Jun 3 2008
Jeff Bezos, CEO of Amazon, campaigned hard on Friday on behalf of the Amazon e-reading device. Booksellers are becoming increasingly nervous about the rise of ebooks. According to the New York Times article, Amazon is selling many of its Kindle books below what it costs to buy the book from the publisher. Amazon, for example, sells all new hardcovers at $9.99. Assuming Amazon gets a 40% discount off the retail price, it’s likely averaging a $5.00 a book loss on hardcovers.
The article appears to conflates booksellers and publishers because it implies that booksellers fear the Kindle because Amazon’s market power may leverage lower publisher prices. I would think booksellers would welcome a lowering in its inventory cost, but worry that ebooks would eat into their market share. Conversely, publishers see a rise in revenue from increased ebook sales given lower operating costs, but would not want to lower its prices upon pressure from Amazon.
Ebook sales are increasing. According to the article:
Nearly all publishers say their sales of electronic books are growing exponentially. Carolyn K. Reidy, the chief executive of Simon & Schuster, said its sales of electronic books will more than double this year compared to last year, after growing 40 percent in 2007 from 2006. David Shanks, the chief executive of Penguin Group USA, said his company sold more electronic books in the first four months of 2008 than in all of last year.
Ultimately, I think ebooks are the wave of the future and brick and mortar stores will have to rethink how to monetize their businesses.
Via New York Times (thanks Tina B).