Thursday, August 18, 2011

Can ebook growth keep Accelerating?

E-ink expects to ship 27 million screens in 2011. This has helped 2011 ebook sales be about 280% of 2010. On triple the ereader sales plus 'other reading devices.' Think about that ratio a minute.

2.8/(3X+1X)=70%

On average in 2011 ereader owners are buying 70% of the books per ereader as 2010 ereader owners. This is better than I expected! It means 2010 ereader buyers are still buying despite a 'too be read pile.' It also means that while, on average, new 2010 ereader buyers are not spending as much (at least on AAP books), they are not slackers in ebook buying either. So can we see further ebook buying acceleration in 2012?

Let me define acceleration. I do not mean that sales just increase, but that the *rate* of sales increase is greater than the prior year. Please look at this chart I put on on May ebook sales:

















Let's estimate ebook sales in 2012 off prior years. (Use the red lines as a guide.)

If we estimate off AAP ebook sales in 2010: $100 million per month in 2012.
Off AAP sales in 2011: $150 million per month in 2012
Off my estimate of total ebook sales in 2011: $200 million per month in 2012!

So acceleration of sales means ebook sales faster than $200 million per month in 2012. :) Can that happen?

First criteria is devices to read on. E-ink has two factories now. One of the two factories is new, so it isn't up to speed. I can only do a 'thumb in the wind estimate,' but I would guess e-ink could slightly more than double e-ink screens in 2012. Perhaps 2.5X the screens of 2011. So e-ink alone could accelerate sales!

But there is also Mirasol from Qualcomm.
http://www.mirasoldisplays.com/

A new factory with new screen capabilities. So we could see 3X the ereaders in 2012 that we see in 2011.

The next need is the ratio of ebook sales to ereader sales. I expected that to drop far more than it has in 2010. 70% as many dollars of ebooks per ereader is great. I would have guessed 50% to 75% is a really optimistic turn out. A tripling of ereader sales plus the prior year sales to generate 200% to 300% of the ebook sales. I'm happy with 280%, but at some point 'less intense readers' will be the normal ereader buyer.

Low end is in 2012 double the ereader sales with a ratio of 50% is (2X+1X)*50%=150%. Or about $150million/month a year from now. So the low end is no acceleration in ebook sales, but no decline. If this happens, expect peak ebook sales to be 60% to 65% of the market (noted by the lack of ebook sales acceleration). I do not expect this scenario.

High end is a tripling of ereader sales again with a ratio of about 65%. (The ratio will always go down.) or (3x+1x)*65%=260% or ~$250million/month (realize we're working with approximate numbers here). Under this scenario ebooks will break 90% of the book market quickly. A little too ambitious in my opinion.

So either ereader sales will drop from the tripling of sales per year or the ratio will drop. We can bracket 2012 ereader sales at 2X to 3X 2011 ereader sales. We can bracket the ratio of ebook dollars per ereader (ignoring ereaders from prior years, assuming they get replaced) at 50% to 65%.

We can also know that both will not be at either their high or low extremes. What will they be? It is anyone's guess.

What I do know is that about a year from now I can tell you the approximate ebook market share in 2017. (Technical diffusion follows a pattern.)

With Amazon discounting the K3 to $114, I expect a K4 soon and in either September or October the 'Kindle tablet.' B&N just received a lifeline that I expect to be invested in further Nook devices. Apple, Kobo, Sony, and Google will all remain active in the market too.

2012 Will be an exciting year for ebooks.

Got Popcorn?
Neil

Ps
First color e-ink go on sale in September. Note: WSJ might be subscription.

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