March 3, 2010, 12:00 AM

Amazon.com`s sales of digital books could increase 84% in 2010

Amazon.com could sell $248 million worth of digital books in 2010, up 84% from $135 million in 2009, according to an estimate from Credit Suisse Group AG. The retailer, however, will face more e-book competition from Apple and Google.

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Amazon.com Inc. could sell $248 million worth of digital books in 2010, up 84% from $135 million in 2009, according to an estimate from Credit Suisse Group AG. The retailer, however, will face more e-book competition from Apple and Google.

Sales of e-books by Amazon, No. 1 in the Internet Retailer Top 500 Guide, could reach $775 million by 2015, Credit Suisse analysts say in a recent research report. Still, competition from the likes of Google Inc. and Apple Inc. could send Amazon’s overall share of the digital book market to 72% in 2010 and 35% in 2015, down from 90% in 2009, the report says.

Amazon, No. 5 in the Internet Retailer Top 500 Guide, hopes to capture digital book sales through the spread of its iPad touch screen computer, which aims to compete with Amazon’s Kindle e-reading device. Google, meanwhile, this year plans to launch Google Editions, a service that enables consumers to buy digital books and play them on a variety of devices, though not Kindle, which uses a proprietary format.

“We envision a scenario where Apple, Amazon and Google eventually split the market,” the report says.

Other challenges face Amazon as it strives to keep a dominant hold on digital books. The retailer generally has charged $9.99 for digital books, preferring to take losses on some titles, especially new releases, in order to sell Kindles and lock consumers into the device, according to analysts. Publishers, though, are putting pressure on retailers to charge more for digital books, with retailers taking a cut, generally 30%, of the transaction, under what is known as the agency model.

Amazon in February caved to demands from Macmillan Publishers Ltd. that the online retailer switch to the agency model and charge higher prices for digital books.

“The new agency pricing model for eBooks undermines Amazon’s ability to aggressively compete on price, a key pillar of its three-pronged value proposition: price, convenience, selection,” Credit Suisse says. “We note that Amazon’s solid track record of innovation should provide some comfort for investors that Amazon can adjust its business model.”

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