Case: Ipad versus Kindle: e-books in the US in 2010

GROUP : 5
Deepak SHEKHAR (B00534970) | Alexandra KLEIN(B00211247) | Meryem QUAZZANI (B00530805)
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1.

How has Amazons Kindle changed the book industry?

When Amazon entered the market in 2007 by launching Kindle, it was not the first commercial e-book
reader. The market for e-book reader already existed yet Kindle managed to stand out in the competition using its
definitive strategy. Kindle was launched with two main objectives: to make users read e-books and make e-books
available through their Kindle Store (digital e-book library). Before the launch of Kindle, all the previous e-book
readers manufactured by competitors had either option of e-books which were in formats exclusive to their device
or an option to transfer the e-book from the PC to the device. But Kindle came up with a dedicated e-book store
and a device to purchase it. When Kindle was launched, it was the cheapest e-book reader and the books offered
in the Kindle Store were much cheaper as compared to the paper back format. Kindle offered most of the books
sold at its online store at 9.99$ or less. In addition, Kindle also offered its users an access to 1.8 million free, outof-copyright pre-1923 titles, much more than its closed competitors.
This led to a change in the reading habits of the users: more number of users were inclined towards e-book
format (large selection, instantly accessible and relatively cheap) as compared to the traditional paper back
format. This attractiveness in favor of e-books was confirmed by the fact that, in 2010, the sales of e-books on
Amazon had surpassed the sales of traditional books.
Furthermore, even if bookstores still are the largest channel of distribution, their share has shrunk from
27% of total unit sales in 2007 (the year of the Kindle launching) to 22% by 2009. By democratizing the use of ebooks, Amazons Kindle deeply redistributed the cards between the different channels of distribution.
This new ecosystem around e-books also enabled the emergence of new authors. In fact, it has allowed
new authors to bypass traditional publishers.
This move toward e-books also led to a profound change in the publishing industry, traditional publishers
having to face new competitors: literacy agents (who take advantage of their clients dissatisfaction with the digital
rights rate of mainstream publishers), self-publishing authors and finally, publishing companies that were 100%
electronic.
To face this new competition, mainstream publishers decided to pursue their consolidation and to begin the
transition from paper to electronic print. Nevertheless, e-books were also a big opportunity for these companies
because they allowed them to save many costs such as the paper and printing costs (35% of their net sales),
depreciation. Moreover, there was not consignment basis anymore.

2. Should Amazon further integrate into book publishing? If so, how (internal development, partnership,
acquisition) ? Provide case based evidence supporting your decision
We believe Amazon should further integrate into book publishing. Amazon has worked really hard in the
past to keep the prices of e-books low so that more number of users switch to e-book format. They priced majority
of their titles at 9.99$ even when they barely managed to make profits. Amazon believed that higher e-book prices
will encourage piracy. Amazons initial publishing strategy was to reach an agreement with the publishers
whereby they would recommend list price of an e-book and provide Amazon with a 50% discount and Amazon
reserved the right to set the retail price. In 2009 Amazon launched its own publishing imprint, Amazon Encore.
Moreover, according to the CEO of Amazon, Jeff Bezos, e-book readers targeted the approximately 30 million
consumers (10% of US population) that were serious about reading and by summer 2010, e-book readers had
sold a cumulative 8-9 million units and sales were projected to continue growing quickly. Therefore there is a
huge demand for e-books in the market.
Actually, we think it should make acquisitions with publishing houses so that it further expands its
business model, Amazon Digital Text Platform, which allows any author with a social security number and a bank
account to publish its e-book. Customers prefer e-books over printed copies as it is much cheaper and
environment friendly. By making further acquisitions with publishing houses, Amazon can provide that platform.
Furthermore, Kindle could make partnership with existing publishing houses to expand its current
database of books. Maybe add sections for newspapers and articles: as the Kindle Store does not have options
for newspapers, adding this sector could appeal customers who prefer reading articles to novels. Partnering with
newspaper publishing houses would thus allow users to subscribe to digital newspapers and get them directly on
their Kindle device.