E-Readers: 19 Million Americans Read E-Books on Devices Like Kindle, Nook, and iPad

How many Americans read e-books?

19.6 million.

Here’s the math:

Americans 15 and Older * Percent of Americans Who Use E-Readers = U.S. E-Book Market

Harris found 8% of Americans use e-readers. There are 307 million Americans. Only 245 million Americans are 15 or older. The Harris poll surveyed people 18 and older. But using 15 and older better measures market size.

245,267,292 * 0.08 = 19,621,383

The U.S. e-book market is 19.6 million people. What is the market in dollars?

U.S. book spending is $77.80 per capita. People who use e-readers spend more. So we’re talking about an installed base that buys more than $1.5 billion in books each year.  That’s today’s addressable market for content. A lot of that is still print. It doesn’t have to be. The most profitable e-book growth will come from selling more e-books to people who already have devices.

People born between 1946 and 1976 read less than everybody else. They are income rich and time poor. There’s a danger they will buy devices without buying enough e-books. I’d ignore them.

Amazon (AMZN) and Barnes & Noble (BKS) should focus on selling e-books to readers who grew up in the ‘80s and ‘90s. They need to maximize the number of e-books sold per device. Whoever sells the most e-books per device will eventually turn cash profits at gross margins that will bankrupt competitors.

The way to sell more e-books per device is to sell devices by subscription.

Think Xbox Live and Costco (COST).

Benjamin Graham died in 1976. In 1996: His memoirs were published. They sold for $28. Today, they’re out of print. Used copies sell for $75. They’re worth every penny.

…intrinsic value and investment merit were destined to assume increasing importance in common-stock analysis after 1914. As a newcomer uninfluenced by the distorting traditions of the old regime – I could respond readily to the new forces that were beginning to enter the financial scene. I learned to distinguish between what was important and unimportant, dependable and undependable, even what was honest and dishonest, with a clearer eye and better judgment than many of my seniors, whose intelligence had been corrupted by their experience. To a large degree, therefore, I found Wall Street virgin territory for examination by a genuine, penetrating analysis of security values.

(Benjamin Graham: The Memoirs of the Dean of Wall Street)

When I read Graham I think of Kuhn. Graham was a revolutionary. When he wrote Security Analysis in 1934, Graham redefined words like “intrinsic value”, “margin of safety”, and “investment” to fit his value paradigm. He tore down the pre-1914 system. Graham could say a cheap stock was a sound investment. That was gibberish to the generation before him. Their definition of investment was: “not a stock”. Graham flipped the investment universe so it spun round the analyst instead of the market. Every word was redefined in terms of security analysis.

Benjamin Graham didn’t add to a body of knowledge. He stormed the Bastille.