we have Amazon sending a direct message –

We now sell more Kindle books than hardcovers and the writing is on the wall – eBooks are going to rule and within ebooks Kindle Store is going to rule.

The Agency Model isn’t killing ebook sales and it’s not taking over – We’re still selling lots of books below $9.99 (80.95% of the Kindle Store to be precise).

It isn’t affecting our dominance either. We’re growing faster than the rest of the industry.

In stark contrast to the vagueness with Kindle Sales figures we see a lot of clear data with Kindle book sales.

Reactions to Kindle book sales figures 

New York Times points out that paperbacks probably still sell better than Kindle books

It’s a good thing they do – lest we start thinking the war is already won. Here’s what NY Times has to say about exploding Kindle book sales

The Kindle sales figure does not include free Kindle books,

Amazon does not disclose how paperback sales compare with e-book sales, but paperback sales still probably outnumber e-books.

… even with the popularity of the iPad, which Apple has marketed as a leisure device for reading and which has its own e-book store, sales of the Kindle are growing, Amazon said.

It highlights something – Amazon’s vagueness is going to cause a lot of confusion. It is a bit strange to give Kindle Book vs Hardcover figures and leave out Kindle Book vs Physical Book figures.

Wired strike out twice

In some cases Amazon’s vagueness really trips up reporters. We have Wired writing that ebooks outsell paper books on Amazon.com –

E-books have hit the mainstream, and for the first time are consistently outselling their pulp-and-ink brethren, according to Amazon.com.

Amazon hit a symbolic milestone last holiday season, when for one day its sales of e-books exceeded the number of dead-tree books it had sold.

How do you confuse hardcovers for ‘all paper books’?

Wired achieve the rare distinction of not only confusing hardcovers for ‘all physical books’ but also confusing ‘growth rate tripled’ for ‘Kindle Sales tripled’ –

Amazon also stated that sales of its Kindle e-book reader have tripled since it cut the price from $260 to $190 …

The little cherry on top is their analysis that Kindle owners recoup the cost of the Kindle after 11 ebook sales.

Bloomberg address Kindle vs iPad

Bloomberg brings up the whole Kindle vs iPad angle and talks to an analyst who thinks there’s room for both –

Its release of growth figures may be aimed at quelling concern that the iPad has crimped Kindle demand, said Dmitriy Molchanov, an analyst at Yankee Group.

“There’s a real perception that the iPad has completely squashed the e-reader space and that’s really not the case,” said Molchanov, who’s based in Boston.

“Amazon is doing really well and both companies can profit at the same time.

That’s very true. There’s little doubt both companies will profit. The question is – Which of these two is going to get a top two spot and really make money from eBooks? Could it be both?

Jacket Copy wonders whether Amazon can continue to dominate ebooks

It’s good to have a few people who aren’t dumbstruck by the Kindle book sales figures. Carolyn Kellogg at Jacket Copy (LA Times) has some Kindle book sales questions

what isn’t being said is that these aren’t necessarily new books; most of these authors have an impressive backlist.

How much of Amazon.com’s Kindle sales are an echo of this —  readers purchasing much-loved favorites in a new format —

Once, the word ebook was all but equivalent with a book sold for the Kindle. Amazon.com may be a huge part of the ebook picture, but now it has to share the stage with other players.

The last point is particularly relevant. There will be a lot of companies eager to steal a share of the 80% of the ebook market the Kindle Store has. We have to wonder how Amazon are going to hold on to such a large chunk.

Galleycat says Amazon just rocked the Publishing World

You bet it did.

Galleycat points out the good and the puzzling about Amazon’s Kindle Books announcement

Amazon founder Jeff Bezos rocked the publishing world with a Kindle sales quote today.

Nevertheless, the company still has not released straightforward figures about total Kindle sales or total eBooks sold.

In a way you have to love the vagueness when it comes to the effect it has on Publishers. They probably have a very good idea of hardcover and ebook sales from Amazon – Yet, the way Amazon puts it they have no option but to either reveal figures (which hurts their whole ‘power and control and secrecy’ obsession) or have people think ebooks are completely destroying hardcovers.

Amazon has well and truly rocked the Publishing World. If it wasn’t painfully obvious to them yet that this time they can’t sabotage eBooks and eReaders it should be now. Can’t wait till next year’s July Kindle news release announcing that ebooks have surpassed combined paper book sales at Amazon.

What's the point at which customers get upset enough to leave?

There have been a few separate things that make this a good question to consider –

  1. Facebook changing its privacy policy. 
  2. Publishers increasing their prices via the Agency Model. 
  3. Amazon and Penguin continuing their stand-off.

It’s interesting to see how customers’ attitudes change and the point at which they start switching and leaving.

Companies can get away with incremental downgrades to an extent

The first thing that’s becoming very clear is that you can get away with small changes –

  1. If the price increase is tiny or done incrementally it mostly goes unnoticed.
  2. If the user inconvenience is increased a little bit users tend to learn to live with it.
  3. If user rights or privacy is reduced a little bit users don’t mind.

There are a small portion of users that do make a big hue and cry – However, there isn’t a big uprising and very few, if any, users actually leave.

Large Changes are not received well

A big change like the Agency Model where prices go up dramatically does not go over well.

$9.99 to $14.99 is an inelegant price increase. If Publishers had done incremental changes from $9.99 to $10.99 to $11.99  in a few years they could have hit $14.99 easily. This also brings up the fact that Publishers probably want to create a HUGE shift. They want to make ebooks very unappealing and there’s no better way than to attack the biggest selling point i.e. the $9.99 price point.

There is a breaking point – It’s further away if you make incremental changes

Various groups of users have various breaking points. They react very differently to reaching this breaking point based on how we get there.

Consider a group who’s breaking point for privacy is that their list of friends gets shared.

  1. If Facebook (or another company) does changes incrementally then when this point is reached it’ll be a small change. Earlier everything except friend’s list and personal contact information was shared. Now everything and friend’s list is shared. While it may be the user’s ‘limit’ or ‘breaking point’ it’s such a small change that it doesn’t carry as much impact.
  2. Note that in addition to not carrying impact it’s a compliance chain. Every little change that eroded privacy and that users agreed to – because it wasn’t such a big change – made them more and more compliant to exposing themselves.
  3. If on the other hand Facebook went from very private to sharing everything including Friend’s List (and only leaving personal contact information untouched) then we would have had people protest in huge numbers and leave Facebook in droves.

Try it with a friend – get them to do little things for you and then ask for a big favor and they will do it even if it’s something they don’t want to – Could I borrow your pen? Could you please lend me a dollar? Could you lend me your car?

It’s used in sales all the time and they call it compliance building.

Users tend to give their trusted company the benefit of the doubt – to a surprising extent

There’s another element here which is very interesting.

If a user loves a company and trusts it the user is very, very reluctant to ever attribute anything bad to it. This is why one of the best strategies for companies is to do lots of ‘good’ things like donate 5 cents per product to the environment and build up a store of credit.

Then when they do something ‘evil’ that huge store of credit built up from seemingly trivial (and actually trivial) things like their donations and various small good deeds excuses them.

Of course, the store of trust applies to really customer-focused companies too. Take a company like Zappos (now owned by Amazon) that has amazing customer service. If they make a mistake they will often get the benefit of the doubt.

Whether it is earned through real, tangible excellence (great customer service, great products, great prices) or imaginary things (5 cent donations, claims of being environmentally friendly without doing much) the Trust and Goodwill built up are powerful and can be used –

  1. To do ‘evil’ and get away with it.  
  2. To get away with genuine mistakes.

Closing Thought – Incremental Downgrades vs Huge Swings

Facebook’s gradual slide towards killing privacy indicates it was well thought out and they do fully intend to expose all user information.

Publishers’ huge shift in prices indicates that either they didn’t think it through or they did and intended to kill ebooks.

The Penguin fiasco is interesting – it’s a gradual shift since users expected a decision in a few days as in Macmillan. However, it’s dragging on and lots of Amazon customers are beginning to reach the end of their patience.

Perhaps it’s a huge issue holding up the negotiations. Perhaps it’s not. Amazon needs to reveal the details soon – otherwise customers will start assuming it’s Amazon’s fault and start leaving. In fact, Amazon have already delayed this too much – It’s beginning to actually hurt customers and that’s simply unacceptable.

Are we at the eReader inflection point?

Everyone in Books (i.e. Publishers, eBook sellers, bookstores, authors) is behaving as if we are 4 or 5 years away from the point at which eBooks begin to take over.

 However, there are two time-points in the rise of eBooks that are important i.e.

  1. The Dominance Point – When eBooks account for 50% or more of unit sales.  
  2. The Inflection Point – The point at which eBooks gather enough momentum and enough of an early adopter base to become unstoppable.

The latter is extremely dangerous because there’s a high chance that the installed user base of eReaders will reach a critical level and trigger the inflection point BEFORE eBook sales start showing it.

The Dominance Point is not very important. By then it’ll be too late.

If Publishers are to stop eBooks they must kill eBooks BEFORE eReaders reach the inflection point.

Here’s the billion dollar question – What if we already are at the inflection point?

Signs we might already be at the inflection point.

There are a lot of signs that we might be at the inflection point –

  1. Kindle is selling well and other eReaders are selling out.  
  2. Smaller companies like Netronix are claiming 30,000+ eReader sales a month. 
  3. A few Authors are reporting more royalties from eBook sales via Kindle Store than from traditional publishing. 
  4. Huge giants like Apple are rumored to be jumping in.
  5. Other giants have already jumped in.
  6. There are 40+ eReader companies.
  7. Publishers have started to delay eBooks – that has to be a sign they think eBooks are doing too well.
  8. When Kindle Books are available Amazon are selling 48 eBooks for every 100 physical books.

eBook sales are a lagging indicator and they are beginning to get scary. Scary enough for Publishers to delay eBook release dates by 4 months.

That means eReader numbers are almost certainly much scarier.

And guess what – eReader numbers are the true indicator of the inflection point.

Publishers are looking at the wrong indicators

Publishers are making two critical mistakes –

  1. Publishers are tracking eBook sales instead of eReader sales. They are working with a lagging indicator.
  2. Publishers are on the alert for the eBooks Dominance Point, without realizing that the eReader Inflection Point is what they really have to watch out for.

Publishers probably have some figure in their heads i.e. when eBooks reach 25% market share we’ll take drastic measures.

However, the real things they should be scared about are –

  1. Reach of devices and applications to read eBooks i.e. What is the total installed base of eReaders and apps like Kindle for iPhone at which the inflection point occurs? 
  2. The percentage point which corresponds to an inflection point for eReaders and eBooks. This will probably correspond to when eBooks account for 7% to 10% of sales. 

What a thought!

Perhaps today is the day that we cross past the line of no return.

Perhaps the 5th Kindle sold today or the 3rd Nook pre-order will trigger the inflection point.

We are at the inflection point – at most a few months away.