The Complete 2012 User's Guide to the Amazing Amazon Kindle: Covers All Current Kindles Including the Kindle Fire, Kindle Touch, Kindle Keyboard, and Kindle (4 page)

One of the rich ironies in all of this is that the Defendants actually lost money by switching to the agency model. Under the wholesale pricing model that had been in effect for ebooks for over two years, the suggested list price for a new release Kindle book was usually the same as the suggested list price for a hardcover. For a book listed at $20 to $25, the publisher received $10 to 12.50 from Amazon for each copy sold, and Amazon was free to set its own retail prices — usually $9.99 on Kindle and about $14-$17 for the hardcover. Under the agency model, when the publisher mandated a retail price of $12.99 to $14.99 for an ebook, it stood to receive 70% from Amazon or another retailer — or somewhere between $9 and $10.50. You’ve gotta hand it to Steve Jobs for the sales job he must have done on those helpless Defendant publishing executives!

Now, of course, the publishers stand to lose even more under the agency model. The infrastructure required to support the model was expensive, and the switch-back will also be expensive. Whether or not the publishers’ corporate counsel were earning their keep back in early 2010, there are certainly some serious legal costs now as all of the Defendants are being represented in federal court by some of the highest-billing law firms in the country.

And then there’s the
coup de grace
: While the federal Department of Justice was acting to secure remedies that it said will restore competition to the ebook marketplace, 16 state attorneys general were suing for another kind of remedy. It was announced on April 11, 2012 that two of the Defendants had settled with these states to create a $51 million restitution pot for ebook customers. It now appears that this fund will soon become much larger, as Jeff Roberts reported on PaidContent.org that “a HarperCollins lawyer predicted that three publishers could reach a settlement with all 50 state governments in the next two months.  Such a deal would not only expand an existing proposed settlement that would refund money to e-book buyers…. The developments came at [an April 18] status hearing in Manhattan attended by Apple, the five ‘big six’ publishers who are under investigation, the Department of Justice and  three state governments.” By the time we’re done, the cost of these restitution settlements is likely to amount to hundreds of millions of dollars.

The hand-wringing by friends of the big publishers in the mainstream media over the Department of Justice’s moves has been something to behold, but it comes as no surprise. Big publishing and big news media are closely linked as a matter of economics, ownership, and corporate culture. The story line of much of the media coverage has been very simple: the DOJ has just killed off the entire US publishing industry and named Jeff Bezos king.

The truth is that the big publishers and their chosen intermediaries (traditional-model literary agents, brick-and-mortar distribution channels, etc.) had one collective dinosaur foot in the coffin before they launched the agency model strategy, and most of the moves that they have made since the launch of the Kindle will only hasten their coming descent into total irrelevance.

Where do we go from here?

Amazon has occasionally been criticized by investors and analysts for growing its gross-revenue top line and various digital and physical delivery systems at the expensive of net profits, but the company is certainly profitable. What it is really doing with loss leaders and paper-thin margins on products and services like Amazon Prime and Kindle hardware is growing market share. As the Defendant publishers and their physical book distribution systems get smaller and less profitable, competitors like Barnes & Noble teeter on the Borders of financial failure, and Apple becomes bored with an iBookstore whose marketplace it cannot control by illegal means, Amazon’s share of the total book trades market only grows, and grows, and grows. That market share grew dramatically throughout 2011 and early 2012 even while Amazon was barred by the Defendants from competitive pricing of their ebook offerings. Now that Amazon is free to hit consumers’ sweet spots with Kindle prices for all books, the growth will only intensify. As astonishing as it may seem, Amazon could well reach a 50% market share for the entire U.S. trade book business across all formats by the end of 2013.

Along the way, we can expect to see new release bestsellers offered again at prices under $10 in the Kindle Store, with prices falling to the $4 to $8 range after books have been available for several months, and hundreds of thousands of ebooks and many future bestsellers priced at under $4, with many of these highlighted through the promotional programs noted earlier. For an advance look at what Kindle prices and the Kindle bestseller lists may look like in the future, it’s worth checking out the 140,000 “Prime-eligible” titles that currently make up
the Kindle Owners’ Lending Library
:

 

• All of them, of course, are priced below $10.
  
 

 

• Among the 100 most popular titles on the list as of April 15, 43 are priced under $3, 24 are priced between $3 and $4.99, and 33 are priced between $5 and $9.99.
  
 

 

• Authors earned 70% royalties on any sale of the vast majority of these 140,000 titles.
  
 

 

• Kindle owners with Prime memberships “borrowed” these titles about 275,350 times in March 2012, and although each “borrow” transaction was free for the customer, Amazon paid authors or publishers $2.179 per borrow.
  
 

Of course there will continue to be some books priced above $10, as there should be. “Boxed set” offerings such as
The Hunger Games trilogy at $15
do very well with price-conscious Kindle customers, and customers show a consistent willingness to pay over $10 for certain textbooks, business, and technology titles, to name a few categories. Readers generally will pay a little more for a book that will save them money, and even more for a book that will make them money. It’s not that the books we read for pleasure are of lesser value to us, but there is a lot more competition for our attention when it comes to a good mystery, romance, biography, or literary novel.

It all sounds like a rosy future for Amazon, but the company needs to proceed with caution and pay close attention to some ticking time bombs. The likelihood that Amazon will approach a 50% market share in the trade book market place will not, in and of itself, make it the target of any serious anti-monopoly actions. But if Amazon uses its market dominance in a willful way to put others out of business or constrain their ability to conduct business, there could be trouble ahead. The 140,000+ titles in the Kindle Owners’ Lending Library are only there now because their rights holders have given Amazon the exclusive right to sell them. That exclusivity clause is a winning tactic that is probably unassailable as a way of fighting back against the anti-competitive maneuvers of Apple and the other Defendants, but once the Defendants are forced to start behaving themselves, its demand for exclusivity could well bring Amazon unwanted legal or regulatory attention.

Other predictable consequences of Amazon’s dominance not only in the ebook sphere but beyond could create problems for the company if it does not make forward-looking changes in the way it does business. The company is seen by many as a tax-avoiding bogeyman that is destroying not only publishers and wholesalers but independent bookstores in particular and Main Street in general, and while there are major economic forces at work here that would probably lead to the same conclusion without Amazon at the head of march, Amazon has to realize that it should do everything possible to avoid being seen as the online version of Walmart. And while Amazon has escaped much of the kind of negative attention that has surrounded Apple and its FoxConn manufacturing plant in China, there is an emerging campaign among labor activists and progressive journalists to focus a spotlight on poor conditions in Amazon fulfillment centers. As with all of these concerns, there are real issues at play, and Amazon’s best moves would be substantive rather than media-driven.

Interesting story, eh? But just in case it might at some point have ceased to resonate with you — say, halfway through one of my 75-word sentences — here’s a paragraph to print out and stick to the refrigerator door.

Shorter term, there’s that restitution fund that could approach half a billion dollars by the time all the Defendants pay their share for all the states, and if Amazon plays its cards right it could end up seeing much of that money invested in Kindle book purchases. For starters, the company should make it easier for its customers to download and print out a spreadsheet of all their past Kindle orders, just as we can do currently for everything else we buy from Amazon via the
Download Order Reports
link on our Amazon account page. I don’t think many people use that link right now, but it could become a very popular page if some tech wizard in Seattle or Mumbai were to spend 15 minutes improving the link so that we could print out a list of all the Kindle books for which we paid $10 and up since April 2010 and get paid several bucks each for them by the Defendants.

The Complete 2012 User's Guide to the Amazing Amazon Kindle
is an up-to-date, concise guide to using the Amazon Kindle.

This book covers all Kindles currently in production, including tablets as well as E Ink readers. It features information developed by the authors over the course of several years of hands-on, direct and loving experience with their Kindles as well as hundreds of suggestions from citizens of Kindle Nation and other Kindle users scattered across many blogs and discussion groups.

Amazon periodically sends software updates to users' Kindles via the wireless network it calls the Whispernet. Each release adds new features to the company’s e-readers. These features include ideas from readers as well as the Kindle development team. Because this book is published as a Kindle book, it is easy to revise and republish, and
we pledge to take advantage of that fact and update this book as soon as possible after each major new software release
.

For an active, hyperlinked
Online Companion to The Complete User’s Guide to the Amazing Amazon Kindle
, please
tap this link
or visit
http://bit.ly/KGUIDE-COMPANION
.
 

This guide is not intended to serve as a substitute for the Kindle user's guides published by Amazon for each Kindle model, which are included free aboard each Kindle that it ships. Instead, it is a supplement to Amazon's guides, including tips and techniques discovered by hands-on users.

As with any such book, a delicate balance exists between serving the needs of readers who are prospective Kindle owners and readers who already own a Kindle and want to strengthen their skill in using it.

Our approach is straightforward: You can read this book without owning a Kindle, so you can decide which Kindle to buy:

•
        
Download one of the Free Kindle Reading Apps (applications) for the PC, Mac, iPad, iPhone, Windows Phone, or Android device from the Amazon Kindle web page at
http://amzn.to/sPd0P8

•
        
Register your app with Amazon

On the other hand, if you already have a Kindle and want to read this book on your computer or another device so you can follow along on your Kindle, just download one of the free apps and read this book on the app.

The Kindle world has just become a lot richer, and perhaps a little more confusing, with the release of the Kindle Fire tablet. Before now, all Kindles have had E Ink electronic paper screens that look and read like a printed page. The Kindle Fire is the first Kindle to use a backlit LCD touchscreen instead of an E Ink screen.