Thursday, August 26, 2010

E-Book sales surpass Book sales

We knew this day was coming ... and it did about 5 weeks ago. Amazon announced, and the major publishers have confirmed that they sold 43% more e-book copies than hardback copies during the second quarter of the year. Celebrated novelist James Patterson has sold more 1 million e-books and other popular writers are seeing similar results.

Although digital book sales account for only 6% of the American consumer book market, it's only a matter of time before paperbacks and hardbacks are relegated to the minority. Right now the primary constraint is the entry-cost. A Kindle is $139, and it does only one thing. Tests of the Kindle for textbooks were unsuccessful, so that will cut into the growth curve. So that means that a person will have to fork over 2 weeks' worth of groceries for a highly discretionary, single-purpose device. Clearly, plenty of people have decided that it's worth the cost, but I don't see that as being sustainable.

All in all, the e-book phenomenon reminds me of the evolution of the cell phone market. In the early 1990's, hard-working men and women handed over $500 for a device that, by today's standards, was laughably limited. For that kind of cash, plus a monthly fee of $75-100, you got a carphone, with maybe 99 speed dial numbers and a hole in your roof for the antenna. Less than two decades later, the BlackBerry - that venerable standard-bearer - has been rendered obsolete by phones that my teenage daughter can afford.

I see this playing out in one of two ways. Either the Kindle we become essentially free ... less than $50; or advanced devices like the iPad will become the de facto digital book readers for the American middle-class. My money is on the latter scenario. An iPad might be 4x the price of a Kindle, but it does far, far more. Once a competitive product comes out, like a Droid or even a Windows Mobile tablet, the market will explode. Price will no longer be a significant barrier for the middle market. And publishers will have to completely rethink their business model... just like the music industry did.

What do you think?

Credit where credit is due:
I got the idea for this post from reading these two articles ...
WSJ Tech Digits: New Thriller Sells More E-Books Than Hardcovers (link requires subscription)
The Guardian (UK): Amazon's ebook milestone: digital sales outstrip hardbacks for first time in US