Issue 8   April 27, 2010
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[POST LETTER]
Digital Devices in the News
Points on e-Books and the IPad revolution

1) Timing is right, publishers need a boost ... between 2002 and 2008 annual sales for for the publishing business had grown only 1.6% and profit margins were shrinking.

 2) Publishers are taking fewer chances on unknown writers; e-books will help bring new writers to the forefront because cost of entry will be less. 

 3) E-books only account for 3-5% of the business today but have increased 177% in 2009.

 4) E-books are projecting to account for between 25 to 50% of total sales in the book industry.  Not sure who came up with this number, but it sounds like SWAG.  If e-books would only account 25% of total book sales--- our industry might not receive the adverse affect everyone fears.  At 50%... yes. 

 5) One issue is the selling price of e-books which publishers feel is too low and will decimate their profits. 

 6) Amazon is trying to 'win' the market by selling all e-books at 9.99.

 7) Amazon allegedly is taking a loss on each e-book at the 9.99 price trying to gain market share.

 8) Amazon accounts for up to 80% of all e-book sales  ... impressive! 

 9) Publishers concerned that 9.99 would become the fixed price in the consumer's mind and would make profit very difficult for the e-book publishers.

 10) IPad will present a serious threat to Amazon's domination and raise the price of e-books.

 11) Macmillan, the smallest of the 'Big Six' publishers, gave Amazon an ultimatum ... don't sell our e-books unless you raise prices.

 12) Amazon reacted by ceasing to sell all of Macmillan's titles  ... that's called hardball, eh! 

 13) Four other major publishers, though, quickly followed suit ... Hachette, Simon, Harper and Penguin also followed Macmillan's lead ...  Random is the only one that hasn't. 

 14) Amazon acquiesced and began selling e-books at higher prices  ... according to the NY Times article. 

 15) Bezo strongly believes in e-books. “The bookstore and physical books are dead”.  Wow!  Strong statement. 

 16) E-books has undeniable advantages for publishers.

 17) No returns, warehousing costs, printing costs, shipping costs, no overruns or remainders.  

 18) There are 3 million Kindles in use today, Amazon lists more than 450,000 e-books available, 175 newspapers and magazines.  Kindle is the company's number 1 best selling product.  John Aiken of Majestic Research now says that Kindle accounts for 2% of Amazon's sales and e-books account for 1.5%.  He predicted that as many as 7 million Kindles will have been sold by the end of the year. 

 19) Bookstores are burdened with rent, labor, inventory, leases and cash flow issues  ... to mention a few. 

 20) How many more slivers of the pie remain for the traditional bookstore ...  chain stores, people reading less, Amazon....  now digital downloads.

 21) ABA membership has declined from 3250 to 1400 since 1999.  

 22) Chains account for approximately 30% of the market, Superstores/Price Clubs account for 45%.

 23) Internet makes every book more available and cheaper.

 24) Book publishers are making the same mistake that the railroad industry made over a century ago... they thought they were in the train business and not the transportation business.  Book publishers have to envision that they are in the multimedia business entertainment business.

 25) Publishers will now have the opportunity to embed audio and video and other value added features into their e-books.  Authors discussing their writings, their characters, movie clips... adding music, news clips and animation. The I-pad opens up the possibilities of making this happen.

 26) Authors may be able to sign 'sweeter' deals with e-book publishers than traditional print publishers because cost of entry is so much lower for e-books. 

 27) Former Harper President, Jane Friedman, has created a new e-book company called Open Road Integrated Media ... plans on acquiring electronic rights to backlists.... many publishers fear that Amazon might try to replace them by having authors coming directly to them for publishing.  Amazon was hot on the trail of publishing before the announcement of the I-pad.

 28) Google has decided to scan every book ever published.. Google has already scanned 12 million and will have a much bigger selection than Amazon or Apple.

 29) Publishers are glad for the competition between Apple, Amazon and Google ... it has already helped them get their prices up to 14.99.

 30) Estimated that between 5 to 7 million I-pads will be sold this year.

 31) Interesting ... Steve Jobs is in the ‘I win/you win’ school while Bezos is in the ‘I win/you lose’ school.  Jobs/Apple is in the device business, not content and needs the publishers.  Bezos may try to circumvent the publishers. 

Source and complete story: http://www.newyorker.com/reporting/2010/04/26/100426fa_fact_auletta?currentPage=all .


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