How Many Kindles Have Sold? Almost a Quarter Million

Through an inside source, the blog TechCrunch has a lead on the number of Kindle e-book readers that Amazon has sold: 240,000, which turns out to be a lot of money -- probably over $100 million though some estimations that I found reasonably done. Over the next year, estimates of how many more Kindle units that Amazon will sell seem to be running between about a half million and upwards of 750,000. It's hardly the whole book buying public, but this shows a readiness of many consumers for electronic book reading. That will affect publisher and, therefore, author business strategies.

Authors Guild Warns About Simon & Schuster E-Book Letter

The Authors Guild has sent a message to its members, warning that Simon & Schuster is trying to get many of its authors to sign an e-book royalty rate amendment to their contracts. They're trying to "set those rates at 15% of the 'catalog retail price' of the e-book." The organization suggests caution:

1. Discuss the amendment with your agent or attorney, if you have one.

2. Depending on your existing contract with Simon & Schuster, the amendment may grant the publisher rights that you've otherwise retained.

3. Be aware that the amendment may affect your ability to obtain a reversion of rights.

Furthermore, the Authors Guild thinks that 15 percent of retail price will be "the low-water mark for e-book royalties." The reason is that the publishers virtually no costs in warehousing, printing, shipping, or handling. My guess is that e-books probably strip a good $2 to $3 from the actual cost of a given title. (And if any publishers read this and disagree with my estimation, I'd be glad to hear the arguments on how it should change and why.)

However, I think we all have to keep aware of the broader economic issues that are happening. Yes, costs for publishers drop, but if Amazon has its way, so will the money that the publishers get in the first place. And by no means am I suggesting that S&S has got the best interests of the authors in mind. If they are trying to set the amount at 15 percent, I suspect they are trying to offer something that sounds generous compared to print royalties, but that leaves more money in their pocket. If you figure a $20 cost for a trade paperback and 50 percent discount, that means the publisher is saving maybe $2 on income of $10, which is an additional 20 percent in available profit. Instead of 15 percent, an author might reasonably get 20 or 25 percent of the sale price.

But read about the prices Amazon is charging for big titles. It's very little compared to print prices - even though Amazon itself is also saving lots in the new format - and the company is taking aggressive portions of the money that comes in. That's why they're pushing on the Kindle so hard. Should other e-book readers come out and become popular as well, there might be multiple formats and outlets, meaning far less ability to twist arms. If the publishers are forced into taking $5 to $7 for a title, there's a whole lot less money now available for all of us.

A "Champion" Disagrees with Views of Kindle

I got the following as a response to my post Some Additional Views on the Kindle. However, as it eventually seemed to border on the self-serving, I thought I'd address the anonymous remarks in parts on a post.

I, myself, am a Kindle champion as well,

And as you were trying to point people to what appears to be an Amazon-affiliated (not owned) site about the Kindle, I have to wonder what "champion" really means.

and I think that there are a number of intangible "cost" savings and benefits to consider for you skeptics out there.

Ah, yes, intangibles - often the last refuge of the businessperson who cannot point to a concrete benefit.

First of all, think of the convenience the Kindle provides you. Now, you can read all of your favorite newspapers, blogs, books, magazines etc. anywhere and everywhere. You do not have to worry about the weight and size of your reading material and about how you will transport it on the move.

Yes, I always travel with a Sherpa carrying my newspapers, magazines, and books. Realistically, when I do travel on business, it's one book, and I find that airlines are terrific about having magazines that I needn't schlep.

Second, you can do and learn more with what would have been wasted down time while you wait for this or that. You can just pull it out whenever you have a few minutes here and there.

How about the educational use of contemplating what you have already read and heard, or even looking around to see where you are? Not every minute of every day needs to be "productive," in the limited sense of the term.

Third, think of the environmental cost savings. If we, as a collected whole, begin to do more and more of our reading from "paper-like" digital devices, we will be cutting down less trees, maintaining and even increasing oxygen levels and perhaps even fighting global warming.

What of the environmental costs of the semiconductors plants that run through tens of thousands of gallons of water daily? The non-replaceable minerals and metals? The energy costs of manufacturing the whole thing? The energy costs in keeping the acres of servers running to make the "environmentally-friendly" reading available? High tech does not translate into green.

Fourth, you begin reading content that you may have otherwise missed and will become more and more educated/cultured as you seek out new and different reading materials.

Wait, you're going to read it just because it's on a screen, although you wouldn't on paper? That seems like one of the most far fetched arguments I've ever heard for anything.

All in all, while $359 for this device plus the cost of the books etc. seems high, you are getting a great deal of value out of it, be it value from convenience, value from supplementary education, value from environmental protection or other value.

In other words, pay no attention to businessman behind the curtain. And, sorry, I won't be listing your Kindle-centered web site that is "in association with Amazon.com," even if you do end your exhortation with an environmentally-friendly electronic exclamation point.

Market Analyst Suggests Explosive Growth for E-Books

Many of us have been wondering just how e-book sales, particularly with Amazon's Kindle, have been going and just how they could change the industry landscape. There's an article on that very topic:

Pacific Crest analyst Steve Weinstein argues that global e-book sales at Amazon could reach $2.5 billion by the year 2012.

To figure this, Weinstein starts with the handiest analogue: iPod and MP3 player sales. He notes that between 2003 and 2008, digital music sales grew from 2 percent of the US market to 33 percent, largely on the back of Apple's ( NSDQ: AAPL) twin offerings. He doesn't expect the Kindle/e-books to track as fast, but he does think the market is off to a strong start already, and that the cycle will pick up steam as the Kindle comes down in price (that's already started) and the ecosystem matures. He also suspects the consumers will be drawn to the instant gratification aspect of Kindle titles, as well as the lower price per book.

MP3 music and e-books aren't exactly the same. People had wanted to buy single tracks for years and not be forced to purchase an entire album for one or two songs. However, they are analogous and the logical is reasonable, I think. Read the article and pay particular attention to the projections he's making for Amazon's profits. Part of that comes out of far lower costs (no manufacturing, warehousing, or shelving), but I wonder how much would come out of the pockets of publishers and authors.

Some Additional Views on the Kindle

The Kindle gets press because Amazon is such a big name that has shown it's not afraid to bully publishers and authors. In fact, if the product really takes off, publishers are going to have an enormous problem; so far as I know, you can only get compatible content through Amazon. I think it's clear that the company wants to become the Apple of downloadable music: Make the device that people want and become the only significant source for satisfying your content cravings.

There has been some additional press on the Kindle since the Book Expo America (BEA) in LA a week or so ago. Paul Krugman in the NYT thinks that a predominantly digital e-book model will drive book prices down to nothing, where they become something you give away to promote other activities, like bands making money on touring, licensing, and merchandise. Danny Hatch's Business Common Sense blog had an entry about the Kindle and Jeff Bezos's pitch for it at BEA. Apparently Amazon claims that the Kindle actually increases print sales:

According to his research, for every e-book bought, Kindle readers buy printed books as well. Kindle increases purchases (e-books plus printed books) by a factor of 2.6.

Who knows what would actually happen? What I do know is that people tend to use forms of communication that work best for particular reasons. Sending e-mails can be fine, but don't replace all uses of the phone. Instead, you could argue that people used to use the phone for virtually everything because it was less of a time sink, but that it wasn't really practical for everything, like having a record of an exchange. Many types of reading you do in a book don't work well on a screen - at least in my experience, and I've been reading heavily from screens for about the last 25 years, literally.

There are some other potential impacts on the book business that the Bezos presentation suggest:

• Amazon wants every book in print available as a Kindle title, which they admit is a big copyright issue. As Hatch notes, is it worth making a Kindle version of a niche title that sells little? That's a tricky question: some, like Chris Anderson and his idea of the long tail, might suggest that digital was the only way to go in such cases. Maybe that type of title is only available electronically, or for POD. That would suggest to me that POD vendors would have to find ways to directly print from popular e-book formats so there isn't double production work.


• Bezos touted how titles never go out of print, leveraging that long tail idea of bringing in money with no investment in inventory or story. POD could offer the same, but in either case you must ask how your book contract reads, and when a title goes out of print and rights revert to you. You're going to want a minimum - maybe 500 or 1000 copies a year - on the number selling via e-book and POD combined. Anything under that triggers the out-of-print reversion clause. But if you don't get such minimums in a contract, you will be stuck for the 35 years it takes, at least in the US, for you to be able to legally recall all rights.


• The Kindle only shows four shades of gray for now, so books depending on illustrations and colorful displays might only work in print. If you don't like the e-book route, that is something to consider in your conception of the book.


• There is built-in audio, so it could become an audio book player as well. (And why not music?) Authors might want to revisit the licensing out of audio book rights, as they might become more important.

One more point that should be read in its entirety:

A member of the audience asked Bezos if Kindle would change what authors and publishers do? “Wait and see,” was the reply. For example, Kindle could revive the old Charles Dickens model of publishing serials—or partsworks—that come out in sequence. Also, unlike printed books, if statistics change, the new material can be inserted, so that the Kindle book is always current.

And it's back to Krugman's point that things could change for authors. No more second editions, for example, which would mean an end to significant continuing revenue for some authors. As for the Dickens idea, where would the parts come out in sequence? That worked for him because he could publish the books in parts in newspapers and then reissue them as full editions. But with newspapers dwindling and magazines feeling the crunch, what would the outlets be? And how about the other major part of Dickens's income - lectures and readings? Are you ready for lessons on how to effectively read on stage and therapy to deal with issues of stage fright?

Some overtly happier thoughts: when people download books, they probably cannot return them, as with buying software or music. Also, publishers no longer have the "returns" issue that makes them and their authors crazy. Can you imagine a royalty statement with no need for reserves against returns?

It could be a different world, indeed.

Giving Away E-Books to Drive Sales

Author Paolo Coelho has apparently been giving away electronic versions of his books to great marketing effect. There's a quote on a site called TorrentFreak:

In 2001, I sold 10,000 hard copies. And everyone was puzzled. We came from zero, from 1000, to 10,000. And then the next year we were over 100,000. […]

I thought that this is fantastic. You give to the reader the possibility of reading your books and choosing whether to buy it or not. […]

So, I went to BitTorrent and I got all my pirate editions… And I created a site called The Pirate Coelho.

And here's something from his official blog discussing a talk he gave about the phenomenon. I'm not saying that every author should immediately run off and give away copies, but the success that some have with this method does give one pause to think. With so many book purchases happening online, maybe this is the online equivalent of going to a book store, having a title catch your eye, flipping through it, and deciding to buy it. Or perhaps this will only work with a few authors and eventually the whole approach will fall apart. Interestingly, the people I've heard of who have had success - Coelho; journalist, science fiction author, and co-publisher of the popular web site BoingBoing.net; and M.J. Rose - have all been giving fiction away.

It makes me wonder whether there has been any success with giving away non-fiction - at least the non-literary type. (If you've heard of a case, please email me and let me know.) It could be that it's an approach that only works with more "literary" works. Or perhaps it's just that non-fiction authors generally have an easier time to get commercially published, and aren't quite desperate enough to take big chances that could result in success.

An Interesting View on E-Books

Tim O'Reilly is a smart book publisher, and he took a look at some of the numbers that e-book enthusiasts tossed around with the advent of Amazon's Kindle. His argument is that even if prices do tumble for e-books, it will likely be only temporary. It's worth the read.

I'll add an additional angle. Let's assume that he's wrong and prices do drop and stay at $5 a title. What publisher and author combination can make money that way? Reading hasn't reduced in volume because the prices are too high - books just aren't that expensive. If you have a current business model under which most titles don't even make back the pitiful advances that authors get, and where the cost of the actual paper is only about $1.50 a copy, then dropping the price by 60 to 80 percent is going to mean that publishers won't be able to afford to print anything that isn't going to be wildly successful.

Current backlists may stay around (if the publishers have acquired the necessary rights), but forget the variety of titles coming out now. You'll be down to a handful of authors who can generate the necessary sales. Some individual authors might be able to self publish, but if they're getting 35 percent of $5, that's $1.75. Take out costs of design and production, and maybe they're at $1 a book if they're lucky, which is the inadequate stream of money they made from publishers - too low to support self-publishing. So $5a copy, if really gutting the paper model, would actually leave book publishing virtually dead. Then supply and demand will kick back in, because there are those massive infrastructures to feed, and prices will head back up anyway.