Kindle Store Top 100 Pricing Analysis

I’ve seen a few recent claims about the average price of the books in the Top 100. Most of them have struck me as strange. We know that prices in the Kindle Store Top 100 are falling relentlessly. Yet claims are made constantly that the average price is in the $8 to $9 range.

Well, let’s do some pricing analysis using two methods, using only the Kindle Store, and figure out what the truth is.

  1. First, let’s do average pricing assuming every book in the Top 100 sells the same amount. This gives us one estimate.
  2. Second, let’s do average pricing assuming book sales are approximately – 10,000 a day for #1 to #10, 2,000 a day for #11 to #20, 1,000 a day for #21 to #50, and 500 a day for #51 to #100. This gives us a second estimate.

From these two estimates, we can get a good idea of what the actual average price of books in the Top 100 is.

Kindle Store Top 100 Pricing

Here’s what we have in the Kindle Store Top 100 -

  1. Kindle Store Sales Ranks of Top 100 Books at $1 – #7, #9, #20, #22, #24, #26, #27, #28, #30, #33, #38, #44, #47, #48, #55, #72, #86, #90, #96, #97, #98.
  2. Kindle Store Sales Ranks of Top 100 Books at $2 – #1, #32, #53, #56, #89, #91.
  3. Kindle Store Sales Ranks of Top 100 Books at $3 – #4, #15, #23, #34, #46, #60, #75, #77, #80, #85, #95.
  4. Kindle Store Sales Ranks of Top 100 Books at $4 – #3, #11, #13, #16, #18, #25, #37, #49, #54, #57, #58, #63, #67, #68, #76, #84.
  5. Kindle Store Sales Ranks of Top 100 Books at $5 – #17, #41, #83, #99.
  6. Kindle Store Sales Ranks of Top 100 Books at $6 – #50, #51, #61, #64, #65, #88.
  7. Kindle Store Sales Ranks of Top 100 Books at $7 – #35, #73, #87, #93.
  8. Kindle Store Sales Ranks of Top 100 Books at $8 – #12, #45, #92, #100..
  9. Kindle Store Sales Ranks of Top 100 Books at $9 – #9, #70.
  10. Kindle Store Sales Ranks of Top 100 Books at $10 – #5, #19, #29, #31, #62, #69, #71, #74, #79.
  11. Kindle Store Sales Ranks of Top 100 Books at $11 – #42.
  12. Kindle Store Sales Ranks of Top 100 Books at $12 – #21, #36, #39, #40.
  13. Kindle Store Sales Ranks of Top 100 Books at $13 – #2, #6, #8, #14, #43, #52, #59, #66, #78, #82 (assumed price), #94.
  14. Kindle Store Sales Ranks of Top 100 Books at $14 – None.
  15. Kindle Store Sales Ranks of Top 100 Books at $15 – #81.

This is a very interesting list. Interesting to see $1, $4, and $3 being so popular. $13 is just as popular as $3 and $10 is also very popular.

Quick Review of the Frequency of Every Price Point in the Top 100

  1. 21 books at $1. That’s massive and is bound to drop the average price. If 20% of your Top 100 are at $1, that says something. It’s also apparent that readers are voting with their still-heavy wallets when it comes to book pricing – $1 works.
  2. 16 books at $4 ($3.99 to be precise). Not sure why $3.99 beats out $1.99, $2.99, and $4.99. Perhaps that whole psychological thing of readers seeing $3.99 as $3. Why then does $2.99 not work better?
  3. 11 books at $3. $3 is the price at which Amazon starts giving Authors 70% revenue share. That, combined with readers preferring prices below $5, is perhaps why $3 and $4 do so well.
  4. 11 books at $13. The joint third-most-popular price point. It seems Publishers are making $13 work for new books. It’s interesting to see 4 books at $13 in the Top 15 and then nothing until #43. Perhaps $13 works for new books but then reduces longevity in the Top 50.
  5. 9 books at $10. This was the price point we were promised in 2007 and 2008 – $9.99. Interesting to see it become the 5th most popular price point.

The rest of the figures are there for you to see. This list obviously changes frequently. However, this is a reasonable list. I don’t see prices going up higher anytime soon.

Average Pricing and Pricing Analysis assuming Similar Sales at all Top 100 Sales Ranks

Yes, we know this is wrong. However, this gives us a good bound.

If we just weigh each sales rank equally, and given the relatively balanced distribution this isn’t a terribly bad idea, we get $571 as the amount required to buy all 100 books. That gives an average price of $5.71.

That should be a wake-up call to Publishers who complained that $9.99 was unsustainable. They started the Agency Model and tried to torture users with $13.99 and $15.99 prices. Now, instead of a nice and healthy $9.99 per ebook, they are faced with the average Top 100 price being just $5.71.

That’s incredible. $5.71. However, this is a very rough method. So let’s try something a bit more accurate.

Average Pricing and Pricing Analysis assuming Sales Figures drop sharply

10,000 a day for #1 to #10, 2,000 a day for #11 to #20, 1,000 a day for #21 to #50, and 500 a day for #51 to #100

We can simplify this as – 20 a day for #1 to #10, 4 a day for #11 to #20, 2 a day for #21 to #50, and 1 a day for #51 to #100. This simplification won’t affect the average price (just imagine we divided each figure by 500).

  1. Average Price of the Top 10 – $6.89. Multiplied by 20 – $137.8.
  2. Average Price of #11 to #20 – $5.63. Multiplied by 4 – $22.51.
  3. Average Price of #21 to #50 – $5.06. Multiplied by 2*3 (because there are 30 books) – $30.364.
  4. Average Price of #51 to #100 – $5.844. Multiplied by 1*5 (because there are 50 books) – $29.22.
  5. Grand Total: $219.894.
  6. Average = Grand Total/35 = $6.283.
  7. An average of $6.283 per book. Very interesting to see the Top 10 being much higher than the other sales ranks. Perhaps due to the presence of three $13.99 books, one $10 book, and one $9 book.

$6.283 is surprisingly close to our previous estimate of $5.71. $6.283 is probably more accurate since it factors in the fact that the Top 10 and Top 20 sell a lot more than the rest of the Top 100.

Conclusion: The Average Sales Price of the Top 100 Kindle Books is perhaps around $6.283

Based on the above estimates and lists, we arrive at a few data points and guesstimates -

  1. Average Sales Price of a Top 100 Kindle Book: $6.283.
  2. Most Popular Price Points: $1, $4, $3 and $13 (joint), $10.
  3. Most Popular Price Bands: $1, $3 to $4, $10 to $13.
  4. Average Sales Price of a Top 10 Kindle Book: $6.89.
  5. Average Sales Price of a Book in the bottom half of the Top 100: $5.844.
  6. There are only 17 books priced above $9.99 in the Top 100. Contrary to the perception that $13.99 is winning out due to impatient Kindle owners, we are seeing prices above $10 mostly fail. The exception is $13 and that might be linked to the newest releases all being $13.
  7. There are an absolutely massive 58 books below $5. This suggests prices below $5 are going to be the norm for the Top 100 in the near future.
  8. There are 21 books at $1 and 16 books at $4 suggesting that $1 and $4 (or perhaps $3) might be long-term stable price points.

That figure of $6.283 is absolutely fascinating. The assumption all along has been that we would settle at price points such as $9, $10, $13, and $7. That would result in an average sales price of $10 to $11. In actuality, the advent of indie authors has forced prices down massively. There are very popular price bands of $1 and $3 to $4. These bring down prices to $6.283 on average.

$6.283 is very interesting. Even more interesting is the rise of $1 and the $3 to $4 band, and the possibility that average prices drop below $5 and perhaps stabilize in the $3 to $4 band.

Kindle and eReader related analysis and news

There’s a lot going on – a welcome change from the last 2 months of nothingness.

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.

Is there a way to make a living on $1 books?

The Kindle has seen a deluge of $1 books from indie authors. Now, we have Amazon and publishers getting into the game too – Alone by Lisa Gardner is at $1, Old Town is at $1, Stalina is at $1, The Summer Son is at $1, The Hangman’s Daughter was at $1 before it went up to $3.99.

Here’s a question -

If $1 is what lots of authors are using to get into the Top 100, how long before everyone has one or more books at $1?

It’s not a hypothetical question. Consider this list -

  1. Hangman’s Daughter is at $3.99 but it used $1 preorders to get into the charts. 
  2. Switched is hovering between #2 and #4, and is at $1. 
  3. Alone by Lisa Gardner is at $1, and it’s at #6.
  4. Saving Rachel by John Locke is at $1, and it’s at #13. 
  5. Deed to Death by D. B. Henson is at $1, and it’s been in the Top 100 for 224 days. It’s currently at #25.
  6. Amanda Hocking has another $1 book in the Top 50 – My Blood Approves is at #27.
  7. Where There’s a Will by Katriena Knights is at $1, and at #30.
  8. Another John Locke book, Lethal People, is at $1, and at #37.
  9. Her Last Letter by Nancy C. Johnson is $1 and at #39. It’s been in the Top 100 for 71 days.
  10. Not What She Seems by Victorine E. Lieske is at $1, and at #44.
  11. Impetuous by Lori Foster was $1 for a long time. It’s managed to stay in the Top 100 for 50 days. Now it’s at $3.38 and down to #50.

Apart from Lisa Gardner and perhaps Lori Foster, none of these authors would have been very likely to make it to the Top 50 without the $1 price. They are taking up spots that $10 and $12.99 books would have taken. Add on the books priced between $1 and $5, of which there are 9 in the Top 50, and we’re seeing a huge shift.

Is it going to become vital to price books at $1 and $5 to be in the Top 100?

Yes. Without a doubt.

We already have 24 out of the Top 50 at $5 or below, 10 of which are priced at $1. Remove the newspapers and magazines and we get two interesting figures -

  1. Nearly 25% of books in the Top 50 are at $1.
  2. Nearly 50% of books in the Top 50 are at $5 or less.

A year ago there used to a handful of books below $5 in the Top 50 – between 5 and 10, sometimes less. It’s hard to get an exact read because it was a combined list with free books and paid books However, if you had weeded out the free books, you would have found hardly any books below $5 in the Top 100. $9.99 ruled. Publishers blew up $9.99, and now they get the infinite joy of watching $1 and $5 books rip them to shreds.

For better or worse, we are seeing a situation where authors have to figure out how to survive on books priced at $5 and below. For indie authors it’s even tougher – they have to figure out how to survive on books priced at $1 and $3.

Can authors survive on $5 books?

Let’s do a simple guesstimate -

  1. Let’s assume a $5 book that makes it into the Top 50 spends an average of 25 days there. 
  2. Let’s assume that the #1 book in the Kindle Store sells 10,000 to 20,000 copies a day, and that the 50th books sells 250 to 500 copies a day. 
  3. Let’s assume that across its 25 day stay in the Top 50 the $5 book sells an average of 700 copies a day.
  4. 70% of $5 = $3.50 per copy. 700 copies per day for 25 days = 17,500 copies. That’s $61,250.
  5. So the $5 book is making $61,250 which is split between Publisher, Author, Agent, etc. Let’s say the author gets 40% which equates to $24,500. 

$24,500 from a $5 book that’s a hit isn’t bad. It’s a start.

Let’s assume that ebooks grow from the current 10% to 70%. Competition increases, and other factors kick in, so let’s assume the effective increase in the market is not 7 times but 4 times. That would mean a $5 book that makes it into the Top 50 and does well would generate $98,000 for its author.

Could an author write one such book every year and earn $98,000 per year? You would think so.

Could an author write one such book every 3 months and earn $392,000 per year? It’s possible though not probable.

It should be pretty obvious that $5 books are a very viable proposition – at least for authors.

Can indie authors survive on $1 books?

Indie authors are in much more trouble than authors. They have to compete against established authors like Suzanne Collins at $5, and against superstar authors like John Grisham at $10. They even have to compete against $1 books from Lisa Gardner, $2 books from Brad Meltzer, and against the $4 The Lost Symbol.

Their only hope is to price their first book at $1 and price subsequent books at $1 to $3.

Is this a sustainable model?

Well, let’s do guesstimates using a few hypothetical scenarios.

Scenario 1: The solitary $1 indie book

All the same assumptions as the $5 book.

  1. We get a 25 day stay in the Top 50 with 700 copies sold per day.
  2. This time the author is getting just 35% of $1 which is 35 cents. That’s one-tenth of what the $5 book is earning per copy.
  3. It translates to a paltry $6,125.

While there are enough indie authors who would be perfectly OK with selling 17,500 copies of their book, and earning $6,125, that isn’t what our question was. Our question was -

Is there a way to make a living on $1 books?

Well, you might say that when ebooks have 75% of the market the earnings will be 4 times – translating to $24,500 per book. You might even say that an indie author could write two such books per year and make $49,000 per year.

It’s certainly an interesting possibility. It’s remarkable than even while earning just 35 cents per copy, indie authors have a shot at making a very good living – Provided ebooks really, really take off.

There are, however, two other possibilities that are far more enticing.

Scenario 2: The $1 left with the $3 right

Again, it’s the same assumptions. Except here we have the indie author releasing one $1 book per year and one $3 book per year.

The $1 book earns her a paltry $6,125 and the $3 book earns her a healthy $36,750. And that’s right now – at the beginning of the rise of ebooks. If ebooks take off she would be earning $24,500 from her $1 book, and $147,000 from her $3 book.

That’s a very healthy figure.

However, our third scenario is the one that’s really mind-blowing.

The problem of the one-off super winner

What throws everything into disarray, and seduces all indie authors into going with $1, is the one-off case of an indie author who hits the Top 10.

That’s an author selling 2,000 to 5,000 copies a day. That translates into $700 to $1,750 per day in earnings if it’s a $1 book. If she stays in the Top 10 for 50 days – she’s made $35,000 to $87,500.

Now, contrast the difference -

  1. $1 Indie Author book hits the Top 10 – Generates $35,000 to $87,500. 
  2. $3 Indie Author book hits the Top 50 – Generates $36,750.
  3. $5 published Author book hits the Top 50 – Generates $61,250, out of which the author gets $24,500.  
  4. $1 Indie Author book hits the Top 50 – Generates $6,125.

The first two scenarios are so attractive that lots of indie authors and some published authors will take a shot. They might end up in the 5th scenario or they might never make it to the Top 50. However, the possibility that they hit the Top 10 and earn $87,500 in a 50 day stretch is too enticing for them to turn away.

Almost every single indie author, and lots of published authors, will end up going with $1 and $3 and $5 books.

Additionally, whether or not an author wants to go with low-priced books, it becomes necessary – How can a $10 book compete with a $1 book? How can a $10 book compete with 10,000 $1 books?

Is there a way to make a living on $1 books?

We end up with a rather interesting answer to our question -

Yes, there are a few ways to make a living on $1 books.

  1. You can hope that one of your $1 books, and one of your $3 books, make it to the Top 50 every year.
  2. You can hope that your $1 book hits the Top 10.
  3. You can hope that Amazon starts giving a 70% cut on books below $3, and that two or more of your $1 books hit the Top 50 every year.
  4. You can hope that the ebook market increases to 75% of books, and that one or more of your $1 books make it to the Top 50 every year.

Please do keep in mind that it’s only the top 0.1% of authors selling their books for $1 that will be able to live off of book sales. Also, you’ll have to be prepared for the time when Lisa Gardner isn’t the only top author selling her books at $1, and when 90% of indie authors realize that they must come in at $1 to have any chance.

Kindle Patterns – Mon, Tue get 77% of free kindle books

For Cyber Monday, there have been 11 free kindle books made available by Amazon for your Kindle.

Interestingly, they’ve been made available in spurts – A few very early in the morning, another bunch after a few hours, and then 4 more later on in the day.

If we start looking back to the kindle book offers in the last few weeks a few questions come up – Why do Mondays seem to get a disproportionate number of offers? Why is there so much randomness? Why does Amazon not have a ‘Free Friday’ like B&N does?

Let’s start by looking at the timings of the various kindle book offers and see if there are any patterns.

Kindle Book Offer Patterns – Manic Mondays

This is what we’ve seen in the first 4 weeks of November in terms of free books per day of the week (numbers for each week listed separately to show consistency) -

  1. Monday: 8, 23, 10, 13.
  2. Tuesday: 1, 4, 9, 3.
  3. Wednesday: 0, 1, 2, 0.
  4. Thursday: 1, 0, 1, 0.
  5. Friday: 1, 0, 1, 3.
  6. Saturday: 0, 1, 0, 0.
  7. Sunday: 1, 1, 0, 1.

Please Note: We haven’t used the 11 offers from today (Monday) as the week’s just started.

This suggests that Monday and Tuesday are the only days it’s really worth searching for, or looking forward to, kindle book offers. Thursday and Saturday are the worst days and the remaining are mostly unremarkable.

Monday gets 65% of kindle book offers. Monday and Tuesday combined get 83% of kindle book offers.

These offers also tend to be the ones that stick around only for a few days – ones you should grab as quickly as possible. It’s also remarkable that there were only 9 days without a Kindle book offer – Perhaps Amazon is making sure that Kindle owners visit Amazon.com very regularly.

October was very similar to November

There’s definitely a pattern in the last 4 weeks of October and it’s very similar to the pattern in the 1st 4 weeks of November -

  1. Monday: 10, 14, 10, 15.
  2. Tuesday: 0, 2, 6, 6.
  3. Wednesday: 0, 2, 1, 1.
  4. Thursday: 2, 1, 0, 0.
  5. Friday: 4, 3, 4, 5.
  6. Saturday: 1, 0, 1, 1.
  7. Sunday: 0, 0, 1, 1.

Please Note: The first week of October was split so we’re not counting the 1st through the 3rd which includes October 1st (a Friday) which had 35 free books.

In October we again see the huge priority given to Mondays. We also have Fridays seeing a lot of free book offers which makes sense given it’s the end of the week. Wonder why this was switched off in November?

Tuesday is the 3rd most popular day. Thursday and Sunday are again the worst days. Additionally, there are only 7 days that didn’t see a free kindle book.

Monday gets 54% of the offers. Monday and Tuesday get 69% of the offers.

Monday, Tuesday, and Friday get the Lion’s Share of free book offers

Across both October and November we see that -

  1. Monday and Tuesday accounted for 77% of the kindle offers.
  2. Monday, Tuesday, and Friday accounted for 88% of the Kindle offers.

If we were to add in the 35 books from Friday, October 1st and the 11 books from today we’d reach a surprising conclusion – You could get 90% of the kindle free book offers simply by checking Amazon.com (or this blog) at 2 pm on each of Monday, Tuesday, and Friday.

The first half of the Month sees a lot more offers

This is what we’ve seen in November -

  1. Day 1 to 5 – 19.
  2. Day 6 to 10 – 22.
  3. Day 11 to 15 – 25. 
  4. Day 16 to 20 – 6
  5. Day 21 to 25 – 11.
  6. Day 26 to 30 – 13. Month still incomplete.

The only thing that stands out – the first half of the month has double the kindle book offers of the second half of the month. October is similar with the first half of the month seeing approximately twice the number of offers.

A pattern in Kindle store offers? 

Well, there are a few possibilities for why Mondays and Tuesdays get favored so heavily -

  1. Perhaps Amazon schedules weekly batches of kindle book offers and Monday therefore gets the most offers and Tuesday quite a few. 
  2. Kindle book offers are designed to lead Kindle owners to Amazon.com and Monday is the best day – This might have some truth to it since Mondays are usually the best shopping days. The puzzling thing is why Amazon would ignore Sundays and Fridays which are also good online shopping days.
  3. It’s conceivable that it’s all random and it just happens to randomly get distributed in this manner.

A delicious add-on is that Amazon always scatters the free book offers across the early morning and afternoon – which usually means kindle owners visit Amazon.com early and often on Monday and Tuesday.

There are a few possibilities for why the first half of the month sees a lot more offers -

  1. Perhaps people spend more at the beginning of the month when they’ve just received their pay checks.
  2. Perhaps Amazon allocates monthly quotas and sends them out in batches. By the middle of the month it just doesn’t have that many kindle book offers left.
  3. Again, it could be just randomness.

The randomness factor is intriguing but doesn’t gel with the way Amazon works. The two viable possibilities are -

  • Amazon tries to capture the beginning of the week shopping and the first half of the month shopping and then it randomly throws in a free book a day to ensure Kindle owners visit Amazon.com regularly.
  • Amazon happens to schedule kindle book offers every week and every month and thus Monday and Tuesday and the first half of the month get most of the offers.

The latter possibility is a bit unlikely since Amazon has more customer data than anyone else and analyzes customer purchases to death.

Would a company that worries about the color and size of the ‘Buy’ button leave a huge Amazon.com traffic source like free kindle book offers unoptimized?

The strongest possibility is that Amazon has figured out 5 key elements that allow it to use Kindle book offers as an effective tool to draw Kindle owners to Amazon.com -

  1. Capture the beginning of the week shopping. Everyone’s struggling to get into the flow of work and that’s the time to draw them in.
  2. Keep everything random so people appreciate the offers more and keep checking Amazon.
  3. Aim for at least 1 book offer a day. Ensures kindle owners visit Amazon almost daily.
  4. Draw in customers in the first 3 weeks of the month when their paychecks are still intact.
  5. Throw in some multi-book days during Wednesday through Sunday to keep customers guessing. My opinion is that they’ll go back to offering lots of free books on Fridays – it’s a good day to get customers to visit.

These reasons make a lot more sense than randomness or laziness.

Free Kindle Books might be the ultimate tool to get Kindle owners to shop regularly at Amazon.com. The Kindle, above all else, is a way to channel customers’ purchases to Amazon.com.

Why comparing ebook stores on bestseller lists is ridiculous

There are two very interesting things happening at the moment -

  1. 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.
  2. 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.

Odious Comparisons

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 -

  1. New Books – Kindle Store has over 500,000. Apple has around 30,000.  
  2. 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. 
  3. Random House – Only in the Kindle Store.  
  4. 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 -

  1. 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. 
  2. Agency Model 5 books – Same price.  
  3. 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 -

  1. Their devices have Kindle Apps. Kindle for iPhone and Kindle for iPad mean you can access the much better Kindle Store on Apple devices.
  2. 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.
  3. 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 -

  1. Let Publishers side with us hoping for $14.99 prices. 
  2. Let Amazon and B&N make the iPad a better option for reading in the hopes of capturing our customers. 
  3. Let’s become a viable reading option.  
  4. 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.
  5. Then, we’ll make it a free market and let competition and smaller publishers bleed big Publishers to death.
  6. Then, we’ll start promoting iBooks as the default and let the power of the default take over.
  7. 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 -

  1. Attach rate of 1 book per Kindle per month.  
  2. Oprah’s recommendation will not have any effect on Kindle Sales. 
  3. 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 -

  1. 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?

Follow

Get every new post delivered to your Inbox.

Join 9,850 other followers