Used Books Blog

In February, a Kindle sales theory was proposed by Citi Investment Research (PDF) using Sprint activation numbers.

Thanks to CIR Telco Analyst Mike Rollins, we have uncovered a key disclosure in Sprint’s September Quarter 10Q filing.  P. 42 in the Wholesale, Affiliate and Other Revenue sector.  Here’s the text:

“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.”

Additional sleuthing on Mike Rollins’ part suggests that there could have been 100,000 wholesale device activations in each Q1 and Q2 of ’08, and our combined view is that these wholesale device activations refer specifically to the Kindle.  Tie these points together with the knowledge that Amazon fully sold out its Kindle supply by mid-November, and it’s hard to escape the conclusion that Amazon sold approximately 500,000 Kindles in 2008.

I just couldn’t understand how one would think that all 210K were specifically Kindle related. I wrote to Sprint Investor Relations asking a very simple question.

Can you confirm that the wholesale device activations referenced are solely Kindle?

The other day, after a bit of persistence, I was able to get the following response from Sprint Investor Relations.

We cannot offer much additional commentary on this topic.  I can tell you that there are other data centric devices included in our reported wholesale and affiliate sub count than the Amazon Kindle.  Neither Amazon nor Sprint provides details on the number of kindle devices.  The comment below about the 210k devices at the end of 3Q08 references those that were activated but not yet in the hands of an end user.

This clearly states that the activations do not specifically relate to Kindle. However, it doesn’t provide any insight as to what percentage may be Kindle related.

The later comment regarding the device activations is odd. My question did not address this in any way, shape or form. Instead, this is a … spontaneous additional comment.

Perhaps it is a simple clarification but in some ways it feels like activations are divorced from the sales cycle. That the activations could be a supply number (for all devices) instead of being mapped to sales. Please share your thoughts here since I find the subject murky.

However, in light of this data, I believe the 500,000 figure is generous. I don’t blame Citi for trying to construct a sales volume theory. It is Amazon and Jeff Bezos who are to blame. Speaking to shareholders at the Seattle Art Museum, Bezos had this to say about Kindle sales.

I’m not sure we will ever reveal all the numbers. Our point of view is that there is a competitive advantage to keeping the numbers close. You may have to remain curious on that point and I certainly understand the curiosity, especially since I look at the numbers so avidly every morning.

I don’t find this a compelling argument and can only surmise that sales are weak. Otherwise, the impact Kindle sales would have on the business would be large enough to meet the materiality definition, and thereby be necessary to any shareholder report.

I understand that Amazon is in a fight with Google for the future of digital books and they want to play their hand like they’re holding pocket aces. But the player who consistently over bets is usually bluffing.

A new partnership between Kirtas Technologies and the University of Pennsylvania Libraries allows users to request and purchase a digitized version of nearly any out-of-copyright book from the Penn Library collection.

What makes this initiative unique is that the books can be offered for sale before they are ever digitized, so there is no up-front printing, production or storage cost.

Indeed, that is interesting. Here’s how they say it works.

The desired book will be pulled from Penn’s shelves, digitized, processed by Kirtas for optimal reading and printing, and a newly-printed copy will be shipped to the initiator. Or, the customer can purchase access to an online-only version of the book. Once the book has been digitized, it is returned undamaged to the library shelf.

Google took some flak when people realized that the scanning of new books often entailed chopping the book apart (disbinding is the politically correct term) to aid in the digitizing process. Lets be clear though, Google doesn’t do this with the books that come from library collections.

The landscape for digitization is relatively small. Kirtas seemed to have the inside track when they partnered with Microsoft in their Live Search Books and Live Search Academic projects. However, both of the aforementioned projects were shuttered last year, leaving Kirtas in a David versus Goliath position with Google.

Mind you, there are other digitizing companies out there. Julian Ball, Manager of the BOPCRIS Digitisation Centre based within the Hartley Library at the University of Southampton, reviewed the four competing scanners at a public exhibition in Munich.

The wrinkle is that many digitizing experts seem to believe Google’s scanning technique, a proprietary process, is suboptimal. Some claim the scans are passable, while others believe rescanning might be necessary in some instances. This might not mean a lot to the everyman, but it’s a hot topic for historians and librarians.

Think of it this way, you’d have wanted the monks with the best penmanship to help preserve texts through the dark ages, right?

Here’s a look at the Kirtas 2400 Scanner.

For irony go watch the Kirtas Book Digitization Tour video.

I might give Kirtas Books a spin and you should too if you want an ‘analog’ book or a digital book that is in the public domain and available at the University of Pennsylvania Library.

Overall, I’m happy to see more momentum behind the digitization of books. I fully believe Google, or gBooks as I’ve come to call it, has the inside track on this business, and by a wide margin, over everyone else including Amazon via Kindle. More competition can only be good at this stage, leading to innovation and better products.

On Thursday Google announced new mobile editions of 1.5 million public domain books. iPhone and Android users now have access to five times the number of titles currently available on Kindle.

While these books were already available on Google Book Search, these new mobile editions are optimized to be read on a small screen.

The timing of this announcement comes 4 days before the likely unveiling on the Kindle 2. Coincidence? I think not.

Of course, the titles currently available through Google Books are different from those on Kindle. We’re talking public domain versus the front list of bestsellers. But how long is that going to last?

Last month I wrote about the future of gBooks which is contingent on the blessing of the settlement agreement with the Authors Guild and Association of American Publishers.

Once this agreement has been approved, you’ll be able to purchase full online access to millions of books. This means you can read an entire book from any Internet-connected computer, simply by logging in to your Book Search account, and it will remain on your electronic bookshelf, so you can come back and access it whenever you want in the future.

Add it up. Sometime this year Google will have well over 3 million titles available and optimized for the small screen. In addition, authors and publishers have a clear and decent revenue share (63%) with the search giant.

What makes anyone think Google will stop with public domain and out-of-print books?

Authors and publishers would welcome an alternative to the increasingly combative Amazon. Last year Amazon put the squeeze to large publishers and Print On Demand (POD) publishers. Is it any wonder that Amazon couldn’t convince textbook publishers to play ball with a textbook Kindle.

Google will have public domain and out-of-print books available to deliver to a built-in base of customers. That’s right, there’s no new device to purchase! Particularly not a single-use device with a $359 price tag.

That larger base of customers is going to look very attractive to publishers. How long until they agree to sell front list bestsellers through Google?

Gadget fans will clearly swoon over Kindle 2 but the real story is the growing competition between Google and Amazon in the digital book arena. The timing of Google’s mobile version is a shot over Amazon’s bow. The industry should take notice and the Internati should be looking beyond the hype.

The future of ebooks may in fact by gBooks. What’s gBooks? It’s Google’s iTunes like interface for books.

No, it doesn’t exist yet but the settlement agreement with the Authors Guild and the Association of American Publishers makes this a likely scenario.

Once this agreement has been approved, you’ll be able to purchase full online access to millions of books. This means you can read an entire book from any Internet-connected computer, simply by logging in to your Book Search account, and it will remain on your electronic bookshelf, so you can come back and access it whenever you want in the future.

Millions of books. That’s right. In one fell swoop Google will have five to ten times the titles currently available on Kindle.

Out-of-print books aren’t actively being published or sold, so the only way to procure one is to track it down in a library or used bookstore. When this agreement is approved, every out-of-print book that we digitize will become available online for preview and purchase, unless its author or publisher chooses to “turn off” that title. We believe it will be a tremendous boon to the publishing industry to enable authors and publishers to earn money from volumes they might have thought were gone forever from the marketplace.

Out-of-print books is the long-tail of the book industry and it makes perfect sense for Google to enable this part of the market. Google has been scanning books for years through the Google Library Project. In 2008, Microsoft finally ceded this space, shuttering its own Live Search Books and Live Search Academic projects. The only real competitor that remains is Amazon.

Some of you may be wondering why I’m writing about this now. It’s not breaking news, right? Here’s the thing. In the last year Google has finally determined that they need to focus and find new revenue streams, particularly with a maturing search market. Here’s a quick listing of Google projects or properties that have recently been closed.

• Lively
• Google Video Uploads
• Google Notebook
• Jaiku
• Dodgeball
• Google Catalog Search

The latter might make you think that Google is abandoning books. But a quick look at the farewell post shows the exact opposite.

It was a great experiment. Nonetheless, in recent years, Catalog Search hasn’t been as popular as some of our other products. So tomorrow, we’re bidding it a fond farewell and focusing our efforts to bring more and more types of offline information such as magazines, newspapers and of course, books, online.

And of course, books.

That’s right, Google is very keen on books and not just because it is part of their mission to help organize information. It’s about revenue. The revenue share on consumer sales under the agreement will be 37% for Google and 63% for the publishers and/or authors. Frankly, this seems like a win for both sides.

Unlike Amazon, I doubt Google is going to restrict how and where these books are read. It could be on your desktop or downloaded to your phone. You might read it on Stanza or perhaps on the new G1.

Google sees dollars in books and has been developing book related projects for five or more years. Here’s a prime example. Anyone poking at Google Base will see that it was built with specific book related fields. I happened to have a front row seat for the transition from Froogle to Google Base and it was obvious that books was a top priority.

Now, what do you think happens when publishers begin to see more dollars from their backlist titles via gBooks versus their frontlist titles via Kindle?

gBooks might not be as sexy as Kindle. It’s not a gadget that can be endlessly debated. Instead gBooks is the quiet tropical depression off the coast of Florida that could quickly turn into a hurricane.

The New York Times recently did a piece on the rise in popularity of ebooks. The centerpiece of the article was the popularity of Amazon’s Kindle.

It is difficult to quantify the success of the Kindle, since Amazon will not disclose how many it has sold and analysts’ estimates vary widely. Peter Hildick-Smith, president of the Codex Group, a book market research company, said he believed Amazon had sold as many as 260,000 units through the beginning of October, before Ms. Winfrey’s endorsement. Others say the number could be as high as a million.

Really?! (I sound like Amy Poehler and Seth Meyers on SNL.)

Earlier this year a number of Internati were throwing around sales numbers for Kindle. In particular, TechCrunch and Mark Mahaney came out with projections and models. 240,000 units sold! That was the meme making its way around the Internet. Amazon quickly responded to these figures and deemed the Kindle estimates ‘extremely high’. Not inaccurate or slightly off base but ‘extremely high’.

But that doesn’t stop The New York Times from using figures between 260,000 and 1 million. 1 million! Really?!

If that were the case I’m guessing Amazon would have been a lot more vocal about the numbers. Heck, they might have been forced to if it had reached a material threshold.

Perhaps The New York Times has some insight we don’t since they are a premier partner, showcased as one of the periodicals that can be delivered via Kindle. Maybe they’ve seen huge subscription numbers that make them certain that Amazon is just sandbagging and keeping expectations in check.

New York Times Co. executives said today during the company’s second-quarter earnings call that the newspaper has sold a “small amount” of subscriptions on the Kindle.

Really?! Yup, that’s from a July 23 Bloomberg article.

So, Amazon won’t divulge anything of substance except to say that the projections being thrown around are ‘extremely high’. On the other side we have an army of affiliates (people with an abiding interest in the success of the product) promoting the fabulous merits of Kindle far and wide.

Well, maybe doing some research on search trends will show this amazing Kindle popularity.

Really?! Well, that Oprah endorsement certainly helped but … it’s still behind the Zune and oh … Mushroom. Now, perhaps Mushroom isn’t fair. Maybe you think there are a bunch of college kids looking up mushrooms for various and sundry reasons.

Really!? So, Oprah got Kindle just above Towel. OMG! Stop the presses!

Where do you suppose these searches are being performed? New York? Illinois? California?

Highest search volume index? Washington. Really!? Sure, Seattle is one of the most literate cities but … it’s also the headquarters for Amazon.

So, despite no actual sales data, previous statements that projected sales numbers were ‘extremely high’, a financial bias from most promoters and limited evidence of popularity via search The New York Times jumps on the Kindle bandwagon.

‘Journalism’ around Kindle has been nonexistent.

A more interesting story surrounding Kindle would be looking at how Amazon has performed as a hardware manufacturer. This is a very big change for Amazon and is, in my opinion, outside of their comfort zone. Think about your local mall deciding it wanted to start selling widgets. How do you think they’d fare?

Years ago when I first heard rumblings of Amazon building their own reader, the scuttlebutt was that they were finding it difficult to secure materials. Fast forward and we’ve seen Amazon twice go out of stock of Kindle. Most assumed that demand had simply outstripped supply.

Really?! We all know what happens when you assume.

Bah. Humbug. That’s right, it’s Black Friday and Kindle is sold out! Expected ship date is in 11 to 13 weeks.

Heavy Customer Demand for Kindle?

How exactly does this happen? And no, I don’t believe that it’s “due to heavy customer demand”.

If customer demand had been that heavy Amazon would have been a lot more vocal about it and wouldn’t have called the projections floating around the Internet “extremely high“.

Kindle Production Problems

For the moment lets pretend the heavy customer demand was real. (Who knows, maybe Oprah did move some Kindles.) It shows a glaringly bad supply chain and inventory management system for Kindle. Seriously, you’re going to be out of a ‘hot’ product during the holidays? Miss out on Cyber Monday? It makes little to no sense.

The supply chain and production problems do match some of the things I heard years ago when I first got wind of Amazon building some sort of eReader. The rumor was that it was expensive and laden with material problems. Lets face it, Amazon isn’t known for hardware, is it? So, perhaps Amazon just can’t build Kindles fast enough.

Kindle 2.0?

If we believe that Kindle is sold out, does this point to the idea that Kindle 2.0 will be out early in 2009? Again, it could be a production problem. Could Amazon have stopped producing the current Kindle, but not have gotten Kindle 2.0 up and running in time for the holidays? If so, do people who pre-order the Kindle get a notification that they’re not getting the current version, but a Kindle 2.0? Does this imply the same purchase price, or lower, for Kindle 2.0?

Amazon Dodges Poor Christmas Kindle Sales

The conspiracy theorist in me screams that Amazon has decided to protect Kindle from poor holiday sales. The economy has battered sales across the board and Kindle has a high price tag. What better way to preserve Kindle buzz than to claim victory before the holidays. We don’t know if they’re really sold out, do we?

The interesting thing about this approach is that it would give Amazon the ability to measure holiday demand for Kindle through pre-orders. They can take pre-orders and based on volume then determine future production schedules or new version releases.

In the end this looks bad for Amazon unless you blindly believe the “heavy customer demand” messaging. Do you believe?

Eric Engleman at TechFlash recently sat down with Ian Freed, VP for Kindle. The interview, despite Eric’s attempts, yielded absolutely nothing of interest about the Kindle.

Here’s my general (and admittedly snarky) synopsis of the interview.

Q: The Kindle is almost one year old, how do you think it’s done?

A: Great.

Q: What features are and are not working?

A: All our features work fabulously.

Q: What metrics can you share about Kindle?

A: None.

Q: When will a new version of Kindle come out?

A: “In the future” (No, really, that’s a direct quote folks!)

Q: Care to specify?

A: No.

Q: How many exclusive titles does Kindle have?

A: A handful, but let me tell you about this other cool Kindle stuff.

Q: Where are Kindles manufactured?

A: China.

Q: What’s it like doing business in China?

A: Lots of other people do business in China, nothing wrong with that.

Q: Would you consider opening the Kindle platform to third party developers?

A: “I think we might be.” (Direct quote again.)

Q: Do you think Stanza is a Kindle competitor?

A: Kindle is really awesome.

Q: Who are the most surprising people using Kindle?

A: Celebrities and super important government people that I can’t talk about.

The interview ends with personal questions which actually provide some real information about Ian, who seems like a decent enough guy and good father.

But really, why give interviews at all if you’re not really going to say anything?

Kindle porn, or Kindle erotica if you like, has been rumored to be a not-so-inconsequential part of sales. But like many things Amazon, they provide little to no information or guidance on the topic. From what I can tell there is no Kindle sales ranking to help us back into the figure.

Here’s what I do know. As of this writing there are 3,844 titles listed under the Kindle Books > Fiction > Erotica category. That means Erotica comprises approximately 2% of the current Kindle catalog. By comparison, Literary Fiction has 4,487 titles. I’m guessing the distribution of titles is quite different outside of Kindle and that Erotica doesn’t have the same high rate of penetration when you look at titles in all formats.

Recently, a thread on FriendFeed developed around the following captured image.

The implication here is that there is a substantial overlap in viewing habits between Kindle and … ‘Sexual Wellness’ items. So, is there a greater incidence of purchasing behavior between the Kindle, erotic titles and … accessories? Perhaps. Or maybe Amazon just has their finger on the proverbial scale and Kindle is almost always presented as a similarly viewed item.

There is some logic to the type of items that are being presented above if you believe some conventional wisdom. The Kindle is black and white only with no picture capability. So it’s not going to attract the normal porn crowd but, most likely, will appeal to a predominantly female demographic who aren’t as visual as their male counterparts.

It would also be appealing since it is completely anonymous. Not only are you ordering ‘online’ but there is no delivery of the title to your home, nor would you have to hide a provocative cover should you be reading it out in public or in bed next to a spouse.

If this is an area where Kindle is gaining traction, I suspect that the sales by format would also favor digital distribution. As such, that could have a material impact on the one Kindle statistic Amazon does mention.

Kindle titles already account for more than 10% of unit sales for books that are available in both digital and print formats.

Fact or (Erotic) Fiction? What do you think?

Oprah endorses Kindle. OMG! Stop the presses. OMG! This is huge. OMG!

Once again, Amazon is trying to create buzz around Kindle and show that Kindle can do for books what the iPod did for music.

Yet, what does Oprah’s endorsement say about the success of Kindle? To me it means current marketing efforts have been less than satisfactory. (Hey, I’m trying to be kind.)

It tells me that Amazon couldn’t leverage their massive base of loyal customers. They couldn’t drum up enough demand by marketing it on their home page continuously for six months. Amazon couldn’t do it by using the largest affiliate marketing program on the Internet.

So Amazon, needing a good holiday season for Kindle, resorts to Oprah. For good or for bad, Oprah is perhaps the largest influencer in books, particularly now that J. K. Rowling closed out the Harry Potter series.

Aside from the Oprah stamp of approval, the endorsement came with a $50 off coupon code. What does that tell you about the price point of Kindle? It’s too expensive!

Remember, Amazon hasn’t released any sales numbers for Kindle. One could argue that Kindle isn’t contributing enough to be reported as material. Yet Amazon’s third quarter results do include references to Kindle title breadth (still a puny 185,000) and Kindle title sales as a percentage of total format sales (more than 10%). So is Kindle material or not? Or is it only material when the numbers look good?

If Kindle were selling like hotcakes Amazon would be beating their chest about it, wouldn’t be crawling to Oprah and wouldn’t be providing a $50 coupon code.

The Internati want Kindle to succeed in the worst way, building projections that Amazon finally had to come out and refute as being extremely high. On the flip side, University publishers and the New York Times have both made less than stellar comments and references about volume.

Kindle 2.0 won’t be out until some time in 2009 and there is still no indication that a textbook Kindle is in the works. Again, if Kindle was a clear success, new versions would have been fast tracked. Now Amazon has to deal with Stanza for iPhone and potential for competition from Google.

Can Oprah save Kindle?

Kindle 2.0 photos have been leaked by The Boy Genius Report and reported in BoingBoing. The new photos show a rounder, sleeker model that is a bit larger than the first generation Kindle. The Boy Genius Report does a very good job breaking down the gadgetry and new user interface. The biggest shocker seems to be the removal of the SD slot, yet another way to ensure users are firmly locked into the Amazon sales channel.

Recent reports indicated that Kindle 2.0 wasn’t going to be available until early 2009. Does this mean Amazon has moved up the scheduled release in hopes of a holiday season push? Or is this a Kindle 1.5? Or perhaps it’ll simply take that much time to get production up and running on the new version? As with all things Amazon, we don’t know because they don’t say much.

I’d be surprised if Amazon did follow through on a holiday launch. The economy isn’t going to kind to retailers and a pricey gadget may not get the traction it did in prior years. It is notable that this is not the Textbook Kindle. I’m guessing that Amazon is trying to persuade publishers to play ball with them for a July 2009 release just prior to the back-to-school rush.

Initial reaction from innovators and early adopters seems mixed at best. This is bad news if Amazon was hoping for a substantial number of upgrade purchases, and saps the momentum it’s had among this group.

In the end I still believe this is much ado about nothing. The Kindle is a solution without a problem. Sure there are niches which would substantially benefit from the Kindle: researchers, travelers and students. However, the first two are small markets and the third, while large and lucrative, is intrinsically tied to publishers who have little love or trust of Amazon.

Conclusion: gadgetry gone wild.