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MYTH: The eBook Market Will be Won on Hardware

3445987681_f8642012e7[1]I was reading an Australian ebook blog this morning when I read something that threw me for a loop. On reflection I decided it needed to be debunked.

Bite the Book is usually a good read, and this post ostensibly covered the current Australian ebook market, major players, and why they’re winning. Amazon is believed to have a 60% or larger share,with Apple, Kobo, and Google trailing as distant runner’s up.

Unfortunately, the analysis is flawed due to a mistaken assumption that ereader hardware is still the deciding factor in controlling the ebook market. I’m not sure why that belief is sticking around, but I do know that I’ve encountered it twice in recent weeks. Here’s how Bite the Book phrased it:

Amazon, Apple and Kobo are winning the battle for eBook market share through their devices.

While any eBook retailer can sell onto tablets and smartphones, as well as Kobo eReaders, the majority of users purchase from the default eBook provider on their device (iBooks, Kobo, Amazon).

The eBook market is essentially a device war: Kindle vs iPad vs Kobo (and to a lesser extent Android).

In spite of the shrinking number of ereader sales (and mushrooming tablet sales), some pundits think that hardware is going to decide which of the major competitors dominates the ebook market.

And they are wrong.

If that were true then Apple would have a majority share of the ebook market by now. They have sold a bajillion more iThings than Amazon has sold Kindles and Kindle Fires (seriously, the ratio is 10:1 or higher). If hardware sales determined ebook market share then why does Apple have only 10% to 20% of the global ebook market?

Even if we limit the discussion to Australia, Apple has sold an estimated 4.3 million iPhones in that market. I can’t find stats on the number of iPads sold in Australia, but an Australian market analyst said that 15% of the population had a tablet in September 2012. Most of those tablets were likely iPads, so why doesn’t Apple dominate the ebook market there?

That’s obvious. It’s because iThing owners are using apps from other ebookstores on their iDevices.

Folks, the ebook market shifted from being hardware centric to being ebook centric a while ago. I can’t pinpoint the exact date but it happened at a point in time after Amazon and Barnes & Noble got into an ereader price war in 2010.

In June 2010 Barnes & Noble announced a new Wifi-only Nook for $149 and they dropped the price of the original Nook to $199. About 8 hours later Amazon responded by dropping the price of the K2 to $189, and about a month later they released the K3 (Wifi and 3G) at the same $139/$189 price points.

And yes, that US-centric price competition did affect the rest of the world. It changed how Amazon priced their hardware but it also changed how Amazon developed their apps. It was only after the Kindle dropped in price that Amazon decided to stop limiting the features of the Kindle apps. Why do you suppose Amazon waited until 2011 to start giving the Kindle apps features like email addresses?

My guess is that so long as Amazon was making money off of hardware sales they kept the features limited of the Kindle apps so the hardware would always be the better option.

And do you know what happened once they stopped treating the app users as second class customers? That’s when Amazon started aggressively trying to sell ebooks on smartphones, tablets, and PCs – other people’s hardware.

Apple has put something upwards of 500 million iPads and iPhones into the hands of consumers. If this were a straight up hardware fight then don’t you think Apple would have won by now?

Maybe, just maybe, Amazon is doing a better job of selling ebooks on Apple’s devices than Apple is. And who knows, maybe the fact that Amazon is selling ebooks on Android, Windows, OSX, and other platforms that Apple is not could also explain why Amazon is still winning.

Gadgetry is cool and all, and I really love seeing new stuff unveiled, but when it comes to content sales (gaming consoles excepted) the real market is on other company’s hardware. That has been true ever since the dawn of the PC age, and the brief period that ereader hardware dominated content is best looked at as an exception, not the norm.

image by Robert Couse-Baker

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ucfgrad93 February 5, 2013 um 10:57 am

I am an Apple guy. There are 4 Apple computers & 3 iPhones in my immediate family. That said, I have never purchased an iBook. The reason for that is I can only read them on an iOS device. Since I don’t have an iPad, that leaves my only option to read an iBook on my iPhone. I don’t want to read on that small of a device. However, Amazon, lets me read on practically any device I want to. That versatility makes Amazon the clear winner for me, and the reason I won’t even consider iBooks at this point in time.

Peter February 5, 2013 um 11:42 am

You could have left it at this: "Amazon is doing a better job of selling ebooks", period.

Mike Cane February 5, 2013 um 12:05 pm

>>>Apple has put something upwards of 200 million iPads and iPhones

Last number out of Apple was 500 million.

Amazon wins due to all the free eBooks. My god, there are THOUSANDS to choose from EVERY DAMN DAY. There are Twitter accounts that tweet them and entire sites devoted to pimping them. Most are self-pub, but so what? From time to time you get Simon & Schuster dropping in a Sherlock Holmes collection for free. And from time to time a Big 6/4 publisher does a pre-order freebie (which locks out people like me who don’t have a credit card yet linked to their Amazon account). The path of least resistance for choosing who to buy from is these freebies. And *no one* can match them because Amazon has most of the self-publishers.

Nate Hoffelder February 5, 2013 um 12:59 pm

typo. Fixed.

Rashkae February 5, 2013 um 1:25 pm

There is a very large piece of information missing from the analysis, which I think is critical, but only e-book sellers can answer. What percentage of e-books sold are sold to customers with dedicated devices vs multi-function tablets? I suspect you’ll find of all those millians i-gismos apple sold, only a small fraction are used to regularly purchase e-books. The Kindles and Kobo’s however, other than the unused Christmas gifts, are probably each worth several dozen e-book purchases.

Nate Hoffelder March 3, 2013 um 12:27 am

I can’t yet prove that tablets and smartphones are driving sales but I did uncover numbers for Germany that show 8 to 9 million Germans had read an ebook in the past year but only about 2 or 3 million owned ereaders:

Edit: Actually, yes I can. Last Spring Bowker said that 21% of Australians had bought an ebook. 32% had downloaded a free ebook. That’s far higher than the percentage that could own an ereader.

Xendula March 3, 2013 um 1:19 am

When I was in Germany over Christmas, one thing that struck me as interesting is that both big electronics chains carried nearly every eink reader on the market – I have never in my life seen so many different choices in one place, and it is a big difference from the previous year, when they only had the Sony reader in one, and nothing in the other store.

The front lit Odyssey was completely backordered at Thalia, as was the Paperwhite for many weeks.

To me, these are indicators that eink readers must be a popular item at the moment, regardless of the fact that everyone has a smartphone and probably a tablet. I was also in France where I only ever saw the Kobos and nothing else.

Rashkae February 5, 2013 um 1:31 pm

Further to my earlier comment, your statement that Amazon is doing a better job than Apple at selling books to iDevice owners also needs some basis. It is purely annecdote, and a small sample, but of the iPad owners I know who *do* buy e-books for them, they all prefer buying from Apple rather than Amazon.

Nate Hoffelder February 5, 2013 um 1:40 pm

I didn’t say Amazon was selling more ebooks on iThings; I said they might be. There are other explanations; for example people might not be reading on them as much as I expect.

Mike Cane February 5, 2013 um 2:09 pm

Oh hell, I’d bet that for every iBookstore buy, there are five to *twenty* done from Amazon.

1) Wasn’t the Kindle app available well before the iBooks app was?
2) The iBooks app is an *optional download* (to skirt EU regulators)
3) When people think "books," they think Amazon and will get the Kindle app
4) Must I repeat? FREE eBOOKS

Xendula March 3, 2013 um 1:22 am

Most of the iPad owners I know buy Kindle books. iBooks was not even available outside of North America for the longest time.

Jon Page February 5, 2013 um 3:20 pm

The Australian eBook market is essentially two years behind the US, eBooks have only recently hit 10% of the market, and it is all about the device here. The device dictates where readers buy from and the device locks some retailers out. Hopefully once the eBook market matures here it will no longer be about the device but right now that is the battleground in this market.

Nate Hoffelder February 5, 2013 um 7:13 pm

Except that Australia has 10 million smartphones in a population of 22 million, meaning you actually have a higher adoption rate than the US. 15% of the population had a tablet in September 2012, slightly behind the US but still a significant number.

Your hardware situation is not terribly different from the US, and you are buying from the same retailers as the US. It is highly likely that device lock in is less important than you think.

Frankly, I expect Australia to be one of the markets that shoots right past the ereader phase and goes straight to content. Yes, ebooks still make up a negligible market share but that doesn’t necessarily have anything to do with hardware adoption.

oj829 February 5, 2013 um 3:47 pm

Phase III: People will get tired of trying to remember which book they bought where, and their Android tablet home page has four different store apps on it. (I’ve bought e-books from Google Play, B&N, and Kobo. If I ever bought from the 'zon, I’d have the Kindle app, also.)

Phase IV: People will get tired of trying to remember the behavioral particulars of one piece of reading software vs. another. Where do I tap to bring up the settings menu? How do I access the dictionary in Kobo? Which one lets me tune margins and fonts? People will gravitate, one way or another, to their favorite reading experience. Platform (hardware OR software) will eventually weigh heavily in deciding where to buy books from once the prices are basically the same.

Tyler February 5, 2013 um 5:20 pm

Sherlock Holmes is in public domain. There are plenty of free ones.

flyingtoastr February 5, 2013 um 7:22 pm

Minor notes:

1. The NOOK Lite "price-war" was actually the second time BN and Amazon went at it over pricing. Amazon originally priced the Kindle 2 at $299, and didn’t lower the price to $259 until BN launched the NOOK 3G – at $259.

2. Your numbers on costs for the "price war" are slightly off. BN dropped the 3G price to $199 and launched the WiFi model at $149. Amazon undercut the pricing by $10 ($189) for the K2 3G.

Nate Hoffelder February 5, 2013 um 7:53 pm

Thank you. I fixed the pricing issue.

Tyler February 6, 2013 um 3:43 am

And the $149 price point came about because Borders was releasing the Kobo at$149 which at the time, seemed to be an incredibly low price. Little did anyone know at the time that the first Kobo would be incredibly slow and useless.

Nate Hoffelder February 6, 2013 um 6:03 pm

It was an incredibly low price. If B&N had not responded and matched the price then Kobo could conceivably have built considerable ebook market share based on that junky device.

James Lythgoe June 15, 2013 um 7:34 pm

I sell an ebook on all the major ebook retailers. Between Amazon and the iBookstore, the sales are about two to one respectively. Actually, I am quite impressed with how well the book is selling from the iBookstore. Third place goes to Barnes & Noble. I haven’t had any sales from Google Play or Kobo. I don’t know why I haven’t had any sales from Kobo.

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