On the Economics of the Kindle

perlow writes "Just how many books a year would you need to read before the cost of Amazon's Kindle is justified? The answer is not so cut-and-dried. If you're a college student and all of your texts were available on Kindle (possible but unlikely), you could recover the cost of the reader in a semester and a half. For consumers to break even with Kindle's cost in that time, they would have to be in the habit of buying and reading four new hardback books per month — if the convenience factor wasn't part of the equation. At two books per month, breakeven would be in three years." Here is the spreadsheet if you want to play with the numbers.

i like the idea of the kindle

but I want something with a color screen at least (i know its too much to ask but oh well)

Re:i like the idea of the kindle

I take it that you've never taken biology or chemistry. The books use color illustrations for a reason, and it's not to justify the price gouging.

Or that you've not read many books talking about basic art concepts or novels that have illustrations in them. Sure they cost more, but there's definitely a reason why the illustrations are there.

Re:i like the idea of the kindle

An electronic reader could be a killer application for education. Textbooks are large, heavy, and you usually have more than one per semester. (For the sake of this argument, we'll assume engineering/science/bio/med students.) Electronic substitutes fail completely because they're lacking color, suitable resolution screens for rendering technical drawings, and textbook availability. Yes, we all have laptops now, but honestly, reading a book (or 5) on a laptop sucks. I could care less if I couldn't sell books back if it lets me carry an entire semester's worth of material (plus *all* of my other year's worth of references) in a tiny device vs. tons of dead trees.

Re:i like the idea of the kindle

i completely agree. however, i think there are several things that need to happen before we can take full advantage of electronic textbooks in colleges and perhaps even high schools. first off, like you and the GP have already mentioned, e-book readers need drop in price and employ higher resolution color displays (either e-ink or low power OLEDs), and WiFi capabilities should also come standard. secondly, there needs to be drastic reforms in the publishing industry, or at least in regards to attitudes towards IP enforcement and DRM. lastly, the business model currently employed by textbook publishers of forcing schools and students to buy new editions of books every other year needs to be dropped.

once these changes have occurred, Universities could simply purchase electronic subscriptions to certain texts, which would allow them to check these subscriptions out to students who need them for classes they're enrolled in. all a student would have to do is connect their e-reader to the school's WiFi network and they can check out the textbooks they need. the subscription would give the school permission to distribute "loaned" copies of the electronic textbooks to as many students as needed (rather than enforcing physical limitations on a virtual commodity) and also allow the school to receive updates from the publisher to keep their digital textbooks up to date. if a student finds a textbook particularly helpful they can pay the publisher for a modestly priced static copy, or they can purchase a single-user subscription that will receive automatic updates.

this model would save students a ton of money, and greatly lower the financial barrier to higher education. however, i imagine the textbook publishing industry would be strongly opposed to the necessary changes as it undermines their strategy of planned obsolescence, which is the basis of their current business model. and the true financial/economic advantages of using paperless textbooks won't be realized (at least not by anyone except for the publishers) until e-book publishers stop charging print prices for non-printed materials.

Re:i like the idea of the kindle

The trouble with "saving students a ton of money" is that it would cost the publishers a ton of money. OK, half that money goes to the bookseller who, as a no-longer-needed intermediary would disappear. But the remainder is lost income for the publisher. The publisher will say that this will produce a dramatic drop in the number of textbooks they publish, to the consequent loss of the whole of academia. Whether that is true or not, if someone's income from a source drops dramatically, they are going to do less of it.

And if the University us paying a block fee for the e-textbook, they are going to have to get that money from somewhere. So either they will charge students for it or they will drop something, presumably worthwhile, that they are doing now (tuition, library books, formal dinners...).

Re:i like the idea of the kindle

The problem with that idea is that textbooks are too profitable an industry to risk modernizing.

Scratch that - education is too profitable an industry to risk modernizing.

The bottom line is: textbooks are a cash cow for the publishers and schools, and while a lot of people talk about saving dead trees, very few actually care because we don't see those dead trees. We see them on TV, we read about them in craptastic magazines (irony!), but that's always "somewhere else" and the idea fades as quickly as it came.

If you really want to save the trees, kill a lawyer. I'd bet one lawyer wastes more paper in a year than an entire classroom.

Re:i like the idea of the kindle

If you really want to save the trees, kill a lawyer. I'd bet one lawyer wastes more paper in a year than an entire classroom.

Done.

Re:i like the idea of the kindle

"Scratch that - education is too profitable an industry to risk modernizing"

It's a bit more complicated than that.

Let me preface my comments with this: first, I own a small publishing company that among other things, publishes a textbook (at $32.95 US). Second, there are a lot of academic books that are overpriced, and in some cases absolute rip-offs. There is even a company that will remain nameless whose prices have absolutely nothing whatsoever to do with reality, and which has absolutely no issues whatsoever with charging $100 for a book that shouldn't be reselling for more than $60.

That being said, modernizing the textbook industry probably wouldn't work at this point in time. And that has nothing to do with the companies - it has to do with the students. They generally prefer a printed book.

I know this because the textbook in question was one I helped write, and we tested it as a free e-book in the class it was written for. At the end of the class, we asked for feedback on the textbook so that we could do some fine-tuning. The comment we got more often than all of the others combined was a complaint that it wasn't a printed book. Keep in mind that these were university students, and we GAVE them the e-book. Not so much as a cent changed hands.

For all the strengths of the e-book, people have to first want to buy it. And when you're looking for something that you can write notes in, an e-book generally won't fit the bill. For that matter, it's a lot easier to deal with a book printed on actual paper than an electronic copy, and that isn't likely to change any time soon. So long as the e-book adds barriers to entry rather than taking them away - and since an e-book requires a reader, electricity, and has to deal with file formats, those barriers aren't going away - the printed book will remain the standard.

Re:i like the idea of the kindle

If you can ask this question, you have not actually read anything from an eInk based device. I'm not being a smart ass. I thought the same thing and I used to read books on my Toshiba e805 which has a full VGA screen with a dpi as high as the iPhone (one of the best looking displays ever put on a PDA). Then I saw eInk. Like someone above, I also own the Sony, not the Kindle, and for remarkably similar reasons. If you have ever read anything on one of the eInk devices, you don't go back. You buy a booklight for when you want to read in the dark, and you never look back. I now use the iPhone as a PDA, and the eReader to read books. The Toshiba is in its case, sitting on my shelf somewhere.

Re:i like the idea of the kindle

Because reading a laptop screen sucks ass if you have to read for any length of time.

Ah I see it's time for the weekly slashdot ebook article again, filled with the same repetitive comments as last time.

Every ebook article has at least one person complain they could never look at a computer screen for more than a few minutes therefore they could never read using a computer. Supposedly, everyone on slashdot is either a gamer or a programmer or hacker or whatever. How are you other gamer/programmers doing it without a monitor? Are you guys ALL using braille readers or speech interfaces? If you are, then more power to you dude. But realizing thats probably about 1% of the readership, I laugh at the other 99%.

Required contents for each weekly slashdot ebook article:

One guy to complain he can't read anything on a computer screen (dude, you go to slashdot for the pictures, like our old pal goatse?)

Another guy to complain all his books have brightly colored pictures (see spot run, run spot run?)

Another guy can't read unless his ebook reader has a built in mp3 player / youtube video player / embedded firefox / etc, you know just like every paperback or hardcover book ever made.

Another guy, whom apparently bathes more than the sterotypical geek, will complain his ebook reader doesn't work so well in the bathtub. Oddly enough no one complains that they can't read paperbacks in the shower. I don't think I've taken a bath since the mid 1980s (before most slashdotters were born?), but don't worry I use my shower once or even twice a day and I never miss not being able to use a book. My advice is bathe with a member of the appropriate sex+species instead of a book, anyway.

Then the other guy complains that his ebook reader only holds a 20 hour charge and he hates it when the battery dies during a reading session (maybe he should nap after nineteen and a half hours of bedtime reading, or sleep somewhere within 100 feet of commercial AC power?)

Then someone else always brings up the "right to read" essay despite the fact that a real slashdotter would never buy a reader that doesn't work with some hack to read plain texts like gutenberg. I waited for that before buying my REB-1150 or whatever its model designation is. Works pretty well. It's a cool story, but everyone here knows it, k thx bye.

There's probably a few other sterotypical ebook comments that I've forgotten.

i like the idea of portable porn.

"Dirty rotten companies shove mp3-camera-gameboy-dildo-phones down our throats every minute of every day. "

I would like to subscribe to your color E-newsletter with stereo screaming and moaning.

Re:Color is hard to do

Readability has to be as good as, or almost as good as, printed text. Mono screens are clearer and work far better in bright light and use less power.
Sure, you can get sunlight readable color screens but they chew power and are costly.

Apparently you missed the part where the Kindle uses an E-paper [wikipedia.org] display, so it uses power only to change the display, doesn't have a backlight, and is sunlight readable.
A color version would have 1/3 the resolution, if they were able to make red, green, and blue versions of the pixels in the current display.

In general, sunlight readable displays could chew much less power than normal displays if you can turn off the backlight, like in the OLPC XO-1.

What's the point of this analysis?

...if the convenience factor wasn't part of the equation.

Isn't this largely the point? Who the hell is making a decision to purchase this based on book cost?

Cost estimates off by factor of ten, inconvenient.

With a real hardback book I can resell it on amazon for most of what I paid for it. Moreover I can buy it used to begin with. So the cost estimates here are off by a factor of 8 to 10 at least. Of course here is some inconvenience i reselling. On the other hand I can also buy a lot more books at one time for the same price and keep them till I'm ready to read. Conveience to me is being able to toss a book in my airplane bag or beach bag. I'm not taking my kindle to the pool or the beach. I'm not going to leave it outside on the patio table while I go take a pee or refill my drink. And I'm certainly not parking it beside the piss pot, or taking it in the bathtub with me. Besides, being old school, I find there's a great deal of visceral nature to books that somehow is part of the reading. Even being able to dog ear a page or write in the margins of certain kinds of books is a very good way to use them effectively. Not to mention...convenient.

Re:Cost estimates off by factor of ten, inconvenie

It's not just about selling. Most of the value in culture is sharing. If I have a real physical book, I can lend it to my friend. I can give it to a family member. I can say "read this; I loved it". If it's locked into my Kindle then that's much less likely to happen. That may not happen with every book, but you don't know which ones are going to be important till you read them.

A real book is worth much more than a DRM controlled image of one.

Convenience

... if the convenience factor wasn't part of the equation.

The convenience factor is the equation. The whole equation.

Next up:

Next up a spreadsheet detailing the break-even point of your iPhone one 25 cent pay phone call at at time!

Dead in the water until file format sorted

As I have argued ad nauseam here [tug.org] (PDF) and elsewhere, Ebook readers sinply won't take off big-time until the manufacturers forget their proprietary formats and go for something sensible.

Unfortunately, "something sensible" doesn't mean some HTML bodge, RTF kludge, or non-reprocessable binary like PDF, but a persistent, parsable, non-proprietary, standard. Gosh, isn't that what XML was supposed to do?

Value over Lifespan not ROI

The advantage e-books have over dead-tree versions is in technical material. Shop manuals, technical schematics, medical journals, etc. Any material where being able to 'search' would be a benefit. E-books offer almost 0 benefit for casual or 'entertainment' reading. But that isn't the point. Source material longevity is the key. A good quality hardcover can last HUNDREDS of years! Try that with any electronic device or file-system. I remember a time not too long ago when 16 registers on a CPU were a big deal, and DOS apps couldn't read Mac files (even the 'simple' ASCII txt files) and there were different file-system structures 7bit vs 8bit vs *. We think that .txt is the safest solution for portability and longevity but IBM used to think the same thing about punch-cards!

If you are going to invest enough money in a Kindle to make it a 'worthy' purchase, then you are that-much-more going to benefit 50 years from now with your library of real-books and a pair of eyeballs as your interface to them.

college textbook analysis doesn't work

His analysis of the kindle as a vehicle for college textbooks doesn't work.

Most students buy their books used and sell most of them back to the bookstore at the end of the semester. If publishers started offering textbooks for the kindle, they'd presumably be DRM'd, and you wouldn't be able to sell them back. The publishers hate the used textbook market, and they do anything they can to kill it off (e.g., a new edition of a calculus textbook every 2-3 years), so there's no question in my mind that they'd use DRM to eliminate it.

Most lower-division textbooks in most subjects are in a large, color format with a layout so complex that it makes every page look like the cockpit of a 747. This doesn't work on the kindle.

He seems to assume that the cost of a college textbook mainly has to do with paper, printing, and binding (ppb), so that it would be much cheaper in electronic form. Actually, ppb is no more than a small fraction of the cost of most textbooks.

He seems to assume that the only way to read an electronic book is on a special e-book reader, and then he goes on to calculate how long it would take to earn back the high cost of a kindle. But nearly all college students either have a laptop or a desktop machine, so the only logical reason for them to buy a kindle would be the same as for anyone else: convenience.

What about the economics of the Kindle for Amazon?

It's consider that a much more interesting topic.

The idea of giving free cellular data service away with a device is basically the exact opposite of what the rest of the industry does.

You can get an iPhone for $200, but then you're obligated to pay ~10x that amount for wireless service over the next couple of years. A Kindle costs $350 and has free wireless for how long? forever?

Can that business model really be profitable in the long term? If so, I'd say it's a great deal for the consumer. But I have to wonder how many people have to do a bit of web browsing on their Kindle before Amazon starts losing money on wireless bills, and decides to remove features or connectivity?

Re:There is more to it...

Also, even if it were not about the experience, I cannot resell books from the Kindle. So the TCO is much higher than the books assuming that I resell all those that do not rock my world.

Re:There is more to it...

And you're locked in to the kindle forever, until they stop supporting it at least:/

Not to be a ra-ra anti-DRM fanboi at every story, but it's somewhat relevant here.

Re:There is more to it...

Amazon needs to offer electronic copies of books I order for a small up charge. I still want the real book. I still want the experience of having a real collection even when the tech is old/broken/unsupported. In bed at night I still want to turn the pages. However, I'd love to have the convenience provided by the Kindle when traveling and even for purchasing. Buy the book now, read instant on the Kindle, get the hard copy in the mail two days later. I'd buy a Kindle regardless of generation/tech in an instance if this plan existed.

Re:I'll stick to books

To be fair, e-ink is about the least screen-like screen you are likely to find. Like paper, it is non-emissive and works only by reflecting ambient light.

I'm not about to buy one; but the Kindle's screen is one of its major selling points over various other cheaper and/or more versatile electronic reading widgets.