Kindle Fantasies Are Running Wild. But, For Now, Amazon Is Losing Its Shirt →
Rory Maher and Henry Blodget on a TBI Research report. As always with any report that guestimates numbers (Amazon doesn’t publish any Kindle sales info), it needs to be taken with a grain of salt. But if their sources are right, it paints an interesting picture:
- 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
If true, Amazon is investing a serious amount on what they believe is the correct price point. When the iTunes Store started there where also some reports that songs where a loss-leader for Apple, so they could make their profit on iPods. But later on, the company financials told another story.
Still, Apple’s business is selling devices. The content distribution through the iTunes Store is there to make the experience seamless. The distribution costs should just be sustainable with the margins going further up the chain to the producers.
I wonder how Amazon sees itself in regards to the Kindle. My guess is that the zero distribution cost in the eBooks market will make switching costs very low. What Amazon is trying to do is move the store from the Web, down into the reading device.
Yet the most fascinating data shared was:
- The less than half of US citizens that read books are educated with high incomes, a profile that matches most early-adopters that would be interested in a new device.
- 2/3 of book buyers are below the age of 55, indicating they are likely technologically sophisticated.
- More people are buying and finding books online, which would support the next step – buying and reading digital books distributed and promoted online.
You hear that Mr. Publishers? That is the sound of inevitability.
