July 21st, 2010

Why say it again? This time, someone on CNET

Really, sorta weak to go after this size audience after the previous entries, but hey.

http://reviews.cnet.com/8301-18438_7-20011038-82.html

General category of, I am not impressed. As in, walkitout is not impressed by the cnet guy being not impressed. It's a little hard to know where to start, so I'll just dive right in without attempting to prioritize. When I stop mocking, it isn't because I ran out of material; it's because I preferred the prospect of sleep.

"I'd like to see gross revenue from e-books vs. gross revenue from hardcovers."

Again, hard to know where to start. So I'll just go after the nut, nit, whatever you want to call it: does this guy mean what he's saying? I mean, _obviously_ Amazon is never going to turn over this information. From one perspective, gross revenue doesn't matter a bit. Wouldn't _you_ rather be in a business where you sold something for a dollar and made fifty cents on it than a business where you sold something for ten dollars and made a nickel on it? From this perspective, what you really want to know is net margin. From a very, very, very different perspective, gross revenue _is_ an interesting number _if Amazon is still using free cash flow to fund growth_. If they are, and the effect of growing e-books (at the cost of hardcover growth or even maintenance), then they might have less free cash flow to pay for other things. Do I _think_ this guy is sophisticated enough to want to know this? No. In fact, I wonder if he understands that as a potential issue. Which it probably isn't anyway. Any more, anyway.

Here's why I just don't think he's got that much going on. The next point he raises is:

"Just how many e-books sold are self-published titles? The Kindle Store is literally flooded with self-published titles and many of them sell between 99 cents and $3.99. Some self-published authors are doing very well because they've written a decent book or books that are priced cheaply. Cheap sells these days."

Again, wouldn't _you_ rather be in a business where you sold something for a dollar and made fifty cents on it than a business where you sold something for ten dollars and made a nickel on it. If you take a look at the royalties on the stuff published directly on Amazon (either at the 35% or the 70% rate) and figure the amount to Amazon, and then you compare some of their kindle bestsellers not under the agency model and figure a payment of 40% of list on lowest-priced physical format currently available for sale new due to the publisher, you might not think it matters whether stuff came from the big 6 or the great unwashed. In fact, the great unwashed might start looking like an awesome supplier.

Here's a fun one:

"On the iPad, iBooks is currenly listed at #1 under free book apps, the Kindle app is listed #2, and the Barnes & Noble app is number #3, though the Kindle and B&N apps tend to flip flop places. So one would presume that Apple and B&N are very competitive on the iPad, which has already sold well over 3 million units."

Downloading the apps at approximately the same rate != buying content through the apps at approximately the same rate. And this is a fairly important distinction.

Another gem:

"Sony and scrappy upstarts like Kobo are also trying to get in on the e-book game, though consolidation seems inevitable."

Makes you want to weep for Sony, doesn't it? Being classed as "trying to get in on the e-book game", when for a good chunk of a decade, the Sony Reader was The Game in Town when it came to e-books?

I'll just wrap it up with one more:

"And while the The New York Times and the American Publishers Association say that industrywide sales of hardcovers are up 22 percent this year that seems hard to believe, especially since e-book sales have allegedly quadrupled since last year."

Here is what 2009 looked like:

http://www.publishers.org/main/IndustryStats/indStats_02.htm

Notice that 2009 was down from 2008. I'm not entirely certain where that 22% is coming from (altho I saw it in the Miller article I poked at earlier). My best guess is it is coming from here:

http://publishers.org/main/PressCenter/Archicves/2010_July/MayStatsPressRelease2010.htm

In any event, if you take a look at the numbers coming out of that group over time, they would seem to be tracking the economy as a whole, and nothing else in particular. Which is to say, if you think being up 22% is a great thing, you should be excited about the way the economy in general is going. No? Not excited? Still focused on that jobless rate? Well, that's about how you should be feeling about the rate at which hardcover books are selling, too.

Perhaps Mr. Carnoy was in a dark closet somewhere completing his recently published book and therefore unaware of the recent economic difficulties?

But now that I think about it, maybe Carnoy should get some points for that observation, that ebook sales have increased a lot faster than hardcovers. Not very many points, because he's wrong on by how much. Here's what that group has to say from the above link:

"E-book sales grew 162.8 percent for the month ($29.3 million), year-to-date eBook sales are up 207.4 percent. Year-To-Date E-book sales of the 13 submitting publishers to that category currently comprise 8.48 % of the total trade books market, compared to 2.89% percent for the same period last year"

There _is_ a story here. From this same press release: "The Adult Hardcover category was up 43.2% percent in May with sales of $138.5 million; sales for the year-to-date are up by 21.7% percent." That's probably where the 22% is coming from. But a lot of other categories are _down_, month over month and YTD: adult mass market, children's/YA hardcover and paperback. Adult paperbacks were mixed: down for the month but up for the year. That hardcovers were growing with some vigor in conjunction with ebooks growing by leaps and bounds suggests what the story really is.

(1) It's a lot easier to grow from a smaller base. The base on hardcovers is smaller than the base on paperbacks. And ebooks are smaller still.
(2) In this particular economic recovery, high end retail is rebounding surprisingly. Altho I still can't find any print/online coverage, Bloomberg's rotating headlines included the astonishing "Nordstrom's will replenish goods which sold out during sale". What they mean is that Nordstrom's had sold out of a bunch of high end items in the first _hours_ of their anniversary sale.

Let me translate that for people who don't shop at Nordstrom's. The "anniversary" sale is the sale they have right now, in which during the heat of summer, you go into a highly airconditioned softgoods department store to buy fall and perhaps winter clothing that is somewhat discounted the first few weeks it is available for sale, and which will go to full price in August. Nordstrom's _does not_ clear the racks at this sale. That's not the goal. At all. The fact that it happened means there was a huge upside surprise. I _know_ that this happened, because the sale started last Friday and I tried buying the tote bag on the bag cover of their flyer online and failed. I tried buying it in person on Saturday and failed. Because _it had already sold out_. Let me be utterly clear: on sale, it was over $300. For a tote bag.

Here's the real story line. Relatively better off people are feeling okay spending again. They're out there at Nordstrom's. And they're online at Amazon. And at the Apple Store. And buying hardcovers at the chain bookstores. It's good for the economy that these people are shopping. And people involved in making and selling physical books can be happy that sales in some categories are up, but they should worry a lot about the idea that the people who feel comfortable spending money are signing up for the gadgetry at a good clip. Because it is just not clear when everyone else is going to feel okay spending money again on anything even remotely discretionary.

Are You Not Impressed?

Juxtapose this from the Chronicle (which is not impressed):

"That's just the equivalent of 6% of the total print book market, which remains tiny."

with this:

"Year-To-Date E-book sales of the 13 submitting publishers to that category currently comprise 8.48 % of the total trade books market, compared to 2.89% percent for the same period last year"

from the May 2010 APA press release.

Then, just for fun, add in this gossipy bit from Carnoy:

"Apple is claiming that it has already taken 20 percent of the e-book market. I've also heard similar, non-confirmed numbers come out of Barnes and Noble. If you believe those numbers, Amazon actually lost quite a bit of market share in the last year, though the overall pie is growing."

One of these numbers is not true. Which one do you think it is? If you think it's the Chronicle's number that is too high, here's how they got it:

"Amazon is estimated to have 19% of the book market, which implies the company sold 15.6 million hardcover books so far this year.

In its announcement yesterday, Amazon said it sold 143 Kindle books for each 100 hardcover books last quarter. (Last month alone, it sold 180 e-books sold for every hardcover book sold.)

If we use the ratio from the last quarter, it implies Amazon has sold around 22 million Kindle books so far this year. That's just the equivalent of 6% of the total print book market, which remains tiny."

The publishers association probably got their numbers right; they're just reporting data. And they are just a trade association.

Maybe it was a rounding error.