For the First Time, E-Book Sales Top Real Books

An interesting article in today's New York Times, courtesy of the increasingly tech-savvy young journalists banging out copy for the Grey Lady. According to virtual bookseller extraordinaire Amazon.com, it is now selling 143 electronic books for its Kindle reader for every 100 physical hardcover books. For effete, left-wing e-book doubters like myself, Amazon's admission is more than a little shocking.

At the root of the story is Amazon's Kindle, the somewhat clunky, grayscale reader now in competition with Apple's iPhone and the Barnes and Noble doppelganger Nook. Compared to the low-resolution e-book readers of the early 2000's (think PalmPilot), all three current-generation devices are loaded with features to make electronic reading a seamless transition.

From screens that mimic paper to the announcement that new iPads will come complete with retina display, developers are no longer simply bundling e-reader technology as one more tool in a suite of products. E-books are front and center.

Competition makes things better. It pushes companies to constantly assess rival products and adopt new features. Now that e-book consumers have several high-quality reader choices, developers are finally cleaning up the rough edges of a technology that has traditionally failed to impress wide swaths of the market. In fact, e-book sales didn't even break $10 million per quarter until 2008, with stagnant figures from early 2002 until late 2007. Now, if Amazon is to be believed, the sales of e-books from their virtual storefront has quickened from 143 per hundred hardcovers to over 180 per hundred hardcovers.

Amazon-kindleAmazon was confident enough in its sales figures to exclude Kindle freebies from the calculation. This is telling, as there are nearly two million free titles in the Kindle library. Amazon's unwillingness to inflate figures by including freebies is both a positive commentary on Amazon's confidence in the Kindle and a sign that, just maybe, e-book sales are growing healthily enough to stand on the strength of their own sales.

 What's more, Apple's flashy-screened, multi-functioned iPad isn't the Kindle killer analysts like TechCrunch predicted. In fact, Amazon's e-book sales have mushroomed well above industry growth rates in general even as consumers snap up iPads and the new iPhone 4, both viable e-book platforms.

This is due in part to some shrewd business positioning by Amazon, which cleverly anticipated future competition in the reader market due to the ever-decreasing costs of high-resolution mobile computing. From the New York Times article:

One reason Kindle book sales have held their own is that owners of
iPads and other mobile reading devices buy Kindle books, which they can
read on computers, iPhones, iPads, BlackBerrys and Android phones. But,
except for the free uncopyrighted books, Kindle owners must buy or
download content via Amazon. “Every time they sell a Kindle, they lock
up a customer,” Mr. Shatzkin said. 

Some industry analysts say that many people do not consider the iPad to
be a reading device the way the Kindle is, and see a need to own both.
Amazon’s latest sales figures are “clearly an indication that the iPad
is complementary to the Kindle, not a replacement,” said Youssef H.
Squali, managing director at Jefferies & Company in charge of
Internet and new media research.

Interoperability is the key here. By selectively rejecting the proprietary systems of the early 2000s, Amazon has created a system where its KIndle books are accessible from a wide variety of platforms while restricting actual Kindle owners to purchasing only Kindle books. This way, Amazon needn't worry about its own customers buying from competitors like Apple's E-Book Store. At the same time, Amazon can leverage its size and experience into substantial bargaining power with publishers.

The result? Consumers are more likely to turn to Amazon to find their next e-book purchase, due mostly to the economies of scale on display. It would be the equivalent of Apple unleashing its massive App Store for other operating systems while restricting iPhone users to purchasing solely from the App Store. Amazon is merely using its comparative advantage in bookselling to cement its position as a market leader, and it's a telling sign of where the "App Wars" are headed.

The Future of Books

So is this a transformative moment for digital media? Should we expect to see the end of the physical hardcover book? Not likely. Physical book sales still total over $23 billion a year, according to the Association of American Publishers, compared with only $170 million in annual e-book sales compiled by the International Digital Publishing Forum. What's more, e-books have been available since the mid-1990s, but only topped $100 million in total sales in 2009. The book publishing industry has maintained its multi-billion-dollar status for decades. 

What's new and interesting about Amazon's recent sales data is that it points to e-books as a potentially permanent niche market that is only recently realizing its potential sales. Thanks in part to the evolution of better reader platforms, more people than ever before are buying and reading books and newspapers electronically. Even if e-books fail to surpass physical publishing houses in sales, continued strong growth in the e-book industry will be enough to catch the notice of major publishing houses and other industry players.

In time, the increased acceptance and use of e-books will lead to more mainstream interest in the technology, leading to more competitors, more innovation, and more consumer conversion. It may be entirely possible for a consumer to keep a healthy physical library of books while reserving e-books for the business commute or times when access to printed material is made difficult. What Amazon has shown is that, given the right combination of availability, performance and low cost, consumers will happily get their fix of Edward Cullen and friends through digital means.