Lawrence Gee | Marketing, Internet, Creativity, Strategy

Will You Be Reading This Post On An Amazon Kindle Someday?

The Amazon Kindle is another big company foray into the world of e-books.   Similar to the Sony Reader, Amazon is trying to capitalize on the belief that people are willing to forego the paper version of books and convert to an all digital solution.  There was a time when the publishing industry was extremely worried about their business model dissolving and were thinking about ways to offer digital solutions.  Even my company before business school, Aplia, incorporated digital versions of Economic textbooks into our product offerings.  However we didn’t see them as a full replacement for a physical textbook.  Rather, we treated the online version as a lower cost alternative for students. We certainly didn’t see digital books as transforming publishing as much as the major publishers did.  And as of now, the fear of people throwing away their paper based books have certainly not been realized.

There are several problems that people have generally had with reading text digitally - it’s usually the complaint of eye strain/fatigue, readability and the scannability of digital text, and portability. Amazon’s Kindle seems to have gotten rid of most of the common complaints of digital text.  It has a paper-like screen that acts and feels like you are reading a real book.  The screen is not backlit and actually uses real ink (just displays the ink particles electronically).  There are different font sizes for your reading preference and has an ergonomic design and shape that’s similar to holding a book.  Plus since it’s a stand alone reader that weighs only 10.3 pounds, you can bring it anywhere.  If you watch the video demonstration of the Kindle, it looks pretty impressive.  Definitely much better than I initially thought it would be.

The only issue right now I have with the Kindle is it’s price point.  The reader itself costs $399 with Kindle formatted books for $9.99 each.  Subscriptions to newspapers like the NY Times and The Wall Street Journal range from $9.99 to $14.99.  Magazines cost $2-3 an issue.

I think the price of the Kindle itself is prohibitive to the mass market and mass acceptance.  While early adopters will gobble up the Kindle (as evidenced by the fact it’s already on backorder), I think in the long run Amazon will need to take a “razor and blades “or “cell phone and service” model.  This means essentially giving the Kindle away with a large subsidy or as close to free as possible.  Where they will make their money is on the books, magazines, and newspapers that I presume they get a cut of due to Kindle’s proprietary format and specific networks. 

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Why iTunes Should Be Worried

Yesterday, Amazon.com unveiled their new digital download service called amazonmp3.

Simply, this is great for consumers and troublesome for Apple.  The competition is great for the industry as it will create more incentives to be price competitive.  Consumers will benefit from lower prices, more promotions, and more innovation from both companies to keep or take away business from each other.

Amazon has positioned their product for success and it’ll be interesting to see Apple’s reaction. 

• Amazonmp3s can work with both iPods and other MP3s — will Apple finally succumb and allow iTunes music to be played on other non-Apple players?
• Amazonmp3s are DRM-free — this means that the files can be burned and transfers without restriction.  iTunes currently limits the number of times the file can be used and burned to CD.
• Amazonmp3 has 2 million songs right now - this is much less than the 6 million songs that iTunes currently has but record labels will be wise to negotiate deals with both companies.
• Amazon.com has a trustworthy name and the capital to keep this service going — unlike other failed mp3 sellers, Amazon has the money and branding to pull this off.  If purchasing music is as easy as iTunes, they can likely be a threat to Apple.

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