Rethinking the Kindle DX

A while ago, I panned the business plan of the Kindle DX because I felt that college students would just pirate their textbooks. After talking to my sister, I'm no longer sure that the numbers are on my side.

Make no mistake, I'm as convinced as ever that the Kindle DX will lead to massive textbook piracy, but I'm not sure that it isn't in author's, publisher's and Amazon's interest to go down this route anyway.

Let's take a hypothetical book textbook - An Introduction to Kindlenomics101, on sale new for $50.00.

Further, assume that the author gets 10% and the publisher gets 10% of the retail price, or $5 each. The rest of the money goes to the school bookstore for shipping, storing, boxing, etc. I have no idea how close these numbers are, but let's not let reality get in the way of theory - theoretically it's the same thing.

Every year, 100 students take An Introduction to Kindlenomics101.
The first year all 100 have to buy new copies of the book because it's brand new and there are no used copies.

100 students * $50 = $500 for the author, $500 for the publisher and $4000 for the bookstore.

At the end of the year 60 students decide Kindlenomics is a waste of time and sell their books back to Amazon for $15 each. (The bookstore now has 60 used copies and $3100 in revenue)

In Year 2, the used copies are only $40 so every used copy sells, as do 40 new copies.
$50 * 40 = $200 for the author, $200 for the publisher, and $1600 for the bookstore
$40 * 60 = $0 for the author, $0 for the publisher, and $2400 for the bookstore

Lets assume this process repeats for years 3-5 with enough books wearing out that the used book population is stable at 60 copies. At year 6 the frustrated professor publishes An Introduction to Kindlenomics 2.0, making all the existing books worthless.

At the end of 5 years we have:
$1300 for the author, $1300 for the publisher and $16,400 for the bookstore (There is no book buy back at the end of year 5).

Now, lets examine the ecconomics in DXland.

Assume the book still costs $50 and that there are still 100 students per year. In Kindlenomics there are no used books, but lets assign a piracy rate of 50%.

50 * 50 = $250 for the author, $250 for the publisher, and $2000 for Amazon

It's the same for all 5 years, leaving us with:
$1250 for the author, $1250 for the publisher and $10,000 for Amazon (and $0 for the bookstore).

With regular books, 52% of all students will pay full price, while 48% will be able to buy used books at 20% off. With kindlenomics, 50% of students will pay full price, while 50% pay nothing.

Conclusion:
There's a bunch of lessions.
First, the campus bookstore is screwed, Amazon shuts them out completely. Amazon may generate less revenue, but it wasn't generating any before.

Second, because there are no used digital books, piracy can be as high as 50% before it has an impact on the author or publisher. That's assuming the kindle's revenue structure is the same as a physical book's - it's probably much kinder to the author and publisher since Amazon doesn't have to store and keep track of the inventory. My guess would be that Amazon is making deals that let authors and publishers come out ahead even if piracy goes up to 2/3 of all copies.

Third, honest students who buy the books are going to end up subsidising the dishonest ones who steal. That will likely either lead to a long term cultural shift against piracy, or students will buy some books and steal others to average the cost out. Will enough people buy books to keep the system going or will individual insentives (steal all books, pay nothing) prevent a more fair system (steal half your books, pay half the total price).

Ecconomics on Amazon's side - kindle success!

In which I get my comeuppance

That was fast.

In my last post, I suggested that by making books free and offering to store them for me forever, Amazon was creating weird incentives that almost require me to "buy" every temporarily free book.

It took all of a week for me to learn how wrong I was.

Here is the description of this week's free book:

He watches her from across the crowded dance club, a sensual black-haired stranger who stirs Gabrielle Maxwell’s deepest fantasies. But nothing about this night—or this man—is what it seems. For when Gabrielle witnesses a murder outside the club, reality shifts into something dark and deadly. In that shattering instant she is thrust into a realm she never knew existed—a realm where vampires stalk the shadows and a blood war is set to ignite.

Lucan Thorne despises the violence carried out by his lawless brethren. A vampire himself, Lucan is a Breed warrior, sworn to protect his kind—and the unwitting humans existing alongside them—from the mounting threat of the Rogues. Lucan cannot risk binding himself to a mortal woman, but when Gabrielle is targeted by his enemies, he has no choice but to bring her into the dark underworld he commands.

Here, in the arms of the Breed’s formidable leader, Gabrielle will confront an extraordinary destiny of danger, seduction, and the darkest pleasures of all. . . .

Well done Amazon! I never considered the social aspect of free books.

Before the Kindle when I wanted to read trash, I would simply make sure not to leave the book lying around, and quickly dispose of it when I was finished. Basically, treat it like porn.

Now, if I ever give in to your free offer for "the darkest pleasures of all" I will never be able to hide it. They will be my dark pleasures forever. Forever lurking in my kindle's content manager. Forever noted whenever I visit Amazon.com.

Oh sure you can explain that "it was free" and that "I got it as a joke", just like porn, but people will still look at you funny. Don't even think of adding "some blogger suggested I try it", you'll only make things worse for yourself.

Tying people to their porn forever, and offering a gateway book for free - kindle fail!

PS: I was being theatrical about amazon.com, you can tell the website to forget all about books you've bought...just like porn.

It's free and I don't have to store it

Today's post on the Amazon Kindle's Blog lets us know that the first book in the Pendragon Series is now available for free.

This is a book that has been recommended to me as being about the same quality as the first Harry Potter book. I've read the first 2 in that series while sitting on the beach (but won't be reading any more until they're available for the kindle) so this looks like a book I might want to read next time I'll be on a beach.

Which will be in December.

If this was a physical book, I would pass on the offer. Yes it's free, but I'd have to store the book for 7 months, and then feel guilty if I didn't attempt to find a book drop after I finished.

But now we're talking Kindlenomics (see that's Kindle-economics, I'm pithy).

I can buy the book now for free and it will download to my kindle. But I hate having a huge pile of books on my kindle (yes I know it can hold 50 billion books, leave me and my neuroses to restricting it to one page). So, after it downloads, I'll just delete it.

Then 7 months from now, when I'm loading up the kindle for my well deserved beach vacation, I'll download Pendragon again. Since I bought it today, I can read it whenever without having to store it.

To put it simply - I can buy every free book Amazon offers, and read them whenever I want without having to deal with storing them myself. This revelation caused me to go back and purchase every free sci-fi book Amazon is promoting regardless of whether I think I'll read it or not. (Thanks to Amazon's contextless promotions, I have no idea why these books are free, but thanks anyway!)

Giving customers the ability to time shift purchase promotions will certainly make it more difficult to analyze the promotion's performance.

I'm not sure this is a fail for anyone in particular, but it is an interesting facet of how Kindlenomics is different from regular book promotions.

Like getting the news a day early

Today's New York Times has an article about the rapid rise in ebook piracy. Which I predicted yesterday.

I don't really have any idea how to combat ebook piracy, but I do know that the transition period between print and digital is an opportunity for piracy to entrench itself.

Right now there are many books I'd like to read on my kindle that aren't available through Amazon but are popular enough that I could download an illegal copy. For example, Harry Potter.

If a book isn't offered for sale, then the choice isn't legal or illegal, it's illegal and free or deprivation. Not many people choose to deprive themselves. The longer it takes to get popular books available digitally the longer ebook piracy will have to establish itself.

So authors and publishers, stop bickering and make everything available for sale already!

Not offering your work for sale? Writer fail!

DX?

I'm sure you've heard that Amazon announced a new text book sized Kindle, the Kindle DX. I've been giving the matter some thought, and want to expand on some of the other commentary about the new Kindle.

I think there's a lot of potential in having variable sized Kindles. Larger screens, smaller screens, it all depends on your preferences.

But textbooks? The technology is no where close to being usable for flipping back and forth to reference something you half understood in the last chapter.

There's a bigger problem though - textbook piracy. College students are the biggest group of pirates around. They're also cheap. If faced with a choice of a $40 textbook, or a free textbook and $40 in beer, you'll find that not many textbooks will be sold.

There's not a lot Amazon or the textbook publishers can do about this either. There's no requirement that students buy the textbook for a class so there's not going to be much evidence to support a piracy claim. Yes, Amazon can have Kindles start calling home (they do have a cellphone chip after all) to report on pirated books, but the wireless can be turned off.

So what then? When I was graduating many of the intro classes were adding lab books that you had to purchase. They were only 100 pages long and you had to rip pages out in order to turn them in, so they weren't available used. They also cost as much as the main textbook new. Students were pretty angry about it.

The only real alternative to combating piracy is to force students to purchase something for the sake of making sure they spend money. It's not good and it won't work.

The digital book market is no where near ready to face the consequences that wholesale piracy will bring. Far from being the springboard to wider acceptance, the college market may well be the anchor that sinks the whole ebook economy.

kindle fail