The Week That Was: Kindle, Amazon, iTunes, Barnes & Noble, and Fictionwise

March 6th, 2009 · 27 Comments
by Kassia Krozser

Used to be that working the d-book (digital book) beat was an easy gig. You could go years without any news of note. Lately, you can’t go to bed for fear of missing a story. Digital books might not be a major revenue item on the P&L, but they’re the hottest story in Pub Town.

Competition is good for books, devices, retailers…and readers.

(Benefit: the press, blogosphere, Twittersphere, and other spheres are talking about books. A lot.)

Hot on the heels of the Kindle 2 and its (silly, pointless, and, frankly, reader-unfriendly) controversy came the long-rumored Amazon Kindle iPhone app. Just as we wrapped our minds around that development, we hear word that Barnes & Noble has purchased Fictionwise for $15.7 million. And, of course, we have Amazon demurring, politely of course, when asked about the possibility that they’ll sell one million Kindle units by Thanksgiving.

So what does all this craziness mean? I’m going to go out on a limb and make a major (ha!) prediction: lower ebook prices from all retailers. Amazon has built a marketing talking point around the $9.99 price point (the fact that many books exceed this amount is irrelevant). Barnes & Noble is no shrinking violet when it comes to the price discounting game. If they don’t use their awesome leverage to lower prices from Fictionwise, I will lose all faith in capitalism.

(Yeah, yeah, yeah, but without cock-eyed optimism, what do we have?)

Let us start somewhere around the middle. While B&N has made noises about getting involved with the (not-ready-for-production) Plastic Logic Reader, Amazon went ahead and knit together the retailer/device/mobile/daddy experience, much like Apple did with the iPhone/iPod. It’s still a possibility that Apple with get itself into the digital book space, but right now Amazon has some serious mojo going on while Barnes & Noble has potential on its side.

Pieces of the puzzle:

  1. Ecosystem: Amazon has created a book-to-reader ecosystem that is painless, portable, and now Kindle-free. I can read on my Kindle, I can read on my iPhone, I can sync between devices via the vaguely dirty-sounding “Whispersync”. That is nifty. I’m sorry, it is. Mr. Andrew Jackson book, we do not ever need part (until I am finished with you!).

    But wait, there’s more! Anyone with an Amazon account and an iPhone/Touch can make use of this free application. It’s not just for Kindle owners. It took Carolyn Kellogg of the Los Angeles Times Jacket Copy about one second, probably less, to grok this. It took the Booksquare test kitchen approximately five minutes to play out this experiment in real life (Kindle app downloaded at 12:15 a.m. on day of release, test title downloaded at 12:20 a.m., but, in defense of our test kitchen, other features were also being explored.).

    You can buy a Kindle edition from the Amazon website — at their price — and have it on your iPhone in moments; you can also, if you’re brave enough, buy a Kindle book on your iPhone through the Safari browser. The process isn’t Kindle-seamless, but, well, it’s close enough for government work. Setting aside our next point, one of the biggest challenges facing Amazon’s competition is the creation of a smooth-as-silk consumer experience. If Barnes & Noble can, at least, fix the Fictionwise purchasing process, get rid of all those steps and additional effort, that’s a huge win for everyone.

    Those who speculate that the new iPhone app will impact Kindle sales exhibit a serious misunderstanding of the customer and the market. Reading on the iPhone and reading on the Kindle are two entirely different (but pleasurable in their own ways) experiences. It’s possible that someone who is on the fence about the Kindle will say, “Well, now that I can read on the iPhone, I’m not shelling out that $350.” It’s far more likely that the iPhone app will serve as a gateway drug that will lead to heavier Kindle usage.

    (This is why the Authors Guild claims about text-to-speech cannibalizing the audiobook market were ludicrous — do they honestly think Mama Amazon raised stupid employees?)

  2. The Fragmented Fictionwise Customer Base: While the Kindle consumer is neatly integrated into the Amazon Ecosystem, the Fictionwise consumer is fragmented. They use a wide range of devices and platforms to read. Check out this FAQ page to get a sense of the insanity that is digital publishing today. Format stuff is invisible to the average Kindle customer; however, our recent survey clearly showed that the average reader of digital books juggles formats like crazy.

    This is a real challenge for Barnes & Noble, but it’s also full of potential. The Fictionwise customer is not necessarily the Kindle customer. There is some overlap (there’s always some overlap), but if B&N wants to form the loyal opposition, they need to retain the unique customers while offering them a device that — at the very least, offers the same level of functionality of the Kindle (not an easy prospect, to be sure, what with the wireless problem) — and something more…yep, a standards-based system that invites portability.

    Tough order. Personally, I’d partner with Sony right now, settle on a standard format (voting EPUB), and implement some of the necessary portability right now. Use that awesome physical store presence to engage customers (funny thing: people who are skeptical about ereaders are less so when they touch and engage them). Fictionwise already has a relationship with Stanza, so no need to go crazy with the iPhone, etc. apps. Go with the application that already has over a million downloads — clearly, they have a head start on the customer base, and they’re confident about their ability to compete.

  3. Pricing: Amazon is porting its under-$10 philosophy to the Apple world. As noted above, anyone can use this app. All it takes is a purchase from Amazon (you cannot read your non-Kindle DRM content via the iPhone app, at least not that I’ve heard). Already, this puts companies like Scrollmotion/Iceberg, Fictionwise/eReader, and (our fave!) Lexcycle/Stanza at a disadvantage. They can’t compete with Amazon’s price points.

    Meaning, um, hello, dominant player on another platform. Pricing was one of the keys to iPod success. Readers price shop. They price shop among online book retailers and they’ll price shop when it comes to iPhone choices. These are early adopters living in tough economic times. Give them choices, they price shop. And you, publishing business, have created a sort of false economy where you pretend Amazon is subsidizing the difference between your discount and their prices, but let’s be frank: your approach to pricing is going to kill competition, though the Barnes & Noble deal obviously gives hope to Fictionwise and Stanza.

    Here’s the problem: because publishers insist on a Digital Price List that equates the digital book with the print book rather than, oh I have to say it!, thinking outside the book, they’re killing competition to Amazon. Without competition, we don’t have innovation. Without competition, consumers lose. Without competition, publishers are at the mercy of one very demanding customer.

    Consider for a moment the example I used a while back in my post about the Iceberg Applications by Scrollmotion. Brisingr is available as a stand-alone application for the iPhone for the low, low price of (and I’m still not kidding!) $27.99. It is available in a Kindle edition for $9.99. Same book. Maybe the Scrollmotion technology is just that awesome and I’m missing the magic, but I’m not going to spend close to $30 to do a side-by-side comparison.

    The question becomes: how does a new company even begin to compete?

    Why not make the shift now, while the business is nascent rather than waiting for things to get ugly?

    On this topic, we frequently encounter the strawman-esque argument “why should the author get paid less just because it’s an ebook?” To which I’d reply, “Why should the consumer pay more for the privilege of giving up rights, quality, and flexibility?” The bigger point, of course, is that authors are not really getting paid less. The correct way to look at this is to see ebooks as a different format (just as trade paperback and mass market are different formats) with a different price point.

    You could — if you wanted to stretch it…and I do — argue that authors are being paid more for ebooks. They get paid for every book sold. After all, there is no after-market for electronic books. Consumers cannot legally resell them nor can they share them with family and friends. The ebook customer must pay for her books. Plus, if Amazon’s statements are to be believed, Kindle customers are buying more ebooks than print customers. Gotta be worth something, right?

  4. Content: Amazon has the biggest library of digital content right now. That’s probably going to change, but right now, they’re getting just about everything that can be got. If you listen to your customers, you will discover a lot of frustration at your digital release patterns. A. Lot.

    Drives them batty.

    As long as you persist in making licensing and distribution and process as hard as possible, you’re killing competition. Two words that might help: day, date. Get over the funny notions about “cannibalizing” sales.

    But when it comes to customers, I’m not just talking about books. I can buy a tankless water heater and few d-books from Amazon. One gets delivered to my front porch, the other to my Kindle/iPhone. So okay, most d-book companies can’t compete there; at least give them a fighting chance on price.

While I always root for the underdog*, I see serious obstacles ahead for Barnes & Noble. They face the challenge to be at least as good as Amazon in the digital book arena while dealing with the prospect that success requires differentiating their product and service from Amazon. The Fictionwise purchase gives them customers and an entré into the exploding (finally?) mobile market.

Competition is necessary in this market. It’s good for the books, it’s good for the devices, it’s good for the retailers, but most of all, it’s good for the readers. Remember: your job — everyone — is to make us happy. And when we’re happy, you’ll know it!

* – With the notable exception of the Yankees, but we all have our weaknesses.

File Under: The Future of Publishing

27 responses so far ↓

  • The Week That Was: Kindle, Amazon, iTunes, Barnes & Noble, and Fictionwise | eBook Business // Mar 6, 2009 at 12:34 pm

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  • bowerbird // Mar 6, 2009 at 5:17 pm

    brave prediction, kassia.

    prices can’t go up.
    they can’t even stay the same.
    voila, predict they will go down.

    what a prophet!


  • Cathy Macleod // Mar 7, 2009 at 12:14 am

    You ask how does a new company compete? We at Darling Newspaper Press compete very nicely thankyou, being new to ebooks yet old in the wiles of publishing. We make good use of the Mobipocket website (also owned by Amazon!) and it gives us distribution worldwide to many retailers. Also includes the Kindle Store. With physical books, this vast coverage would be impossible for a small publisher.

  • Melody McClure // Mar 7, 2009 at 4:17 am

    The notion that pricing ebooks lower than physical books would result in authors being paid less conveniently ignores the fact that paper must cost something. If we readers aren’t buying paper, we shouldn’t have to pay for it.

    The fact that publishers make the authors-will-be-paid-less argument is proof that they are cheating the authors. Authors provide the content. Publishers provide the delivery platform. Why should authors take the hit if readers choose a cheaper delivery platform?

  • Lorrie Blackburn // Mar 7, 2009 at 5:07 am

    Melody hit the nail on the head; now I’m going to drive it deeper. Not only does the publisher save on paper; they save on shipping, storage, overstocks, and returns. You can’t produce too many copies of a digital product; you can only produce exactly what is demanded by the market. It’s a perfect scenario for publishers. Why can’t they see that?

  • Michael Tannenbaum // Mar 7, 2009 at 2:06 pm

    A well reasoned summary of the ebook market to-day. However one factor probably makes an purely on-line retailer such as Amazon the probable victor. They do not have to absorb the costs of keeping all these stand alone stores in dying shopping centers alive. The retail book store is doomed and the recession/depression will only accelerate the process. Amazon can and will flay the opposition on price, availability and convenience.

  • bowerbird // Mar 7, 2009 at 2:44 pm

    melody said:
    > The fact that publishers
    > make the
    > authors-will-be-paid-less
    > argument is proof that
    > they are cheating the authors.

    publishers _do_ cheat authors.

    but the reason they say that
    is because contracts typically
    compute the author royalties
    based on the _list-price_ of
    the book, so if e-books have
    a lower list-price, then authors
    will indeed be “paid less”,
    at least on a per-book basis,
    although they might actually
    end up making more money if
    e-books sell in greater numbers,
    which is entirely possible,
    since publishers have hit
    (and probably gone far past)
    the point of charging much
    more than the market will bear.

    o’reilly is selling a p-book of
    “the iphone missing manual”
    for $24.99. when they issued
    an iphone-app version of it,
    the “introductory” price was
    $4.99, and it was a huge hit.

    they raised the price to $9.99,
    and found that sales plummeted
    to just 25% of the previous level.

    so they dropped the price again,
    and sales went back up again…

    the near-zero marginal cost of
    e-books makes it very easy to
    sell books at a low price-point.


  • Kassia Krozser // Mar 7, 2009 at 3:47 pm

    michael, your point about retail space is well taken, though retail remains a bigger seller than amazon (i believe, haven’t looked at recent numbers). but overhead — in the form of rent — remains a key aspect in success (and having this technology in retail would be a benefit as the hands-on experience helps convince people that digital reading isn’t weird or uncomfortable).

  • Kassia Krozser // Mar 7, 2009 at 4:00 pm

    There are definite cost savings in digital, but there are also costs that cannot be avoided. And there are costs that must be considered even though they aren’t necessarily new: hardware, software, storage, servers, connectivity, etc. Even in those cases where fulfillment is handled by a third party (such as Amazon), the publisher still bears cost burden. And I’m not even including such things as editorial, production, air conditioning, and marketing.

    The problem from the perspective of the consumer is this mythical digital list price — the tying of the digital edition to the current print edition. Royalties are often paid based on the “printed” retail price of the book. But it doesn’t follow logically that authors “lose” money when the digital list price is lower (for the reasons I noted). They only lose money in a mythical scenario where the digital price list is set to match print editions. Or, if the author loses a digital (and print) sale because the consumer won’t buy at hardcover prices, but sells two books at at $9.99 price point, where is the loss? There seems to be some assumption that the customer is the same in digital or print (sometimes true, but mostly not).

    This is the big internal battle for publishers — and they are very reluctant to turn this business model around (understandably…change is scary and hard). In the current digital scenario, Amazon is indeed subsidizing a portion of certain Kindle sales, and that works for Amazon in the long run. Other powerful retailers will exert similar pressure on the existing structure because the additional “discounts” will not come in the form of co-op/placement payments.

  • April L. Hamilton // Mar 7, 2009 at 6:24 pm

    I wrote about this not long ago at Publetariat, in part 2 of my #TOC trip report:

    At lunch one day, a gentleman at the table asserted it’s unreasonable for readers to expect ebooks to cost significantly less than their bound-paper counterparts. Casting myself in the role of “ignorant consumer,” I asked him to explain why ebooks shouldn’t cost less on the basis of savings in paper, printing, hard copy distribution and shipping costs alone. He explained that those expenses don’t just go away, but are replaced with equal or even greater expenses introduced by the need to preserve “branding” in the ebook through the use of specialized layout, design and typography experts and technologies.

    He took as his example the ‘Dummies’ series of books, which utilize proprietary fonts and graphics and are all laid out for print in a manner consistent with one another (i.e., sidebars with tips and gotchas, highlighted through the use of specific graphic icons). He went on to explain the incredibly difficult and expensive process of trying to faithfully recreate the Dummies ‘experience’ in an ebook, particularly since there are so many different ebook file formats to deal with, each with its own limitations and technological specfications.

    When I raised the possibility that it might not be necessary to perfectly reproduce every aspect of the paper book when releasing it in e form, because people who read ebooks don’t necessarily expect electronic books to look identical to their paper counterparts, he flatly disagreed. Preserving the ‘look and feel’ of the paper book was critical, he felt, not only to meet customer expectations but to keep the sanctity of the ‘Dummies’ brand intact.

    Like so many others I met at the conference, this gentleman has not yet altered his definition of the word “book”. Numerous speakers at TOC exhorted attendees to stop thinking of books as those paper things bound between two covers, and recognize that when people buy books, most of them are paying for the content—not the delivery system. And with some notable exceptions (i.e., books containing physically interactive elements like letters to be pulled out of envelopes bound into the book, pop-ups, etc.) paper bound between covers is nothing more than one of many possible delivery systems for content.

    There was much agreement with this gentleman’s point of view at the table, however. So when you see an ebook from a mainstream publisher that’s priced at or above the price of the paper version, it’s probably because the publisher is spending lots of money and effort to faithfully recreate the ‘look and feel’ of the paper book for you—something they’re very certain is critical to you, even though they’ve never actually asked your opinion on the matter. In other words, they’re trying to force new media into an old media mold; they don’t get it.

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  • victoria mays // Mar 8, 2009 at 6:18 pm

    every blog/article I have read has not touched on the fact that while Amazon has a huge selection of ebooks to offer a reader by using the kindle for the iphone, none of these book reside anywhere but on the unit. I purchases atleast 20 -30 book a month from fictionwise, BooksonBoard, ARE, Ereaser and a host of other ebook stores that I like to have the physical file for on my desktop and transfer them to my iTouch using stanza desktop or via wi-fi. The Kindle for the iPhone does not provide this feature, so basically you buy a book at the kindle store that can only be read by a kindle or the kindle app. What happens if you unit breaks, now you have books that can’t even be read on your dekstop.

  • Kassia Krozser // Mar 8, 2009 at 8:28 pm

    victoria, it *is* possible to download your kindle books from amazon. you can read on your computer. not saying this is a pretty solution, but you can grab your books.

  • Kassia Krozser // Mar 8, 2009 at 8:32 pm

    April — I think I read your piece, and agree about the “faithful” reproduction. For some books, layout is absolutely essential, and a challenge that must be met (though, conversely, I think some books will be better in print only because of said layouts). However, passing these technical costs on to the consumer is not necessarily a good business choice (though I’d make an exception for a beautifully rendered work of art). Part of the problem is that these books are being made digital second, print first. Turn that process around and you have a lower cost.

  • Myca // Mar 9, 2009 at 9:49 am

    Kassia – As a relative newbie to the publishing industry (and an even newer addition to digital publishing!) I would be very interested to hear your take on Symtio – a new way to buy eBooks and audio books. It seems to be one of the few ways to ‘gift’ a digital product, which is intriguing to me.

    It also brings together many different formats in one convenient location that we don’t necessarily think of when looking for digital products–a physical store.

  • Clive Warner // Mar 9, 2009 at 1:57 pm

    Personally I agree the price is too high. My bottom line is that I want to make the same profit from the EBook that I get from the paper book. Which means the DISCOUNT has to change. What does it cost me to produce the EBook? Almost nothing. I have already typeset and produced the paper version so I have Adobe files of the book block and cover. Merely press a few buttons and I have a PDF file. Downloads cost almost nothing.
    I.M.O. Ebooks should retail at $4.95 with Amazon getting $1, the author gets $1, the publisher gets $2.95

  • Kassia Krozser // Mar 9, 2009 at 8:35 pm

    Thanks Clive for chiming in on the discount concept. Right now, publishers are (in my hardly ever humble opinion) starting from the wrong price so they’re setting the wrong “discount”. The model only makes sense if you truly believe that each d-book sale replaces an equal physical (hardcover in this example) book sale. A does not equal B. When you do your models, you don’t assume that digital sales will replace physical on a one-for-one basis and price accordingly. I keep harping on the notion that digital books need to be seen as a separate market. The distribution might be day-and-date, but the customer is not necessarily the same. Price differently. Treat differently.

  • Sean Cranbury // Mar 10, 2009 at 5:34 am

    Kassia: you’re really hitting a stride these days. Funny what you mention at the beginning of the article, that you can’t blink these days without some exciting new development in the digibook craze. It’s almost worse than hoola hoops.

    Question: what – besides time – is really preventing the ebook from retailing at less than a dollar and essentially trading on torrent sites for free? Like the mp3 does?

    I’d like to submit this perspective: The digital file is strictly utilitarian and transferrable. It is a lower quality version of the print – lacking in the short term wacky fonts and the presentation of many paper texts – and is intended to serve the consumer as a quick and portable book. Read it on the subway, in the waiting room, wherever. Tuck it back into purse or pocket when the time comes.

    But people require ‘thingness’ for money. They require 3 or 4 dimensions to be present for their hard earned cash.

    This is where the publisher gets to really strut their stuff by providing the book as gorgeous physical object that demands to be owned. Whether it contains ‘extras’ that cannot be found in the digital realm or not.

    The digital book is the bait for the physical specimen.

    This is probably obvious.

    Anyway, if I were a publisher just starting out I would give my books away electronically on as many different platforms as possible. I would make quick friends with independent software engineers – sometimes called hackers 😉 – who can facilitate these things. All digital material would be available from my home site and would be posted on all torrent and download sites. The files would obviously contain data leading to the homepage and other retailers carrying the physical book and etc…

    Am I crazy to think that digital books will eventually become at or near costlessness for the consumer?

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  • Pageless // Mar 13, 2009 at 8:25 am

    I really think you’re onto something with “treat differently.” I say, stop calling all ebook-sellers conglomerates, there are plenty of ebooks stores that are as independent as your favorite coffee shop. is one of my faves. I also like Gutenberg project.

  • Anysia (Booklorn on Twitter) // Mar 16, 2009 at 12:20 pm

    At first I thought Amazon was clever for releasing an iPhone app for the Kindle format because I thought their goal was to sell more books. Then I realized their goal is to sell Kindles, not books. Not so clever after all since books are the attraction, not some fancy piece of hardware, especially when the target audience already has a fancy piece of hardware (iPhone) that does the same job (yes, it does — I’ve read books on PDAs for years I don’t need eInk @ $369 US).

    The iPhone Kindle app is restricted to US customers making it painfully clear that they are, as you suggest, using the iPhone Kindle app as a gateway drug to entice more Americans to buy Kindles. Amazon is missing the mark by excluding readers outside of the US. Whether this is a marketing thing or a rights issue, I don’t know (and, as a consumer, I don’t care: gimme books).

    As an aside, I have seen the geographic rights issue used as excuse to restrict distribution of ebooks to the US. This is an issue that the publishing industry is going to have to figure out when it comes to ebooks. It’s not called the worldwide web for nothing. If you’re doing business on the web with a digital product (like ebooks), it becomes increasingly counterproductive and off putting to try to restrict sales geographically.

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