About six and a half months ago (January 27th, 2010 to be specific), most technology bloggers and analysts chose the casket for the Kindle. The iPad was going to kill the Kindle device and distribution model. iBooks was going to take over as the de-facto eBook marketplace just like iTunes became the world’s biggest music store. Amazon looked like it was going to be another victim on the road to Apple dominance.
Jump back to the present and it seems that the early demise of the Kindle product line is not going to be so fast or simple. Amazon today announced that their eBook sales are outpacing regular hardcover book sales. For the last three months, Amazon sold 148 eBooks for every 100 hardcover books. Further, last month, Amazon sold 180 eBooks for every 100 hardcover books. These numbers defied all expectations. So what happened?
No one can say for sure what happened since Amazon does not release any data about where the majority of the sales were made and which device is used more extensively, but there were several factors that definitely helped. Aside from the hardware differences between the iPad and the Kindle devices (weight, display type, comfort in holding, etc…), Amazon dropped the price down on the Kindle devices. At $189 for the 6” Kindle and $389 for the 9.7” Kindle, these devices are priced much lower than when they were released and the math works much better. Avid readers who read multiple books each month realize the savings alone in the cost of the book. A reader reading 20 books a year will pay for the device in the cost saving when compared to purchasing hardcover books.
But the most interesting theory behind these numbers is that one of the reasons for the increase was the release of the iPad. On the same day of the release, Amazon’s Kindle App for the iPad was also released. Further, Amazon started a marketing campaign targeting iPad users. The purpose was to convert users from using iBooks to using the Kindle App. It looks like they succeeded. There is no doubt that the iPad as a hardware device is a great device and many people do not care about the display type when reading is involved. Amazon succeeded in doing something that many companies have failed. They turned the iPad into “their” device. They created a platform and delivery mechanism that worked the same across not just one device (the iPhone version of iBooks only became available recently) and allowed the user to switch between devices effortlessly with features such as location synchronization.
Jefferies analyst Youseff Squali’s analysis of the Kindle circulation estimates further supports this theory. Squali wrote:
We believe that Kindle’s e-book sales are benefiting from the launch of the iPad, since the Kindle e-book store offers a broad (and probably the richest) selection, with over 630K titles, which iPad owners can easily chose from. Our current estimates for 2H10/FY11 could also prove conservative as we assume only 10% Y/Y growth in Kindle device sales with no contribution to e-book sales from the iPad. A more probable scenario, based on a higher unit sales of Kindle and e-books, yields an additional ~$100M and $200M upside to our revenue estimates for FY10 and FY11.
Essentially, Squali deduces that due to a small growth in Kindle device sales, it is clear that the growth in eBook sales is due to other devices and specifically the iPad.
All of this leads to a very interesting question regarding who will be crowned king of the eBooks platform. Unlike iTunes, Apple does not have a first-to-market advantage when it comes to eBooks and has made some execution mistakes with iBooks. Barnes and Nobles is also making a move for this market and have released their own eBook reader application for the iPad. It is clear that Amazon is the current king but no one knows how long that will last for.
Which device do you use for eBooks? Are you an iPad reader using the Kindle App or the iBooks App? Which do you like better? Let us know your thoughts.