Is Apple Now the No. 2 Ebook Retailer in the U.S.?

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I wish I could give you a clear answer, but after nearly a month of investigation into whether Apple or Barnes & Noble is now the second-largest ebook retailer in the U.S., this is the best I have: It depends.

Over the past month, I’ve spoken to over a dozen large, medium and small publishers of ebooks and a handful of important ebook distributors which cater to indie authors. Many of them have shared with me their ebook retailer market share breakdown for the past three months (December, January and February). At the same time, due to the sensitivity of the matter (no publisher wants to publicly acknowledge what percentage of revenue comes from Amazon, for instance), many publishers officially declined to share data with me.

That said, I have unofficial sources within publishers and managed to get some idea of ebook retailer market share at large, medium and small institutions. Ebook distributors that work with indie authors were more forthcoming.

While there is no consensus among my sources as to which ebook retailer is No. 2, some patterns have emerged:

 

Among the largest publishers, Barnes & Noble seems to still be solidly No. 2 behind Amazon, but both Apple and Amazon are gaining market share and B&N is losing it. 

Barnes & Noble’s results over the past year inspired me to undertake this line of inquiry. Quarter-to-quarter, the company has continued to see digital content revenue decline. For instance, in its latest quarterly report in February, Barnes & Noble sold $57 million in digital content, a decline of nearly 27% over the same quarter a year ago. This was typical of the company in the past year.

At the same time, I tried to figure out whether Apple had increased its iBooks revenue over the past year. A company spokesperson declined to comment.

One surprise in looking at large publishers is that Google kept on coming up as a retailer that is gaining market share.

 

Among medium-sized publishers, Apple and Barnes & Noble are closer. 

Among the medium-sized publishers I spoke with, some are making more money with Apple, and some with B&N. I was told that month-to-month, genre-to-genre and book-to-book it changes.

 

Among small publishers, Apple seems to have taken the market share lead. 

I was told by small publishers that Apple has become very attentive to their needs while the opposite has happened at Barnes & Noble. Apple’s efforts, they told me, have paid off.

At a small publisher, one book can make a huge difference in retailer market-share over the course of a month. I was told several stories of how clever marketing by Apple for titles with momentum resulted in huge market-share swings in Apple’s direction over the course of a month or two. I was even told by one small publisher that for one book, Apple far eclipsed Amazon in sales.

 

Among indie authors, Barnes & Noble is likely the leader still, but it’s unclear. 

One major distributor had Barnes & Noble in the lead, but not by much and with the margin shrinking. Another said Apple was far ahead.

“Apple is our No. 2 ebook retailer over the past year – and a strong No. 2,” said Matt Cavnar, co-founder of Vook, which distributes about 5,000 ebooks for authors, small- and medium-sized publishers and its own publishing operations.

According to Cavnar, Apple is paying a lot more attention to what Vook’s author and publisher clients are doing and capitalizing when possible.

“They have been extraordinarily diligent about merchandising and making sure they keep on eye on all the marketing – even the marketing we’re doing – and they manage it so closely and I think that’s paid off for them,” Cavnar said.

 

Among all categories, Amazon seems to be gaining market share. 

Among all the groups we spoke with, the overall narrative seemed to be that Amazon and Apple were gaining market share and that Barnes & Noble was losing it.

The going thinking right now is that the shift away from agency pricing by the largest publishers has helped Amazon grow its ebook market share because it’s doing the most discounting. I don’t think that’s quite right. Amazon’s competitors are discounting, too.

What I think has happened is that because Nook, for instance, is now selling many, many titles without making a profit (or at a loss — I’m talking about best-selling titles from the publishers which were previously agency), the bleeding of 2011 and 2012, when the company was losing hundreds of millions of dollars a year, has turned to a full-on hemorrhage. And, in reaction, Barnes & Noble cut investment in other critical areas for Nook. B&N didn’t release a new tablet product last year and has cut a large percentage of its workforce.

The moves forced Barnes & Noble to discontinue investment in critical areas, like hardware and software — areas in which the company was already well-behind Amazon, and areas critical to maintaining and growing market share.

As book industry consultant and DBW partner Mike Shatzkin often points out, unlike Amazon, which sells many things, Nook needs to sell ebooks and devices profitably in order to survive; Amazon does not.

At this point in the ebook game, it’s really impossible for any party to know ebook retail market share across the U.S. The industry is far too fractured between retailers, publishers, distributors and authors and publishers selling ebooks direct for any one party to have a handle on the whole market. Any retailer that says it knows its own market share even is likely being disingenuous. (Think about it. How would they know?)

There’s a rumor going around that a very well-known tracking organization (I’ll give you one guess) is making a hard push right now to create a product that measures ebook sales across the largest retailers — but this is an effort that has been ongoing for years.

We’ll likely never have a complete picture of this market. But, after going through the exercise twice in two years trying to get some sort of blurry image (I did the same thing last year), I’m fairly confident that Amazon is winning (by a lot) and that Apple is catching up with Barnes & Noble.

 

Our Best-Seller List

Part of the secret sauce of the Digital Book World Ebook Best-Seller list is a calculation of ebook retailer market share. Last year, we added Apple to our data-gathering operation, bringing you a more complete picture of ebook sales in the U.S. So, we needed to rejigger our market share calculations between the retailers.

With this new research and the disappearance of Sony and retreat of Kobo from the U.S. ebook retail market, we will again be updating our calculations. Stay tuned.

 

Jeremy Greenfield

About Jeremy Greenfield

Jeremy Greenfield is the editorial director of Digital Book World. Opinions presented here are his own. Read more of his work here.

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9 thoughts on “Is Apple Now the No. 2 Ebook Retailer in the U.S.?

  1. Apple is almost certainly a bigger seller of ebooks than B&N. What with B&N’s declining digital revenue I do not see how it could be otherwise.

    • The feedback above also seems to be backwards-looking. There typically is a surge in ebook purchases after the holiday season, due to the gifting of devices and recipients loading up their devices w/ebooks. B&N was selling its own devices these few holiday seasons, but it seems pretty clear they’re now exiting the device business entirely (at least tablets, and e-readers are small). So next holiday season they won’t see anywhere near the same spike in ebook sales. Meanwhile Apple, Amazon, Google will keep growing in devices. On a going-forward basis, then, which is reflective of current realities, B&N is probably much farther behind Apple.

      It also seems to me that B&N’s ebook pricing is now much less competitive vs. Amazon. They may have been resistant to dropping prices alongside Amazon because they’re trying to keep profits up as they continue trying to sell the Nook business. That might work in the short term, but it could cause further market share erosion in the medium to long term.

  2. Amazon is still way out in front, but both Apple and Google Play (surprisingly) have surpassed B&N for my sales. It’s a shame since 4 years ago B&N was a big seller for most indie authors. Things have gotten so slow there, a lot of us are wondering if their digital days are numbered. I wish that wasn’t the case–the more booksellers, the better in my opinion.

  3. Sounds like the feedback may be backwards-looking, since you quote a publisher talking about Apple’s rank in sales over the last year. Note that a lot of ebook sales occur right after the holiday season due to gifting of the devices, which then lead to a spurt in ebook purchases by the recipients. B&N had Nook devices these last few holiday seasons, even though their sales have been declining. But if you think B&N will not have any real Nook device next holiday season (perhaps they’ll have some e-readers, but hard to see them selling tablets at this point), then on a going-forward basis they may have fallen solidly behind Apple.

    It also appears to me that Nook ebooks are now very uncompetitively priced vs. Kindle ebooks. Perhaps B&N has not wanted to drop prices alongside Amazon because they want to keep profits up as they keep trying to sell this business. That might work in the short term but it would cause more share erosion over the medium to long term.

  4. Barnes and Noble is panicking – accelerating its slide to ebook nowhere. After aggressively pricing titles last year, this year it is pricing ebooks above $ 14 and $ 15 to recoup fiscal balance. This short term strategy will not work.

    I liked my Nook (particularly when it did not get stuck on the same page) but in the face of in-your-face pricing like this I just use my Kindle. And my wife uses her ipad. Will B/N get the message? Doubt it.

  5. Quote: \I was told by small publishers that Apple has become very attentive to their needs while the opposite has happened at Barnes & Noble. Apple’s efforts, they told me, have paid off.\

    Exactly right, except perhaps that pattern isn’t new. From the start, Apple has shown an interest in small publishers and independent authors. I saw that in its eagerness to sign with Smashwords and the treatment I have gotten. Perhaps it flows from their prior music and software apps business, both of depend heavily on smaller sources. You can also see that in the fact that they’ve developed iBooks Author. The app has its issues, particularly importing, but it does allow an author unskilled in the geeky stuff, to create an excellent-looking book at no cost.

    The downside is that I’ve yet to see evidence that Apple executives have the same zeal to whip Amazon in the ebook market as they have to dominate digital music sales, to beat Samsung in mobile devices, or (perhaps soon) to rule the streaming video market. That, I’ve long suspected, is why, through a Seattle law firm, Amazon has put the DOJ onto Apple’s ebook business. Amazon thinks that with a bit of federalized bullying, Apple will lose interest in ebooks, conceding dominance to them. Acting the wimp in the ebook market, Apple is now finding itself bullied, an unaccustomed role for it.

    That’s bad for readers because the iBooks not only handles standard ePub, it looks better with graphics rich books than Amazon’s Kindle apps. Apple is happy to accept ebook images over 3 meg in size. Amazon refuses any over 127K. That’s over a 10-fold difference in raw image quality.

    Amazon’s dominance is even worse for authors and small publishers because Apple pays the best royalties in the industry, 70% at all price levels with no download fees. Outside the narrow $2.99-9.99 retail price range, Amazon pays a miserly 35% and inside that range, their inflated download fee can drop the actual royalties to about 50%.

    And keep in mind that Amazon can pocket all that money extracted from mostly impoverished authors. Amazon really, really, really is bad for writers. It is literally starving them. Unfortunately, too many writers think that because their Amazon check is larger, Amazon must be paying them better. Not so when tallied up per sale.

    If Apple wanted to compete more aggressively, there are several steps they could take:

    1. Apple pays much better than Amazon but is not seen as doing so because Amazon complex royalty scheme enables them to give the impression they pay the same 70%. Apple should publicize the fact that it pays better and do so not just to authors but to readers. If a reader knows that buying a ebook from Apple will pay sometimes their favorite independent author twice as much (i.e. at the $0.99-1.99 level) even though the book price is the same, they’ll be more likely to buy from Apple.

    2. Apple has a major market advantage over Amazon. Amazon, I suspect, is selling Kindle devices below cost to increase the sales of ebooks. Despite what many think, that makes it painful for Amazon to also cut ebook prices. It can’t afford to lose money on both for long.

    Apple, on the other hand, makes quite large profits on its iPhones and iPads. It can afford to make an initial investment from those profits to create more long-term ebook profits. It could do that by including a iBookstore coupon with each new iPhone or iPad, good for perhaps $25-50 in ebooks. That’d get people started off reading with iBooks and, having done so, many wouldn’t bother with the Kindle app. That coupon would sell more iPads and more ebooks to busy readers. Amazon, with its Kindle device subsidies, will have trouble matching that. It’s always smart to keep the competition in areas where you do well and your competitor does poorly.

    3. As I know all too well, authors are very sensitive to how quickly their book comes out. Amazon caters to that. I’ve uploaded an ebook on Friday evening and found it available for sale when I got up Saturday morning. Apple isn’t nearly as quick. I’m lucky if that book appears within a week of the upload. That’s a hitch Apple needs to fix with next-day availability. And yes, I know Apple vets its books more carefully than Amazon. But that vetting takes the same amount of time if done quickly as if done slowly. Speed that process up to match Amazon. Authors will love it.

    4. Couple that speed with an additional bonus. Offer authors an additional 5-10% royalties for the first month an ebook is available. What would that do? It’d encourage authors who’re in contact with their fan base to release first with Apple and steer their fans to buy from Apple instead of Amazon. For an illustrated $4.95 novel, for instance, Apple might be paying them $4.21, while Amazon, with its download fee, might only be paying about $3.0o. For a thousand sales that first month, that means the author pockets an additional $1,200 while Apple makes about $742 in profits it might not have made and attracts new customers.

    The most important point is obvious. If these informal statistics are right, at present the iBookstore is mostly growing its marketshare at the expense of B&N. Long-term that’s not good because in the end the demise of Nooks will only leave Amazon that much stronger a competitor. Apple needs to consciously and aggressively take on Amazon and do so in ways that play to its strengths and Amazon’s weaknesses.

    I might add that, as an author, I’m happy to see my ebooks sell through either. It’s the market dominance that lets Amazon get away with paying authors so poorly that has me ticked off. I don’t want either Amazon or Apple to snuff out the other. I want to see both engaged in healthy competition for my business and that of ebook readers.

    Amazon is, I suspect, using its woefully low author royalties to subsidize Kindle device sales.

    Apple’s ebooks can only be read on Apple devices (iDevices and now the more recent Macs).

    • Michael, do you have ebooks for sale on Apple?

      You make some interesting points. I am debating how to use Amazon. I just found out about this download fee, as well. So many people around me are pro-Amazon.

      Thanks.

  6. Of course all the bad press about Nook isn’t helping. I’ve seen many Nook users say they thought when it was announced that Nook wasn’t making new tablets that their existing Nooks would no longer be supported, and were afraid to buy more books on Nook lest they lose them. Thus, the “death of Nook” story becomes self-fulfilling prophecy.

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