Has Apple Already Beaten Kindle?

Without even bringing their A game? Big news is that Random House is going Agency, ahead of the rumored iPad 2 launch (Wednesday.) This is on top of news that companies like Pearson (Penguin’s parent) are really kicking it with ebook sales via Apple, B&N and others.

Random House’s move clearly signals that they’re going to show up in Apple’s stores. Previously, they’d been the only company that was letting Amazon set prices (and they got “special favors” from Amazon for not being part of the Agency 5.) Obviously, from RH’s perspective, going Amazon-only hasn’t been enough of a boost to their bottom line.

Why is that?

Well, think about Kindle circa ’09. Amazon had approximately 90% of the ebook market (kicking Sony’s tail), to go along with 85% of the online books market. That’s amazing dominance in a short period, and there was no reason to think, given Amazon’s relationship with customers, that they’d lose much share.

B&N did better than I expected with Nook. Having around 25% of the U.S. market. Downside, B&N kicked me out of their store and hasn’t paid me for three months. But 25% (of the U.S.) is still 25%.

I have a bunch of books in the Apple store. I have around 20x as many in the Kindle Store. I’ve only recently started putting more books into Apple. There were technical difficulties*. Some books do sell better in Kindle-land. Others sell better in Apple-land. I have no idea how many Apple will end up including. I’d say Apple probably has 20% of the ebook market as well. And they’re likely to grow. Fast.

In other words, after 2 years, despite setting all kinds of sales records for the device, Kindle has gone from 90% of the ebook market to, oh, 50% or so. That’s… not good. There are other players coming–Google, Kobo’s doing better–that might also chip away at Amazon’s lead. Just a few percentage points here and there.

It gets even more fun. One of the killer apps for ebooks has always been textbooks. You don’t sell those to students so much, you sell them to school districts. Amazon will not be a player in that market. They’ll have to pay sales taxes, among other things, before states commit their dollars to them. The academic market’ll come down to Apple, Ingram, maybe B&N College, Overdrive possibly–and a ton of firms you probably haven’t heard of.

90% market share to 50% in two years. And we haven’t even gotten to Apple’s new rules about in-app sales.

It gets even better. Amazon’s counter has been that they’re nicer to the indie author. A few, sure. Better than us independent presses, at least. But there, too, an Indie author is kinda getting screwed by Amazon. Your $.99 Kindle short gets you $.35. They same title from Apple gets you $.70; $.65 from B&N (assuming they pay you), $.62 from Google, $.50 from Kobo. No independent author putting a book into Amazon will not also put that book into the other markets, via PubIt, Smashwords, or however.

Say what you will about the Agency Model. Personally, as a small publisher, if the big guys want to charge a ton more without discounting, I’m all for it. Charge whatever you want. How ’bout $35 for an ebook? $50, maybe? Come on, you can do it… But whatever their motivation, what’s happened here is a revolt from the content providers, big and small. And by taking a stand, they’ve absolutely brought Amazon to its knees.

Now you know why short interest in the Seattle-based retailer was up around 40% from January. And why Amazon has been careening around, harassing the smaller presses.

*Lot of people have had problems with Apple’s content regs for the iBookstore. Particularly when they changed them. My own take on Apple is: new to the book business, they had an initial situation where you’d have to go through Ingram or some other third party (paying a ton). They realized that didn’t work, so they went to allowing direct publishers after a month or two. Then they discovered that epub wasn’t the universal donor format, so they had to make more changes. Meanwhile, they pay in a timely fashion, and do cool things like an iPad app that covers sales reporting. I don’t know how much of my content they’ll allow. But I’m a little different, with a fairly large customer base. Given that base, the app I’ve got coming for Olympia is likely to pay for itself in the Android market first (and get installed on at least a handful of cooked Nooks). We’ll see, cool part of the mobile apps market is you don’t need to be an MIT Grad to get basic functionality anymore.

About dmoynihan

Me here.
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  • DMcCunney

    “90% market share to 50% in two years. And we haven’t even gotten to Apple’s new rules about in-app sales.”

    Yeah, but that’s 90% to 50% of what? Amazon’s share has dropped, but the total size of the market has expanded. So Amazon may be doing happily better in terms of revenue and profit on ebooks than they were two years ago, even with the drop in share.

    From where I sit, the Kindle was intended to prime the ebook pump. Ebooks are a natural fit for Amazon. The infrastructure to display the catalog and take the order already existed. Fulfillment in terms of an immediate download was fairly simple to implement, and ebooks don’t have warehousing or shipping costs.

    Once the pump *was* primed, the fact that Kindle apps for PC, iPhone/iPad and Android should appear was no surprise at all. Amazon wants to sell you ebooks, and the more platforms on which you can buy and read them, the better.

    Amazon also wants to be your sole source for purchased content, and their DRM is designed to enforce that. Yes, you can get Mobi formatted content not encumbered by DRM and side-load and read it with a Kindle or Kindle app, but if it *is* encumbered by DRM, you must either buy from Amazon or strip the DRM, and the majority of the market doesn’t know how to do the latter.

    As for textbooks, *everyone* is still trying to address that market. The KindleDX with the larger than usual screen and PDF viewing through the Adobe Mobile SDK was an attempt at that: most textbooks are poor fits for Mobi or ePub formats, and they are expensive enough to produce that no publisher will want to maintain two separate design schemes, one for PDF/print, and the other for eBook. Initial student response to pilot programs at universities was apparently less than thrilled. Annotation was an issue, and they couldn’t sell the text used when they no longer needed to use it. :-P

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