eBook Market Needs Transparency, and Fast

iBooks eBook Market ShareBy Guy LeCharles Gonzalez, Chief Executive Optimist, Digital Book World

“Five of the six biggest publishers in the US, who have their books on the iBookstore tell us that the share of eBooks now that are going through the iBookstore, is about 22%.

So iBooks market share now, of ebooks from 5 of these 6 major publishers, is up to 22% in just about eight weeks.”

Steve Jobs, WWDC 2010 : June 07, 2010

From consumer demand, to devices and DRM schemes, to piracy concerns and reliable sales data, the nascent but undeniably booming eBook market is becoming a smoke and mirrored mess for anyone looking for straight answers.

During Apple’s Worldwide Developer Conference 2010 on Monday, Steve Jobs added the latest puff of smoke with his carefully worded statement on iBooks’ eBook market share that many media outlets took out of context, paying more attention to his visuals than his words, gleefully “reporting” that Apple, in only two months, had miraculously cornered more than 1/5th of the market with their relatively minuscule selection of eBooks from only a handful-plus of publishers.

One of the most glaring instances is the sensationalistic Motley Fool article, Apple Will Eat Amazon Alive, in which they engage in the kind of “analysis” that enabled little things like Enron and the sub-prime mortgage crisis:

That’s good enough for a 22% slice of the e-book market, according to Apple’s publishers.

Now, before we begin shrugging our shoulders at a 22% sliver of the nascent digital book market, or musing on how many of those 5 million books were public domain freebies, let’s consider how remarkable an accomplishment this actually is…

If you’re Barnes & Noble (NYSE: BKS) or Sony (NYSE: SNE), throwing in the digital towel doesn’t seem like such a crazy idea at this point.

This isn’t Mashable or even Publishers Weekly getting it wrong, but a notable financial news and analysis outlet that claims to be “The World’s Greatest Investing Community” ignorantly pushing a lie that could adversely affect both Apple’s competitors and their publishing partners.

Even Allen Weiner, a research VP for Gartner, was misled by Jobs’ discordant visuals and heavily nuanced statement:

At the Apple World Wide Developers Conference, CEO Steve Jobs announced that in 65 days, five million e-books have been downloaded for the iPad. Using some sort of voodoo algorithm, he claims that amounts to 22% of all e-book sales. I am not sure how he calculated that given many of the e-book retailers are private and publishers are loathe to share those sorts of figures. Nonetheless, the take-away is that Apple is selling lots of e-books for the iPad.

This is important for a number of reasons, the most apparent one being that reading books on mobile, digital devices are real. The other notable revelation could be that consumers are OK with reading e-books on an LCD screen (iPad) even though it offers a less optimal (read, harder on the eyes) reading experience than e-paper devices such as the Kindle, Nook, Sony Reader, etc.. This early in the e-reader evolution, perhaps consumers are willing to trade a less optimal e-reading experience for the added bonus of video, games and other applications available for the iPad.

invisible ipod by timsnellUPDATED: Just saw this over at Publisher’s Lunch (registration required):

In another sign of how sentiment is running on Wall Street, yesterday Bank of America-Merrill Lynch lowered their price target on Amazon.com, from $155 a share to $150. Of course that’s well above the company’s current trading price, and the day before Goldman Sachs analyst James Mitchell had raised his target to $190 a share, basd on an expectation of growing sales in China.

So there’s plenty of opinion out there–but Amazon is more than 20 percent down from a recent high of 150 a share in April and with a high price-to-earning ratio of over 51 may be more sensitive to changes in investors’ growth expectations.

As I noted two weeks ago, reflecting on the hiccup in eBooks sales growth in February and March, the second quarter of 2010 will offer a new benchmark to watch as the effects of Apple’s claim of 5 million eBook downloads (not sales, downloads) via iBooks will finally move beyond speculation and spin and into [still somewhat speculative] measurable data.

A few questions that need be answered, and fast, are:

  1. How much of the decline in February and March was attributable to Macmillan’s [and Penguin’s, et al] eBooks being removed from Amazon during their dustup over eBook pricing and the move to the “agency model”?
  2. Will April sales spike upwards, and will it be thanks to iBooks or the iPad’s relatively open platform that allows Amazon, B&N, Kobo and others to play along?
  3. Will the Nook have any impact at all, and if so, will anyone acknowledge it?

Of course, the $100,000 $1,000,000 Question is will Amazon or any publishers come forward with hard data on their eBook sales to confirm any of the answers that are offered to the above questions?

And if not, why not?

NOTE: On Twitter, The Motley Fool responded, somewhat coyly, to my questioning their analysis: “Well, that’s why we have ‘Fool’ in the name. (: We’ve passed your observation on to the writer of the piece in question.”

Considering the writer, Rick Aristotle Munarriz, hasn’t bothered to respond to any of the comments left on the article itself, some questioning his “analysis”, I’m not holding my breath.

14 thoughts on “eBook Market Needs Transparency, and Fast

  1. Nick Ruffilo


    Well written article – You bring up something that few do – most statistics, especially when obfuscated are really just a warping of words. There’s no doubt that Apple is a force to be considered, but all this means is that Amazon, BN, and Google need to stay on their toes and innovate.

    In 2-3 years time, we will look back on the kindle, the nook, and other black/white e-book readers and laugh. In fact, we will probably look back on the iPad as if it were a first-generation iPod.

    Will Apple become the dominant force in e-books as its become with music with iTunes – possibly, but now is way too early to call.

    Again, great article.

    1. Guy LeCharles Gonzalez Post author

      Apple was handed instant market share when some publishers jumped on the Agency Model, blindsiding many of their long-time wholesale partners in the process. Playing along with their spin is kind of a cutting your nose to spite your face exercise; if iTunes manages to become the dominant player, I suspect many publishers will look back wistfully on good old days of the Kindle and $9.99 eBooks.

      Thanks for the compliment!

  2. Don Linn

    I’m not quite sure why the ebook market ‘needs’ transparency in reporting sales to the public. Most businesses don’t report sales by product other than as required by the SEC for distinctively different lines of business (which ebooks are not), where data (like auto registrations) makes sales by product easily obtainable, or where it’s in a company’s interest to disclose such data. I’m not sure it is in Amazon’s and Apple’s best interest right now nor should they be expected to do so any more than one would expect F+W to break out specific numbers for DBW for the sake of the public’s curiosity.

    What Jobs said was, I assume, factually correct (albeit phrased in a way worthy of the spinmeister he is). It was the media that made the incorrect leap. And the last time The Motley Fool was a credible source was sometime late in the dotcom bubble.

    1. Guy LeCharles Gonzalez Post author

      I think the need for transparency comes from the fact that many of the companies involved are publicly owned, and the whole “death of publishing” meme is partly being driven by the belief that there’s an eBook Tipping Point coming that’s going to put some of those companies out of business, while making others’ stocks soar. It’s the dotcom boom all over again.

      1. Julieta Lionetti

        Great article and better answer, Guy. We are allowing estraneous forces to decide the future of publishing and, of course, that of the book. And yes, I can see all the syptoms of a bubble and the sound and fury of battles that go beyond the book industry: Apple vs. Google vs. SM vs. whatever but books.

  3. Des Greene

    Transparency or not the ebook revolution continues apace despite the denial of traditional publishers and media in general.

    If ebook sales can reach present levels in such a short time without the benefit of acceptance by newspaper reviewers and other media commentators, the mind boggles at what will happen when mainstream media keel over and start accepting/reviewing new epublished work.

  4. Cathy Macleod

    The biggest power of all in the ebook market is me and other readers. We’ll follow good content, easy access and reasonable pricing . The device doesn’t matter if we can’t download a decent read. So far the razzle-dazzle has left me hungry.

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  6. Kassia Krozser

    I’ve been thinking about this quite a bit, and keeping asking myself who “needs” this information? I know many of us want more details, more transparency, but the parties who need the information are certainly getting it. Amazon and Apple communicate to their investors and certainly track in-house data very closely. Publishers are getting more than sufficient detail to do necessary analysis — unless there is something very wrong, they should be getting daily flash reports, at a minimum.

    That being said, I doubt either Amazon or Apple will follow Kobo’s lead and provide more detailed information. They certainly are not obligated to do so, and history shows they tend to report more on milestones than specifics. In fact, I’d venture to say that any of the public statements they make about Kindles or ebooks is not targeted specifically at the publishing industry as much as other interested parties.

    What I would love to see is more leadership from the big publishers, and, yes, that includes providing more sales data. O’Reilly does a great job of providing data, though they obviously are not giving away everything. And they are one type of publishing house. Given that publishers have the advantage of not only consolidating ebook sales across various channels but also price points and even release periods, it seems the kind of transparency you are seeking would best be served by publishers.

    While I would agree that there is a likelihood we will see one or more of the so-called Big Six companies fold into another house or worse, I think that future is less associated with any “ebook tipping point” than with the fact that most of these publishers have parent companies who demand certain performance measurements that don’t necessarily jibe with the market realities. Ebooks represent a new market to exploit, but anyone hoping they’re going to save publishing is looking at the business too narrowly.

  7. Stephen Bateman

    I think until there is some measure of stability and normality in the market, publishers will continue to be focused on their balance sheets and on saving or growing their enterprises. Reporting digital sales is not the current preoccupation of the big publishers since, for the majority of big publishers, the sales of digital units are so insignificant compared with the downturn in their sales of physical books. Even those publishers making up some of the difference by selling books through their websites are scarcely able to off-set the effects of the downturn in the high street.

    On the other hand, new entrants in the digital publishing marketplace, who are not encumbered by efforts to improve failing legacy businesses, are very happy to report their sales because these are proof of genuine growth and accomplishment. If they don’t report them publicly they certainly talk about their figures openly. Many new publishers working with authors on new media projects are working in partnerships with authors on the basis of “shared risk” with no royalty advances. Transparency is built into these collaborative arrangements. Parties have agreed that they will only earn a return on effort and moneys expended, when sales of the product push the profit and loss account beyond the threshold of break-even. So there is no need for mystery.

    Publishing as we know it (knew it) is in the doldrums. The digital media agencies and developers I meet with, all say so. There is no funding in publishing because expensive liabilities are crippling the publishing houses.

    The digital media agencies, however, are starting to adapt their approach to business by mixing their revenue models with more capital intensive projects.

    With their better understanding of the current and future needs of consumers, they are starting to put the chips on the table to fund projects, manage and produce them with teams of authors, editors, designers and production professionals. Lay-offs of skilled publishing professionals with 20 000 or 30 000 hours of premium experience and connections under their belts inevitably contributes to a re-clustering of creative and business talent.

    Innovation and new product development in the non-fiction reference market is evolving at breakneck speed and we are on the verge of witnessing some very ambitious game changing new formats arriving through new channels and from new publishing sources.

    When this market re-establishes its norms, then I believe we will see better, more accurate and more meaningful sales reporting. But until then publishers have bigger cats to swing.

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