Is Apple Using Gift Cards to Prop Up a Sagging iBookstore?

Gift cards are among the most popular items given out as presents during the holiday season. Apple (AAPL) has certainly reaped success from its iTunes gift cards, selling them both online and in retail stores to millions of customers for music downloads.

So no wonder Apple is now selling gift cards for iBooks, its e-bookstore platform, in its own stores and also in places like Target (TGT), according to a report by iLounge.

While the obvious reason for Apple to start doing this is to grab more of the buying power from brand-new iPad owners, the less obvious rationale is to bump up sales directly from the iBookstore -- which lags very far behind other e-retailers, as multiple publishing sources have told DailyFinance throughout the summer and fall.

When the iPad first became available in the spring, it -- and the iBookstore -- was seen as a way for publishers to change the terms of how they approached and sold e-books. Whereas before, retailers like Amazon (AMZN) were selling e-books via a wholesale model, paying 50% of the hardcover list price and then selling e-books to customers at a loss, the arrival of Apple on the scene caused five of the six biggest book publishers to switch to an agency model, with retailers taking a 30% cut of the (much) lower digital list price.

Retailers could instead make a profit off e-book sales, even if author royalties dropped. Amazon may not have been happy to switch to agency terms, but they complied -- and still hold the dominant e-book market share. Barnes & Noble (BKS), thanks to its own e-reader, Nook, has comfortably settled into second place for digital market share, with Kobo, stocked by Borders (BGP), and Sony (SNE), also battling it out. And what of the iBookstore? They aren't much of factor, as one example illustrates all too well.

iBookstore Not "Much of a Factor" in the Race for e-Book Market Share


One New York Times bestselling writer of commercial fiction, in the opening week of her most recent book, sold 140,000 print copies and 50,000 digital editions -- typical numbers for a top-selling writer these days. Where things became more interesting was in the break-down of digital books: 30,000 e-books were sold through Amazon, for a 60% digital share. Approximately 13,000 e-book sales were for the Nook (26%) with just 3,000 e-copies -- 6% for digital, or 0.016% of overall sales -- emerging from the iBookstore. (Sales through Sony were also low, but higher than through the iBookstore.)

These are fairly hard numbers, but other phrases bandied about by publishers, agents and authors include "negligible," "barely a blip" and "hardly on the radar." It was one thing for early sales on the iBookstore to be small -- less than one e-book downloaded per iPad sold for the device's first week on sale -- but continued lagging market share poses a number of questions for Apple. (A spokesperson for the company hadn't answered DailyFinance's request for comment, due to the time zone differences. We'll update with a response accordingly.)

Is the iBookstore platform something Apple takes seriously, or is it happy to cede e-book sales to retailers like Amazon and B&N, which allow their customers to read their books through apps developed for Apple's devices? If the iBookstore is worth all that much to Apple, then what will happen when the current agency model contract is up in April, and what sort of negotiating power will publishers have if they want to alter terms in their favor -- especially if Apple wants terms more to its liking?

Adding the iBookstore gift cards may reinforce that Apple understands it can, and should, sell more books through its own store platform. Customers may well bite, but it may not be enough to make the iBookstore a real player in the e-book sales game.

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