eBooks / eReaders

SAI notes that more Kindle e-Books were sold on Amazon on Xmas day than real books:

On Christmas, the company sold more Kindle books than physical books.

Yes, this is obviously the result of everyone who got a Kindle for Christmas (lots of folks) firing it up and ordering a bunch of eBooks on a day in which most physical-book readers weren't shopping. But it's still important and impressive.

The Kindle's economics are still lousy for Amazon: The company loses money on new releases and makes only a modest amount on older titles, thus losing an estimated $1 per Kindle book.

Actually, whats more amazing is that punters will pay those prices for them, but, to paraphrase PT Barnum, there's an early adopter born every minute.... The bit I find amusing though is that the economics of an e-Book are lousy for Amazon - following the above link leads to this analysis:

Amazon accounts for about half of US e-reader sales currently and is losing money selling e-books. Here is how:

- Book publishers are standing their ground on wholesales prices – selling books at about $12 to distributors regardless of if it is a print copy or digital copy.
- Amazon sells them for $9.99, losing about $2 per sale.

Clearly companies like Amazon have to start selling e-books at print retail prices or book publishers will have to lower their wholesale prices. We think it will be the latter.

Given that, like CD's and Newsprint, a large % of the cost of a paper book is physical production and distribution, its amazing that publishers have managed to keep those prices up.

Like CD's and Newsprint, this is not sustainable longer term however, there is a limit to the suck...er, I mean early adopters. Not only that, but publishers already de-risk book sales by the remaindering system (unsold books are not charged for and are sent back at publishers' expense) and Amazon de-risks physical delivery by making the user pay extra.

I suspect in a year or so we will hear the loud wails of book publishers joining the music and news choir's refrain that the Internet is ruining their livelihood, when its clear that a lot of the reasons are self-inflicted. But its not as if they haven't had ample warning, after all music publishing hit this issuel in about 2005.

Kat "Clash City Rocker" Hannaford in Gizmodo has it in for e-Readers - she does a rather good fisk on their well documented major shortcomings, ie overpriced books and DRM worries:

With ebooks costing between $10 - $15, you're forced into continually feeding your Kindle/Reader/Nook/Other-warm-and-nurturing-sounding-device with cash, and as the ereaders are so physically large you also need to invest in a manbag just to avoid being mugged. Did we say mugged? We meant "laughed at." There's a reason why you don't see people using them on public transport.

Such shock that a proto punk would defend books - its a mixed up world Anyway, her argument on the death (or at least ongoing zombie status) of th e-Reader is that a combination of poor pricing and good enough other devices will see them off:

Any company that attempts to own market share in that area is fighting a losing battle. Consumers won't buy an electronic book when they can get a paperback for the same price or even less, and when they can lend it to friends, read it in the bathtub or even sell it on and make a percentage of their money back.

......

During September of this year, there were more ebooks added to Apple's App Store than there were games, according to San Francisco-based analysts Flurry. There's an obvious advantage to reading an ebook on an iPhone, as chances are you already own one. You don't have to fork out several hundred dollars on a new device that just displays lines of e-ink. iPhones are devices which serve more than one purpose, and while some ereaders allow for music playback and even gaming, you'd never buy one just to play MP3s on.

So, 3 comments and 2 predictions:

- Firstly, Kat is right with pricing - thats is the biggest impediment to it taking off in any big way. Its like "what have we learned from the CD market"

- Secondly, DRM needs to be sorted. There needs to be a trusted system that does not hand all power to the producer and can be changed at will. There have been enough cases of DRM systems going out of business or failing. We suspect there needs to be a pricing difference, with DRM'd stuff being much cheaper (ie un -DRM'd is sold on the assumption of copying)

- Thirdly, the iPhone is only a good enough today as the current crop of e-readers use old technology, but if you look at the next generation devices such as Plastic Logic's reader* there is an order of magnitude change in quality.

Now, the predictions:

- e-Readers will run alongside books, not replace them. When we did our research on the e-Reader market for Plastic Logic 2 years ago, we came to the conclusion that the major early market would be "road warriors" who would use the e-Reader to ensure they didn't need a second man bag to carry all their papers. It will be some time that they move out of this market and hit mass market price points - and even when this happens, history tells us that new technologies take some of the market away but usually co-exist

- Kat is right when she thinks that e-Readers are an interim phase - However, I think she is neglecting Moore's Law - go out 6 cycles (about 10 years) and you are looking at something two orders of magnitude cheaper and much, much lighter - it will be a commodity that we use in a semi-disposable manner, so it can be used in the bath and shower. It will also do other things, like do your singing in the shower for you. (I note that the biggest complaint when local newspapers close is the loss of the crossword, maybe that will be the killer app)

(Update - see Moore's Law vs Learning Curve discussion in Chris Edwards' comment and my replay - I used a 75% learning curve to get to 5% of the cost in 10 years)

And Kat shows a stunning lack of sensitivity to all us fusty techies when she says:

Our grandchildren won't be housing first edition ebook copies of War and Peace in an antiquated Kindle, passed down from generation to generation. There's no opportunity to get sentimental over an e-book, and when it comes to works of fiction and non, which have had thousands of man-hours injected into them, surely that's the reason people read them?

You mean I've been storing my Sinclair Spectrum in vain? (I note an interesting trend among teens to start listening to vinyl LP's again, so there's a future in the past)

* Disclosure - we worked on the early day specification of the Plastic Logic e-Reader

One of the risks of owning digital media is that in many cases the supplier's hidden claw is there long after purchase. This was made obvious when people realised that there was a reproduction limit on the number of times they could move their own (paid for) copy of iTunes songs, and was really brought to the fore when Microsoft and Google turned off DRM on media services, rendering a whole lot of (paid for) collections useless and offering scant recompense (See our coverage here).

The obvious conclusion there was don't buy digital music through any form of proprietary system - if you pirate it, or buy CD's it stays yours.

Next up in the digital media own goal stakes is the Amazon Kindle, which has turned off hundreds of users' (paid for) copies of George Orwell's books. Gloriously ironic, as the EFF notes:

In George Orwell's Nineteen Eighty-Four, the protagonist Winston Smith labors in obscurity to make information appear and disappear at the whims of the Ministry of Truth:

This process of continuous alteration was applied not only to newspapers, but to books, periodicals, pamphlets, posters, leaflets, films, sound-tracks, cartoons, photographs — to every kind of literature or documentation which might conceivably hold any political or ideological significance. Day by day and almost minute by minute the past was brought up to date.

It would appear the publisher changed its mind about offering an electronic edition of Orwell's books, and according to the NYT apparently Amazon, whose business lives and dies by publisher happiness, caved in.

Lesson for anybody that wants to learn it is don't buy a Kindle, either buy the book in (uncancellable) paper or pull it off the 'Net and put it on your PC/IPod/etc where it stays safe. By the way, the prices of eBooks vs their costs make music prices look positively tame.

Its great when you can talk about work you have done, and great companies you have worked with. Too often in cutting edge tech work, the NDA's are pretty constrictive. Anyway, this week Plastic Logic unveiled its next generation e-Reader, using flexible pages. There is a video of it over here from DEMOfall.

As the article we've linked to notes, however:

Other bloggers have overreacted somewhat by predicting that the Plastic Logic reader will kill the Kindle, but that isn't going to happen. There's more to providing a good e-book experience than industrial design. The Kindle is very well supported by Amazon, and it has that unique free-forever wireless-data link. But if Plastic Logic can find a partner with ties to the publishing industry and solve the wireless problem, the result would be a serious challenge to Amazon.

Exactly - the lesson, from the iPod onwards, is that the end device needs to be supported by an end to end supply chain to capture maximum value. I'm sure Plastic Logic is well aware of this. But, having seen the technology in action, all we can say to anyone contemplating buying an e-Reader is check these ones and maybe wait till they come out.

(Update - from Drew Benvie's blog a link to El Reg talking about a toaster that acts like a printer. Seems like a very similar space to our work on e-Readers really. Prompts the thought - will Plastic Logic make plates, shower curtains and the like that one can read? )

In recent weeks there has been quite a lot of puff about the Amazon Kindle being the "iPod for Books" - this piece by Jack Schofield in the Grauniad punctures that to an extent:

Yes, but perhaps only after it becomes a newspaper reader. One of the drawbacks with today's ebook readers is the price of the hardware, which ranges up to £400. Even after this year's $40 price cut, Amazon's ebook reader, the Kindle, costs $359. Not many people buy enough books to recoup the cost. However, if it could replace a printed newspaper, regular readers could probably recover the hardware cost in a few months - or they might be given one free.

The Kindle has been very successful by ebook standards, and Citigroup analyst Mark Mahaney has just doubled his projections for Kindle sales to 378,000 units for this year, 934,000 next year and 4.4m in 2010. "Turns out the Kindle is becoming the iPod of the book world," he told Citigroup clients.

The numbers are small compared to other consumer electronics devices. For comparison, Apple sold around 8.2m iPods in the US in last year's Christmas quarter, Nintendo's Wii sold 2.9m and Microsoft's Xbox 360 2.4m. Mahaney's estimate of Kindle sales is exactly the same as the iPod sold in its first year. However, the iPod entered a market that had been pioneered by devices such as the Diamond Rio, and the huge success of Napster's file-sharing service meant there was plenty of free content. Amazon is having to create the market itself.

What surprises me is that its even got this far - this generation of e-Readers are still pretty hard to read and are expensive to buy. Also, as Jack says, there is not a body of low cost books to read - book pricing for e-Books still has not nearly discounted the move from physical products. After looking at the plastic ink e-Readers now in development (disclosure - we have done work with the next generation e-Readers), I think I'll pass for now.

Article in the NYT re the inexorable rise of the eBook, Kindle style. Its worth linking to for this quote alone:

Do you remember what it was like back in the old days when we had a New Economy? In the 1990s, jobs were abundant, oil was cheap and information technology was about to change everything.

Then the technology bubble popped. Many highly touted New Economy companies, it turned out, were better at promoting their images than at making money — although some of them did pioneer new forms of accounting fraud.

I suspect we will find that The New Economy 2.0 will have its own share of stars of fraud and flop.

However, I do take issue with some other thoughts in the article. Firstly, this:

In 1994, one of those gurus, Esther Dyson, made a striking prediction: that the ease with which digital content can be copied and disseminated would eventually force businesses to sell the results of creative activity cheaply, or even give it away. Whatever the product — software, books, music, movies — the cost of creation would have to be recouped indirectly: businesses would have to “distribute intellectual property free in order to sell services and relationships.”

For example, she described how some software companies gave their product away but earned fees for installation and servicing. But her most compelling illustration of how you can make money by giving stuff away was that of the Grateful Dead, who encouraged people to tape live performances because “enough of the people who copy and listen to Grateful Dead tapes end up paying for hats, T-shirts and performance tickets. In the new era, the ancillary market is the market.”

Except that it is not a "free" transfer from goods to relationships - as we explained in our articles in FreeConomics Part I and Part II, if your free lunch is usually being paid for by offset funding, and / or by your data being chained up, there is a price to pay. What is often forgotten in the "rush to free" discussion is that by and large, if another piper is paying, they will want to call the tune at some point. That bit of the bargain is too often neglected by the Freeconomists - but not by Ms Dyson, I note .

Also, making money from T shirts as a famous band (with all that Big Label spend gone in already) like the Grateful Dead is one thing - being further down the Long Tail means its a lot tougher, and this has become clearer in the interim as the network power law has just allowed the rich to get richer.

The scary thing is I find myself arguing these economics with the NYT author who is none other than Paul Krugman. Hmmmm. Second thing I'd take issue with is this thought:

According to a report in The Times, the buzz at this year’s BookExpo America was all about electronic books. Now, e-books have been the coming, but somehow not yet arrived, thing for a very long time. (There’s an old Brazilian joke: “Brazil is the country of the future — and always will be.” E-books have been like that.) But we may finally have reached the point at which e-books are about to become a widely used alternative to paper and ink.

That’s certainly my impression after a couple of months’ experience with the device feeding the buzz, the Amazon Kindle.

Not the bit about eBooks being the perpetual next year's technology (along with the mobile internet), but the bit about the Kindle replacing books. I don't buy it (literally).

We've done a lot of work on e-Readers in the last two years or so, and there are 2 things that they are still struggling with:

(i) The kindle generation is still too small creen and not natural light enough for most people to find reading an easy pleasure. A few road warriors reading papers they'd otherwise have to read on laptops yes, the mass market - unlikely yet according to our analysis. We need to await the next generation of displays

(ii) Price point - not just of the Kindle, but of total (legal) ownership. Despite the price cut, its still $359.00. And the reduction in price of the average books in eBook form is - according to the Amazon Kindle site for say Clay Shirky's "Here Comes Everybody" - a whopping great reduction apparently from S25.95 to $15.42 - except that elsewhere on the Amazon site the actual book is only $17.43 Hardcover. Somehow a $2.00 reduction for a zero dead tree edition does not seem to be that great a deal. I need a lot of those to (c 180 in fact) to justify the $360 outlay!

Unless you were thinking of going to BitTorrent for Clay's book, which we could not condone as that, after all, is Piracy. Or the inevitable future, as Esther Dyson would have it ?

Better get started printing those T Shirts, Clay

e-Book Readers don't stand a chance, sez C:net:

The only way e-book readers will emerge from their current state of irrelevance is if the manufacturers of the device decide to make them free or as close as possible to free and then make their money on the e-books. At that point, consumers would be more than happy to pick up a Kindle or a Sony Reader and buy cheaper books at their leisure. And by doing that, everyone wins: the installed base will increase dramatically, e-books will sell far more copies than previously imagined and the niche market could finally become a mainstream alternative to print books.

Until then, this industry has no promise. Let's face it -- if you can buy a book for $30, why would you spend over $300 just to be able to read it?

The economics of the e-book reader industry are off and so far, no one in the business has realized it. It's time they wake up and see what's really going on.

I apologise in advance, but this is making me grumpy because it is so adamant a post, and yet shows a level of disregard of both the economics and the emerging technology that makes me think the author is not that familiar with the latest developments in the field.

We did a piece of work last year on the future of e-Books and e-Readers for Plastic Logic, a manufacturer of state of the art plastic paper, and if you look at the trajectory of that technology you know that its coming over the next few years. The Kindle is 5 year old technology (at least) re-hashed, but the next generation is a different thing entirely.

As for the economics, this is classical, well, classical thinking.

An e-Book doesn't need to be manufactured so will sell for less than a paper book (and let us not mention bitTorrent), and many of the early use cases will be pro-sumers and corporate types where its not a book, but a pad with X'00 papers and magazines to read on business trips etc,

One of the (many) things you may not know about us is that over the last few months we have been helping develop the content delivery systems for a brand new eBook proposition, so it was interesting to go along to this talk during this London Book Fair week.

Authors Margaret Atwood and Andrew O'Hagan, Faber CEO Stephen Page and Times literary editor Erica Wagner talked about the future of the book in the digital age.

To summarise.....overall it felt to like a paean for the return of the Old Media, a remembrance of things past. Although I never attended the Guardian Future of Media summit it had the same ring about it judging from the blog posts. For example there were no digital mediarati (like us, or maybe even Amazon at a push in on the panel), so there was not really the input from that side until Question Time.

Nonetheless, there were a number of points that came up that were quite interesting. Its probably useful to split the discussions into three areas, viz:

- The future of the book as a technology for reading text
- The future of the book as a thing flogged by booksellers
- The future of the book as a way of authors making money (aka copyright)

The future of the book as a technology for reading text was in my view best expressed by Margaret Atwood in her talk "the death of the scroll" - she noted that if history is anything to go by, new tech (eBooks etc) will be adopted if they solve a problem, and will then coexist with Old Tech for quite a while, and the Old Guard will tut about the New Stuff all that while - it was ever thus.

Her view was that an e-Reader will only really replace a book when you can drop it in the bath and it still works (must pass that tip on to the product design team....)

She also asserted that book reading is a more neurologically effective way of taking in and assimilating data....I haven't been able to corroborate this yet though.

There was also quite a passionate discussion about the physical joys of actually owning and interacting with a physical book - riffling, smelling, scribbling - clearly some fetishes going on there - and quite a subtle point was made (by Andrew O'Hagan I think), in that physical book ownership tends to push you to exploring the canon of works by an author, whereas Amazon etc pushes you to explore "books like this that others have bought" - which can be useful but can also link books you buy for yourself plus the one you bought for retired Uncle Bob.

The future of the book as a thing flogged by booksellers really (in my view) resolves itself into the discussion about how the "long tail" is to be found and sold, ie how best to serve the many literary niche audiences - via digital media or books.

(Note - at no point was the term Long Tail ever used in any of the presenters' talks....thats how little "digerati" input there was, until I asked about it specifically in the Q&A)

Stephen Page's view was that the Long Tail is best handled right now by the ability to print on demand, but over time the more the niches are pulled out of teh book supermarkets, the harder it will get to find physical niche books.

It would seem that partly in response to Amazon etc, large commercial booksellers are stacking "books like beans" and it is harder and harder to get niche (aka quality) literature. One of the corollaries of this has been the increased manufacture of "beans" - large amounts of "crap books", typically by slebs - to the point that to be a successful author the last talent you probably need is good writing skills - fame is the thing.

There was also quite a long discussion on the death of niche forms like the essay, and literary criticism (which they differentiated from literary review)...but no comments about the blogosphere, where criticism - literary and otherwise - certainly abounds, as do essays and many other media forms. (There was some disagreement on the state of poetry.....interesting to know why it has become resurgent if true - has the 'Net had an impact?)

The last - and most emotive - area was about Copyright and DRM, and is clearly what literature is really all about - Andrew O'Hagan quoted an Edith Wharton character:

"A keen sense of copyright is the nearest thing she has to emotion"

Needless to say the Internet is (mainly) a Bad, Bad thing for Literature - you've heard it all before....but the reference to Ghougle - a ghoul that reduces all literature to searches of lumps of text - was an interesting allusion

I thought two interesting points were made here though:

Firstly, copyright as a quality assurance tool - editing is a craft, and its supposed replacement, social media - the tyranny of the most popular - does not really replace it.

Secondly, many people see publishers as the Evil Aggregator - but the truth is that they arose because writers wanted people to "monetise" their talents. ( Margaret Atwood noted that publishers were a 20th century phenomenon, and that the 'Net may have removed the need for their role)

Overall though, the sense I was left with was that Olde Literature, like Olde Audio and Olde Video, are still not really grasping, grappling with and grabbing the opportunities from the emergence of the Digital Media.

Other writeups are a detailed one here, and others here, here and here