Why people won't pay for e-books on the iPhone
I'm not sure why, but some analysts seemed a little surprised about Amazon.com's announcement on Wednesday that it would begin offering Amazon e-books on the iPhone and iPod Touch, and move beyond the confines of the Kindle.
First of all, the company had effectively confirmed off-Kindle reading access in February, so it shouldn't have surprised anyone. Second, anybody who knows anything knows that it's all about the razor blades (the e-books) and not the razor (the Kindle).
Like the game console world, the real profits aren't in the hardware but rather the software. Yes, the Kindle 2's hot now, but to reach a larger audience, Amazon will eventually have to reduce the price for the reader and shrink its margins.
By contrast, the margins on e-books should remain pretty beefy, and you can imagine all the cost savings involved when you don't have to deal with warehousing and shipping physical books. It's a great business model.
The bestsellers list in Apple's App Store.
(Credit: Apple)But there's just one problem. While Amazon might be able to find a market for $9.99 books on the Kindle, the iPhone-iPod Touch world is a very different place. Very few people are willing to pay that kind of money for any sort of application, let alone an e-book.
In the Apple application world, the sweet spot for selling anything seems to be less than $4.99--and more like $.99 or $1.99. Sure, you're going to get some bestselling series with almost cult-like followings (read: "Harry Potter" and "Twilight"), but the vast majority of books being "sold" on the iPhone are very cheap--and rightly so because the overall iPhone-reading experience doesn't justify you spending $10 (or even $5) on an e-book. (See Nicole Lee's in-depth piece on comparing the Kindle 2 reading experience to that of the iPhone's).
Of course, the Kindle app isn't the first way to read e-books on the iPhone--there are already dozens of paid and free reader applications (and books-as-apps) available on the App Store. And taking a look at the list of top paid (nonfree) book or reader apps will give you an idea of how pricing works.
Books in the "Twilight" series, and one app called "50 Great Books for 10 Bucks," are the only ones in the top 20 that have a $9.99 price tag. Arguably, the perfect book for Apple's smartphone, "iPhone: The Missing Manual" (written by The New York Times' David Pogue), sells for $4.99. But it took a big hit in sales when the publisher tested a $9.99 price point.
More amusingly, Hougton Mifflin recently had the audacity to release Philip Roth's "Indignation" as an $25.99 iPhone app via ScrollMotion (it makes the Iceberg Reader). I love Philip Roth and all, but I wouldn't pay more than $2.99 to read his book on the iPhone, if that.
To be sure, with all the publicity surrounding the launch of Amazon's Kindle app for the iPhone, Amazon will get a quick boost in sales of e-books to iPhone owners. And for those who own a Kindle or Kindle 2, the idea of being able to read books from your e-book library on both your Kindle and iPhone or iPod Touch is appealing (with Whispersync, you can shift your e-books from one device to another, and even keep your reading place). But in the long run, Amazon clearly faces some pricing challenges, and I'd venture to guess that the vast majority of books that will ultimately get downloaded to the iPhone will cost less than $2.
If you haven't noticed yet, as part of the move to Kindle 2, Amazon added tons of free public-domain titles to its Kindle Store. If you're into classics and esoteric titles from the 19th century, there's lots of free reading to do.
And let me tell you: free sells. I know a little something about this because I have a book that's a free iPhone app. The book has been averaging about 700 downloads a week--and it was averaging more than that, when it first came out. By contrast, the Kindle version of the book, which sells for $3.98, is averaging about four sales a day (that currently gets you a ranking of 5,000 to 8,000 out of 230,000 books in Amazon's Kindle Store).
But while we're doing the math, here's what makes the razor model so attractive for Amazon. I get 35 percent of the $4.98 list price of the book--and Amazon gets the rest. In four days, my book has generated about $35 in revenue for Amazon. If the book were to continue selling at the same rate, it could end up putting close to $200 into the bank for Amazon this month. And I'm just a fledgling fiction writer--imagine what a known author selling hundreds or thousands of e-books would do for the company. (Interestingly, Apple's terms are much more generous: sell an e-book--or any other app--on the App Store, and you keep 70 percent of the price, while Apple takes just 30 percent. Also: Sony goes 50-50 with authors in its eBook Store.)
So, yes, selling e-books to iPhone users--and a broader audience, in general--is a good move for Amazon that will bring some nice incremental revenue. But the ultimate moral of the story is that e-books have to be cheaper and that pricing for different platforms will have to vary.
Paying $10 for an e-book bestseller on any platform is just too much, especially when the paperback versions of the book will end up costing less. Unfortunately, at the present time, Amazon can't do anything about that because it's barely breaking even on bestsellers (and might even be taking a loss on certain titles) because the publishers' list price on e-books is so high that the $10 is as low Amazon can go. (It's a different story with backlist titles, which can net Amazon a profit of a buck or two). In time, of course, as the Kindle platform becomes more popular, Amazon will be able to put the screws into publishers and bring the list prices down so it makes a profit. The fact is bestsellers on the Kindle should cost $7, while bestsellers on the iPhone should cost no more than $4.99--and probably less. Of course, it will take publishers a while to figure they can sell a lot more books at those prices, and to stop wasting everybody's time by putting out books on the iPhone for $25.99.
As always, feel free to comment. And here's a question for iPhone or iPod Touch owners who don't have a Kindle: How much would you pay for an e-book to read on those devices?
Hunkered down in New York City, Executive Editor David Carnoy covers the gamut of gadgets and writes his Fully Equipped column, which carries the tag line "The electronics you lust for." He's also the author of "Knife Music," a novel. E-mail David. Follow David on Twitter.
and the kindle isn't? Amazon won't even release sales figures. That screams "niche."
This is why when I'm on the plane nobody ever watches a full length movie on their iphones. Their eyes just can't handle it.
Yes, even on a smaller iPod screen when held at the usual distance the relative size is about the same as my TV screen. Disclaimer: I do not yet have a big flat panel TV. In that case the TV would probably be bigger.
But the brilliance here is that it's a looooong road to travel and Amazon has just put a giant foot on the path. By releasing the app they demonstrate a willingness and ability to extend Kindle books beyond the Kindle. This is good news for publishers and authors because it means more potential customers and sales. It's good news for device manufacturers because if Amazon keeps up this openness, they might be able to someday market their device as Kindle-ready. It gets many more consumers thinking of purchasing books in mobile terms - you're no longer tied to your desktop to purchase and read - just like the app store has done for applications. Amazon is building a consumer base and experimenting with tech. This app is an important first step. If Apple produces an iPod with a slightly larger form-factor (I'm praying for one that is roughly the size of the Vaio P screen), then Amazon is primed to take advantage of that. If Apple doesn't, but someone else produces, say, a larger Android-based device, perhaps Amazon develops an Android app.
This is such a smart business move it's silly. I don't see how this hurts Amazon in any way, and it could benefit truckloads. So might as well do it now and give themselves more time to reap the profits.
Nice analysis here:
Intermodal Attack - Amazon releases free 'Kindle for iPhone' application
http://switchtoamac.com/site/intermodal-attack-amazon-releases-free-kindle-for-iphone-application.html
That has got to be the most ass backwards thing I believe I've ever heard. An e-book doesn't have shipping costs, ink costs, paper costs, energy costs related to both of those, taxes on the previous, etc. A can write a book on my laptop, publish it online, and have it digitally distributed for FREE and you think I should charge MORE for that than if I had to have thousands of copies printed and shipped to Barnes and Noble????
Can't be serious. The only advantage of an e-book should be COST. At $9.99 a book it isn't cost effective especially not if you RAISE the price.
The writer here thinks a lot of people don't like reading off iPhone, That's just an opinion, no data to back that up. Let's assume that's an accurate statement. The cost in providing a format for iPhone seems almost non-existent if one is available for Kindle on Amazon, so the potential of a larger customer base easily justify the existence of having iPhone version of the same book.
A reader who prefer a physical book coudl buy a physical book from Amazon, if they get used to eBooks and like the Kindle, then Amazon has that too, Now if there's a niche market out there that likes to carry their book on their cellphone and read off that (I, myself, don't object to that concept, I don't even own an iPhone), Amazon's trying to get that covered too (at least starting with iPhones). I will not be a bit surprised if a standard among eBook reader and document format becomes available, you will see Amazon start carrying eBook for all mobile phones supporting that format, iPhone is just so popular and represent a relative large customer base who may be the most likely to buy eBooks in the first place, what's so strange about Amazon tapping into that crowd? The eBook is a revolution a book seller cann't help but salivate over, Amazon with its roots stemming from being a on-line bookstore wants to lead that charge. It's nothing but sound business decision.
So what if iPhone versions will only account for 5% or maybe 1% of the overall sales, that's 5 or 1% that wasn't there in the first place, on top of that, that puts Amazon among the leader in eBook providers, what's Amazon got to lose?
Speaking directly to Kindle books, the price point isn't nearly as big an issue as some others. Prices for new best selling books might be $10 but wait a few months and the price will drop. The idea of variable pricing, $10 for the Kindle and $4 for the iPhone is ludicrous given one of the advantages of Amazon's current model. Books I have on my Kindle can be read on my iPhone too. Your silly idea would force Amazon to break that model which in the end would be worse for consumers than the current high price you object to. I have no desire to buy a book for my iPhone that isn't readable on the Kindle too.
The more problematic issue for me is DRM. We've seen it before music and now we have to fight the good fight again. My $10 buys me nothing but Amazon's good will with no guarantees the purchase will continue to be worth anything in the future. Witness the closing of online music stores from the likes of Yahoo, WalMart and Microsoft. The same can happen to the Kindle at any time.
I tried Stanza or rather I downloaded it and forgot about it. Lack of content access was the reason. I've downloaded the amazon kindle app. Have taken about a dozen samples, purchased one book having read a couple of those, and then downloaded some of the free books available as well. Some excellent history available at no cost.
If the expectation is that this model is over, that's incorrect. The real question is how long before you can view the content on your computer/laptop? I would suggest that the iPhone is merely an entry into that next phase.
The kindle is just an IBM PC that was looking for an OS. It's all about delivery of the razor blades. Amazon knows this without a doubt. The iPhone application will merely confirm this strategy and advance it.
Cost is a different matter. That may be fine tuned a few dollars here and there. But volume will justify it and of course there's not transport and storage of books so it's a moot point. Profitability is built in.
Also, you must not have tried very hard to use Stanza. I don't even have an iphone/ipod touch, yet in 5 minutes time, I was able to figure out that you can:
1. Read anything from Ereader.com/Fictionwise (Over 100,000 titles).
2. Read anything from Mobipocket and the kindle, as long as it's DRM-free.
3. Import anything from your desktop TO the iphone/ipod to read it without having to go through Amazon's service.
Now, that last one is important, because you can go to Gutenberg.org and download any of the free titles from there, convert them to either eReader or Mobipocket format (remember the non-DRM part?), then upload it to your iphone/ipod. This takes only a few minutes once you get the hang of it.
And all of this could/will change if Apple decides to get in the game themselves. I can see older fiction titles going for $1.99, and current Fiction titles for $2.99 (or thereabouts), maybe the NEW stuff for a little more (Like maybe $4-$5). Apple took over the emusic business in spite of not being there first. They could do the same thing to the ebook market, without trying very hard (Expecially if they outright BOUGHT Ficitonwise, or licensed the software from them for ereader).
The audience for gaming and book readers might overlap, but those of us who love reading are not going to balk a the Amazon ebook prices. $9.99 for a book just released is a great price.
I'm not sure I'll ever buy a Kindle but I'm sure I'll buy and read many books on the iPhone. We need to watch the pricing move, as it will as this new market is defined.
Currently I am publishing on Smashwords.com, which, by not demanding print distribution percentages for electronic product, has a formula that allows authors to be paid well at low price points. Most of what I have there so far goes for one dollar. I won't put "The Shenandoah Spy" there because I don't want to damage the market for the print version. The appeal of Smashwords.com is that it automatically formats text to ten different formats, including iPhone and Kindle and allows the author or publisher to set the price.
E-books will not replace print, which is still more than 90 percent of the market. They are merely an added layer of distribution based on customer convenience.
I agree with you that care must be taken to protect artists/writers right to profit from their own labor, which, if they stay with the traditional model the Publishing houses use, will be better than music artists get from their labels. And if they could write it into the contract, could pay you as much as you make from the dead-tree version.
Which brings up another point: at some point we need to convert from printed material anyway. I'm not an environmentalist wacko by any stretch of the imagination, but even I can see the benefits from moving to an electronic format. We are just now seeing the revolution in the newspaper industry now. People are getting their info from the web, and TV, which can be updated instantly, and this is killing the traditional newspapers. Books won't completely got this route, but it may be close.
I do agree that e-books are overpriced, but hopefully Amazon will be able to convince publishers that lower prices will equal higher volume. Price books at $2-3 apiece and I'll buy them by the truckload. So will everybody else, I reckon.
At most the e-books should be the same cost as paperbacks, at best they should be cheaper.
How many times has a fanboy like me have to be told that its a flawed model,before they all become jokes . Lets think,Michael Dell commenting on Apple upon Steve Jobs, Itunes becoming the # 1 music store on the planet, the Iphone will never be competitive and on and on.
I laugh everytime I flip on my Appletv for a dinner party and the guests are amazed at the seemless integration of MEDIA(of all kinds.
Maybe ill be reading Farewell to Arms on my 42 in plasma soon.That little white remote sure would be a good page flipper.
Dude, dont hate the player... well maybe the jokes on me, you got me to read your article.No offence intended,but I still dont know who you are. But I could tell you that someone is a millionaire from writing a fart application.
You are underestimating the power of seamless design that allows for the IMPULSE buy. Man my wallet is hot, I cant even imagine looking at my purchase history in the itunes store. Now that would be painful.
Ill purchase your app,wait is it in book form on the kindle app?
The market will determine the pricing, not <i>your</i> monthly budget for discretionary spending.
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by genuwinesarah
March 17, 2009 9:22 AM PDT
- Actually, one of the main reason why I bought an Ipod touch was for the ebook app called ereader. The ebook prices are not as cheap as on the Kindle (ereader's average price is 14.99), but it has the ability to change the background to black and the font color to a grayish white which makes for hours of comfortable reader without having a glaring blare on my eyes. I love it! And I don't mind the price per book if I'm truly happy with a product. I also really enjoy reading the NY Times and blogs on my Touch. My prediction is that the ebook market on this device will take off within the next few years. I would NOT buy a Kindle because it's $150 more than the Touch and can't as much. I like reading websites in color. The only nice thing about the Kindle is Whispernet and the 9.99 ebook price, but its not worth an extra $150.
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