New device apt to kindle greater interest in reading

by Takamitsu Sawa

The first thing that catches your eye when you open the yousho (imported books) section of Amazon Japan’s home page is an advertisement for the Kindle DX Wireless Reading Device. The Kindle DX ad, which first appeared last summer, claims that a reader can perform a wireless download of any of more than 320,000 imported books within 60 seconds anytime, anywhere.

You would have to pay to buy a book from the Kindle store, but the cost would be considerably lower than buying the book in the conventional form at a bookstore. Moreover, by subscribing to it, you would be able to read not only books but also The New York Times and other dailies if you pay.

This may give you the impression that the print media are being taken over by the electronic media. Do publishers of newspapers and books stand to gain or lose with the appearance of a new device like the Kindle? In my opinion, they have more to gain than to lose.

In Japan, daily newspapers with nationwide circulation are delivered to individual homes by sales agents. As a growing number of students read dailies on the Internet, only one of every 10 students today subscribes to papers regularly.

How should newspaper publishers cope with the gradual shrinking of their readerships?

One idea I would suggest is to give only regular subscribers the right to read newspaper articles on the Kindle DX. Under this system, you would spend about 10 minutes to scan newspaper headlines while sipping coffee before leaving for work, and then read the articles in detail on the Kindle DX while riding the train or bus on your way to work, saving time and gaining added convenience.

If this works, the new service launched by the Kindle DX would not necessarily cause a decline in the number of regular subscribers. On the contrary, the number would in all likelihood increase because you could read news on the new device without struggling to fold and unfold pages in a crowded commuter train. Thus newspaper publishers would benefit from the growing number of readers who choose to subscribe regularly in order to qualify to read newspaper articles on the Kindle DX.

One problem that needs to be resolved before this idea is implemented is how newspaper companies and Amazon should split subscription revenue. Another is the inevitable decline in advertising revenue for the newspapers. Whoever reads newspaper articles on the Kindle DX can hardly be expected to take a look at advertisements because they would spend much less time reading the paper. This would lower the value of newspaper ads, which in turn would lead to falling revenues from advertising. Thus the Japanese media must do away with their traditionally heavy dependence on advertising revenues.

It must be noted that, in coping with the debut of these new services, there is a fundamental difference in business models between major Japanese newspapers distributed nationwide through sales networks and their American counterparts, whose readership is limited by area.

For Japanese papers, the business model for survival would be to permit only regular subscribers to download newspaper articles into the Kindle DX free of charge. American newspapers, meanwhile, would be able to create new readers in areas not covered by delivery routes by offering them the chance to read newspaper articles on the Kindle DX for a certain fee.

In other words, newspaper publishers in the United States could gain from the Kindle DX service by cultivating new readers who cannot otherwise be reached by conventional delivery.

How would book publishers be affected by the Kindle DX?

Once it becomes possible to download a whole book into the hard disk of the Kindle DX, there will inevitably be a decrease in the number of paper copies sold. It is reasonable to assume that the cost of downloading would be less than the list price of the book.

If 20 percent of the list price is the cost of printing and binding the book, the appropriate charge for downloading a book might be 20 percent less than the list price.

If it is assumed that royalties payable to the author account for 10 percent of the list price, then the publishing company and Amazon must agree on how to split the remaining 70 percent.

Although figures vary from one publisher to another, Amazon on average is believed to pay around 60 percent of the list price for each book it gets. This means that if shipping charges are ignored, Amazon’s net income is about 40 percent of the list price.

If it is assumed that the downloading charge of the Kindle DX is 80 percent of the book’s list price (list price minus printing and binding costs), the publisher’s net comes to 40 percent (including royalties) of list or the same as for Amazon. When royalties equivalent to 10 percent of the list price are deducted, the publisher gets 30 percent of the list price, which is about the same as it would receive by selling the paper book.

Moreover, as the cost to the reader is 20 percent lower than for a paper book, it is certain that the publisher will be able to sell many more copies, including those downloaded into the Kindle DX. All told, the Kindle DX works to the advantage of the publishers.

Those expected to incur serious losses include bookstores, distributing agencies, printers, bookbinders, home delivery service providers and others who rely on paper books. The number of subscribers to the Kindle DX will increase drastically if its price comes down to around ¥20,000, in which case the paper books could account for less than half of all copies sold.

The Internet was been blamed for younger generations’ loss of interest in reading. It is conceivable, however, that this trend may be reversed with the appearance of the Kindle DX. It could become a new fashion to download books into the Kindle DX and read them while riding the train or bus on the way to and from work. If this happens, the quality of the content will determine the fate of the publishers and newspaper companies.

Regardless of how reluctant people have become to read, good books still sell well and quality commentaries in newspapers remain useful sources of information for conversation at parties. With the Kindle DX’s debut, a golden opportunity has arrived to reverse the current trend and to encourage the general public to start reading again. I call upon those who publish books and newspapers to bear this in mind and compete with each other by improving the quality of content.

It has long been said that the barriers between telecommunications and broadcasting have come down. The new Kindle DX service is about to open a new era in which the barriers between telecommunications and newspaper/book publication cease to exist. Although some people regard this change as likely to hasten the decline of the publishing industry, I think it represents a once-in-a-lifetime opportunity to bring people back into the world of reading.

That’s why I’m hoping that the publishers of newspapers and books will exercise their creativity and ingenuity in offering high-quality content.

Takamitsu Sawa is a professor of Ritsumeikan University’s Graduate School of Policy Science and an appointed professor at Kyoto University’s Institute of Economic Research.