Kindle

I don’t think too many future predictors are .300 hitters, and one ground ball I tapped out to shortstop was my hunch that the iPad wouldn’t have an immediate significant impact on ebook sales (although I thought it would be important over time.) According to data and analysis uniquely developed and provided by Michael Cader, published last Wednesday (which you need to subscribe to Publishers Marketplace to get and, if you don’t yet, what are you waiting for?), I was proved wrong in less than a month. Apparently if we get slightly larger and portable screens into people’s hands, they want to read books on them. And they don’t need to be e-ink and be lightweight (like Kindle and Nook and Sony Reader and the new Kobo Reader and a slew of forthcoming devices) to have that impact.

All we know from Apple is that they sold about a million iPads in the month of April, with 3G sales beginning only at month end. (Virtually everything sold in April was wifi-only.) We got download numbers, but no real guidance about what they meant in terms of sales. We can figure out that any sales numbers we can gather are for an average installed base of 500,000 iPads.

We wouldn’t expect the monthly sales rate of a million units to be sustained; there were a lot of pre-orders and launch-hype sales in April’s numbers. But with May being launch month for the 3G version and both the wifi and 3G models available going forward, and the 3G model apparently much more popular than the wifi-only, a sale of 500,000 in May which is 3G launch month and a “run rate” of 300,000 a month going forward would seem a modest expectation. If that’s right, then the average installed base in May will be 1.25 million, in June 1.55 million. So the installed base for June will be triple what it was in April.

Cader got anonymized information from an unknown number of large Agency publishers for the April sales. He says that for most of the companies he surveyed, iBooks sales were 12 to 15 percent of their ebook total before the 3G models landed! And then two companies reported sales jumps of 300 and 400 percent on the weekend that they did. And one publisher who showed Cader figures by title revealed that there were already books on which the iPad sales exceeded Kindle sales.

Cader’s analysis pointed out two nuances that need to be considered when interpreting these numbers. The Agency Five impact is overstated because of relatively restricted competition. They have far fewer titles competing with them in the iBooks environment than they do in the Kindle store, the Kobo store, the Sony store, or from the ebook independents. Giant Random House and lots of smaller publishers just weren’t there. So even if the sales of all five publishers were 12 percent of their total ebook sales in April, it wouldn’t suggest that iBooks constitute that portion of overall ebook sales. Yet.

But, at the same time, these numbers also understate the impact of the iPad because iPad owners also buy and consume books on the device from the Kindle and Kobo and B&N readers which wouldn’t be reflected in Cader’s survey numbers. One ebook retailer who shares information told me that sales for his company were very strong in April. I had asked that question to probe whether sales were adversely affected by the price increases mandated by the Agency model. Were they reducing business? No, definitely not. (This is a very big sub-point, but we’ll leave it for another day.) So while one must assume that some of the sales being made from iBooks would otherwise have been made by Kindle or Kobo or another existing retailer, the market is apparently growing fast enough to mask the impact of any cannibalization.

With five of the Big Six and most of the big titles in the iBooks store, it would seem reasonable to assume that 65% of the sales potential is reflected in those books. Applying that assumption to the average of the reported 12-to-15 percent market share (13.5%) would suggest that the overall share of iBooks sales is just a tad under nine percent.

But it would seem to me that number will more than double in May. The installed base will be more than twice as high and the 3G model, from which publishers are reporting much more activity, will constitute a significant portion of the May base after having been non-existent in April. In fact, it seems at least as likely that the number could triple! So by June, we could well be seeing a quarter or more of all ebook sales occurring through iBooks. The rise will probably be slower after that (May sales will reflect the huge installed base increases generated by initial sales in April of the wifi model and in May of the 3G) but Apple climbing into a solid second place behind Kindle in 60 days is pretty dramatic.

Even more exciting for publishers is the evidence that the iBooks sales are expanding the ebook market. Cader reported that many strong titles skewed to a younger and male demographic and that iBooks sales boosted the performance of some nonfiction titles. Most people figured that the iPad would appeal to an audience of not-as-heavy book buyers compared to Kindle, which was part of the reasoning behind my own flawed expectation that sales would be modest at first. But what we may be seeing is that people who get a decent reader in their hands might consume more books digitally than they had in print. If that proves to be true, it would be very good for publishers and authors.

Meanwhile, even before this analysis was delivered, we got news last week from two publishers that increased ebook sales were their best financial news. Both Simon & Schuster and Harlequin reported that print results were disappointing, but digital sales were stronger than expected.

It was only about six weeks ago that I looked at the IDPF’s most recent numbers, applied them to what I’d heard in my own anecdotal conversations with major publishers and agents, and had an epiphanic moment realizing how close we were to what we called at BISG’s Making Information Pay conference last week a “point of no return.” I wrote in my London posts and then repeated at the conference last week that I saw ebook sales to be 25% of a narrative book’s unit sales expectation by the end of 2012. With print book sales made online thrown in, I saw virtual cash registers ringing up half the units for narrative books by then. Two Big Six CEOs privately agreed with me as did a retailer knowledgable about both print and ebook sales. Then I spoke to a Big Six digital strategist who said I was being conservative.

This view is not universally accepted. An executive at a trade book distributor last week told me (nicely, he’s a nice person) that he thought I was nuts. He still sees ebook sales as trivial and not likely to reach the levels I expect by the end of 2012 by even the end of 2016.

Well, I intended to be conservative because I was so surprised at my own realization at the beginning of April. But I remind myself (and all of you) that things happen “gradually, then suddenly.” It now looks to me like the iPad — joined as it will be by a flood of new ereaders and tablets and even whole new platforms like Blio and Copia — may be the catalyst for the transition encapsuled in those three words.

When I examined the Random House tactic of staying out of the iBook store initially, I said it made sense but that it constituted a bet that iBooks sales wouldn’t be robust right out of the box. Now that sales results seem to have proven that conjecture (which I shared) wrong, I’d expect that Random House will join the other big publishers in moving to the Agency model to enable them to join the iBook offering. The numbers we discuss in this piece would suggest they’re losing sales and the agents representing the authors not in the iBooks store are bound to be pointing that out. In the meantime, Random House has gained some benefits from having less expensive ebooks in the marketplace in other storefronts, but it would be surprising if that compensated for not having an outlet selling 12% or more of the ebook units.

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Here’s a quick review of the iPad. I’ve had it for a few days now and, based on what I know so far, it isn’t going to be a very important part of my life. It has great capabilities, but it has real limitations. The capsule summary is “not as good for straight text ereading as a Kindle; fabulous for visual stuff like movies and pictures and games (which I don’t play) but limited there by not supporting Flash.”

So far, I’ve watched a movie (using the Netflix app here might be the biggest payoff here for me with it, but I’m usually not big on movies out of theaters), gotten books from three platforms (Kindle, Kobo, and, of course, the iBook store), grabbed the Elements book-app (cool…). I also got a Vook (Dr. Jekyll and Mr. Hyde), which was enough for me to see “not my cup of tea.” Maybe others on other subjects will be different…better. This one was both just not appealing (a clip introducing John Barrymore embedded in the first page of the story) and defective (a bunch of links that don’t work.)

The keyboard is miles better than one on a phone, but nowhere near as good as one on a laptop or netbook. So it isn’t a substitute for carrying a full-function computer on a trip, regardless of what software they eventually build for it. And if you’re going to carry another keyboard, what have you gained over carrying a netbook?

I bought it because I needed to see it and, to tell the truth, I thought it would be cool to carry it around the London Book Fair next week and show it to a lot of people in publishing who had not seen it yet. But the damn thing weighs a pound-and-a-half and doesn’t fit in any pockets (the Kindle fits in the hip pocket of most sports jackets which, frankly, I wear regularly for the pockets!) and I’m not slinging a briefcase on my shoulder to have the iPad when the iPhone keeps me adequately connected in a conference or trade show situation. It’s worth putting in my suitcase to show friends in some situations, but it won’t be with me most of the time.

There was some fun I could have on a computer or an iPhone that was definitely better with the iPad: using the YouTube app, punching in the names of old rock stars, and watching clips. (The sound from the iPad speakers is more than passable.) And being able to show photographs on the big iPad screen will be a great benefit for some people.

But as a straight ereading device, it just doesn’t cut it for me. The extra weight (over a Kindle or an iPhone) just isn’t sufficient compensation for the extra screen capability. It isn’t as good as the iPhone for reading in bed in the dark because the much more light it throws off makes it harder to avoid annoying your significant other. It took me a while to find it, but the lock that allows you to lie on your side and have the type lie in its side with you is managed by a button on the device itself, not a setting in the ereader platform, which is how Kindle and Kobo do it on the iPhone.

And Apple has not mastered the shopping experience for books yet. The iBook store shows far too few books per category. You see “new in fiction” and you ask for “all” and you get 23 titles? Give me a break! Or you go to “history” and see “recent releases” and you ask for “all” and see 18 titles? It looks great, but this is not using the unlimited bookshelf of the web to anything near its potential.

When you search for “baseball” in the iBook store, it doesn’t tell you how many results you get, but the answer is 117, strikingly similar to Kobo.

Kobo’s shopping experience is similar. When you search for a topic (I chose “baseball”). you are told how many results are being returned to you (I got 114.) While shopping for Kindle titles requires you to go “out of app” to their store on the web, that’s not really a problem (you can hardly tell the difference.) Of course, Amazon is the champion of choice – their killer app — and there are 946 search results for baseball. That suggests to me that both Kobo and iBooks have a long way to go to catch up to Kindle’s selection of titles. That means the advantage remains with Amazon for the foreseeable future.

I had a chat today with a collaborator who is more tech-savvy than I. He said he’s hearing the “too heavy for an ereader” comment from a lot of people. He theorized that perhaps some people might get an iPad instead of a computer if all they needed a computer for was web-surfing and emailing. But he admitted a netbook might be a smarter purchase in that situation for a lot of people.

Certainly, this device is not going to put the Kindle out of business and I doubt it will be the preferred ereader for any heavy consumer of books, or what books are today.

But the good news for publishers is that Apple will sell a lot of them as “content machines”: to people who aren’t primarily book readers. We might pick up some new ebook readers from the large universe of people who hardly read books now as a result. That would expand the market to our benefit.

On the other hand, anybody interpreting the announced 750,000 ebook “downloads” (not “purchases”) to 600,000 iPad purchasers in the first weekend as promising for publishers would need more data to come to that conclusion. That number by itself isn’t impressive, but we don’t know how many Kindle or Kobo (or other) books were downloaded by new iPad owners. Only Amazon knows for sure, but I’ll bet that 600,000 Kindle owners download three times that many book files in the first 24-48 hours they have their devices and it would be a bit of an upset (to me) if initial iPad activity were heavier with non-iBook content than with books purchased directly from Apple.

So the hunch from here is that the iPad will help us grow the ebook market but the makers of lighter and cheaper e-ink devices don’t have to leave the field just yet.

I thought Kassia’s take on this was useful as well. She explores the Ibis Reader which I didn’t (it sells little or no “branded” content so it is of less interest to me.) We mostly seem to agree about the iPad and ereading except that because she’s a woman,  she’s thinking this will encourage men to carry some form of handbag. Good luck with that one…

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A busy day today, but time for some very quick and simple math.

The IDPF’s figures for January show nearly a 4-fold increase in ebook sales over the prior January. Recent reports suggests that ebook sales are now in the 3%+ range for some big publishers.  But that’s a bit of an understatement of reality because so many books haven’t been ebookable (illustrated) and the backlist has been introduced gradually over time (which accounts for part of the increase.) Sales of ebook editions of new straight text titles are higher with 5% more like a minimum expectation than an average.

Meanwhile, we know this year we’ll be adding our new client Copia (with six devices and a platform that works on just about everything else except Kindle), B&T’s Blio, the iStore and Apple iPad, the Google Editions program, and a host of other new devices as well as expected next generation readers (with color, perhaps) from Kindle and Nook. Those new ebook platforms will keep the title increase going because they include an ability to deliver a more robust presentation on a larger screen.

So would we expect the pace of ebook adoption to slow down in the next 12 months from what it has been over the last 12 months? I wouldn’t, and there won’t be a slowdown until ebooks hit some new point of resistance by penetrating the market to the point of saturation. Where would that be? Your guess is as good as mine.

It is worth pondering that if the rate of growth remains about the same (let’s call it 3.5 times growth annually to be conservative about where it stands now) for the next 12 months, then the ebook minimum expectation by next Christmas would be between 15 and 20 percent of the sales of a new title. And then it can’t really continue the same growth rate the following year because that would take us to a great majority of books read being ebooks. And I don’t think you’ll find anybody expecting 60% or more ebook penetration in two years.

So my hunch is that growth will continue to accelerate for a while longer and then it will have to start slowing down. But my guess (which is as good as yours!) is that it won’t start slowing down until ebook sales are 20-25% of what a publisher expects on a new title. I’d take the bet that we reach that level before Obama’s re-election in November, 2012. Given the historical trend line, that’s a very conservative prediction, although, as I write it, it seems like I’m going way out on a limb.

What does 20-25% ebook sales fewer than 30 months from now mean if it happens? A lot of disruption.

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Kindle is certainly engendering a lot of confusion by billboarding the downloads of free ebooks as “sales.” That paradoxical scorekeeping was the lead for an article by Motoko Rich in The New York Times on Saturday that quoted a lot of people, some apparently disagreeing with each other, but none of them necessarily wrong.

There really are three separate questions to consider, which get elided in these conversations.

1. What is the impact of giving away ebooks as a promotional device, either to boost the word of mouth on the book being given away or to promote an author’s other titles?

2. What is the potential impact on the industry overall of ubiquitous giveaways of ebooks that would apparently have commercial value?

3. When ebooks are given away, how should that sale be “scored” in any measurement of the book’s popularity?

The answer to the first question appears, anecdotally but just about universally, to be that giving ebooks away boosts sales of that title and related titles. Rich’s piece sites numerous publishers attesting to that. She apparently found no publisher that is skeptical about whether giveaway promotions work or has seen the tactic fail. And that would confirm my experience: I don’t know of one.

But as we’ve noted before, this effect could change over time. We’re still in a period where ebooks are not an acceptable format to most book readers. That means the benefits of giving them away is not confined to the word-of-mouth from the recipients, it can result in a print book purchase by the very person you gave it to! As ebook reading becomes more popular, particularly if we go to a DRM-free universe, the impact of cannibalization from giveaways could grow dramatically from what it is now.

The second question is what is apparently paramount to David Young of Hachette (as quoted in the Rich piece) and is influencing the policies described at Penguin. As more and more ebooks are given away, it offers a wider array of choice to people who prefer to select from the free offerings and just never pay. For the last 15 years of his life, my father, Len Shatzkin, refused to buy anything except remainders. He shopped from several mail order catalogs and, if he was in a bookstore, shopped at the bargain tables. His position was that if publishers were going to be dumb enough to reliably give the books away six months or a year later, he’d just wait and choose his reading from among what had been marked down. With free ebook marketing the way it is today, sometimes you don’t even have to wait!

And that’s obviously what was on Young’s mind when he said the tactic was “illogical.” It is illogical if you take a long-term, industry-health view of the situation. It is totally logical if you’re trying for short-term advantage to break a new book or build a particular author, as most of the other authors and publishers were trying to say.

There was a long comment string on the HarperStudio blog about this question six or eight months ago. I said at the time that I figured that if these giveaways kept spreading, one of our more industrious web entrepreneurs would create an ebooksforfree.com site which would be a consumer directory to “free” offers at various publishers and web retailers, title by title.

It’s a classic Tragedy of the Commons. Each person giving away ebooks succeeds in their intentions to boost their sales, but everybody will pay for the overgrazing in the end.

The third question is a tricky one. It is worth noting that the App Store makes it very easy to for the consumer to decide whether to shop the free apps or the priced apps. I think Amazon is hurting themselves by not at least sorting their bestseller pages that way. And they don’t. Amazon says the Kindle bestseller listings change every hour: I just checked the Top 10 and found one 25 cent book, one book at a substantial price (higher than $9.99), and eight free. Some of the eight free were self-promoters like the lead in Rich’s story; some were public domain; some were multi-book authors from established publishers. But only one of the Top 10 was elected with votes paid for with dollars from the Kindle clientele, which is what I think most people looking at “best sellers” would be looking for.

This raises a question I don’t know the answer to and my way to do the research will be to see if somebody with knowledge posts a comment. Kindle reports to the USA Today Bestseller List. This is, as far as I know, the only reflection of ebook popularity in the public domain. It would be interesting to know if USA Today has a standard for that reporting. Of course, most of the “weight” of the USA Today list, quite properly, would be print sales so whatever Kindle reports might not move the needle much. Most sales today are still print sales. But we’re headed for a crazy world if the concept of what “sold best” is expanded to include what people were willing to take for free.

On the other hand, if you try to separate free from paid, you will still face the question of where to draw the line. If publishers sell a $20 hardcover as a $5 ebook, should those units count equally in determining bestseller status? How about a dollar? How about a penny?

A tip of the hat here to my sometimes colleague Brian O’Leary of Magellan Media, who hinted at what I have said at length in this piece in his brief turn in Rich’s article. Brian has done extensive research that tends to confirm what Rich’s interviews and my anecdotal information suggest: that giving away ebooks boost sales in the present marketplace. But Brian managed to bridge the enthusiasm of the giveaway marketers and the incredulity expressed by David Young with his observation that there was a risk that free reading could eventually “supplant paid reading.”

And that wouldn’t really be good for anybody.

This is absolutely the last post you will see promoting Digital Book World 2010, which is on this Tuesday and Wednesday at the New York Sheraton and which is turning out to exceed my fondest hopes when we started out planning it this summer. But we have a panel on the very subject of this post called “Ebook challenges: competing with free and getting the timing right.” Brian O’Leary is moderating, and the panelists include agent Robert Gottlieb of the Trident Group; marketing director Mindy Stockfield of Hyperion (which published Chris Anderson’s book “Free”); ebook retailer Kobo’s VP Michael Tamblyn, and Steve Ross, who has been a publisher at both Random House and HarperCollins. There’s another panel on “Ebook pricing: what should they cost and why?” which includes the head of Penguin’s ebook publishing efforts, Tim McCall.  I enjoy having The New York Times stamp the topics we selected last August as “current” 72 hours before our show begins, even if just implicitly.

If you like this blog, I know you’ll enjoy Digital Book World. I hope to see you there.

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Is this where I came in?

In the early 1990s, the computer manufacturers and Microsoft were doing everything they could to persuade businesses and consumers that they really, really, really needed CD-Rom drives. That Microsoft would benefit from them was very clear; the software they were selling was taking more and more diskettes to deliver in those pre-broadband, pre-Web days when all software was “shrinkwrapped.” If computer owners could take their new software on CD-Roms, the cost of delivering the product would drop dramatically.

Only a year or two before, Bob Stein had developed what we can now identify as the first “enhanced ebooks”. His company, Voyager, introduced the “Expanded Book”. These were the first efforts to use the book as the foundation to do something much more ambitious: linking in pictures and sound and video and databased information. No web links yet, because there was no web yet, but the Voyager Expanded Books really foresaw the possibilities.

Microsoft encouraged publishers to build on the Voyager Expanded Books example with CD-Roms, and, indeed, the Voyager product itself moved quickly from a diskette-based product to a CD-Rom, which gave it a multiple of the digital space to add content.

Publishers at that time had recent experience with new product forms. In the early 1980s, a few had experimented with software publishing, but that was quickly seen not to work and the publishers who tried it, like Wiley, pretty quickly got out. In the mid-1980s, audiobooks first came on the scene, however, and their acceptance, fueled by the ubiquity of tape players in cars and the relatively new Sony Walkman family of portable cassette players, was very rapid. With the encouragement of Microsoft and the hardware makers promising that all computers would soon have CD-Rom drives, many publishers jumped into what we can look back and see was an enhanced ebook business with both feet.

It turns out they jumped into an empty swimming pool. Many legs were broken.

The whole idea that people who wanted a cookbook needed video in the middle of the recipe or that people would “read” a book on a desktop computer because of sound effects in a CD-Rom version always seemed like a stretch to me. Sometime in the middle of the CD-Rom craze, I learned that McGraw-Hill had a big animal encylopedia on which something like 60% of the cost went into the sound. This was for a high-priced professional product. This made no intuitive sense. It wasn’t placing the investment where I thought anybody would find the value.

What seemed more likely to work to me at that time was to just put the book on a diskette (they were still much more common then than CD-Rom drives) to allow one to just read it on their laptop. The writer and enrepreneur Po Bronson might not remember this, but he and I discussed that idea at great length at the time. Meanwhile, I predicted in 1995 and 1996 that CD-Roms were going nowhere, that the “action” for book publishers would be online, and that the first important thing that would happen online would be increased sales of plain old printed books, all of which turned out to be utterly correct.

Now, as Yogi Berra allegedly once said, we have deja vu all over again.

In the later 1990s, the simple ebook delivery I imagined happened through online distribution, not diskettes. The devices of choice were plain old PCs (mostly reading PDFs) and handheld PDAs, reading the Palm Digital format, Microsoft’s new “dot lit” format (remember how revolutionary that was supposed to be when it first came out!), and then Mobipocket which, until Amazon bought them and largely buried them, was going to be the cross-platform standard.

Now that I had what I wanted, I was a happy guy. I started reading ebooks predominantly and I went out on the prediction limb again. I figured that PDA-reading would become widespread, and quickly.

Talk about jumping into an empty pool!

In fact, underscoring my misunderstanding, I wrote in about 2004 or 2005 that PDAs were the key to ebooks. If you carry a PDA, was my thinking, then you shouldn’t need anybody to explain the advantage of ebooks to you. It was transparent; you always had your book with you. And, conversely, I figured that if you did not have a PDA, there was no great advantage to ebooks. What I saw as the big advantage was not having to carry the book as an “extra.”

Still, ebooks just didn’t happen. I couldn’t understand it. A lot of people told me the problem was that ebooks didn’t really do anything that couldn’t be done with plain old print books. They didn’t take advantage of the opportunities afforded by digital books. No video. No audio. No web links. That didn’t seem like the answer to me. I remembered the CD-Rom fiasco.

Then Kindle came along. On the one hand, it proved me wrong because here was a device that had to be carried around (like a book) and didn’t do anything for you except let you read a book. On the other hand, Kindles sold well (particularly considering Amazon was the only place to get one) and, more important, Kindles sparked an explosion of interest in and uptake of ebooks. And that, I thought, proved that “just the book” was enough for many people to have a satisfying ebook experience.

But now it looks like market forces are going to tempt publishers to invest in enhanced ebooks all over again. We are awash in news of new ebook readers — meaning both software that can play on PCs, netbooks, iPhones, or various more dedicated devices and a slew of those more dedicated devices to choose from. So people are going to be reading books on devices that can do a lot more than a Kindle or Sony Reader can do.

Two other things happening at the same time also push for more complex ebooks. One is that the tool sets to deliver them — and even to allow any author working with a bright young person alongside of them to deliver them — are getting more ubiquitous. And the other is that publishers think they see a connection between more complex ebooks and higher-priced ebooks, and that makes them very interested in exploring the subject.

A lot has changed in the past 15 years since the CD-Rom era. I am not in any way suggesting that the CD-Rom disaster of the mid-1990s will be repeated in the enhanced ebook era we are heading to now. But nobody figured out what compelling consumer product could be made from a book with lots of digital space to play with then and we’d be kidding ourselves to think anybody’s figured it out now either. There will be a lot of trial and error work done by the industry in the next couple of years trying to find the book-into-something-better formula that works artistically, functionally, and commercially. The answers are by no means self-evident.

One cautionary tale from the CD-Rom era. One of the first big successes on CD-Rom was issued by Simon & Schuster and based on StarTrek. In retrospect, we can see that StarTrek was the “perfect subject”: the one thing that would work with early-adapting techie geeks even if nothing else would. Unfortunately, S&S read the StarTrek success as an endorsement of the CD-Rom product idea and rapidly expanded their new media division to do more titles. Nothing else came close to matching StarTrek’s success.

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It took me a couple of days of pondering this to come to my current understanding of it, but I now think that Carolyn Reidy of Simon & Schuster and David Young of Hachette Book Group, since joined by Brian Murray of HarperCollins, are not really fighting a battle to rescue hardcover books from price perception issues caused by inexpensive ebooks. What this is really about is wresting control of their ebook destinies back from Amazon.

I first — mistakenly — focused on the economics of the decision announced by Reidy and Young through the Wall Street Journal to withhold ebook editions from the market for a few months on major new releases. I was not the only blogger or analyst to see it that way. The purpose stated explicitly by Reidy to the Wall Street Journal was to protect the hardcover sales from being cannibalized by very inexpensive ebooks. This sounded like a very dubious calculation to me; I just couldn’t see very many people saying to themselves, “I’d have bought the ebook right now if it were available right now, particularly for those cheap ebook prices, but I just can’t wait to read this new book, so I’ll pay extra to read it sooner in a format which isn’t the one I prefer.”

But, reflecting on this, I realized: “I know Carolyn and David are smart people. They wouldn’t flub this math!”

So I thought a little harder. The subtext should have been more obvious.

The penny dropped for me when HarperCollins announced a similar policy. That’s three of the Big Six, three of the publishers that deliver all the high-profile big books to the industry. Publishers Lunch reports today that Macmillan has delayed some books and will continue to look at that strategy, that Penguin might do it from time to time but “not systematically” and, so far, no word from Random House. Random House is particularly interesting since their new key executive decision-maker, Madeline McIntosh, just returned to them from Amazon.

We know something else that matters: agents must, for the most part, be supporting this. The three houses that already announced are (like the others) agent-sensitive and in touch with them all the time. And no agent has stood up yet and protested. There’s an easy answer for any that do; no publisher has announced this as a policy covering all their books. “You don’t want a delay on your author, Ms Agent? If it’s what you’d like, we’ll put that ebook out simultaneously.”

In fact, Reidy hinted at this. She said there was one S&S author who asked to not be included in the list of withheld titles. She didn’t say how they handled it, but big houses don’t generally fight with big authors.

If all of the Big Six, or even just those who have announced this delay policy, stick to their guns then the ebook world may have lost a driver of converts from print. It may be that Amazon has, at least temporarily, lost an important sales tool to move Kindle devices. And, regardless of how this plays out from here, the power of the major author brands — through their publishers today and through their agents forever — to influence the course of development of the ebook market has been so clearly established that I (and other analysts as well) are not likely to miss the point again anytime soon.

So this is really about the agents and publishers trying to take control of ebook pricing, and value perception, back from Amazon. Some further evidence of that comes from the reaction of Len Riggio, Chairman of Amazon competitor Barnes & Noble (vendors of Kindle competitor Nook) who is reported in the Journal piece to be quite comfortable with this tactic, which the Journal characterizes as “in keeping with the long-held practice of issuing paperback editions after the initial hardcover.”

If the other biggest bookseller, which also has a dedicated ereader and an aggressive attitude toward consumer pricing, seems okay with this idea, it strengthens my belief that it is about controlling Amazon, not about controlling ebook pricing. The desirability of restraining Amazon is certainly something the big publishers and Barnes & Noble can agree on.

If the big houses can do this, they can do much more than this. They can sell ebooks direct off their own web sites. (That’s not doable for Kindle at the moment, but they’re eschewing Kindle sales for a time with this strategy anyway.) They can put ebooks into some channels (let’s say ScrollMotion, or the new Baker & Taylor Blio platform) and not others. They can’t tell a retailer what to charge for what they sell them (until somebody figures out how Apple and Bose manage to enforce price maintenance, apparently legally, but without the added complication of a wholesale-supply network), but they can deny a retailer whose policies about anything they don’t like direct access to their content.

How will Amazon respond to this? That is the big question. Their first reaction is to cut the price of the Sarah Palin book, which had been withheld, from their $9.99 point to $7.99. That’s not a conciliatory gesture, but it is a costly one!

Therein lies the irony that is scaring the hell out of the publishers. Amazon pays (approximately, I am not privy to the actual deals) half of the publisher’s suggested retail for these ebooks and then is selling the $9.99 or cheaper ones at a loss on every unit. From Amazon’s perspective, that makes complete sense. They build market share for the Kindle and they build a lot of customer loyalty. And they could even be doing this and still be making a positive margin contribution across all the content they sell for Kindle, even with the losses on the biggest books selling the most units.

So the publishers (and authors) actually benefit from Amazon’s policy; they sell more units and have more margin to share between them on each than they do on the print book.

But publishers don’t trust Amazon to keep things that way. From their perspective, Amazon is building a consumer expectation of an under-$10 price point while they are building up their audience of captive Kindle consumers. How long can it be, publishers figure, before Amazon says “sorry, now you have to sell me these for under ten dollars”?

The most-frequently ridiculed quote in the Journal article from Reidy points to that irony. The Journal quotes her saying, “with new [electronic] readers coming and sales booming, we need to do this now, before the installed base of e-book reading devices gets to a size where doing it would be impossible.” Taken literally, this remark leads to the ridicule that she’s shafting a market where sales are booming. But the subtext is that if publishers can slow down the growth of the Kindle installed base, it will give time for other technologies to catch up and create a more diverse marketplace, which is better for publishers.

There are two important aspects of this that will play out later. One is that what the publishers can do to Amazon today, the authors can do to the publishers tomorrow. If the publishers could sell the ebooks of big books successfully from their sites, then the big authors could also sell them directly without a publisher. The other is that this is a “last gasp” of a “static product” publishing economy. Big moneymakers ten years from now won’t often come from just selling the same content over and over again, but will more often come from content that triggers a more extended interaction. The most future-oriented thinkers are already past this battle, although there’s still a lot of fighting left to be done.

Does the war escalate from here? Do the publishers take their displeasure at Kindle pricing policies and Amazon’s apparent determination to promulgate cheap books to the next level, putting ebooks out in other formats and not Kindle?

And does Amazon, which has shown its willingness in the past to suppress the sale of print books, using its power to control the “buy” button”  to retaliate against policies it doesn’t like, fight back even harder than the Palin pricing decision indicates?

And if Amazon does fight back, do the publishers who aren’t executing this policy (Penguin is tentative and Random House is silent) benefit at the expense of those who are creating this window?

Will authors and agents (and let’s recall that a dozen agents were guests of Amazon out in Seattle a couple of weeks ago; one wonders that have been in any way a prelude to all of this) support the publishers in this policy which, after all, is costing both publishers and authors sales in the short run?

It is hard to imagine this battle ending peacefully anytime soon.

I am so glad that we have some panels at Digital Book World with agents on them and two panels on ebooks — one on pricing and one on windowing — that have both agents and publishers on them. This is one of those conversations about publishing’s future that makes no sense if you don’t include agents in the conversation and DBW is the first major conference on digital change in publishing to do that.

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Here’s a prediction that has almost no chance of being wrong. Every major player in the trade book industry is about to develop a new obsession: how must our business model change when we reach a level of ebook sales that is dynamically disruptive to the print book ecosystem?

This might not be exactly a “tipping point”, since that implies a point at which growth accelerates from some people to most people, or nearly all people. But print publishing will be seriously disrupted long before ebooks are used by “most people.” That’s because print publishing is a “critical mass” business: we need to sell enough to make a sensible print run, to keep the bookstore open, to support the sales organization and the warehouse. Our bestseller lists (with one exception) capture exclusively print sales, our author-publisher contracts and sales terms with accounts are based on the notion that we’re selling a physical object, and the biggest publishers in the land use their scale to perform capital-intensive functions that are, as much as any editorial or marketing expertise, what the authors need them for.

This presents a problem to all the incumbent players. Every powerful company in the print book supply chain: the big publishers, the big retailers (including Amazon!), the wholesalers, and certainly the independent retailers have a huge investment in competencies that revolve around print books. They can design them, jacket them, price them, print them, ship them hither and yon and keep track of each separate ISBN in the package, put them on shelves so customers will find them when they arrive and calculate when to take them off the shelves to send them back. Although there are other skills that these companies have that might port to an all-ebook or ebook-dominant world, none of these do.

Whether the challenges get acute when 20% of the sales of a narrative title are predictably e, or whether the number is 25% or 30%, the day is coming faster and faster. Growth in sales of the simplest kind of ebook — a direct lift of what is published in print — are exceeding the most aggressive predictions. The IDPF just announced that year-over-year ebook sales for August are triple what they were a year ago! Michael Pietsch, Publisher of Little, Brown, reports that 15% of total sales is the level many of their top authors are reaching now.

(Ruminative interlude: it has been my surmise that big authors will have their ebook sales “capped” at a lower level than smaller authors, just because their print books are on sale in so many more places. However, ebook sales are also very sensitive to “brand”; you don’t and can’t “browse” as many titles when you shop electronically, particularly on a device. I know that smaller publishers with less effective total distribution report Amazon sales of 60% and 80% of sales, so their ebook sales proportions are also bound to be much higher. But how the midlist authors of big publishers fare on overall ebook sales relative to the big ones is a question I haven’t asked. I will. Or, I am…)

Meanwhile, ereaders keep improving and proliferating; there have been several announcements of new devices in the past week, including the forthcoming “Nook” from B&N, which will really raise the stakes for Kindle. It will “see” Kindle’s e-ink screen and “raise” one LCD panel for link viewing, plus a 3G connection and Wifi use in B&N stores, all at the same price. B&N has the same power Amazon does to amass a robust list of titles (they have deep contacts with all the publishers) and they have at least as good a skill set for curation and merchandising to make a great shopping experience. And they’re putting their reader front and center in their bookstores (with the free wifi and some special in-store content features) which will expose the concept of the device to many people who don’t shop at Amazon and did not get blasted with a sales pitch every time they bought books.

Barnes & Noble had entertained being the ebook market leader a decade ago, losing interest when the Palm format became the early format frontrunner and wasn’t made available for intermediary distribution (one of the first in a string of futile attempts to install an iTunes device-capture model for book content, and before the iPod, at that.) Then B&N let Amazon get the jump on them in the ebook world with the Kindle; their Nook will be following more than two years later. In the meantime, B&N may have realized what all the big publishers know: that when the customer shifts to ebooks, it threatens all their business models, sunk investments, and longtime marketplace advantages. That, along with the sour experience of trying to lead on ebooks and being frustrated by what was actually a self-destructive policy by Palm, may have fed their apparent disinterest in ebooks until recently.

But it was clear to everybody that the first round of ebook growth shifted power dramatically to Amazon. Publishers have been frustrated and humbled by the Kindle’s rock-bottom, loss-leading pricing of the hottest new titles. And Barnes & Noble had to figure that, recession aside, some of those same-store sales they were missing were from shoppers who stopped coming to them because they had bought a Kindle and were now locked into the Kindle store for their purchasing to use the device.

Incidentally, the sales levels that the IDPF and Michael Pietsch are revealing are for legitimate ebook sales. Nobody knows the size of the pirate ebook market. There are some who guess it is rather small despite the robust number of files available in various hard-to-quell locations on the Internet, but if it includes any significant number of current or recent print-book customers, it only magnifies the impact on the legacy businesses.

There are a multitude of questions facing the industry about the expanding ebook market: how (some, including some highly credible voices, would say “whether”) to use digital rights management (DRM), how to price ebooks, what enhancements or updating can make commercial sense and how to manage them in the marketplace, when they should be made available, and, most important of all in the long run, what the “deal” is for the consumer (and then, based on that, for the author) who is actually licensing something rather than taking possession of something. But the questions about the declining print side are just as acute.

The brick-and-mortar bookstores, led by Barnes & Noble, are going to have to figure out how to keep their stores enticing with might be a smaller selection of print books. Nothing can grow the market for print books in the years to come, but keeping the number of points of purchase as high as possible and the traffic as high as possible are in the industry’s interests. It will require some real creativity to figure out what other activities or product offerings are compatible to keep people coming and how to drive traffic with online activity.

Amazon is not unaffected by this shift, either. Their big early lead in the ebook world was really built on the back of their superior print-book supply chain. From the very beginning, when they put out a database that had out-of-print books in it and then gave the customer a reliable delivery date for what they could sell, they created an unmatched print book shopping experience, provided a) you knew pretty much what you wanted and b) you didn’t have to have it right this minute. Their logistical capabilities are nonpareil but don’t do them nearly as much good with an electronic customer as a physical one. Their grasp on the ebook market really depends on the Kindle remaining a favored device and I think you could get good odds if you wanted to bet on that. Making hardware is not a core competency for them.

As the print business declines, Amazon continues to win if real print book demand falls more slowly than brick-and-mortar availability. But their hammerlock on the ebook market will probably not last; there will be too many better devices and they have to make a concessionary shift to selling the epub format before they can even begin to compete for those customers. They’ll do it someday, and probably soon, but they loosen the grip they have on the Kindle owners the day they do.

Publishers have an interest in continuing to support bookstore survival because the display they get there is great promotion and because being seen by a browser who put themselves at a bookstore section is still a great way to be discovered and bought. And there will still be, for some time, books which are not narrative reading which are simply better in print than in any electronic rendition. Publishers still sell a lot of these books (many of them juveniles) and bookstores, or some appropriate retail setting, are essential to them.

But publishers are going to have to rethink their operations. Sales staffs will probably contract; warehouse space will become redundant; investments in IT systems for the print operation will have to be more rigorously controlled. Publishers will likely combine, of course; the big houses now all gladly take competing publishers into their back office operations to help support them. But downward shifts in scale are not only inevitable, they will probably happen in more dramatic lurches than we’ve known in the past.

Wholesalers and distributors will both win and lose in this shift, but the shape of their business will certainly change. On the one hand, they, like everybody else, will lose sales that they have today because accounts go under and publishers they distribute cease operating. On the other hand, they are in the business of converting fixed operating costs to variable ones, and the number of customers for that proposition will grow as the apparent costs of operations (as a percentage of sales) get out of control at many companies.

Agents and the top 500 authors (an arbitrary number) are most likely to be the biggest beneficiaries of these changes in the short term. Because they themselves are powerful, searchable brands, they could actually sell ebooks themselves off their own websites, keep all the money, and make considerably more than their contracts would give them for ebook sales today even with sales of a quarter or less than the publisher and retailer get for them. (And the sales might not be that low.) I have talked to big publishers about the threat that top authors might just make their ebook deals first (you can cover the market in 4 or 5 stops and branded authors would have their own websites to sell from as well) and offer publishers print-only. Without exception, the big publishers tell me “no way we do the deal on that basis.” But if what is contended in this post is true — that keeping the print business viable is going to depend on amassing volume for it any way you can — they might not actually feel that way when presented with the problem. I think they will be getting the opportunity to make the choice.

I’ve posted on variations of this thought before. I had already decided it needed to be the topic of a keynote panel at Digital Book World. I’ve recruited Ken Brooks, Michael Cader, Larry Kirshbaum, and Evan Schnittman to join me on stage there to discuss it. Continually rebalancing the business between print and electronic, and maintaining the scale to run still-vital print operations, will be a topic of interest for just about all of us in the months and years to come.

Apologies for the paucity of posts lately. I’ve had a lot of work, been traveling, and had a bout of food poisoning. The food poisoning’s about gone, but the work and travel schedule remain robust for the rest of the month. I should become a more reliable correspondent again in a couple of weeks.

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The tactic of keeping the ebook off the market to “protect” hardcover sales, first executed by Sourcebooks this month on behalf of Bran Hambric, is becoming more widespread. At the same time that Dan Brown’s The Lost Symbol was released simultaneously in cloth and digital, Ted Kennedy’s posthumous True Compass was released in print with the ebook withheld. Now Harper has announced that the new Sarah Palin biography will come out in cloth in November, but the ebook will be held back until the day after Christmas.

The Kennedy case is a bit different because the book contained color pictures that would not render on the most popular ebook platform (the Kindle), but in all these cases the primary motivation of the publisher seemed to be to avoid having a low-priced ebook competing with its hardcover sales.

Kassia Kroszer has written a nice little rant about the counterproductiveness of this strategy, with which on purely economic and marketing grounds, I substantially agree. She points out that there is no evidence that ebook sales come at the expense of hardcover sales (of course; there’s also no evidence that they don’t…) She also posits that the ebook reader and print reader are often different people. If that’s true (and it is a general notion I’m inclined to share), then holding back the ebook is bound to just lose sales because the title won’t be available as an ebook during “maximum buzz.”

If a publisher’s concern is that reckless ebook pricing bleeds sales away from the hardcover, there is another solution. (One that can work; I have proposed solutions that can’t work.)  The publisher could just sell the ebook exclusively at its own site and price it any way they want. It would be like the publisher download is the ebook “hardcover” (i.e. expensive) which is replaced by the ebook “paperback” (i.e. sold at retailers and priced more aggressively) with whatever timetable for that the publisher wanted.

If publishers maintain their retail prices and their discounts, then the aggressively-priced ebooks aren’t costing them any margin. In that case, they’d be making more money per unit on the ebook than on the print books. There’s a degree to which the retailers’ aggressive pricing constitutes a gift to publishers and authors, even if none of them seem to be seeing it that way.

But there are also two other elements  major publishers have to  considere when they make ebook decisions: their relationship with Amazon.com and the health — even the existence — of a brick-and-mortar retail book trade.

Amazon is the driving force behind cheap ebooks, and they’re doing it to herd more and more people into their closed market with the Kindle. That’s a perfectly reasonable objective from their point of view, but it is very threatening to everybody else in the industry, all of whom would prefer a more diversified ebook market for their own reasons. That’s part of why I think selling direct off the web site at the higher price is something you might see happen. It’s a polite way to stick a finger in Amazon’s eye.

The retail book trade is important for many reasons, but the under-appreciated one is that bookstore shelf space, at 45 to 50% discount off retail, is the cheapest marketing investment publishers can make. It sorts their books out and puts them on display (hey! sometimes even in shop windows!) in front of people who want to buy a book. There isn’t any better product placement than that. Every ebook sold weakens the trade, accelerates the reduction of opportunities to put books in front of readers in the most efficient possible way. Publishers have a real interest in preserving that asset.

Earlier today we interviewed Raelene Gorlinsky of Ellora’s Cave as part of our preparation for Digital Book World. (They will be on the program!) I was aware that Ellora’s Cave existed and vaguely aware that they were an ebook-first publisher, but, not being a romance reader I was not as clued in to them as I should have been. They’re nine years old and the company is quite a story.

I’ll save the story for another time but I want to pass along one piece of wisdom from this morning’s conversation that is relevant to this post. Ellora’s Cave publishes printed-on-demand editions of those books of theirs that they can (many are too short to be print books and are only put into print as part of anthologies.) Raelene explained to us that they generally hold the print book back for 18 months after the ebook is published (and they publish about 10 new titles a week!)

Why does Ellora’s Cave hold back the print book? Because they make more money on the ebooks, of course, even though the print books cost somewhat more! (They have to pay for that paper, presswork, and binding somehow…)

Of course, I’d tell them to just raise the price of the print book for the first 18 months rather than withhold it. They’re making a close cousin to the mistake I’m accusing the conventional publishers of. But at least they’re preserving the higher margin sale, not the lower margin one.

Sometimes being in publishing makes you feel like Alice in Wonderland.

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There’s a new publishing model afoot, which is to lead with the ebook and just print what you need. That might be POD, and it might be press runs, if you can sell out whole press runs. If the ebook becomes a substantial chunk of sales and if ebooks maintain their prices, this looks like it could be a new way to do much lower-risk publishing.

Some very smart publishing people are moving in this direction. It had been the plan of the meteoric Quartet, which has already flamed out. It is part of the plan of Richard Nash, an experienced publisher (Soft Skull Press) and a budding entrepeneur. It is the model for a young and aspiring Irish publisher named Eoin Purcell. And last week, tor.com announced that it would be publishing books (this is distinct from its “parent”, St. Martin’s sci-fi imprint Tor) with an ebook first and POD methodology.

Can no pressrun publishing work? That’s a subject for discussion at Digital Book World in January, but, based on an interesting post by Kassia Kroszer, one of the four principals in Quartet, I have real doubts.

Kassia’s post makes it clear that direct sales at “full margin” (meaning no cut to anybody else in the supply chain) were an important part of Quartet’s budget and plan. They figured that by sticking to niches, and the first one was going to be romance, they’d be able to build up a direct audience and avoid sharing revenues with retailers and wholesalers. Kassia points out that savvy ebook readers (who apparently also hate DRM, high prices, lack of interoperability, etc.) are willing to support their “local” publisher, knowing that more money gets to the author that way.

This all makes me more skeptical about the model.

Savvy ebook readers are a large part of the current readership, but they won’t stay that way. If ebooks are going to become a business, than casual and uninformed ebook readers will have to join the party. Although I’ve been reading ebooks for 10 years, I’m one of those. I don’t shop around for my ebooks; I buy from what I deem to be the most convenient source. When I used to read on a Palm (in pre-Kindle days), there was no such animal, but Peanut Press followed by Palm Digital followed by ereader had to serve. Then Amazon and Kindle changed the game. And now B&N is providing me exactly what I need for my iPhone.

If a web site I was on anyway offered me an ebook I wanted that would work in my BN reader software, I wouldn’t be reluctant to buy it. But I will only be shopping at places that offer me a choice of things I want. It’s hard to imagine a single publisher doing that.

The web constantly reminds us of the value of monopoly. Amazon has a huge advantage in being the best place to shop for books because they’re the biggest. The size of the purchasing community adds value: more reviews, more data to make better suggestions or respond better to search queries, and it gives them the scale to add unique content through Kindle and BookSurge. In the same way, we’re likely to see a dominant horizontal ebook retailer emerge.

So no matter how good you are at selling your own stuff, if you want to sell to the public at large, you’ll almost always have to use intermediaries. And if you want to sell stuff to your own niche, you’re going to have to be an aggregator, not just a creator, to offer enough product to keep even a niche audience interested. And, if that’s true, then even within the niches, most of the small creators will have to share their revenue with an intermediary.

The loyal and informed crowd of romance readers may have learned that they can find the books they want at Harlequin.com or Ellora’s Cave, but there has to be a limit to the number of individual romance publisher sites the community will support. The right move for Harlequin would be to imitate tor.com and start selling their competitors’ books. (Tor hasn’t done this for ebooks, yet, but they have done it for print.)

The idea of building a niche presence for most subjects simply through publishing in it, rather than by building a real vortal or community site, seems futile. Another lesson from the web (so far; it could change) is that making your own content and selling what you make is not a viable model, except at the very highest price points. You have to figure out how to leverage other people’s content and community participation. That’s what Google does. That’s what PublishersMarketplace does. That’s what the future successful publishers I envision in the Shift speech will have done.

Cutting costs and cutting waste, which ebook-first publishing does, would certainly seem like a path to financial viability. But it takes revenue to pay the bills. If you don’t go out and reach customers where they are — at the big Internet retailers — you need to be selling ebooks to a very large community for sales to be substantial enough to run a business. And if you do use those retailers, they (quite reasonably) extract their share of revenue for delivering access to the customers.

It may be too soon for the ebook-first model to succeed, except in niches more tightly defined than “romance” (which, indeed, is a big part of Purcell’s initial approach) or when it is supported by another business (which is, if you think about it, tor.com’s approach.)

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When I did my two recent posts on ebook pricing — first one proposing “debut pricing” and then one taking it back as not viable — I got a note from a major company CEO saying that, of course, no publisher could discuss pricing with me because of anti-trust concerns. At the same time, I have been trying to staff a panel for Digital Book World on ebook pricing and was told by one of my Board of Advisors, who is from another of the big companies, that I shouldn’t expect any publisher to be able to discuss that issue.

So it was mildly refreshing to see that Arnaud Nourry, the global CEO for Hachette Books, expressed some pretty strong opinions about ebook pricing to the Financial Times in an interview. Nourry said publicly what I have only heard expressed privately before: that the aggressive pricing by ebook retailers (led by Amazon) where they actually sold ebooks at a loss could come to no good end.

On Amazon’s current policy of selling many high-profile new releases at $9.99, FT quoted Nourry as saying: “That cannot last . . . Amazon is not in the business of losing money. So, one day, they are going to come to the publishers and say: ‘by the way, we are cutting the price we pay’. If that happens, after paying the authors, there will be nothing left for the publishers.”

Nourry also expresses concern about the reported one million public domain titles that Google is releasing as free ebooks. Although the article is wrong in its reporting that Amazon charges $9.99 “for all its e-books in the US” (Michael Cader has reported several times that many are higher than that and, of course, many are also lower), we can understand Nourry’s expressed concern that “all the rest will have to be sold at between zero and $9.99.”

I agree with Nourry’s characterization of the present condition as unhealthy and threatening, but I think things look a little better for him and his fellow large publishers than his comments would suggest. And as powerful as Amazon’s position in, there is reason to believe it is at a high-water mark in the ebook marketplace and that, at the very moment Barnes & Noble is stepping up, the conditions are perfect for a competitor.

The downward pressure on ebook prices has been apparent for some time. I reported that John Sargent, CEO of Macmillan, said at a panel discussion for agents (I was one of the panelists) several months ago that maintaining ebook margins was the key strategic concern for publishers over the next few years. Since Sargent made that statement, very shortly after the announcement of Kindle 2 and Kindle DX, we’ve had a reported surge in ebook sales, a host of new reader and retailer announcements, and the further entrenchment of the epub standard. These, combined with B&N’s entry into the market, are good news for publishers.

Epub is probably the publishers’ best defense against Amazon and the Kindle. With all other device manufacturers able to coalesce around a non-Amazon standard, we have a situation analogous to the VHS-Beta conflict of the 1980s and the Mac-Windows duke-out of the late 80s and early 90s. On one side, we have a standard that remains closed to enable “control” (Beta, Mac, Kindle.) On the other side, we have a wide-open standard to enable multi-player use (VHS, Windows, Epub.) In the two cases we know about because they are historical, the consensus was that the “loser” of the numbers race (Beta and Mac) provided a superior technological performance. Kindle does not seem to have even that element in its favor. Whether you use something larger that does e-ink (Kindle, Sony Reader) or something you’re carrying anyway that is backlit (the iPhone or any other smartphone) is a matter of personal preference. But does anybody doubt that a world full of hardware creators will soon make a device that is similar but demonstrably better than the Kindle?

Right now, Amazon has a huge head start on the narrative-reading consumer ebook market. By putting Kindles into the hands of (estimates are) 1 to 1.5 million of the heaviest book consumers, they jump-started ebook uptake and grabbed a huge lead in sales. Anecdotal information gathered from publishers and agents suggests to me that, right now, 70% of the ebook sales for most titles offered in Kindle and epub are Kindle. And a lot are still sold as pdf.

But Google just put a huge thumb on the scale by making one million public domain titles available in epub for free! Those can’t be read on a Kindle without a little bit of technological bridge-building. On the one hand, if Amazon makes that bridge-building transparent and shows that it is easy for people to load epub titles on the Kindle, they compromise the whole Kindle business model. But the perception of choice — and the relative number of titles that will show up under any consumer’s search — is attacking what has been one of Kindle’s greatest advantages: a bigger title selection.

Amazon made what looked from here like a major concession last winter when they released an iPhone app for Kindle. I am hesitant to read too much into my own behavior, but that was the catalyst for me to give my Kindle to my wife and do all my reading on my iPhone. So it was easy for me to switch over to B&N when they came back into the marketplace a month or two ago. And, you know what? The shopping experience is just as good as Kindle. My wife may buy Kindle books again, but I won’t. (The Kindle on iPhone mimics the worst fault of Kindle’s presentation on the device itself: it only presents justified lines, no ragged right!)

Of course, all this means that the blades and razors strategy is going too. When Sony launched the reader, it looked for all the world like they figured they’d make their money selling the books. That was Palm’s idea too nearly a decade ago. Amazon blew them away because they were real booksellers, which they parlayed into both more title availability (they had the contacts) and a better presentation.

It will be a big surprise to me if B&N and Indigo’s Shortcovers don’t rapidly become the dominant horizontal purveyors of epub-formatted titles. And every web site and blogger will sell ebooks in their niche (why not?) which will include offerings that might not make the full-line distribution system. The next question is how long it will take Amazon to start selling epub titles as aggressively as they sell Kindle and print books. Or make Kindle transparently epub-compliant, which amounts to the same thing. They’ll need to do one of the other to protect their overall franchise, but it might mean the end of a meteoric Kindle era (remember the Commodore 64?) when they do.

Oh, and one note on all that to Mr. Nourry. If I’m right about the overall situation, don’t worry about Amazon telling you they need more margin. Because they’re going to need your titles fully as much as you need their sales. Expect to start seeing movement on this first from the smaller publishers, some of which report that they have been pushed into relatively low-margin deals by Amazon. There will be competition among epub vendors; they’ll all want to have the biggest number of titles (and accept the challenge of curating and presenting that.) If you can get higher revenues by 25% or more in one channel, might you be tempted to try to “force” consumers to buy it there by withholding from the lower margin channel? You’d surely be tempted.

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