Amazon’s success with its Kindle business is hitting an inflection point as it nears a full one-tenth of the company’s total revenues, according to an analyst report. The online retailer is likely to see Kindle-related revenue hit 10 percent of its total revenue by next year, said Citi analyst Mark Mahaney.
Mahaney said based on recent disclosures by Amazon and Citi’s own analysis, he believes that Amazon will sell 17.5 million Kindle units this year, worth more than $2 billion in revenue, and 310 million Kindle books, which will generate more than $1.7 billion this year. He said that would mean a combined revenue of almost $3.8 billion or about 8 percent of revenue through Kindle activites.
Next year, Mahaney said he expects Amazon to sell 26.2 million Kindles and 751.5 million Kindle books, worth a combined $6.1 billion in revenue or 9.9 percent of Amazon’s total. Mahaney said when a business segment reaches 10 percent, it has the potential to impact the growth rate of the total business.
The analysis comes on the heels of news last month that Amazon is now selling more ebooks than physical titles. As of April 1, Amazon is selling 105 ebooks to every 100 physical books, not including free Kindle titles. The company should see even more mainstream adoption of its Kindle readers as the hardware price comes down below $100, which Mahaney believes will happen by the end of this year. Amazon’s cheapest unit is now the $114 ad-supported Kindle, which Mahaney said is the best selling unit in the Kindle family.
This is pretty impressive growth no matter how you slice it. And it shows how quickly consumers have shifted their reading habits to digital content on a plethora of devices. Amazon is on a roll and seems to have even bigger ambitions for its book business. As my colleague Michael Wolf reported, Amazon has been adding new imprints to become a “book industry in a box.”
Mahaney said there are still challenges posed by the iPad and offline retailers getting their act together in the ebook industry. But Amazon seems to be in the driver seat with ebook sales and it’s now realizing how big a businesses it has on its hands.