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Amazon’s Q4 Report Suggests the Kindle, Kindle Fire Have Peaked

January 30th, 2014 by · 12 Comments · Amazon, Kindle, Kindle Fire

I’m sureamazon-logo3 that you’ve already read the news that Amazon released their year end report today, but did you happen to notice what wasn’t in the press release?

There were a few telling absences from the press release, and if we read between the lines we end up with a few questions Amazon hasn’t answered.

The press release starts out well. The financial news was generally good, with Amazon reporting that net sales were up in 2013:

Net sales increased 22% to $74.45 billion, compared with $61.09 billion in 2012. Excluding the $1.28 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the year, net sales grew 24% compared with 2012.

Operating income increased 10% to $745 million, compared with $676 million in 2012. The unfavorable impact from year-over-year changes in foreign exchange rates throughout the year on operating income was $29 million.

Net income was $274 million, or $0.59 per diluted share, compared with net loss of $39 million, or $0.09 per diluted share, in 2012.

Analysts weren’t happy, of course, but that’s no surprise.

After the financial news Amazon listed the accomplishments they wanted to highlight. It’s too long to quote here, so I suggest that you go read the press release. While you’re at it, count the number of times the Kindle is mentioned, and then count the mentions of the Kindle Fire.

Did you notice what wasn’t there?

There’s no mention of how many tablets and ereaders Amazon sold, and there’s no mention of how many ebooks they sold, either. Those are telling details, IMO, and they could be saying that Amazon’s hardware efforts and ebook efforts have peaked.

Amazon took the time to mention the new Australian Kindle Store, and they took time to mention Kindle on airplanes, Kindle mayday, Kindle FreeTime, and pretty much every other new Kindle program.

And yet Amazon didn’t mention ebook sales or hardware sales.

I’m sure some of my readers recall that I wrote a very similar post around this time last year. I can’t link to that post because it unfortunately has been eaten by my blog (I cannot find it in the Internet Archive’s Wayback machine, either). As I recall, I commented upon Amazon not mentioning their hardware sales; they mentioned ebook sales in the press release (up 70%), but not hardware, and I concluded that the hardware news was not good (or at least that’s what I think I wrote).

Earlier today I was reminded of that post by a reader who I think wanted to remain anonymous. He reached much the same conclusion I did. Actually, he went several steps further than I dare, and he wrote that

  • International expansion is basically at a standstill, both for Amazon as a whole and in particular for Kindle. After a few big launches in Europe and Asia, the roster of countries has remained the same for about a year. So the Kindle ecosystem basically exists in ten countries.
  • The Kindle Fire has gone through countless sales.
  • Kindle Fire appears to have flopped in mainland Europe. If you look at the rankings sometimes you’ll see it below the top 100!
  • In both the UK and US, the Kindle store shows Paperwhite ahead of any Fire model.
  • This is anecdotal, but less and less Android developers seem to be making the effort of publishing on the Amazon store.My guess is the Kindle Fire has flopped, and the Paperwhite is doing OK but not booming in sales. Amazon will shove this under the carpet the usual way, i.e. through total silence.

I think he went too far, but I do agree that Amazon is no longer seeing the growth along the lines of what they reported in past years. I would go along with the theory that hardware sales have flattened (IDC estimates back this up), but I am not so sure I would make the same claim about ebook sales.

Yes, Amazon neglected to mention ebook sales, and while that probably means that there was insufficient growth, the relative lack of growth might have a cause other than Amazon’s digital efforts fizzling.

As you might recall, in 2012 there was an ebook sales bubble due to the release of The Hunger Games movie (and 50 Shades). This made the AAP’s stats for 2013 look flat, and Amazon’s sales could be suffering from the same effect.

Of course, the AAP statistics mainly cover the US ebook market, while Amazon sells internationally. But if Amazon wasn’t seeing much in the way of growth of international ebook sales then it might not have been enough to overcome the unimpressive stats for the US ebook market.

This is all speculation, obviously, but before you dismiss it as the ramblings of a madperson I would like to ask you one question.

Why didn’t Amazon use a phrase like “best year ever” to describe their ebook sales?

It’s vague enough that Amazon could have used it to refer to sales that were up by as little as a couple percent and still told the truth (and avoided an SEC investigation).  But Amazon didn’t even use a vague phrase, and I would argue that it’s a sign that sales were not up.

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12 Comments so far ↓

  • Olympia Press

    Yeah, also 50 Shades was a huge hit in the Kindle store in 2012, not so much last year. It’s understandable if ebook sales are down.

    Your commenter there was awesome, I also remember Amazon completely changing their marketing strategy in the middle of the holiday season. First Kindle Fire ads Mayday showed this impossibly timid guy who was afraid of both his Android tablet and his 11-year-old niece, then they mixed in some quickies with a couple of NFL broadcast analysts — I think James Brown, guy who’s been on Fox forever — then they completely pulled the original Mayday ads (unless they’re still running on Lifetime or something.)

    Just not something you’d do if you were happy with North American Device sales.

    (Though all that said, in the UK, Kindle is still pretty much a verb, with cheaper/better Android devices not really taking over the market… yet.)

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  • Maria (BearMountainBooks)

    For now, I agree ebook sales and Kindle sales have peaked or stalled. Something new and exciting would have to happen to bring that back. I think the sheer number of freebies they started to allow a couple of years back actually hurt them. It developed a huge following of freebie groupies (and I don’t mean that in a bad way–I download freebies myself). People became more reluctant to spend money on books–waiting for free or sales. Hunting down free sites. Part of the evidence that free got out of hand? Amazon warned associates to stop posting so many freebies or it would impact their income.

    Amazon has also done a poor job lately of putting unique books on sale. It’s the same few hundred books that roll from sale to sale. There’s nothing exciting to make people look through the sales because the vast majority (if not all) are repeats. Amazon isn’t looking very hard to find a few more interesting gems to promote and keep their lists interesting.

    I think they began a huge focus on Prime expecting that to generate tons of sale (and book lends and movie downloads) but the cost of shipping has skyrocketed. That cost dented their plans in that area and it shows.

    Reading comes and goes, but it’s a bit more “normalized” right now with no blockbuster hit to draw readers. All the book forums I’m on have lost traffic. Even those with decent traffic numbers have less comments and more comments from the ‘regulars.’ Less new faces.

    I reach no conclusions really. Only that it is harder to sell books and that won’t be news to anyone who is in the business!

  • Tyler

    Last year (2012) Christmas season introduced the Kindle Paperwhite. It’s just my opinion , not supported by any facts, that the upgrade to a new Kindle e-ink peaked there. There would not be much reason to upgrade from that one to the new one that was released in 2013 when the average person would not be able to tell the difference. The same could be said for the Kindle HDXs in some regards too. If you bought the Kindle Fire or HD in the past two years, why go to the HDX? I know at looking at it in Best Buy that the blue box around the display would annoy me.

  • New Name Same Guy

    $41!

  • Caleb Mason

    An old truism says there is only room for two major players in any market. For tablets based on recent q4 results those two are Apple and Samsung, same as smartphones. It seems likely Lenovo will become number three. The rest are all monkeys and chimps. The temptation to diworsify comes in cycles and I predict Amazon will have to retreat to its core business as a reseller. Same as B&N although the latter is hindered by being mainly a brick and mortar book reseller. So expect Amazon to focus on selling ebooks on all devices as a better strategic move. Hardware is too tough, too expensive, with lousy margins. Anyway, this is how I see it.

  • Ebook Bargains UK

    What’s most significant is that Amazon made no comment about international ebook sales at a time when the international ebook market is blossoming.

    But what could they say?

    They saw their market share in Germany plummet in 2013 as the Tolino Alliance stores soared.

    In the UK stores like Sainsbury have eaten into Amazon market share, and the imminent launch of Tesco Blinkbox Books will see Amazon’s UK dominance eroded further.

    Amazon shot themselves in the foot with their cack-handed Kindle Australia launch, whacking a half a dollar on a £2.99 USD ebook which now goes automatically to $3.99 AUD, and alienating New Zealanders who not only have to pay the extra but have to buy from the Australia store.

    In similar vein Amazon expects Belgians to shop at Kindle France and the Swiss and Austrians to shop at Kindle Germany, seemingly oblivious to the fact that stores as varied as Apple, ‘txtr and Google Play can all deliver glocalized stores and content for these countries.

    Amazon have so many hoops to jump through to buy from Kindle India that many Indians are simply going elsewhere. Not least with payments. Go to an ebook product page on Kindle India and follow the links in their little box about buying an ebook). While stores like Google Play glocalize and offer carrier billing and other local payment options, Amazon is still living in the last century when it comes to international payment options.

    Amazon continues to block downloads to vast tracts of the world, and impose surcharges across key markets in Europe and Latin America where it does permit downloads.

    The Kindle Russia store may materialize this year (and we certainly hope it does – every new retail outlet is good news) but we’ve seen similar rumours about Kindle Chile, Kindle Netherlands and Kindle Sweden which have all come to nothing. No doubt the timid performance of the Kindle Mexico and Kindle Brazil stores have tempered Amazon’s international ambitions.

    Sadly Kobo also seems stuck in a rut, after the very disappointing India launch and their failure to pick up the pieces after the W H Smith / Whitcoulls disaster.

    Meanwhile Google Play and wholesale catalogues like OverDrive, Copia, Gardners, Ingram and Baker & Taylor are laying the foundation for a truly international reach, and enjoying the open goals Amazon and Kobo have left them across much of the globe.

    Harper Collins and Simon & Schuster have variously reported selling ebooks in 190-200 countries in 2013. Many of those had nothing to do with Amazon.

    When most of the world think of Amazon they think of a river. Readers around the globe wanting to buy ebooks aren’t patiently waiting for Jeff Bezos to launch a Kindle store in their country. They are buying elsewhere, and reading on other devices.

  • Will Entrekin

    Amazon’s never released those figures. They consider them proprietary sales data.

    I wonder if they couldn’t claim it was the best year ever in terms of sales simply because sale price of exorbitantly priced ebooks dropped after the publishers settled and the DoJ spanked Apple in the collusion/price-fixing case.

    • Nate Hoffelder

      I doubt that was the cause. People buy more ebooks when they are cheaper, and that equals more units sold. Amazon could have boasted that they sold X percent more copies than last year.

      • Will Entrekin

        That’s fair, but I still dispute your assertion and headline. Especially given that I’m reasonably certain you were aware Amazon’s never released those figures (it’s widely reported they don’t. Publishers hate that they don’t).

        • Nate Hoffelder

          Amazon never releases figures, no, but they did use to release vague statements lauding their ebook growth. Those statements are no longer being released. Considering how many other times ebooks were mentioned, the fact that Amzn didn’t say anything about growth was IMO noteworthy.

  • Ebook Bargains UK

    Will, Amazon never miss an opportunity to tell us when things are going well. No, they never spelle out the detail, but accentuate the positive has always been the driving ethos of their PR department.

    Which makes their silence on this issue all the more deafening.

    Whether the Amazon slowdown is a temporary blip or part of a wider underlaying malaise remains to be scene, but as per our comment above, Amazon are already in a rut outside the US, and staying at the top at home is always going to be harder than getting there in the first place.

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