"The Kindle format has now overtaken the hardcover format," says Jeff Bezos, Amazon's chief executive. A drastic cut in the price of the Kindle portable reader is probably a major factor.
July 20, 2010|By Shan Li, Los Angeles Times
There's more evidence that digital books are upending the publishing industry.
Internet retailer Amazon.com Inc. says it is now selling 80% more downloaded books than hardbacks. Amazon's download format is for its Kindle electronic reader as well as other devices.
"The Kindle format has now overtaken the hardcover format," said Jeff Bezos, Amazon's chief executive, in a statement.
"Astonishing when considering that we've been selling hardcover books for 15 years and Kindle books for 33 months."
Paperback books, which far outsell hardbacks, were not included in the announcement. Also, Amazon did not disclose sales numbers for the categories.
But it was clear that digital books were on the rise. A survey by PricewaterhouseCoopers and Wilkofsky Gruen Associates Inc. has shown that although revenue from retail sales of printed books has been stagnant for several years, electronic books were forecast to surge to $1.6 billion in sales in 2010 from $1 billion last year.
Amazon said that for its full second quarter, 143 electronic books were purchased on the site for every 100 hardcover books sold.
A drastic cut in the price of the Kindle portable reader was probably a major factor. Amazon said sales of the device tripled after the company lowered the price to $189 from $259 last month.
"We've reached a tipping point with the new price of Kindle," Bezos said.
Amazon dropped the price mere hours after Barnes & Noble lowered that of its rival e-book reader, Nook, to $199 and introduced a $150 version.
Without more detailed information about Amazon's e-book business, analysts said it's difficult to gauge how the company is doing in that area.
"We don't know the economics of these e-books," said Colin Gillis, an analyst with BGC Financial. "In our opinion, they are losing money on a lot of the bestsellers sold as e-books."
The site has about 630,000 e-books for sale, plus numerous titles that are available as free downloads. About 80% of the priced e-books go for $9.99 or less, according to the company, significantly lower than the approximate $25 average for hardbacks.
The profit margin on these is unclear. Amazon "can easily set a price and lose money," Gillis said.
The company is much more likely to be making a profit on sales of its Kindle device, he said, even with the price cut. "There's one thing that we're pretty certain on," Gillis said. "They're making a lot of money on the hardware."
Amazon said the Kindle reader has been its top-selling single item for the last two years. The device debuted in 2007.
The company's announcement came three days before it was due to report its second-quarter earnings, fueling some speculation that the company wished to highlight that positive news beforehand.
"Why release this today instead of in the earnings report?" Gillis asked. "Which is more typical."
Dmitriy Molchanov, an analyst at Yankee Group, said Amazon might have wanted to dispel notions that sales of its Kindle could be hurting since Apple Inc.'s iPad tablet computer was introduced in January.
The iPad models, which start at $499, can also be used for downloading and reading books.
"There's a real perception that the iPad has completely squashed the e-reader space, and that's really not the case," Molchanov said. "Amazon is doing really well and both companies can profit at the same time."
shan.li@latimes.com
Bloomberg News was used in compiling this report.
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