Amazon’s Numbers: What They Mean, Why They Matter

Yesterday Amazon released figures which I covered in a nutshell here. That’s still the bottom line.

But shortly after Amazon’s news spread, people on Twitter began to question the sales figures versus mass-market paperbacks.

I’m here to tell you that mass-market paperback sales do not enter into this equation at all.

Let me first quote the book stats that everyone gives carte blance to, from the American Association of Publishers:

The Adult Hardcover category was up 43.2% percent in May with sales of $138.5 million; sales for the year-to-date are up by 21.7% percent. Adult Paperback sales decreased 2.2 percent for the month ($110.7 million) but increased by 15.7 percent for the year so far. Adult Mass Market sales decreased 14.6 percent for May with sales totaling $54.6 million; sales were down by 7.3 percent year-to-date. Hardcover Children’s/YA sales declined 1.3 percent for the month with sales of $58.1 million in May; year-to-date sales are down by 23.3 percent. Children’s/YA Paperback sales decreased 8.1 percent in May with sales totaling $39.9 million; sales fell 6.6 percent for the year-to-date.

What do those numbers mean for book publishing?

Nothing, really.

As some people are keen to point out (and I’m not picking on Sarah here, who is a good analyst — which is why I’m citing her!), in regard to Amazon:

Each of these authors sell tens to hundreds of millions of print books around the world, so total e-book sales don’t even approach 1% of print sales, and Amazon won’t break down e-sales by specific title. Consider, too, that 630,000 books in the Kindle Store is but a fraction of the millions of copies of print books Amazon offers for sale.

See what Sarah is doing there? She is doing what the AAP is not doing with its stats: citing number of books sold and published.

What the AAP is providing is how much the bank accounts of publishers have grown. That figure is really meaningless. Dollar amounts are meaningless!

The real estate bubble we had inflated the value of houses. It’d be possible to go to a town where an agent could state she sold “X million dollars of houses.” Yeah, but how many houses does that represent? Is it ten? With today’s collapse in valuations, it’s possible that dollar figure would account for a multiple of the original number of price-inflated houses.

So, citing dollar figures are meaningless. Publishing could be experiencing dollar growth entirely without readership growth.

And that is why this Amazon statistic really means something:

We’ve reached a tipping point with the new price of Kindle — the growth rate of Kindle device unit sales has tripled since we lowered the price from $259 to $189.

That’s a statement showing an increase in the base of readers. Can print publishing claim that? Not with Borders laying off people, chain and independent bookstores being closed, and public libraries under siege from coast to coast! Beyond that, there’s time competition from videogames and the Internet itself.

In fact, if Bezos really wanted to brag, he would have piled on with download statistics for Kindle for PC/Mac, Kindle for iPhone/iPod Touch and iPad, and Kindle for Android! How many of those people have been buying Kindle books without ever owning a Kindle itself?

And then from Amazon:

Over the past three months, for every 100 hardcover books Amazon.com has sold, it has sold 143 Kindle books. Over the past month, for every 100 hardcover books Amazon.com has sold, it has sold 180 Kindle books. This is across Amazon.com’s entire U.S. book business and includes sales of hardcover books where there is no Kindle edition. Free Kindle books are excluded and if included would make the number even higher.

That is a significant number. More eBooks than print hardcover books. It’s a solid statistic citing number of books sold, something the AAP does not provide.

And here is why bringing in mass-market paperbacks doesn’t matter. From the AAP above, let me repeat:

Adult Mass Market sales decreased 14.6 percent for May with sales totaling $54.6 million; sales were down by 7.3 percent year-to-date.

Those sales have been trending, and continue to go, downward. Why should Amazon compare itself to a market that’s shriveling up? If Amazon had cited mass-market paper instead of hardcover, the same people would be saying Amazon should have compared itself to the growing sales of hardcovers!

Amazon chose hardcovers because they also stated that’s still growing for them:

In addition, even while our hardcover sales continue to grow, the Kindle format has now overtaken the hardcover format. Amazon.com customers now purchase more Kindle books than hardcover books–astonishing when you consider that we’ve been selling hardcover books for 15 years, and Kindle books for 33 months.

And if you were to ask every publisher which business they’d rather stay in — hardcover or mass-market paper — most of them would pick hardcover. That’s where the biggest profits are.

But that metric no longer matters.

Amazon has killed the distinction between hardcover, trade paperback, and mass-market paperback with its pricing.

As I showed yesterday, I was shocked by the prices for the Kindle editions of the three Larsson books. One of those is brand new in hardcover. Here’s photo proof from the window of Borders:

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That has an MSRP of a whopping $27.95 in hardcover (the discount price at Borders or elsewhere doesn’t matter; they’re all still above the Kindle price). Yet Amazon has collapsed that price to what is typically less than the MSRP for many trade paperbacks! In fact, I’ll argue that at $9.99, Amazon has defined a new pricing category right between mass-market paperback and trade paper.

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At $9.99, the price is not so high above most $7.99 mass-market books, but less than the $12-$15 of most trade paperbacks.

This is absolutely brilliant, really genius-level, price anchoring (see the book Predictably Irrational — which is not available for Kindle — for a full discussion of that concept).

Someone can buy a book with the freshness of a hardcover at the price of what is perceived as a “premium-priced” mass-market paperback! In fact, the extra $2.00 above a typical $7.99 mass-market book can be seen as a small fee for getting the book faster than it would otherwise be available at a lower price in print.

And it should be noted that for some books, they never go from hardcover to either trade paper or mass-market paperback. So Amazon selling those titles at $9.99 is actually doing publishers a favor by expanding the market for them while the publisher itself would not!

Finally, look at this picture:

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On the left is a Kevin Wignall book. That hardcover had an MSRP of $22.00. And it’s a thin book. On the right is a mass-market paperback with an MSRP of $6.99. A cursory thumb-through of both reveals their word counts are not so disparate.

Yet why does one command $22.00 while the other is $6.99?

The packaging!

That one is hardcover and the other is paper. Period. That’s it. The price is not based on the quality of the work, the prestige of the writers (all three of whom are damned good!). The pricing is based on their physical form.

Physical form goes away with eBooks. So why should print publishers labor under this delusion that they can still charge a price based on a physical attribute that no longer exists?

They can’t.

And people are not stupid — especially book readers. Print publishers can squawk all they wish to about how their production costs are “fixed,” yet that photo puts a lie to that: it takes no more publishing effort to create the first book — in hardcover — than it does for the second — in paperback.

Both go through the same acquisition, editing, proofing, design, and typesetting process as the other.

Yet one goes for an MSRP of $22.00, the other for an MSRP of $6.99.

And, on Amazon, that $22.00 hardcover is now $9.99 — a price significantly higher than it would be as a mass-market paperback. I cite mass-market paperback, because both books are in the same genre: crime fiction. Here’s the Amazon listing for Wignall’s book:

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(There is no Kindle edition for the other book — Bust — a paperback, despite Hard Case Crime announcing over a year ago that eBook editions were coming.)

So stop this nonsense, print publishers, about how your costs are “fixed.” Will you claim you do less editing, less proofing, less design, and less typesetting for the $6.99 book? No, you will not. Yet you can kick out a $6.99 paper book — that I have to believe has a profit built-into it! — but weep about how you can’t afford to do a $9.99 eBook?

Stop it!

Amazon’s statistics from yesterday are far more significant than anyone else has stated.

Now start changing the damned print publishing industry to move into the future.