9 Charts That Show Why Amazon Investors Have Nothing To Worry About

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Photo: Credit Suisse

Amazon’s share of the digital book market will slip from 90% today to 35% by 2015, according to a report from Spencer Wang at Credit Suisse. Spencer thinks Apple, Google and Amazon eventually end up splitting the e-book market.But while Spencer believes this reality has spooked Amazon investors, he himself doesn’t see this market share adjustment causing a great deal of long term pain for Amazon.

Amazon controls approximately 22% of total book sales (19% print, 90% digital). Even as its e-book marketshare slips, its physical book sales will grow, and Spencer projects Amazon will eventually control 33% of all book sales.

Spencer calculates the company’s compounded annual growth rate in the North American book market will be 7.5%.

Nevertheless, Amazon’s stock price has fallen since early December and Spencer thinks some of the pressure on the stock is coming from investors worried about Amazon’s ability to compete with Apple during a transition from physical books to digital.

To answer these concerns, Spencer put together a few charts to show why Amazon investors have nothing to worry about →

Amazon's stock is under pressure, as investors worry that Apple's iPad is going to eat the Kindle and digital sales

Some perspective on what's at stake here. Amazon's media business (DVDs, CDs, video games, books) are a little over half of gross revenues

More perspective, books are 38% of the company's media sales, and 18% of total North America sales

Sizing up Amazon's influence on the physical book market: It has 19% share, bigger than an other single retailer.

Amazon wanted to sell digital books for $9.99 to sell more Kindles, and satisfy consumers. Publishers said no.

Instead, publishers chose a model that makes them less money, but undermines Amazon.

Without the pricing advantage, Amazon's share of the e-book market will slip, but its overall book marketshare will grow.

Despite the slip in share, the total sales continue growing, giving Amazon a 7.5% CAGR

In summary, Amazon faces some pressure (who doesn't?) but it's staked out a strong position for itself

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