Tuesday, May 11, 2010

Do iPad Buyers Read? There's Reason to Doubt

Steve:


The publishing industry has been looking to the iPad as some kind of savior to them in the eBook Wars.  I think that's a pretty dubious proposition for a lot of reasons, starting with Apple's poor track record of being a friend to anyone but Apple.  (Just look at what's happening to Adobe right now, and a huge part of the Mac's success, even its survival, can be attributed to Adobe products.)

But now there's reason to think otherwise, at least for that part of the industry that would just like to see eBooks go away, or at least, stop their rapid growth.  Many predicted that the iPad would immediately steal the eBook market from Amazon's Kindle and everyone else as well, and embracing the agency model of purchasing books, head off Amazon's $9.99-and-lower price-points.

But though the iPad is so far a success, outselling the iPhone in its early days, it's far too early for publishing to count their chickens.  Because, and I have to keep reminding people of this, the publishing industry is not in the business of selling iPads.  It's in the business of selling books, in whatever form, electronic or print.  And early numbers suggest the iPad isn't selling that many ebooks.  In fact, you could make the case that it's actually hurting ebook sales, and in a more speculative way, hurting print book sales as well.

Let's look at some of the numbers that have hit the press in the last few weeks.  First of all, we're told that iPads sold about a million units in its first month.  That's quite a few iPads, and since there's been no end of discussion about what a snazzy ebook reader the iPad, that should translate into a lot of ebook sales, right?

Well, not really.  About the same time we were told that the iPad app store had sold 1.5 million ebooks.  That sounds like a lot, but any idiot can do the math.  In that month, that exciting month, when a million people were trying out their new iPads, finding out what it can do, and showing those things off to their friends, the average iPad owner purchased 1.5 books.  Not so good.  Worse, this number apparently includes free books!  What owner who ever intended to ever use their iPad as an ebook wouldn't download at least a couple free books just to trying?

Even if every iPad owner downloaded at least one book, it means that no more than half of them ordered a second one.  If you assume that many avid readers ordered at least three or four or five or more books, and it you assume that the people that bothered to order a book at all probably ordered at least two or three then it starts to look like a lot of iPad readers may have little or no interest in using their iPads as ebooks at all.  Ever.

 Let's look at another set of numbers that just came out, a survey of iPad owners on the subject of market cannibalization.  (You can read the details at AppleInsider.)  According to the survey, 28% see the iPad as an eBook reader replacement.  More view it as a replacement for a netbook or an iPod Touch.

But let's assume that the 28% are the kind of serious readers who have apparently been buying the Kindle and Nook, the kind of people who order lots of books.  If we assume that only that 28% (let's call it a third, just for ease of math, and on the assumption that a few others were buying books as well) bought books on their iPad, then suddenly we're up to 4.5 books per iPad user that actually uses their iPad as an ebook.  Given my unscientific observation of myself and other Kindle owners, that doesn't seem hugely far off the mark.

But come on, don't you think a larger percentage than that at least tried the ebook function, at least with a free book?  So the numbers are probably lower.  It's all guesswork, but it could mean the average serious ebook customer who bought an iPad on average bought only 3 or so books.  Maybe less.  And some unknown number of those were freebies that didn't generate revenue for anyone (except Apple).

Why should that be happening?  Well, it could be that, despite the mostly glowing reviews, the iPad simply isn't that great a reading experience.  Remember that the problems don't have to be glaring or obvious.  They just have to cause people, consciously or not, to choose not to read (and therefore to buy more books).  It could be that the iPad is too heavy, that its LCD screen is causing eye-strain or (as some researchers have warned) insomnia, that the screen is washing out in the sunny locations where people want to read, or that its too large to haul around conveniently, or even that those animated page turns and 3D shadows are getting on people's nerves after the novelty wears off.

Honestly though, if those things are a factor, I'd expect them to shake out over more time.  You'd see them in the first quarter's numbers, maybe, but not so much the first month.

It's far more likely that iPad owners, even those who purchased it with the idea it would be used as an ebook,  are just distracted by all the other wonderful, flashy, animated, loud, cool, interactive things that it can do.  Publishing, already suffering (especially among male readers, as shown in this essay by Tom Dupree) from competition by our plugged-in modern lifestyles, has just signed-on with a big-ol'-slab-O-distractions.

So, what do we have?  The average iPad owner possibly isn't much interested in using their iPad as a book.  Even among those that do, they're getting distracted and not buying a lot of books.  Meanwhile, the iPad apparently has convinced somewhere between a quarter and a third of a million people not to buy a relatively-distraction-free Kindle or Nook or Sony Reader instead.  So they may have hurt ebook sales overall in a number of ways.  And you can bet, if those new iPad owners are too distracted to read books on their iPad, then for sure they're too distracted to put down the iPad and pick up one of those old-fashioned hardcovers that the publishers are so hot on moving.  So it's fail, and fail for the publishers.

Of course, there's a way that all my assumptions could be totally full of fluff.  That 1.5 million books apparently only includes books sold though the iPad app store.  It presumably doesn't include books sold through third-party eBook reader apps.  

And though the app-store may be the easiest and most obvious way to get books on your iPad, it isn't the only way.  There are lots of ways.  But the way people are most likely to go for, the way whose numbers I'm betting will dwarf all others, is the Amazon app for iPad.

Uh-oh.  Weren't we supposed to be freezing those people out?

And if most of the ebook sales for the iPad are going to Amazon anyway, the publishing industry has accomplished what exactly?  They've (probably temporarily) broken Amazon's $9.99 price point for new-releases and top-sellers (though it looks like a lot of those will end up being $9.99 in the iPad store anyway).  They've also alienated a lot of Kindle owners through those price increases and unavailability of books, and lost a lot of ebook sales as well.  (Penguin, who has published the great majority of the novels written by my wife and I, has yet to come to an agency agreement with Amazon, and all of their new titles remain unavailable on the Kindle.)  I'm not sure how any of this is greatly going to benefit the industry.

In any case, these numbers will change over the long haul, and that's what really counts.  Not how many iPads sell, or even how many sell to people who intend to use it (at least in part) as an ebook reader.  What counts for publishing is how many ebooks will iPad owners buy?  And not just today, or this month, but over the long haul.  Check back in six months or a year and we'll see where things stand.

Maybe it will turn out that early adopters read less.  Maybe seasoned users will get bored with the novelty of all that noise and color and finally settle down to read a book.  Maybe those low sales averages will improve.

Or maybe iPad users won't like reading on the iPad as much as they expected.  If so, they'll quietly vote with their credit cards, and they may not even realize why.  And if so, the biggest losers could be those of us who write, edit, and are in the business of selling, books.

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7 comments:

  1. Maybe I'm missing something, but when is the average reader buying 4 books a month a bad thing? I think I might buy slightly more than that, but 500,000 people buying 48 books a year doesn't seem like a bad situation. Especially since those people still probably bought some paper-bound editions as well.

    I don't think it's really fair to extrapolate from a month of sales data, but even if you were, one third of iPad users buying 4 books a month means selling 24 million books a year on the iPad. I wasn't able to find a solid figure, but some shaky napkin math tells me that's a pretty decent chunk of change, and a significantly bigger percentage of the market share than ebooks currently have.

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  2. Nice piece, Steve, and thanks for nodding to mine. To Matt's point, I'd really love to know whether Apple's 1.5 million figure is *actual sales* or just *downloads*. As you correctly point out, lots of titles in both Apple and Kindle stores are p-d or promo books that cost $0.00. It makes sense that new iPad owners would see how this e-book stuff works by trying a free title. Without that info, it's hard for you, me, or Matt to extrapolate. I've never seen an actual iPad, but I've also heard that they're not built for bright sunlight, and what else do you have for a "beach read"?

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  3. Thanks for the kind words, Tom.

    My understanding is that they 1.5 million figure DOES include free books. This may have been a PR-flacks way of dancing around the actual number paid for. If that's the case, then it's probably embarrassingly lower.

    I may also underestimating the average number of free books that an iPad ebook app user is downloading. I haven't played with the app, but from what I've seen it uses a virtual bookshelf metaphor for its directory display, and one little book is going to look mighty lonely on that shelf. And especially since a lot of the pleasure of owning a cool new Apple device is showing it off to friends, it practically demands you to fill those shelves up, even if it's only with the digital equivalent of "books by the yard."

    So the average number of books downloaded (by someone actually using the ebook app) could be six or more. If that were true (and like Matt says, I am building a straw house out of little material here), it paints a far different picture.

    Lets assume that the average ebook app user buys on average one book and fills their shelves with six more. That would give you about 215,000 app users out of 1.5 million sold, and about the same number of books.

    That number doesn't seem that outrageous if you assume that the average iPad user represents the general population. Various surveys suggest that between a quarter and half of all adult Americans don't read even a book a year.

    Readers, especially SERIOUS readers, have always been a minority, and I don't expect that to change.

    Steve Jobs also famously said that "people don't read any more," and in that, he was completely wrong. But only if by "people" he meant the general population. It's just as likely that he was talking about "his" people, the Apple customer base, and I suspect he knows them very well.

    If so, maybe he's right, the average loyal Apple customer isn't a book reader. If so, those people are going to be vastly over-represented in early iPad purchases and might push early ebook use down. Later, as the user base broadens out, we might see more ebook use and better ebook sales.

    I worry more about the people who bought the iPad instead of a dedicated ebook reader, or the people who are readers of paper books and who buy the iPad.

    Though Amazon doesn't release sales figures, indications are that the average Kindle buyer is already a serious reader (I mean, why spend that much for a device that doesn't do much else but display text well), and that owning a Kindle causes them to buy MORE books.

    That's certainly been true for me. Certainly I'm buying far more new books rather than used ones.

    Our biggest nightmare would be that people will buy the iPad will attract serious readers to buy it with the idea of reading ebooks, and then actually be influenced by ownership to buy FEWER books.

    The facts don't support that yet, but I think it's a plausible scenario, especially for recent iPad purchasers. By all reports, the iPad is just too addictive a toy. It's hard to imagine anyone buying it and then ONLY reading books, no matter their intentions.

    Certainly its other capabilities are going to be seductive time-sinks.

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  4. I use my iPad for reading ebooks a lot. But I use it with the Kindle for iPad app. I bought a lot of ebooks for my previously used, now almost never used, Kindle. I much prefer my iPad for reading over reading on the actual Kindle. I like the backlighting as a read a lot in the dark in bed, and well, the whole thing just looks nicer, cleaner, sharper.

    I think that you do have some serious issues in your numbers when you take into account that iBooks is not the only ebooks store/app you can buy ebooks for, as you mentioned. Kindle for iPad has a much better selection, and B&N has an app now for iPad, too. And once I purchase a Kindle version book I can read it on a Kindle, a Mac, an iPhone, or an iPad--all synched to whatever page I'm at.

    I prefer the user experience of the iBooks app (except for the bookmarking function, which I find somewhat overdone--i'd like to just hit "bookmark," not have to select some text), but I have only purchased one ebook in iBooks, and that was because the preorder I made for Death in the Family through the Kindle store was cancelled suddenly because they'd no longer be offering it in the Kindle store at release date. Since I could buy it from iBooks, I bought it there.

    I will keep buying my ebooks from Amazon through the Kindle store because of the selection and the better book descriptions. The iTunes store data is not very compelling for figuring out about whether your really want to buy a book. It's missing the reams of info found in Amazon. But I'll keep reading those books on my iPad.

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  5. I have heard from a number of iPad owners, directly and indirectly, protesting that they're avid readers and have downloaded a bunch of books on their iPads.

    From this we can learn at least two things:
    1. A lot of iPad owners think they're "average."
    and
    2. Several of these people are dragging everyone else's average down...

    You see, I've always assumed that some people out there were excited about their iPads as ebooks and were downloading a ton of books. But the more books that a few people download out of the 1.5 million, the less likely it is that a lot of people downloaded any at all.

    My feeling, and I think it's sound, is that if you don't download at least a few books onto your iPad in the first month, it's fairly likely that you'll never download a significant number. Fairly likely you'll never download any at all.

    My gut feeling at this point is that a fair percentage of iPad owners, probably at least 25%, maybe higher, haven't downloaded any books, and reading (books anyway) will never be a significant use of their iPad.

    Some other percentage (maybe 25% or more) have downloaded some books to try it out, but will never buy more than the occasional best-seller.

    Some small percentage (probably less then 25%), greatly over-represented in the people-who-care-enough-to-pay-attention-to-my-theorys department, are avid readers who have already downloaded a lot of books, and will likely download many more in the future.

    Really it's this last group that count. Will they buy fewer paper books because they have an iPad? Will they compensate by purchasing as many or more ebooks on their iPad? If they were using a Kindle instead of an iPad, would they buy the same number of ebooks, or less, or more?

    It will be some time before we know. This is all a big, real-world experiment, and it's going to be interesting to see how it shakes out.

    Really, I'm convinced the spoiler here is the Amazon Kindle App. Yes, there are a lot of ways to get ebooks onto the Kindle. But my money says that the iBooks store and the Kindle App numbers are doing to drop everything else into the statistical noise, and I would be less than surprised if books sold through the Kindle App exceed those sold through Apple's own store.

    Wonder if Steve Jobs is regretting not blocking the Kindle App right now? Don't see how he could get away with it at this late date.

    However, there could be one bit of brilliance in this on Apple's part. Amazon has been keeping actual Kindle book sales very close to their chest. I'm thinking that Apple has a way to track Kindle sales through the App, at least the number of downloads, if not the details. That could be very useful intelligence as Apple tries to outmaneuver Amazon in the future.

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  6. One other interesting data point I've just become aware of. According to Publisher's Weekly, Amazon has announced that their Kindle Bestseller list is being split between paid books and free titles (currently they're combined, and many free titles rank among the best-sellers). Here's the story:
    http://www.publishersweekly.com/pw/by-topic/digital/content-and-e-books/article/43152-amazon-to-drop-free-books-from-kindle-bestseller-list.html

    There could be many reasons for this, and it could be a response to the New York Times article cited by PW. But the timing is suspicious. One possibility is that Amazon is looking at very pleasing sales numbers through their iPad Kindle App, and therefore suspect that a large percentage of those 1.5 million books reported by Apple are actually freebies. Separating out their numbers could put pressure on Apple to do the same, and that might put Apple in a situation of revealing that their iBooks store isn't doing very well compared to Amazon, even on their own device.

    Yeah, that's a little convoluted, but worth thinking about anyway.

    Hmmm. This logic really only works if Amazon sold LESS than 1.5 million new books through the iPad App, otherwise they could simple release their sales numbers directly, but high enough that they think they might have sold more new books than Apple. If that's true, I'd bet that the total of all books sold by Apple on the iPad plus the NEW books sold by Amazon is somewhere in the 2 million to 3 million range, and probably in the middle somewhere.

    You'd suspect that Amazon might also have sold more free books than paid ones, so the REAL total of books downloaded to the iPad could be much healthier than Apple's report indicates. Maybe 4 million or more, and that's starting to sound like a much healthier ebook platform. Just not one that's going to wrest control of the ebook market from Amazon like Apple and the publishing industry hoped.

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  7. One interesting data point since I posted this. Apparently more people are downloading Barnes and Nobel's Nook app on the iPad than are downloading the iBooks reader. Maybe the Apple "party line" is steering people away from Amazon's Kindle app, but they prefer the bigger selection and less-flashy reading experience of the Nook app over Apple's.

    I'm still haven't heard any reports on initial sales of books on iPad. You'd think we'd be hearing more if the numbers were impressive. The most concrete thing I've heard is a report from Penguin that they're doing well on iPad, especially relative to other publishers.

    But this is somewhat colored by their recent Mexican stand-off with Amazon (new Penguin books were unavailable on Kindle for about two months, until a new, undisclosed, agreement was finally signed).

    This gives them every reason to push sales on iBooks, no competition from Amazon on Kindle or its apps, and every reason to spin the data in as favorable a way as possible. It's hard to say if this represents a trend, or simply a short-term anomaly.

    It now seems that, even just in terms of iPad sales, dominance in the iBooks store may not be as importance as once thought.

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