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eReader Sales Outstripping eBook Unit Sales Growth

Jason Green contributes a very interesting analysis of the trend in eReader device sales versus the growth of eBook sales. Over to Jason:

I start by looking at several years of data from Verso Digital and the American Association of Publishers, which understandably, does not include numbers for self published eBooks. Combining data using the last three annual reports from Verso we get the following table for trending the intent to purchase an eReader device among survey participants:

  2009 2010 2011 ’09 to ’11 change
Not likely 49% 52.2% 51.8% 2.1%
Not sure 23.1 17.1 16.1 -7.0
Somewhat likely 15.2 15.7 9.9 -5.3
Very likely 9.8 8.2 6.4 -3.4
Already Own 2.9 6.8 15.8 11.9

The last column indicates that Verso survey respondents have acted consistently with their intentions. Nearly 75% of the growth in eBook reader sales has come from those who have said they were “very likely” or “somewhat likely” to purchase an eBook reader in the near future. That leaves a little over a quarter of eBook reader sales going to those who were “not sure” or who received them as gifts. This  leaves plenty of room for growth in eBook reader sales, with the ultimate goal being nearly half of the reading population.

But it’s interesting to note that some recent surveys combining eReader and tablet (primarily iPad) numbers have put eReader/tablet ownership at 30%. Does this mean that the vast majority of tablet owners don’t see them as eReaders?

Planned purchases 2009 2010 2011 Est # purchases per device # Devices at the end of 2011 (% of 94 M) 2011 est eBook unit sales (29% own 94 M devices) 2010 eBook unit sales (10% own 32 M devices)
Not sure 35.4% 16.0% 10.0% 0 9.4 M    
0 8.3 22.0 11.3% 0 10.6    
1-2 25.4 13.0 15.2% 1.5 14.3 21.4 M 6.3 M
3-4 12.3 10.0 15.6% 3.5 14.7 51.3 11.2
5-9 11.8 14.0 17.9% 7.0 16.8 117.8 31.4
10+ 6.8 25.0 29.6% 15.0 27.8 417.4 120.0
            607.9 168.9

So, if those who intended to buy in 2011 actually buy in 2012, and estimating 2011 sales from the AAP numbers ($950MM in eBooks purchased), then the average purchase price was $5.62. Print books have outpaced inflation in pricing for many, many years.  So, could the pricing model for eBooks be ‘recapturing’ sales that were lost due to price resistance of the print book? Casual readers who now own devices may be eReading, not just because it is more convenient, etc., but that it is cheaper. In 2010, my estimate is that the average eReader owner intended to purchase 5.3 books; in 2011 that number is 6.47, which seems to contradict some of the ‘power user’ data.  Unless, the casual reader is reading more (which is what the data above indicates).

The issue long term is that you can only read so many books, regardless of the format, reader fatigue may already be setting in.

For my baseline comparison of the eBooks to eReader numbers, I considered that the Kindles were the only eReaders used to download and read eBooks.  This gives a comparison that while consistent, actually significantly under reports the decay in eBook to eReader growth, since the universe of eReading devices is growing much more rapidly than the numbers of Kindles.

Two more components are missing, the sales of Amazon only kindle self published titles and the 800 pound gorilla in the room–piracy. Using the 2011 planned eBook purchases over the next 12 months data (from the Verso study data above), if those projections and the average price hold, then the 2012 eBook market will be $3.416B in sales, up 260%.

$5.62 average price * 607.9M units projected = $3.416B in sales

BUT, that number is not trending with the sales of books per device.  If you use the data below, then I project that eBook sales in 2012 will be $2.44B, which would be 157% increase.

We can estimate Kindle numbers, based on their recent reports and industry estimates.  I estimate there were 12MM Kindles sold in 4Q 2011.  Based on Amazon’s recent press releases and reports, I break down 2011 Kindle unit sales as follows:

    4Q  11.8M
    3Q   6.8M
    2Q   4.5M
    1Q   3.0M

2011 total 26M units  up 189%
2010 total 8M  units  up 167%
2009 total 3M  units

This is close to an IDC study that estimated that Amazon sold 6.2M units in 2010, and that eReader growth was up 143%. So, long story short, I estimate there are 37M Kindles in circulation. Last year, the AAP eBook sales were $432MM; this year the estimate is $950MM.

If *every* eBook was bought on a Kindle, then the following occurs:

2010  $432MM = $39/kindle @ $6/eBook = 6.5 books per device
2011  $950MM = $26/kindle @ $6/eBook = 4.3 books per device

Again, I know there are more eReaders than just Kindles out there.  If that growth is figured, then sales per device is even worse and the rate of decay is increasing at an even greater rate. This indicates a few possibilities:

  1. Long term device owners are buying less (they have built up libraries, and need to read those instead of purchase additional titles)
  2. New owners are buying less (early adopters buy more, later adopters buy fewer).  If you assume that the 2009 and 2010 owners are buying the same in 2011, then the NEW 2011 owners are only spending $20/device; at $6/eBook = 3.3 books per 2011 device–a significant reduction in sales per device.
  3. Kindle owners are reading more ‘free’ material:  library eBooks, lending eBooks, reading .pdfs, free eBooks, etc.

A report given at the Winter Institute indicated that the studies “might include ‘some scary numbers’.” This part of the report is indicative: “The BookStats data indicates that digital growth most notably affected sales in fiction, and, though the volume of eBook sales has increased dramatically, Vlahos said that preliminary data seen from a number of studies suggest that the growth in eBook sales slowed in the second half of 2011′

That is at a time when device sales exploded?

There is a [mis]belief out there that as more people have more devices, that more books will be sold.  If that were historically true, then music sales would be at an all time high, since there are more digital music devices than ever. Yet music sales (and per capital consumption) remain low, and could be argued that it has decreased, even with the improvements in technology.

Jason Green is the President of Mardel, Inc., a chain of 35 Christian book stores (and mardel.com), with locations in 7 states in the mid and southwest United States.  Jason has been involved with digital content and the shift in consumer behavior in the industry, having been involved with several of the Christian Booksellers Association’s panels, lectures, and events concerning digital content and the changes impacting the industry. Jason is also a student of the history and business of the book industry and a part-time publishing industry analyst.

16 comments to eReader Sales Outstripping eBook Unit Sales Growth

  • RayS

    Interesting article. I suspect the new write/publish/read paradigm has yet to settle into a stable & final(?) configuration. Until it does, there will be a lot of confusing, sometimes-contradictory viewpoints and evaluations. Maybe some good opportunities along the way for marketers who guess correctly about short-term trends.

    BTW:
    I prefer paper, but I bought my wife a Kindle Fire and she put 5 books on it immediately, including one I wanted to read. (Got that because I wanted to see how I do with an eReader.)
    May buy my a tablet for use when I’m away from home and need short-term mind-fodder and carrying paper. particularly large hardbounds is not convenient. For me, the major advantage is space – I have loaded bookshelves and have cartons in storage waiting a move at retirement time.

    Wife does read the Fire at home but it’s too soon to tell whether she prefers it over paper or whether she will continue to buy/read.

    BTW2: Reader fatigue? I’ve never experienced such a thing and can’t imagine it – always have 2 or 3 books in-progress. :-)

  • Amazon KDP Select shrinking from $700K to $600K is perhaps a reflection of decreasing eBook reading…?

  • Bryan,

    Well, February is 10% shorter than January:-)

    The pattern I’m seeing the past week is that the ratio between sales and borrows has jumped over the last two months, meaning more sales per borrow. The most likely reason is that the majority of new Fire owners didn’t extend their Prime membership, but it’s also possible that after a borrow or two, people have finally wised-up and decided not to waste it on a 99 cent title.

    It will be interesting when Amazon reports the split of that $700K pot, to see if the $1.70/borrow rises or falls. The amount of money involved in the Prime borrowing perk means nothing to Amazon, you have to remember they lose something like a billion dollars a year just on shipping perks. My guess is they have a loose target for what they think is a fair payment per eBook, though I don’t know if that’s closer to $1 or $5.

    It makes no difference for the cost of the program whether 300,000 books get borrowed in February or just 30, but I imagine they would be awfully embarassed if it were the latter because it would mean that the borrowing program for self publishers was unpopular with customers. Of course, it would be funny to be the publisher with one of those thirty books borrowed and pick up $20,000.

    Morris

  • Interesting thoughts, Morris. So far, 6 copies of one of my titles have been borrowed, so hopefully I’ll get the whole pot :-)

  • Uri

    Speaking of Amazon KDP Select, for an author promoting a new work, the system they’ve set up (which is price agnostic) seems to reward setting a high price for the time in KDP Select as that would give the appearance of making the book more worthwhile to try. Once the 3 month period with Select is finished, assuming the promotion worked and the book has some future, then the price would be dropped to it’s normal selling range. I’m bothered by the idea of gaming the system this way, but it can’t be ignored that KDP Select is set up to incentivize doing exactly this.

  • Uri,

    You would think that price/borrow relationship would be obvious, but I haven’t seen any data yet showing it to exist. In my own limited data set, it makes no difference. It doesn’t appear that people worry about getting “value” for their monthly borrow. On the other hand, borrows are way down for me this month, so either that’s changing or new Fire users aren’t buying into Prime when the free trial expires.

    Long term pricing is another issue, but it has been proven that Kindle book buyers are exteremely price sensitive when it comes to laying out cash, low prices sell. For fiction, I can’t see any advantage to ever pricing above $2.99, unless a series is in the NYT Bestseller class, because the higher volume at the $2.99 price point above higher price points should more than make up for the lower profit per unit.

    Nonfiction is a different story because very few people buy nonfiction titles (other than maybe politics, some superstar self help and business titles) on impulse. The market is much, much smaller, but much more motivated to buy at a higher price if “it” is the book they need, so nonfiction can be prcied higher.

    Morris

  • Uri, that’s an interesting thought. I suspect there is some truth to that. One of the Select titles I have right now is priced for sales at $46, and Amazon discounts it to about $26, so a very expensive title. And I have to say, the borrows are outpacing the sales by quite a bit.

  • I think the Prime trial period ending for new Kindle owners will be part of the reason for the decrease in borrows. I had over 50 borrows last month. For the same three books (I only made these three available) the total so far this month is a mere 4 borrows.

    There does seem to be some merit to the idea of placing a high retail price to encourage borrowing for non-fiction, but given the low amount of revenue generated per borrow compared to the revenue of a sale at a reasonable price makes it hard to understand why one would want to use this approach.

    I would prefer steady sales at a reasonable price over a long period of time and the tactic that generates this result is preferable.

    I also believe overcharging a reader in a niche non-fiction area is bad business. Repeat sales are much easier to obtain than generating that first sale. Being fair in pricing and providing value in the first purchase will equal many more purchases so long as the pricing is fair and the value consistently what the reader wants.

    But what do I know. This is why I visit Morris’ blog and read on a regular basis.

  • Uri

    Kevin,

    The idea of raising the price only has merit as a way to promote a new book, as I suggested previously, and even then, only for the minimum time period allowed by the KDP Select program. Outside of that, I agree with you about pricing and repeat sales strategy.

    Morris’ observation that the price/borrow relationship, while intuitive, does not match the facts seen so far, is very interesting. I have a feeling that a good number of people didn’t realize that they are allowed only one borrow per month.

  • I was just looking at my Select stats for the month so far and it struck me that I’ll be lucky to reach one third of the January level. The interesting thing about one third is that if the January pay-out is in the same ballpark as December, $1.70, that would happen to be a third of $5.00. And $5/borrow is the example Amazon used to explain the put spit when they first introduced Select. It could be that it’s been their target all along, but whoever did the math didn’t allow for the Christmas sales of Fire with all the free trial Prime memberships.

    The other interesting thing about $5/borrow is it would be a lot closer to what the large trade publishers get since they don’t give anything up to be in Prime. I believe Amazon just pays them the same as for books sold at the cover price and takes its lumps.

    It is interesting that there are two competing schools of thought on the ethics of Select. There are authors with 99 cent eBooks who wonder about getting paid 5X as much for a borrow as for a sale, and there are authors who wonder about “artificially” encouraging lending by going with a high cover price. The way I look at it, Amazon is promising to spend six million dollars in 2012 to offer the perk of free lending for participating self published books to Prime users they don’t have any reason to care how it gets divided up. If the program encourages some self publishers to ignore Barnes&Noble and Apple in order to participate, well, that’s a minor perk for Amazon in return.

    Morris

  • Steve Windwalker did the math on Select for January. 437,000 borrows (up 43%) and paying $1.60 per borrow:

    http://indie.kindlenationdaily.com/?p=1055

    Morris

  • Ritah

    Hi Morris, I’ve been reading several of your articles in your blog about self publishing. I found them really helpful and realistic. Thanks for sharing that knowledge.
    Do you know about a good POD company that reaches and have good distribution network in the Latinamerican market?

    Any input will be very welcomed.
    Ritah

  • Ritah,

    I’m sorry to say that I don’t know anything about the state of POD south of the border.

    Morris

  • Ritah

    Thanks Morris, in any case would you recommend to own the ISBN or just use the one that CreateSpace assigns to your book but you cannot use with any other publisher?

  • Ritah,

    If you are publishing first with CreateSpace, I’d just use their number.

    Morris

  • Ritah

    :) thanks. I will let you know my experience with Latinamerica distribution… just a cent to your already big baggage of knowledge I just found Publidisa.. they seem to be quite big …at least enough for LA. I will do more research though and ‘ll share something with you latter. Ritah

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