Posted: Dec 25, 2011

Digital Goods Sales Jump in 2011 Holiday Season - Amazon doing great

Not surprisingly, digital goods are the best selling niche this holiday season, and e-books are the most purchased type of digital goods. Not so long ago, lined up a slew of affordable e-book readers and a tablet PC. So far, looks like consumers are buying lots of those devices and stocking their e-shelves with - what else - e-books. Digital goods, which include e-books, downloadable music and videos, are up about 30 percent this holiday season, compared to the same period last year, according to the metrics of comScore. Sales of consumer electronics and jewelry and watches are up about 25 percent over last year's holiday season, and clothes and accessories up nearly 15 percent, per comScore.

Experts say that Amazon's series of e-readers and tablet seems to have done to the book industry what Apple's iPods and iTunes did to the music industry. Amazon has unveiled its moderately priced Kindle Fire tablet just before the holidays and lowered the prices on its wide range of Kindle e-readers. Amazon said in early December that its customers were ordering more than one million Kindles a week and analysts at Goldman Sachs estimate the company will exceed 15 million units during the current quarter. Amazon has priced these products at or below the cost of goods, and many financial analysts are of the opinion that the company is making hardly any profit on the sale of these handhelds. Instead, Amazon is banking on profits from sales of digital goods that originate from Kindle e-reader and tablet owners.

It's quite likely that a good majority of these devices were bought as gifts this holiday season, hence the real boost to digital content sales will likely not materialize until many days after Christmas. Hence the growth of digital goods could exceed the 30 percent growth rate seen thus far. Christmas Day is traditionally the heaviest day of the year for digital content downloads. In 2010 almost $10 million was spent on buying content on Christmas Day. This continued onto Dec 26 and Dec 27, according to comScore. Consumer spending on digital content during the days from Christmas to New Year's last year was three times more than the average weekly sales in all of 2010, comScore data reveals. So far, such spikes have been attributed to people using their new Apple iPods, iPads and iTunes gift cards to buy downloadable music, videos, e-books and apps. This year the spike is expected to be even higher due to the onslaught of a variety of tablets and e-readers, not to mention that Amazon would likely be a major beneficiary of the boom due to its lineup of e-readers and tablet.

For Amazon, Christmas Day has been historically the largest day for digital content sales, followed by Dec 26. With the advent of an aptly priced Kindle Fire this season, millions more customers and gift recipients will be shopping for new digital content. To spice up its digital goods sales, Amazon is planning to run discounts on digital goods, including e-books, music, video, apps for Kindle Fire and games, from Christmas Day onwards. Amazon is also offering one month free Amazon Prime membership to its Kindle Fire customers, which includes unlimited streaming of thousands of movies and TV shows and free borrowing of e-books from Kindle owners' library. This might keep at least the Kindle Fire customers busy with enough content that they don't need to pay for immediately, which might reduce the digital sales a little bit in the days after opening the gifts.

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