Like Your Kindle Books Cheap? Don’t Get Too Used to It.
by Peter Kafka
Posted on June 19, 2009 at 9:00 AM PT
Are you one of those Kindle owners who stuffs your device with cheap e-books? Enjoy it now, say analysts at Bernstein Research. Because they’re not going to stay cheap, or at least, not quite as cheap, forever.
One of the chief selling points of Amazon’s (AMZN) Kindle is that once you’ve paid $359 or more for the e-book reader, you can start recouping your investment by buying digital books for much less than it costs to buy their physical counterparts. And the vast majority of Kindle downloads are indeed priced at $9.99 or less (and a third of them are freebies):
Digital books should be higher-margin products than physical ones since the cost to produce and distribute them is so much lower. And they will generate higher margins eventually. But right now, Amazon is subsidizing the cost of those $9.99 books, which means they’re just barely profitable.
Bernstein analysts Claudio Aspesi and Jeffrey Lindsay estimate that Jeff Bezos and company record an operating profit of 61 cents on each $9.99 e-book they sell. But a $24.95 hardcover generates $4.25 in operating profit. That’s a 7 to 1 ratio, and that can’t continue, indefinitely.
The good news: Aspesi and Lindsay argue that Bezos doesn’t have to raise his prices by that much to make his e-books much more profitable. Bumping up best-seller prices from $9.99 to $12.50 would boost his profits from 6 to 20 percent per book, they estimate. The flip side: Costs for the devices themselves will certainly go down.
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Comments
All things considered, that’s why I still prefer audiobooks for casual “reading”.
Posted by Kit Tsoi at June 19th, 2009 at 10:45 amI sub to audible.com and pay $21 a month for 2 books, thats aroun $10 a book.. narrated.. sometimes dramatized.. there’s added value.
When publishers move to $12, wheres the value; on top of getting a reader. Most people already have a media player.
And I’ll throw in BOMC2 has hard cover books for less than $10. Why would I want to buy a $300+ device to get eBooks for the same price I pay for good old fashioned books?
Posted by William Cherry at June 19th, 2009 at 11:03 am