Monday, October 31, 2011

AAP Sales too obscured to chart

Do I chart August sales that were YTD sales are far less than the sum of prior YTD reports?

YTD hardcover sums to $930.4M (January through July) while the AAP reports YTD sales through August of $641.7M. Ummm....

YTD paperback sums to $772.5M (January through July) while the AAP reports YTD of 772.5M.

YTD MMP $380.4M (through July) vs. $310.4 through August.

YTD Childrends $734.23 through July vs. a reported $638.4M through August.

Ebooks: $638.4M through July vs. reported $649.2M through August.

In other words, the downward revisions in sales mean August had massive negative sales for every category except ebooks. Ebooks would have puny sales... I suspect fewer vendors reported.

I hope monthly book sales come out later. August sales would normally have come out now, but the AAP is delaying, hiding, and obscuring the data as much as possible. I suspect we'll see numbers later worth graphing.

But when the sum of 8 months of sales is that much less than the sum of the previously reported 7 months of sales...


Saturday, October 15, 2011

July 2011 E-book Sales

July ebook figures are finally out. We can now see that the K3/Nook Color launch put a stake in the heart of Adult paperbacks. The K2 started that job with MMPB. What will the new Kindles do? We've been waiting for sub-$100 ereaders from a big name to accelerate ebook sales...

Everyone has already told you ebooks continue to show good growth. Paper trade sales were weak, but not as weak as they were earlier in 2011. If I estimate children's sales, which weren't disclosed, trade sales were 84% of 2010. Much noise has been made of the Hardcover sales. They weren't bad. But if just some of August's hardcover sales were moved to July by 'stuffing the channel,' we could be seeing noise.

YTD sales
July Sales

David has already posted, but I do the graphs. ;)

Or could it be due to the big6 favoring Hardcover sales at the expense of everything else, including overall profit. I can only speculate on this. But look at it this way, two of my favorite sci-fi authors just released new books. Eric Flint's is only in Hardcover and David Weber is charging $12.99 for the ebook. Oh well, I'll wait and buy other books that interest me.

To the graphs!

Ebook sales remain at a pace faster than an extrapolation of the 2010 sales. I keep noting that that means we have not yet hit the point where ebooks are at half the market penetration they will achieve. Hold that thought for the next graph:

Since e-books are less than half the market, approaching 29% with my estimate of Indie sales, we should expect ebooks sales to one day be over double today's market share. When we pass the mid-point, we'll see sales below the prior year's trend line (see the first chart). We are not there yet!

Print Trade is not doing well. It is below trend for July. Now, with my estimate of Children't books, it is at 84% of 2010. I suspect my estimate of Children's book sales will prove to be too optimistic.

Am I the only one who sees a downward trend for MMPB? If one eyeballs a trendline since the K3/Nook Color launch, it looks like the end of MMPB will be in 2013. :( If one does the trendline from the K2 launch, the end of MMPB would be in 2014. MMPB was my prior favorite book form factor. The form factor has plummeted below viable economics. I suspect the espresso machines will fill the market for what MMPB customers who insist on paper.

Hardcover books had a good month. Better than prior years trends. My question, is the channel getting stuffed? I hope I'm being a nay-sayer... So we'll have to wait and see.

Paperback is weak too. Again, I see a trendline. From the K3's/Nook Color's launch, Paperback's have been on a declining trend. Again, a trend that shows an end to the form factor in 2013.

There is no data on Children's books for this month. Since Childrens books have been trending at 77% of 2010 sales, I took that number. My rational is that if the numbers were any better, we would have heard them. I suspect the Sales of children's books could have been worse. :(

I assume you've seen the Youtube of the 1 year old who doesn't get magazines. My two very young daughters love touchscreen. Their Grandma is now buying them electronic book gift cards instead of print books. Good, bad, or indifferent, that is where the market will go. I've seen it with Mom's with the Nook and the iPad and the Kindle Fire will kick that trend into high gear.

Seasonal Graphs

I do different graphs to show the trends in different ways. The bar chart shows ebook growth was spectacular in July, just not as spectacular as prior months in 2011. I read discussions of a 'lull' this summer in ebook blog comment sections. I suspect August numbers will reflect the same trend.

The seasonal graph for Hardcovers in July helps show that July was a great July for Hardcovers, but it is September through December where the money is made. Let's see how hardcovers do during the ramp up to holiday shopping:

The seasonal graph on paperbacks shows more of what I was discussing earlier: The K3 stared this form factor's slow death.

MMPB has been on a downward trend since the K2 launch. The K3/Nook Color launch accelerated that trend. Anyone want to bet against the K4/Kindle Fire/Nook Color 2/iPad2/Android tablet assault?

I had to estimate Children's sales for July. The trend for 2011 is 77% of 2010. If that was the July sales, we could have our next category breaking down. If Children's sales are going down, I wouldn't look at the prior B&W Kindles. As I noted, kids today expect touchscreen. Between the Kindle Fire/Nook Color (2?)/Android tablets and a horde of smartphones, I'm betting on touchscreen for 2012.

I save the ebook seasonal graph for last as... ebook sales are only seasonal in two ways. First, the 2nd half sales see a jump. Usually that jump is in July, but could the excellent weather have delayed the spike up? The other 'seasonality' is that there is also a beginning of the year spike as those Christmas ereaders are loaded up. :) Otherwise, note the nice year on year growth the last few years?

Predictions and comparison vs. Prior years

I introduced the last chart just over a month ago. I show:
1. Nominal sales from prior years (pre-2010)
2. 2010 sales for that category
3. How the sales should be following the 2011 YTD trend tweaked to be a prediction (oops, I shouldn't have tweaked children's expected sales).
4. Actual sales.

Overall trade was weak, but not as bad as it was. The big boost was Hardcover, which is doing better than pre-Kindle trends! MMPB and adult paperback are in an rapid decline with paperback's decline possibly accelerating.

Each succeeding generation of ereaders is taking down one more category of books. The K2/Nook/Sony ereaders/Kobo started the MMPB decline. The K3/Nook Color initiated the drop in adult paperbacks. I suspect we're about to see touchscreens hitting children's sales. That leaves the question, will hardcover somehow survive the onslaught of the K4/Nook color 2/iPad2? I suspect that in 7 or 8 months, we'll have the data to say hardcover sales went digital with the emerging generation of ereaders and tablets.


Thursday, October 13, 2011

K4 Cost less than $113 to make

Kindle Blog has done an estimate of the parts in the new K4. I'll let you read the link for details.

But the blog is conservative. I see, of the $113 cost:
Amazon should be getting a 40% to 60% discount on the screens. Let's round that to a savings of $18 less than estimated.

$13 for a CPU is a *much* higher end CPU in volume than an ARM A8. For $13, Amazon should be getting a 1.0 to 1.2 Ghz A9. A further $5 in savings (or so) in high volume.

Many of the other chips are overpriced by a bit here and there. Recall, Amazon is buying in multi-million unit quantities. They do not pay list nor fleet price. The vendors negotiate far lower pricing. I estimate another $8 in savings.

Or $113 - $18 - $5 -$8 = $82

For something that sells for $109 (sans special offers), I suspect Amazon is making a small profit out the door.

Oh, e-ink pricing will drop. Now that there is the 'Kindle Fire,' e-ink knows they must be competitive or Amazon will make the tablet cheap enough to start displacing e-ink sales.


Sunday, October 2, 2011

Bad Kindle Fire Cost Estimates

I have a small number of friends who are executives who negotiate for big contracts. They've always been able to beat analyst expectations when negotiating in high volumes.

I'e seen some ridiculous cost estimates of the Kindle fire that use the cost when buying chips and other parts in thousand unit quantities. At those quantities, one calls a clerk and has a fixed price. For the Kindle fire, it is an estimated 4 million units in 2011. I'm sure for large minimum order quantities and a six+ month production run, Amazon is paying less. Far less.

The trick is:
1. Buy vendors (e.g., Amazon bought their touchscreen chip vendor, Apple with their CPUs)
2. Bid three or more vendors against each other (Amazon did this with LCDs and CPUs bidding Qualcomm, Nvidia, and the winner TI against each other for a huge order).
3. Do not rush the bidding (no evidence of this on Amazon's part). The vendors need to go to their sub-vendors to find unit price reductions for volume guarantees. For example, in chip testing.
4. Listen to vendor suggestions for alternate design ideas. I'm certain Quandra removed cost from the blackberry playbook and was willing to 'give' the design to Amazon in return for volume guarantees. I doubt this was Amazon's going in position.

Analysis where the Kindle fire costs a little more that $199 to build.

More believable $150 BOM for Kindle fire.
The above analysis breaks down the costs . My only real complaint is Amazon wouldn't pay $19 per processor (CPU). Rumors are Amazon is paying TI far closer to $10. That alone would make the Kindle Fire a profit maker. I've also heard Amazon negotiated at just the right time for the screens and is paying less for them. True or not, Amazon is the first Apple competitor to be able to jump in and guarantee multi-million unit volumes. Amazon probably paid upfront the setup costs, so the more they sell, the more profit. :)

The above doesn't include all the costs of building/selling a Kindle fire. It is probably $30 to $40 short of the full cost. So do not think Amazon is making $49 profit per Kindle Fire. It is probably in the $1 to $10 range in 2011 (better in 2012 as post holidays chip and other costs drop).

My best estimate is the Kindle Fire goes out the door at a tiny profit. I just cannot believe the high component costs quoted for Amazon when they are bidding on multi-million unit quantities. It isn't that Amazon isn't spending and losing money somewhere (e.g., India fullfilment centers). I just do not see the huge 'loss leaders' for the new Kindles some articles are claiming. Not in the volumes Amazon in buying in.


Saturday, October 1, 2011

2.7 Kindles 2Q2011, Estimated over 25 million in 2011

Amazon sold about 2.7m of its Kindle e-readers in the second quarter as it took 51.7% of the e-reader market, IDC says. The second-larger share was taken by Barnes & Noble's reader, with 21.2%, in a market totalling 5.4m units in total for the quarter.

Source Gaurdian

Now let's talk other ereader numbers:

Digitimes has more information

6.9 million Kindles in 2010

Total 6.0 million Kindles in the 1st half of 2011 (not surprising, ereaders sell better in the 1st quarter than the 2nd quarter).

Expecting sales of 15 million 'new Kindles' and 'Kindle touch' (in 2011)
Plus some undisclosed number of K3s/'Kindle Keyboard' in the 2nd half of 2011.
And 4 million 'Kindle Fire'

Or: 25+ million Kindles in 2011 versus 6.9 million in 2010.

Look at that seasonality... 19 million in the 4th quarter versus 6 million in the first half of the year. Plus a few million more K3s sold in the 3rd quarter. :)

Amazon has laid down their cards. The competition must react.

Late edit:
IDC raised the ereader estimate from a mere 16.2 million units to 27 million. They're also going to count the 'Kindle Fire' as ereaders and not tablets. If they're doing that, I expect ereader sales to easily beat their expectations. Then again, they only expected ereaders under $100, not all the way down at $79. (I still am amazed how aggressive Amazon is being.)

If my previous post's prediction of new Kindles selling half as many books per Kindle as older Kindles holds true, we'll still see an explosion in ebook sales. I'm very much looking forward to seeing what indie author sales do after November 16th (new Kindle shipping date).

Got Popcorn,