Will Digital Books Turn Paper Books to Kindle-ing? - eMarketer

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Will Digital Books Turn Paper Books to Kindle-ing?

Heated words.

May 20, 2009

The Amazon Kindle is catching fire, and interest in digital reading devices is heating up. But what are the ramifications for authors, publishers and book lovers?

According to Piper Jaffray, worldwide Kindle revenues will reach $405 million by the end of 2009, and more than double to nearly $1 billion in 2010.

Kindle Revenues Worldwide, 2007-2010 (millions)

To gauge the impact that Kindle is having on the book business and the general e-commerce space, consider what Mark Mahaney of Citigroup told TechCrunch: The device, first introduced in late 2007, accounted for approximately 10% of total North American book units sold in Q1 2009—or about 4 million out of the 38 million books sold.

Importantly, people are increasingly willing to try e-book readers.

Piper Jaffray found that 5% of consumers surveyed were interested in buying a digital book reader, and 9% were interested in buying one after a price drop. Nineteen percent of respondents had never seen a digital book reader but wanted to check one out.

US Consumers' Opinions About Digital Book Readers*, December 2008 & March 2009 (% of respondents)

Of course, the urge to try e-book readers is still far from universal. Nearly 65% of those polled claimed to have no interest in them.

Price is still a significant hurdle. The average retail cost is $359 for the original Kindle and $489 for a Kindle DX. The Sony Reader currently retails for $299.99 and up.

However, historically, the cost of new electronic gadgets has declined with time, and adoption has increased.

In addition, the figure that has consumers excited is the price for Kindle e-books: $9.99 for many best sellers. The fact that the e-books can be wirelessly downloaded to reading devices in seconds is also a plus.

That price point is bad news for book publishers.

Even though consumers expect to pay less for a digital editions, publishers maintain that printing and shipping savings account for only a small percentage of their costs, while larger production and marketing costs remain the same.

“The concept that because a book is an e-book it should automatically be priced significantly lower than a paper book is one we don’t agree with,” Carolyn Reidy of Simon & Schuster told The New York Times. “What a consumer is buying is the content, not necessarily the format.”

Her protest sounds familiar. Book publishers rely on networks of editors, printers, and bookstores to move their product—a situation not dissimilar to how record companies operated before the emergence of Napster and, later, iTunes.

As everyone knows, the music business has not fared well in the transition to digital delivery. Whether the book business can avoid similar problems is a story that is yet to be written.

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