Posted by: Douglas Macmillan on January 28, 2010
Amazon.com keeps secret the number of Kindles it sells, saying the devices generate too small a portion of overall revenues to warrant disclosure. But on Thursday, the company gave its first big hint at the e-book reader’s financial success.
In a press release detailing the e-commerce giant’s solid all-around performance in the fourth quarter of 2009, CEO Jeff Bezos says, “Millions of people now own Kindles.” So, assuming that at least two million people have bought the device, and that each paid at least $259 – the cost of the least-expensive Kindle – Amazon now has a business worth more than $500 million in sales. Not bad for a product that’s a little more than two years old.
Amazon spokeswoman Mary Osako declines to specify whether the word “millions” was deliberately pluralized in the release. “We’re letting the quote stand for itself,” she says.
The size of the Kindle market has been the subject of much guesswork, since e-books are such a new and promising business. In 2008, Citigroup analyst Mark Mahaney came up with a method of estimating sales based on a filing from Sprint, the former wireless carrier for all Kindles, and estimated 500,000 that year. Forrester Research recently estimated that 2.5 million Kindles have been sold, based on consumer surveys.
An increasing number of people are interested in gauging the success of the Kindle. Makers of rival e-book readers, many of them launching early this year, need to know the size of the opportunity to plan accordingly. Spring Design, which launches its $359 Alex e-reader in February, decided to start conservatively: it contracted with a Taiwanese manufacturer to produce 120,000 units in the first year.
Earlier this month, Amazon told software developers they would soon be able to write programs for the Kindle – some are holding back because they’re not sure the device gives them a big enough audience. Jeff Smith, CEO of mobile app maker Smule, is holding off on creating apps for the Kindle, in part because the investment required to write a program for the device wouldn’t be worth the potential payoff with just one to two million users.
Also watching closely is Apple. The computer maker made an obvious play for the e-reader market on Wednesday, when it launched its e-book-friendly tablet, the iPad. “Amazon’s done a great job of pioneering this functionality with the Kindle,” CEO Steve Jobs said during the launch of the iPad. “We’re going to stand on their shoulders and go a little further.”
But after seeing Apple’s expected “Kindle killer,” some analysts don’t think the iPad will do much to hurt sales of the Kindle. “For avid readers of books and periodicals, [the Kindle] is still the best option,” says Lazard Capital Market’s Colin Sebastian. Forrester analyst James McQuivey agrees, and is even considering raising his estimate on total sales of the Kindle and other single-purpose e-book readers in 2010 to 7 million, from his previous estimate of 6 million.
Update 1/29 10:10 AM ET: Michael Arrington at TechCrunch says the number of Kindles shipped is closer to 3 million, according to unnamed sources. And he points out that Amazon appears to have given away some Kindles for free -- which makes financial analysis of Bezos' claim that "millions of people now own Kindles" a little trickier. Still, consensus among people making educated guesses (the blog Kindle Review has an interesting mathematical breakdown) appears to put the number of Kindles sold between 2.5 million and 3 million.