Amazon is clearly in a classical Faultline style danger, created perhaps by the popularity of its own Kindle device. Already Jeff Bezos the company founder admitted at the Amazon results to his company selling 6 Kindle books for every 10 physical books (37% of its unit sales). It would be even more, but the calculation has been done only on its paid for books, and a number of Kindle books are given away, while no physical books are.
In the past Amazon grew to power by solving problems associated with the logistics of physical book delivery and by virtually inventing the automated recommendation process. Now it needs once more to win the fight be being the best online book provider, and until the epub standard came along, and rival book stores sprung up, the latest being Apple’s iBook Store, it had the field to itself.
The company revealed that so far all that as it produced stunning results to a happy Wall Street, with net sales up 42% to $9.5 billion in the fourth quarter, compared with $6.7 billion a year ago. Net income increased 71% to $384 million, compared with $225 million this time last year. Did anyone tell Amazon that there was a recession on?
Net sales were up for the year only 28% to $24.5 billion, and net income was up 40% to $902 million. All the company wanted to talk about was the Kindle and the Kindle DX, which are now shipping in 100 countries, along with the iPhone Kindle software shipping in more than 60 countries, through the Apple App Store and it is also available on the Blackberry, Mac and iPad.
The US Kindle Store has 410,000 books available, including 100 of 112 New York Times Bestsellers, more than 8,000 blogs, and more than 130 top US and International newspapers and magazines.
But unlike its old business of shipping books, Amazon has far fewer economies of scale in a purely online business and prices can be the same from other suppliers, and many rival eBook libraries are being launched. This in turn will make it rest purely on its brand and take quite a bit of premium margin away, which the Kindle has so far had throughout its period of operating with no competition.
To respond to that, and particularly to the Apple iBook Store launch, Amazon will now copy the Apple royalty plan and take just 30% of revenue for the Kindle, said Bezos, net of delivery costs.
Amazon also introduced the Kindle Development Kit, which gives developers access to programming interfaces, tools and documentation to build and upload active content for Kindle.
Amazon gave 2010 first quarter guidance between $6.45 billion and $7.00 billion, up between 32% and 43% compared, with first quarter 2009.