Parks Associates Blog

Friday, March 27, 2009

The e-Book Market Is Garnering Rising Interest

Amazon.com stays mum about sales of its e-book reader the Kindle. Private sources pegged 2008 unit sales between 300K and 500K. More rosy is the forecast. An equity research analyst projected early this year that Kindle and its content can bring Amazon.com $1.2 billion in 2012.

Whether such forecast is accurate is anyone’s guess. But there is no doubt that electronic books and literatures are an under-monetized asset. This week I learned, in quite a surprise, that Shanda Literature, a subsidiary of China’s largest online game company Shanda Interactive, earned almost 100 million Yuan (equivalent to $14 million) in revenue in 2008. Shanda Literature operates three online Chinese literature communities where users contribute original stories and novels and share with one another. Visitors and community readers can opt to pay to read premium content, and Shanda Literature provides the distribution and payment platform and earn commission from each microtransaction. $14 million might be too small by American standards, but given the fact that Shanda just formerly established the subsidiary eight months ago (the portals were first set up in 2004), and the fact that the $14 million was based on micropayment, I would call Shanda Literature’s accomplishment “impressive.”

Let’s turn back to Amazon.com’s business model with Kindle. Earlier this month, Amazon made available an e-book reader software for Apple’s iPhone. It indicates that Amazon realizes that the Kindle is just half the digital literature market. The more lucrative part longer term might be the content and distribution business. Making e-book reader software available to more devices and platforms is just like Apple made its iTunes software to Windows-based PCs back in 2003. The goal is to expand the application’s reach so as to maximize the potential user base. Amazon will not be content with just distributing books in its physical form. It is reasonable to assume that its ambition is to become a digital publisher and play a commanding role in how e-books/literatures will be published and distributed. It may even distribute user generated content as the e-publishing platform tears down the all the barriers between an unrecognized yet talented writer and the traditional book publishing ecosystem. Since we could vote Kelly Clarkson as our “American Idol,” why we can’t let users vote their “Stephen King” or “Dan Brown” through an e-publishing system?

Perhaps recognizing e-book/e-literature market’s potential, two more collaborations were forged over the last two weeks. Last week, Sony partnered with Google to make the latter’s digital book content available on Sony’s e-book reader devices. Then Barnes & Noble yesterday announced that it will make its own e-book reader software available to RIM’s Blackberrys. Earlier this month, Barnes & Nobles also acquired an e-book seller Fictionwise.com. These deals revealed an intensified interest in the e-book business. As consumers get more accustomed to reading books on a digital device, the book publishing industry could be the next victim of the digital age.

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