Kindle

The Extent Of B&N’s Weakness In The Tablet Space

Pretty much everyone knows that Barnes & Noble had a bad holiday season in terms of selling tablets, even the company acknowledged it.

I was inclined to let it lie, I did wonder why B&N had under-performed, after all the  company seemed to have perfectly fine tablet devices on offer, but perhaps it was just one of those quirks that sometimes happens. But then I saw the IDC figures for tablet shipments in quarter four, 2012 and, even if we take those figures as close to accurate, the news  is really quite bad news for B&N:

Worldwide tablet shipments outpaced predictions reaching a record total of 52.5 million units worldwide in the fourth quarter of 2012 (4Q12), according to preliminary data from the International Data Corporation (IDC) Worldwide Quarterly Tablet Tracker. The tablet market grew 75.3% year over year in 4Q12 (up from 29.9 million units in 4Q11) and increased 74.3% from the previous quarter’s total of 30.1 million units. Lower average selling prices (ASPs), a wide range of new product offerings, and increased holiday spending all acted as catalysts to push the already climbing tablet market to record levels.

via Tablet Shipments Soar to Record Levels During Strong Holiday Quarter, According to IDC – prUS23926713.

B&N went from shipping 1.4 million tablets in 2011, to shipping only 1 million in 2012 (an almost 28% drop in units shipped). That would be bad enough in a stable or falling market, but the market GREW by some 75% over the same period.

B&N was crushed by its closest competitor, ASUS who went from shipping 0.6 million units to shipping 3.1 million units! Or from less less than half of what B&N sold to shipping three times more.

Amazon moved decisively away from B&N, shipping six times as many units. Samsung, who only sold 600,000 more tablets than B&N in 2011, shipped 6.9 million more tablets than B&N in 2012.

Even Microsoft, whose tablets were new entries to the market (and who have partnered with B&N in the Nook/Newco venture) is said to have shipped 900,000 units.

The only sensible analysis of these figures is that B&N is losing ground and facing vibrant, effective and tough competitors. Unless the deal with Microsoft yields fruit soon and enables the Nook/Newco venture to grow shipments and sales aggressively, we have seen the peak of the Nook tablet business.

 

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Story title edited from Failure to Weakness. I felt using failure was unfairly harsh on the company, given the success they had in selling 1 million units, no mean feat for a bookseller!

Some Words Can Really Hit Home

Like these words:

“We’re now seeing the transition we’ve been expecting,” said Jeff Bezos, founder and CEO of Amazon.com. “After 5 years, eBooks is a multi-billion dollar category for us and growing fast – up approximately 70% last year. In contrast, our physical book sales experienced the lowest December growth rate in our 17 years as a book seller, up just 5%. Were excited and very grateful to our customers for their response to Kindle and our ever expanding ecosystem and selection.”

via Amazon Media Room: Press Releases.

Go Read This | The E-Reader Revolution: Over Just as It Has Begun? – WSJ.com

Think of it like the horseless carriage! I think that line about the real innovation is where it’s at:

“The real innovation in e-readers has been giving consumers a convenient way to buy books, wirelessly, without even having to use their computers,” says Sarah Rotman Epps, a Forrester Research analyst. “Giving consumers a digital storefront right in their hands, that’s what really made e-readers a phenomenon.”

But tastes and technology have moved on. People haven’t stopped reading. They are just increasingly likely to read e-books on tablets rather than e-readers, according to a recent Pew Research Center report. The polling firm found that 23% of Americans said they had read e-books in 2012, compared with 16% in 2011

via The E-Reader Revolution: Over Just as It Has Begun? – WSJ.com.

The Rewards & Costs Of Inaction

Eason LeafI’ve often written of the value of inaction in the face of an uncertain future. Today, I want to write about both the rewards and the costs of inaction in a specific case, Ireland and the ebook retail business.

Eason, by far the largest bookstore chain in Ireland, is set to launch an ereader onto the Irish market in December. It’s called the Eason Leaf. To be fair to Eason, it has a natty offering, a 6-inch, touch-screen eInk device with weeks of battery life and storage for 4,000 titles. All for less than €100. It could plausibly become the best-selling dedicated ereading device in Ireland after the Kindle and create a mass market for ebooks sold via the Eason ebookstore.

You could say that the company’s move is a great example of collecting the rewards of inaction. Having followed a sensible and cautious strategy in a period marked by uncertainty and using the intelligence it gained during that period, Eason acted decisively.

It bought in a device from an OEM, branded it and is selling content directly to readers via its own ebookstore. In this way Eason can build a closed circle for its customers with itself at the centre and all the while build a digital retail position to rival its physical one.

No doubt Eason has seen the work Barnes & Noble was able to do in the US, converting heavy book readers to Nook users through in-store selling efforts and hopes to replicate it.

Even if you see the move as more defensive, ie a way to capture a limited audience of ereading book people, while ensuring the majority stay devoted to print, the strategy has the benefit of being low cost. I don’t often have praise for Eason, but in this instance I think the company has played a good hand. Given the choices available to Eason I think it has taken by far the best option it has.

The costs of inaction of which I wrote at the beginning then are being paid by the other ereading/ebook retail players (Kindle aside) whose inaction has meant their ereader presence here is not backed by a convincing consumer message, and certainly not by a retail store presence. They have not scaled rapidly enough in order to stifle competition,

Kobo seems to be making the most of its distribution via chains like PC World (distribution which includes even the keenly priced Vox table at only €139 which packs a fair punch relative to the Leaf) but name recognition is low and no BOOKSELLERS seem to be on board except WH Smiths whose High Street retail presence in Ireland consists of one concession in Arnotts. Without a convincing way to reach the readers how will Kobo convert them from print to digital?

Nook‘s plans are mystifying though the company does seem to be offering to ship tablets and ereaders to Ireland from its UK Nook site. If Kobo has a name recognition problem I wager Nook’s is far, far worse in Ireland. Nook then faces a huge challenge in establishing a name, a brand and a conversion strategy in Ireland.

Apple is the only competitor with some chance of making gains in 2012, with the iPad mini, but in truth I suspect that device will not be a book readers choice. I’ll wait to see.

The truth is though that all these companies could have acted more forcefully in Ireland at any time, it’s a small, English language territory with pretty friendly tax arrangements. It was inaction when the time called for action that led them to where they are now.

The costs of inaction for the major Amazon rivals are first and foremost that a local competitor in a small local market looks set to steal a march on them. It seems so very unlikely but it’s really happening (I wonder who will be the first to pondering buying out the Eason operation should it prove successful?).

In an English language market that could easily be technologically serviced from the UK or US (as Amazon does with Kindle) so long as the retailer made a small commitment on the ground marketing and brand building and converting print readers to digital, a small bookseller with great physical footprint and footfall but not much by way of a digital track record might just, strangely, be a leader in this shift from print to digital in Ireland.

We always do things a little differently here!

Eoin

Some MORE Thoughts On Amazon & Waterstones

The possible pit falls of Waterstones decision to link up with Amazon and sell Kindle devices in-store have cropped up again, most especially in this blog post over on the Telegraph by Mic Wright:

Unless the customer buys e-books on the company’s own in-store WiFi network, Waterstones gets no cut of future sales. Effectively, the book chain is shepherding customers over to Amazon. The sheer convenience of being able to shop for new titles directly from their Kindle means most of them are unlikely to darken the doors of a real-world bookshop very often in the future.

While many people are still wedded to the experience of reading a traditional book, customers seduced by the Kindle tend to stick with it. Russ Grandinetti, the Amazon vice-president who heads up its Kindle efforts, told the author Peter Nowak earlier this year: “Customers buy three to four times as many books after they buy the Kindle device.” If that’s true, and the Kindle makes for more engaged readers, Waterstones is actively going to be losing valuable customers.

It is true that the deal presents challenges for Waterstones but as I wrote a little while ago I wrote:

Alternatively it could be very seen as a sensible decision. It relieves Waterstones of the burden of competing with Amazon on more fronts and crucially reduces the need for a huge capital outlay on technology R&D (the kind B&N has committed itself to). It also enables the management to concentrate on making the stores profitable and on selling print books (still the company’s core product). It makes the decision about selling Amazon’s print books easier (I would think that’s a big one for authors). It probably presents more opportunities than it closes off for Waterstones in other words.

If I was to think of one single reason for the move being a good though I would say it is this, it allows Waterstones to stand still and observe for a little longer. The value of inaction is often underestimated and right now when the ebook retail and distribution space is changing rapidly and requires such a huge investment, this move brings revenue, options but most crucially of all, time to just see what happens while rebuilding the core bookselling business.

The other issue that gets glossed over in the discussion is that Waterstones other potential partners are either currently or would become by way of a partnership, direct competitors in the ebook marketplace. Enabling any one of the major players (or even a smaller scrappy rival) would make the marketplace more difficult for Waterstones.

You might even argue that Waterstones, in choosing Amazon were choosing the partner who already has the most exposure in the market and the one least likely to make a dramatic splash in store. After all, what Waterstones customer hasn’t heard of the Kindle five years after launch? Nook & B&N on the other hand, had they entered the market via Waterstones would have done so as a fresh and potentially big arrival on the scene. They might well have given a more dangerous rival a platform rather than a known entity.

Still the threats are real for Waterstones, they’ll need to make sure they take the painful closure and revamp decisions the chain needs while taking advantage of the fact that they don’t need to compete in the ebook market. They can also watch and wait and plan for the day they DO step back into the market, if they ever do.

If the ebook market does grow to more than 50% of all book sales, then perhaps the best they can hope for is a graceful decline towards a rump of the former chain, but a profitable and sustainable one if they can adapt and change.

Go Read This | Appearing At Harrogate – The Plot Thickens

In which an author serves a publisher:

So I explain to Ursula – and the audience – that I can write a short story in five days and am happy to sell that at the Amazon minimum of 72p which generates me an income of 25p. At this point Ursula – who runs one of the biggest publishing houses in the UK –  asked me “so you’re happy to work for 5p a day, are you?”  The audience laughed and clapped, and I was frankly gob-smacked.  I couldn’t understand why they hadn’t seen the fallacy in her comment. She was assuming that I spent five days writing a story and then sold one copy. She can’t possibly have believed that, could she?  Of course I don’t work for 5p a day.  My Inspector Zhang stories sell about five or six hundred copies a month. Each. So one story sells 6,000 copies a year. So over the next ten years it could sell 60,000 copies which means I’d get £15,000, which is £3,000 a day and that’s probably more than she gets paid.

via How To Make A Million Dollars From Writing eBooks (or How I Learned To Love The Kindle): Appearing At Harrogate – The Plot Thickens.

The Future Of Publishing In Microcosm | The Increasing Internationalization Of Irish Publishing

Yesterday I was a little unfair to Easons for the pronouncements of the company’s spokesperson and the tone of the article on its ebook strategy which suggested the company was about to embark on a  mission to build a rival platform to B&N and Amazon, something that would surely have been a valiant, if doomed, effort.

When I thought about it for the rest of the day though it got me thinking about just how much ebooks are changing the profile of book publishing and bookselling and how quickly that is happening. For instance I am almost certain of two things about the Irish ebook market:

1) That foreign based platforms and retailers account for the majority of sales (Amazon, Apple, Kobo, Sony etc)

2) That like in the print world UK publishers (and their local imprints) publish the majority of ebooks bought in Ireland both in terms of units and revenue

I’m also close to certain about a third item, but without evidence I cannot prove it, here it goes anyway:

3) That US-based publishers sell more units (and I don’t doubt generate more revenue) from ebooks in Ireland than domestic Irish publishers do and are perhaps second only to the UK publishers (and their Irish imprints)

The first and the last points there are pretty radical statements. The first represents a huge change to the Irish experience of the book industry. Right now in print terms, most books bought by Irish consumers are sold to them by Irish retailers, Easons the principle one but others like Dubray, The Book Centres, Kenny’s, O’Mahony’s, Hughes & Hughes and many many others. That is despite the growth of physical sales through Amazon and the internationally owned (except for Dunnes Stores) supermarket chains. The wholesale and distribution businesses are also heavily Irish owned (with some British presence, increasingly on the Library supply side of things).

The Difference Digital Makes

But the situation is dramatically different on the ebook side of the house. Easons is the only ebook retailer of note in the Irish context (others should shout out if I’ve unfairly missed them out). On the ebook distribution side, EpubDirect are the only (and admittedly impressive) crew actually making a go of that business and even they don’t make up for the fact that the majority of ebooks sold in Ireland will have been distributed through other channels.

You can argue the toss over why this is the case but several factors loom large:

1) Irish publishers have been slow to digitize their content (though they are getting there now)

2) Irish retailers have been slow to embrace the web (except for a few notable exceptions) and slower to embrace eCommerce (again a  few notable exceptions aside) and, finally, even slower again to embrace ebook retailing

3) The costs of developing ebook platforms, ebook retailing sites and ebook distribution systems are high, the Irish market is small, while it might have been possible to forecast the potential to gain customers outside of the island, it is a difficult result to actually achieve (which makes EpubDirect’s success all the more impressive) which mitigates against anyone investing in them

In terms of sales, while UK publishers and their Irish based imprints have come to dominate the book trade, significant numbers of books published by Irish houses continue to sell in print form and account for anything between 15-25% of the trade. With ebooks however, sales from publishers whose books would not traditionally have been made available in Irish territory is increasingly likely. For instance a US published book that does well but might not get a print deal outside of the US has as much (if not more) opportunity to sell in Ireland as any other ebook, the key is whether it is high in bestseller/popular lists or promoted by the retailer for some reason

The only ebook store that really seems to cater specifically for the Irish ebook market is Apple’s iTunes so when Irish publishers do start to make content available they have to fight against ALL the published content there is, not just all the domestically published content and all the UK published content as they do in the print world. Further the people making decisions about ebook merchandising are rarely based in Ireland as once they were (or indeed still are in the print world) and therefore open to some discussion or indeed charm (not inconsiderable amounts of which the Irish are possessed).  You see the problem.

The Outside Context Problem

The Irish publishing industry is fast running into what might be described as some fashion of an ‘Outside Context Problem‘ wherein the new arrivals on the scene are vastly superior in terms of abilities, vastly superior in terms of resources and possessed of superior technology. While some of the participants in the market might grasp the nature of the problem and respond as effectively as they can, the truth is that the disparity in attributes makes success unlikely and the new threat is very much an existential one.

Which sounds very dramatic but think of it this way. The Irish consumer market for trade books is around €150 million a year and 15 million units all in. Suppose only 30% shifts digital over time or €45 million and 4.5 million units. That would leave only €105 million up for grabs for Irish retailers in print form and 10.5 million units. The impact on stores, book publishers and other market participants would be pretty dramatic. There would be closures and job losses and the industry would be considerably weaker. And that’s just the impact on the retail side of the trade. The impact on the publishing side of the trade is unknowable, but there is little doubt that it would be significant and would probably be negative for the domestic publishers (see my earlier paragraph on why). The UK publishers will probably cede sales to US-based publishers, especially if US publishers seek to enforce global ebook rights deals on authors.

We are probably headed in the direction of 30% digital pretty quickly. If we even approach the kind of conversion to digital sales that seems to be happening in the US or even the UK, we can expect that 30% figure to be a reality by 2015. By then the Irish industry will have changed radically and will become almost unstoppably more international not just in terms of the books that sell her, but also in terms of those who sell them. US publishers will probably be the second biggest publishers of ebooks bought by Irish readers (if not the first having overtaken the UK).

There’s interesting evidence of this too from the other side of the fence. The AAP reported that ‘total eBook net sales revenue [for US publisher] for 2011 was $21.5 million, a gain of 332.6% over 2010; this represents 3.4 million eBook units sold in 2011, up 303.3%.’

Frustratingly the APP did not share details for Ireland (those were contained in the full report but not as a single territory, rather as part of a larger group of English language territories) so we don’t know how well those publishers are doing here. Still, we can assume that they did well relative to the size of the market.

What’s more, Ireland and the story of change in the publishing industry really acts as a microcosm for the rest of the English language publishing industry (indeed it acts as a microcosm for any small market which shares a language with a much larger market be it French or German or Spanish or Chinese).

In some ways the whole industry is encountering the ‘Outside Context Problem’ I mentioned earlier as software and technology firms move into a traditionally physical business, but for larger companies, responding can be easier because of their scale and their resources make for a wider context as it were. It’s the small markets where the combination of these larger players and the changes in technology make for such a difficult problem.

Beautiful day here in Dublin!
Eoin

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Interestingly (or maybe just interesting for me) I wrote some time ago about the impact of divergent rates of digital growth on small markets, and in many ways this post is all about that impact. The increasing internationalization of the Irish publishing industry is driven by the very issue I highlighted: Divergent Growth Rates In Digital.