As the e-book industry matures and users amass progressively larger content libraries, generating incremental e-book sales may become increasingly difficult. When the Amazon Kindle was introduced in 2007 and customers began building digital content libraries, the product had a relatively high attach rate, in our view. Now that the Kindle has been in the market for over 5 years, we believe the attach rate has declined. This is especially true as a larger proportion of Kindle sales are “upgrade-sales”, in which case, the customer already owns an existing content library. Data from BookStats shows that e-book revenue has decelerated every year for the past 4 years.
According to The Digital Reader, 76% of public libraries across the country offer e-books and almost 40% lend e-readers to library members. As e-reader users become more familiar with the library system’s free alternative, and as libraries reduce the friction associated with borrowing e-books, we believe digital content revenue growth at Amazon may soften.
We believe the slowdown in Kindle content sales is further supported by Google Trends data which shows that interest in the Amazon Kindle is at its lowest level in over a year and a half as shown below.
