Markets

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.

Confusing Statistics And What They Might Mean

I was thrown by several stats in this story. (E-Book Bummer: Growth Slower Than Thought—‘Incremental, Not Exponential’ | paidContent.) I touched on the issue of digital growth earlier today, but this story warrants a separate consideration.

For one:

According to new data from Bowker and the Book Industry Study Group, the number of book buyers who also purchased an e-book increased by 17 percent in 2011, compared to 9 percent in 2010 – well below the 25 to 30 percent growth that some had hoped for.

When I read this as ‘the number of book buyers who also bought a book rose from 9% to 17%’ it looks like an 89% increase in book buyers who also bought ebooks. Sure it wasn’t the 175% or 250% increase (as would be the case if the figure reached 25% or 30%) as some people seemed to expect, but it is still reasonable. For the record, I read it that way following a Twitter exchange with the author Laura Hazard Owen (who has been writing some great pieces on the publishing and digital change):

Then there is the section that says:

Seventy-four percent of book buyers have never bought an e-book (and 14 percent of those actually own an e-reader or tablet but choose not to use it to read e-books).

Parse that for a moment. 26% of book buyers HAVE bought ebooks and 14% of 76% (10.5%) also  HAVE ereaders but don’t use them. Which means that circa 36.5% of book buyers have ereaders though they may or may not use them. Meaning, that while ebook purchasing might not have spread as widely as we thought, ownership of devices seems to be spreading pretty well.

Finally there is this startling statistic:

There’s a bright spot for e-book growth: Around 7 to 12 months after buying their first e-book, 72 percent of power buyers switch over to e-books exclusively.

Which reinforces the idea I’ve been pondering for a little bit, that this current phase of ebook development is about making heavy readers, heavy ereaders.

It is the reason why B&N needs to keep Nook locked into its stores and indeed why B&N has been so successful at gaining market share, because it was converting exactly the right people BOOK BUYERS into ebook buyers. It is why Amazon’s efforts are targeted at converting their best book buyers into digital readers hence their seemingly crazy popularization of the $9.99 price point (which I might add I liked, but hey) and why a broader strategy for converting light readers might not make sense just yet.

Getting ereaders into the hands of medium and heavy readers and encouraging them to use them EVENTUALLY is the key for now. There’s a whole different battle to come once that happens. Won’t that be fun?
Eoin