About That Kindle Revolution: A Few Nuggets from Amazon’s April 22 Conference Call

By Stephen Windwalker, Editor of Kindle Nation Daily

As a follow-up to my post yesterday about Amazon’s earnings report and the company’s progress in advancing the Kindle Revolution, I thought it would be helpful to post some brief excerpts from last Thursday’s Amazon earnings conference call. I am using the transcript provided by Seeking Alpha, which is available here if you’d like to see the full transcript:
http://seekingalpha.com/article/200342-amazon-com-inc-q1-2010-earnings-call-transcript?source=marketwatch&page=-1

In order to abide by Seeking Alpha’s 400-word maximum on such excerpts, I’ll pare this down to a few quotations from Amazon senior vice-president and chief financial officer Tom Szkutak, specifically about the Kindle:

  • “[I]n terms of marketing itself you saw that it increased a little bit as a percentage of revenue year-over-year and we are doing advertising for Kindle, it’s certainly a product and an area that we are very excited about. You probably seen some of the ads that we are doing….”
  • “We are excited about the idea that the world may shift to a place where 3G connected devices are available to browse [the] net and our view is that the more of web connected devices whether [they] be tablets or smartphones, the better that is for our retail business … and we will figure out the best way to make sure that we [make it] as easy as possible for customers to purchase from those devices but we think that that’s an exciting opportunity to have a world that looks like that.”
  • Spencer Wang of  Credit Suisse asked an interesting Kindle question: “A question on e-books. I guess, as you and the industry move more towards the agency model for digital books, it shifts the ability to set pricing to publishers. I guess our understanding is you also have to charge sales tax, also. So it would seem that your ability to leverage low price maybe mitigated a little bit. So I was wondering if you could just talk about how you would adjust your model to differentiate Amazon versus some of the other players in the context of the other two pillars, I guess, convenience and selection that you are focused on?” Szkutak answered: “One of the things that we’re doing is we are expanding selection, pre-dramatically. When we launched two plus years ago, with Kindle we had approximately 90,000 titles. Just recently we passed over 500,000 titles and so our vision is, as we stated when we launched Kindles to have every book ever published in any language available for customers in under 60 seconds and that’s still our stated long-term goal and so we’re going to continue to add selection in support of that vision.”

A few other nuggets from the call, not specifically about the Kindle, that struck me as significant:

  • Amazon now has 114 million active customer accounts, which more than doubles that metric for the point when the Kindle was launched in the fourth quarter of 2007.
  • Although it is reasonable to think that the Kindle is just beginning to penetrate the international ebook market, given the fact that the Kindle is still nearly an English-only platform and only began shipping outside the US in late 2009, it is nonetheless stunning to note the extent to which Amazon itself, the mother ship, has matured into a truly international company. $3.35 billion of Amazon’s $7.13 billion in first-quarter revenues came from outside the US. It would be silly to think that Amazon does not have plans to give the Kindle an equally impressive global footprint, or that such plans would not be based on an integrated business plan involving expansion of catalog, foreign language support, and in-country retail and wireless carrier support.
  • Regarding Kindle demand during the quarter, Szkutak did give one cryptic but significant answer that suggested that the rate of growth for Kindle sales compared with the year-ago first quarter of 2009 was greater than the 2009 fourth-quarter rate of growth for Kindles sales over the year-ago fourth-quarter of 2008. Although Szkutak wouldn’t translate any of this into actual units or dollars, the fact that Kindle unit sales experienced such an upbeat first quarter (within a calendar-year model) is especially significant given that we might reasonably have expected the January announcement of the iPad and the subsequent opening of iPad pre-orders to have at least a chilling effect on Kindle hardware sales. I’ve seen where some observers have tried to extrapolate a slowdown in Kindle sales from “data points” such as a slowdown in Kindle hardware orders placed via their own Amazon Associate links, but this just seems a little silly: unless those “sales” were in the hundreds, the sample size is just too small to be a basis for such assessments.

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