[LINK] on the ebook scene

[Jan Whitaker]

This from Publisher's Marketplace today:

>New Kindle Guess: 500k in 2008
>It's ironic that the analysts at Citi--home of catastrophic banking 
>losses--are still considered by Wall Street to provide the best 
>appraisal of Kindle sales. On Tuesday analyst Mark Mahaney's team 
>updated their earlier guess of 380,000 Kindles sold to a new 
>estimate of 500,000 units sold. The number may well be in the 
>ballpark, but it's important to keep in mind how little the Citi 
>analysts actually know.
>
>They admit the only "credible sources" on Kindle sales are Amazon 
>(not talking) and component manufacturers like Hon Hai (also not 
>talking). What they find is a disclosure in Sprint Nextel's recent 
>quarterly 10Q that reports "certain wholesale devices are activated 
>on the network by our wholesale partners prior to selling the device 
>to the end customer, which resulted in approximately 210,000 such 
>additions being activated on our network during the third quarter 
>2008." Citi concludes these activations are Kindle stats, without 
>offering further evidence. And they claim "additional 
>sleuthing...suggests that there could have been 100,000 wholesale 
>device activations in each Q1 and Q2 of 2008." Or not, as our 
>additional sleuthing through multiple quarters of Sprint 10Qs reveals.
>
>Having guessed at 500,000 Kindle sales for 2008, they still assume 
>an iPod-like adoption curve that magically estimates 1 million 
>Kindle sales for 2009 and, hang on, 3.5 million units sold in 2010. 
>Except that iPod and Kindle are not nearly analogous (nor are the 
>respective distribution approaches of Apple and Kindle). And there's 
>nary a mention of the rapidly-emerging competition in ebook for 
>smartphones that do not require purchase of a separate device.
>
>Most disturbing--and most flawed--is that for all their sleuthing, 
>Citi doesn't know how the book business works, despite citing the 
>fancy-sounding "understanding of AMZN's book unit economics (based 
>on public disclosures) and analysis done by our Media & 
>Entertainment Equity Research group on book publishing industry 
>economics." They posit that Amazon is paying publishers 60 percent 
>of Amazon's artificially low retail price for Kindle books, which 
>magically provides almost four dollars of margin on a $9.99 Kindle 
>book. They don't realize that Amazon is paying based on the 
>publishers' ebook list prices, at traditional discount schedules, 
>which can leave Amazon little or no margin on many titles at a $9.99 
>price point. And where some publishers once priced ebook versions of 
>new hardcovers somewhat below the print versions, that trend is 
>turning as well, reducing Amazon's margin further. (As an example, 
>starting on January 1, Simon & Schuster has gone to parity on 
>suggested retail prices between ebooks and the most-recently 
>published print edition (hardcover or paperback).


Melbourne, Victoria, Australia
jwhit at janwhitaker.com
business: http://www.janwhitaker.com
personal: http://www.janwhitaker.com/personal/
blog: http://janwhitaker.com/jansblog/

Our truest response to the irrationality of the world is to paint or 
sing or write, for only in such response do we find truth.
~Madeline L'Engle, writer

Writing Lesson #54:
Learn to love revision. Think of it as polishing the silver for 
guests. - JW, May, 2007
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