Surprise! Most consumers buy e-books from a single retailer

At Digital Book World, book industry research firm Codex Group has some news for you that will completely shock and surprise you: in a survey of just over 2,000 people who buy e-books, 86% buy them from only one retailer. Those who buy books from Amazon tend to keep buying them from Amazon, etc.

Oh, wait. Maybe that won’t shock and surprise you after all. Maybe it’s completely what you expected given that most major e-book vendors have erected walled gardens around their content to keep you from taking it out to another garden. If you buy books from Amazon, you have a strong incentive to keep buying them from Amazon, because you can’t read your library on anything else. (Unless you know the secret.) After a while, you just get used to it. This is why Baen made substantial changes to its own e-book program in order to get its books into Amazon’s store—most Amazon customers are so conditioned to it that they don’t want to step outside their garden even if they can.

But the really weird thing about this article is that it mentions the “walled garden” nature of these stores without once ever touching on the true cause. It mentions walls or walled gardens at least twice, but these are the conclusions it draws:

1. The big ebook retailers that have created fairly seamless reading, buying and storing experiences have loyal customers who will continue to buy ebooks from them. So, these retailers probably don’t have to do all that much to keep these customers save for continue to do what they’ve been doing.

2. The smaller ebook retailers have an uphill battle to fight when it comes to not only attracting new readers but keeping old ones. And their biggest foe in that fight is Amazon, which is the most successful ebook retailer when it comes to luring rivals’ customers — likely through price promotions, exclusive content and ubiquity.

Wait, what? “Seamless” experiences? “Loyal customers”? “Price promotions, exclusive content and ubiquity”?

There’s not one word about digital rights management that keeps readers from moving their purchases to another hardware platform. Why would people forego their main e-book vendor if they lose everything they bought when they switch? What does DBW think those “walls” are built out of, papier-mâché?

It’s pretty obvious, and even publishing-industry insiders are starting to realize, that publishers’ insistence on DRM is what handed Amazon the keys to the kingdom. Some publishers, like Baen, have never used DRM. Others, like Tor, have started dropping it. But until the majority of publishers get rid of the stuff, Amazon gets a free pass on keeping its customers locked up in its garden—at least the ones who don’t know about Calibre and Apprentice Alf.

About Chris Meadows (4156 Articles)
TeleRead Editor Chris Meadows has been writing for us--except for a brief interruption--since 2006. Son of two librarians, he has worked on a third-party help line for Best Buy and holds degrees in computer science and communications. He clearly personifies TeleRead's motto: "For geeks who love books--and book-lovers who love gadgets." Chris lives in Indianapolis and is active in the gamer community.

15 Comments on Surprise! Most consumers buy e-books from a single retailer

  1. I’m not surprised. Apart from all the other ease-of-use factors, it’s a hassle to remember just where an ebook you read once is when it could be on any of several devices or apps. Who wants to spend half-an-hour locating an ebook just to look up one passage?

    Another major hassle factor is getting an ebook, even one without DRM, onto a specific device or into a particular ereader app. Yesterday, I had to do that for an ebook I’d purchased as a free-standing ePub. Putting it into iBooks on my Mac was no problem. Just drag and drop. But I found that I was sadly wrong to think that would make it also automatically appear on my iPad. Only after Googling a bit did I discover that, while iTunes now refuses to place ebooks in its library, it still does the synching of ebooks between a Mac and an iPad. Weird!

    It’s nice to talk of technical fixes like removing DRM, but that’s not where the real problem lies. It lies in a money game. I place Amazon’s dominance of the ebook market not in DRM, which is common across the market, but in the fact that Amazon’s royalty policy is ripping off authors terribly.

    I’m referring to both their outrageous download fees (over five times what cell companies charge for their data services), and their variable royalty payments.

    * Apple pays 70% for any ebook priced over $.99 and under $200 while charging no download fees.

    * Amazon only pays 70% for ebooks priced over a narrow range from ($2.99 to $9.99) and makes out like a robber baron for any ebook that’s priced outside that range, pocketing 65 cents for every 35 cents an author or publisher gets. Keep in mind that for that 65% of the profit, all Amazon is doing is process a credit card transaction.

    Do a few back of the envelope calculations, and you’ll discover that Amazon’s probably averaging twice as much profit per ebook sale as Apple, B&N and the others. That gives it more money to fund the development of their ebook ecosystem and to subsidize sales of their Kindles. That’s why the Nook is dying. It’s why Amazon has the money to cut prices and crush competitors. It’s why it is doing that.

    It’s a non-virtuous cycle. Authors have to sell through Amazon because it dominates the market, but earn, on average, about 10-20% less per sale. (My latest earns about 15% less.) Since 10-20% is about the profit margin on ebooks at companies such as Apple, that extra 10-20% means Amazon is making double the profit of other retailers. That lets Amazon make moves (such as discounting Kindle Fires), that then assure its market dominance, forcing authors to deal with it even though it’s ripping them off..

    That is clearly market-dominating price fixing at the wholesale level. Amazon is essentially saying to authors (at least those who have run the numbers), “We’re going to pay you less than anyone else and you can do nothing about that because you must sell through us.”

    The DOJ isn’t going to do anything about this. It’s spending millions beating up on an Apple that pays authors some of the best prices in publishing. It’s authors who are going to have to wake up and give Amazon what the British call ‘bloody hell’ about this.

  2. It’s a bit surprising to me that it’s as high as that. Keep in mind this means Amazon customers loyal to Kindle, Apple customers loyal to iTunes and some loyalty respectively for B&N, Kobo, Sony. But with many people claiming to read mainly on tablets, and most tablets support apps from all of Kindle, Kobo, Nook and Sony (and iPads support all players as well as iTunes) … it does make it easy for a consumer to pick and choose a bit.

    Realistically, who wants to maintain five libraries? But having two companies as source, I would have thought, would be more commonplace. I have bought more titles from Kobo than anyone, with Kindle format a healthy second … I sometimes buy from Nook when Kobo prices are out of whack; and years ago I bought a couple of titles at Sony.

  3. If you are surfing inside a Kindle Fire and want to download an ebook, you can’t download it directly into the Kindle app. That’s a serious impediment (to say nothing of the epub vs. mobi dilemma). At least on the ipad, you can put things into ibooks without much problem (via email, browser, etc). It’s true you can email an ebook directly into a device and view it on the Kindle app, but the Kindle app on ios produces seriously deformed ebooks. The only way you can do it is through itunes syncing. That’s a pain.

    Geeks can tout the advantages of NO DRM ebooks, but if it requires a significant number of extra steps, consumers won’t see the advantage…and therefore be content to stick inside the walled gardens.

    MICHAEL PERRY, you mentioned that Apple has lower royalties for authors because of Amazon’s download fees. This isn’t a factor for most sales and although I agree that these fees are higher than they should be, I think it’s ok to charge the customer a few pennies for using the 3g network to download stuff. I wish consumers could be informed about the differences to the author in downloading via wifi vs downloading via 3g.

  4. In the case of Amazon, I don’t think they really need DRM. Unless a user knows about Calibre, Kindle’s AZW format just effectively ties them to Amazon as DRM does since last I checked Nook, Kobo and Sony don’t support it or the older mobi format.

    Also I am curious about Mr. Perry’s comments. I had thought (though could be wrong) that the amazon payments he referred to mostly applied to independent and small publishers. I suspect that they are less about Amazon making profit and more about keeping the prices in the range they have calculated most likely to make them money. Since he doesn’t mention what the actual transmission costs are, I don’t have enough info to comment there.

  5. Ibooks uses DRM and yet allows ebooks to be imported via email or browser. But the kindle devices don’t allow ebooks to be imported except through its device email — and on IOS devices, doing this results in a poorly formatted ebook — you need to transfer it through itunes. DRM is a problem here, but I think just making it easier for consumers to import no-DRM content into the Kindle viewer would do a lot to help consumers see the advantages of no DRM.

  6. @Robert, what kind of content are you referring to? I’ve transferred .mobi formatted books into the iOS Kindle app using the Send to Kindle applet with no problems. I’ve never use iTunes sync to get books into my Kindle app. Didn’t even realize you could. Are you talking about other document formats, like .doc (which, yes, can show up oddly)?

  7. As someone who has watched and been part of this market since the late Nineties, I’ve seen the very same thing since the very beginning. That’s before Amazon, before the rise of DRM, before the rise of the ebook reader, before every other factor listed here.

    The real truth is that a majority of readers are lazy. They want what they want, and they don’t want to shop around much or have to insert credit card numbers and personal information all over the place, and they certainly don’t want to have to go through the trouble of learning different methods of downloading books, etc.

    These days, the learning curve for converting books to various formats and stripping the DRM, etc., just increases the amount of laziness.

    Remember that those of us here who are savvy in the ways of ebooks are a minority.

  8. Julie, you probably think that it’s not a problem because the ebooks you transferred had trivial formatting. If an ebook has any kind of quality formatting, transferring it this way will mess it up when you do that. I’m talking about .mobi and .epub — not just Word docs. I followed the KF8 specs to the letter and found the .mobi via Personal Docs had issues with background colors, margins, images. Rendered perfectly on the android app and on Kindle Fire — but lousy on the ipad app.

    This is a well-known problem which I discovered the hard way a few months ago.
    It has been confirmed by Paul Salvette, who wrote a recent book about ebook formatting. I haven’t checked since November whether it’s been fixed, but Kindle has no incentive to fix this issue — why would Amazon waste developer time improving an ios app when all their devices (and most of the world) is moving toward Android. More importantly, these bad ebooks only affect ebook testers and people trying to move DRM free ebooks into the app. Still I remain hopeful that

    In November I wrote:

    The ipad kindle app actually has decent rendering of the KF8 format. However, my method of sending a kindle file to the iPad was producing a kind of Frankenstein ebook which was neither Mobi 7 or KF8. I used the method of emailing a .mobi file via Personal Docs to the ipad app. Apparently the only acceptable way to test the file on the iPad was to sync it through iTunes. You could email a .mobi file to the Kindle app on the iPad, but Amazon would not do the proper conversion to make this file readable. I was vaguely aware that testing via Personal Docs had its issues, but never in my wildest dreams could I imagine that they would be this bad.

  9. I remain hopeful that Amazon will fix this issue — especially if it affects the Kindle app for all iphone/Ipad platforms. To repeat though: Sending it to any Android device has no issues at all.

  10. @Robert. Wow. I had no idea it was that bad. You’re right. I only transfer fiction, so I haven’t seen it. Interesting.

  11. You don’t have to make this so complicated: using an Android tablet, buy Kindle books and open them with the Kindle app; buy Kobo books and open them with the Kobo app; buy B&N, Sony and open the books on their respective apps. One device, multiple stores; pick the one which has the best price or selection. You don’t have to stick to any specific provider.

    Whether there is DRM on any of them is moot. The geeks can transform if they wish and put everything onto an e-ink reader.

  12. When you purchase an ebook from Amazon, the kindle app on IOS will render it almost perfectly as a KF8 file. But when trying to transfer a .mobi file NOT bought from Amazon, unless you sync it via itunes, Amazon’s document delivery service will mangle it. Isn’t that crazy?

  13. I’m with Marilynn, I don’t think DRM is the only reason for this behaviour. People prefer not giving their financial information to a lot of sites and creating a new account, so you choose a bookstore and buy there, unless you have a strong reason to buy on another site. I don’t have any problems with DRM, and I usually buy on two bookstores of my choosing (depending on genre, I choose one or the other) and I take advantage of their discounts. Even if the price is slightly higher than in another bookstore, it’s not worth the fuss .

  14. In a world where the ePub standard is followed and DRM is not a factor, one could maintain their entire eBook library in Calibre without a thought to where it came from. Calibre has all sorts of ways to transfer eBooks to eReaders on all sorts of platforms when they are connected to the machine on which Calibre is running. As well, there are a bunch of ways to get at your library over the air. My favorite is to use Calibre server which supports HTTP and OPDS over the Internet. This requires a fixed IP address so not everyone can use the Calibre server but if you cam, it makes your library of eBooks available to you on any device anywhere in the world where you can obtain an internet connection.
    Would this separate people from their silos? Maybe.

  15. Marilynn makes a good point about the reluctance to have financial info exposed in many places (think Target). Michael’s accounting of the returns to authors could be the start of an interesting analysis. All of these vendors want to give the appearance of being good folks but readers and authors should know better. They are out for themselves, all of them. Like debate where we discover not the truth but who is the better debater, we can only discover who is the better merchandizer. Amazin appears to be in the lead right now.

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