) announced that its Kindle Singles are for sales, a new format for
the Kindle e-reader to sell shorter and cheaper e-Books. These
books roughly between 30 - 90 pages and run somewhere between
the size of a magazine article and a full novel, but are lengthy
enough to meet the marketing and distribution requirements. We
believe this initiative could engage a lot more writers in
producing shorter books and assist those who don't have a publisher
to meet marketing and distribution requirements. Amazon competes
with eBay (
), Barnes & Noble (
), Overstock.com (
) and Wal-Mart (
Cheaper prices for the shorter format e-Books compared to
traditional e-Books could also mean that unit sales of e-Books from
the Kindle store will likely go up. This move could help Amazon and
benefit its stock.
We currently have a 182 price estimate for
Potential upside to Amazon's stock
Amazon primarily competes with Barnes and Noble (
) and Apple (AAPL) in the e-Books market. Kindle has
an edge over Apple in terms of the availability of
e-Books. Amazon is the market leader in the e-Books market and
claims its market share to be around 70% to 80%,
according to an interview conducted by CNET with
Amazon vice president
. Amazon's edge lies in its inventory of e-Books which is currently
, compared to Apple's, which is far less at slightly over 100,000.
We believe that Amazon's move to allow shorter e-Books to be made
available through its store could further increase the inventory of
eBooks currently present and provide customers with a wider variety
of options to choose from.
We currently estimate that Amazon will increase its share in the
U.S. Online Media market (Books, DVDs and Music) from around 23% in
2011 to around 30% by the end of the Trefis forecast period.
In another article, we discussed how the e-Books segment could
eventually become a billion dollar business for Amazon. The
introduction of shorter format e-Books could create more upside to
our estimate of e-Books revenues. Although these shorter format
e-Books are expected to be priced lower than traditional e-Books,
we expect revenues to be compensated through higher unit sales.
We believe that it could create greater revenue generating
opportunities for Amazon in the long run. As a show of sensitivity,
if Amazon captures 35% market share by the end of our forecast,
this would add around just under 5% to our price estimate.
You can see the complete $107 Trefis Price
estimate for Amazon's stock here