Posted by The big news this week in the newspaper industry was not Google‘s Marissa Mayer speaking before a Senate subcommittee on communications, technology, and the Internet at a hearing on the future of journalism. The big news was Amazon‘s newer (and bigger) Kindle, the Kindle DX.
First off, the lowdown on the Kindle DX: The size is 9.7" diagonal e-ink versus the traditional Kindle at 6". It is just over 1/3 of an inch thick ("as thin as most magazines") and it can hold up to 3500 books. It has a great battery life, fast boot-up and looks very slick and cool.
It looks like a magazine or tabloid newspaper.
Many of the initial discussion online and speculation about the Amazon Kindle DX was around the fact that this would be Amazon’s first strike at the heart of the newspaper and magazine industry by creating a reader (or as Amazon calls it, a "wireless reading device") that is closer in size to a newspaper/magazine. Others think that this form factor is geared more towards the business user as the page size would enable us to view documents as if it were a standard 8 1/2" x 11" page.
There’s no doubt that the Amazon Kindle DX does look more like a device that will replicate the magazine and newspaper experience.
Here’s what’s interesting: newspapers and magazines continue to report record losses in terms of advertising revenue. They continue to report a loss of subscribers and readership (so, it’s not just serious debt load that is sinking many of these publishing institutions). There’s additional complaints from traditional publishers that their revenue models need to revisited because consumers no longer see the value in paying for content when much of the news is available – in one form or another – online for free.
Where does Amazon get off charging $489.00 for the device, and a monthly subscription to The New York Times kindle edition will run you $167.88 for the year in a world where no one is willing to pay $0.75 for a daily newspaper or pay a cent for newspaper content that is online?
Does anyone really think that Amazon developed this new piece of hardware and built business models around the content without truly understanding the marketplace? I don’t. I think Amazon knows the Kindle DX is going to sell well, and I also believe that they know which type of content will work and how much people are willing to pay for it.
The bigger question might be this: If Amazon can charge that much for the device and content, why are traditional media companies unable to sell their product or – at the very least – be able to monetize their digital properties in a more efficient way?
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Because
1. Novelty (new shiny!) creates perceived scarcity of supply, pushing up price.
2. Products that provide access to commodities (information) are more valuable than the commodity itself.
3. Platforms (ecosystems) that open up other services are valued higher than a single service itself.
4. Ink won’t come off on your fingers.
Because traditional media doesn’t offer instantaneously available on-demand content with virtually no distribution or production costs per unit. Duh.
I think they know what they’re doing. Early adapter are use to pulling out the cash for the privialage of being the coolest for a short period. What did the i-phone come out at? How long did that price hold – they just grabbed the easy money and accepted the realities of supply and demand.
There’s my 3 cents worth of uneducated guessing anyway. Thanks for the insights, Mitch!
Up front: I own a Kindle2 and love it (whenever I can pry it away from my wife). Long term, there will be more and more competitors and I feel confident that the harware price will drop. In the short term, the convenience and overall performance of Kindle justifies it for me. The Wall Street Journal (paid subscription) downloads in a flash…when I am finished, there isn’t a stack of paper to recycle. ‘Our’ Kindle currently stores 7 novels, a dictionary, and two translations of the Bible…plenty of reading for a vacation, all in a nice neat package (versus a bulging backpack)!
The experience is radically different from reading on a traditional laptop or desktop monitor. The device is lightweight, fits nicely into a book-like cover, and can be read in full sunlight.
This already sounds too much like a commercial, so I’ll stop now. Suffice it to say, somewhere between a tablet computer, an i-phone, and this first generation of e-readers is a ‘homerun’ that borders on revolutionary.
I think Joe might have hit on the price – the early adopters! Because I agree, it seems outrageous someone would pay so much for something that’s free or practically free in comparison. There’s no way I’m ever going to pay close to $500 for a device that allows me to read books/magazines/newspapers/etc electronically. There are other tools I have that can already do that.
At the same time, the idea of these devices makes me a little sad. What happened to curling up with a good book on a cold day? Everything I read about the Kindle makes it seem like it’s trying to compete with that experience. But I’m a bit of a purist about things. I’m sure when the price comes down to something I consider reasonable, I’ll be a Kindle reader too.
1) The Kindle sells to a smaller market than the NYT. So there are plenty of people willing to pay for content — not enough to keep a newspaper viable but enough to support a Kindle? Sure.
2) PDAs & Smart Phones sell in the $300-$700 range. The Kindle’s price point is not that outrageous.
3) Amazon cares but not that much if the content providers don’t make money. The Boston Globe had a good article recently profiling App Store developers — the majority experience seems to be developers losing money. I imagine it’ll be the same with Kindle. Content providers better be making their principal income somewhere else because they won’t make a living off their Kindle earnings.
I invite you to get the NY Times for free on your Kindle instead using Calibre. That plus about a hundred other publications.
Simple answer: Amazon understands the modern marketplace.
What many people who have not read extensively on the Kindle don’t understand is how much easier on the eyes and mind the eInk screen is. It’s more like paper than a backlit computer screen. And you can curl up with it in your favorite leather chair or bed, or at the beach. That’s why I’m willing to pay for subscriptions to the Financial Times, The Washington Post, and Denver Post on my Kindle when I’d never pay a cent for those publications on the web.
I think the market Amazon may understand well enough to dominate next is textbooks. If studying on a DX is as much of an improvement over traditional textbooks as reading a novel on the Kindle is over print, then the DX may actually improve learning. I’m not kidding. I think the newspaper part of this week’s press conference was an add-on, perhaps begged for by the NYT so they could look like they have a clue about what’s next. Amazon has been plotting this textbook foray for a long time, and I believe it will be a huge success.
I really enjoy this discussion Mitch, because this is an area that I have been researching for a long time as to why people and companies buy.
The Kindle DX delivers a unique experience that is multi-dimensional, enough that people perceive more value having the same NYT edition and pay more for it.
Quite honestly, I haven’t seen the pitch that Amazon has made to customers, but it probably looked something like this.
“The NYT Kindle edition is designed for the sophisticated business professional, who are dissatisfied with the ‘old-school’ way of reading the news. The NYT Kindle edition is a virtual news rack, that will hold 10,000 copies of NYT that is fully indexed and the user chooses how they want to read it. Unlike traditional newspapers like USA Today or Wall Street Journal in paper format, the NYT Kindle edition is packed with features, portable, ink-free, environmentally friendly, and is at the cutting edge of the future of digital learning.”
For that, I think I just convinced myself to get one. 🙂
Keep it up Mitch!
In addendum to all of the justifications above…
It’s about the lifestyle of the owner. I read about 100+ books per year. Assume a jacket price of $15-25 (conservative), and that’s an average of $2K/year.
A Kindle (which I don’t own, but now am thinking about it) is $500(ish) plus, if my reasearch is accurate, about $10 per book.
In the first year, that is a $500 savings, and for future years, about $1K/year.
Not to mention the reduced carbon footprint:
– no glossy covers
– no paper
– no ink
– no cost of recycling (trucks, fuel, sorting, post-consumer processing)
It sounds great to me!
I am late to the party but I have enjoyed the comments on a subject that I hold dear. Sherrie sums it up: there is no greater pleasure than curling up with a great book in your favourite chair. But then Len comments that the Kindle still gives you that feeling. (Must say that I am sceptical…) One thing is for sure: I hate reading my paper on my laptop, it’s just not “right”. If I ever get a Kindle, which I doubt, I’ll be the late adopter, when the price is really cheap and it’s everywhere. Then maybe I can believe that holding an electronic device will give me the small thrill as the first special moment when you open the cover of a new book.
I doubt it though…
I would hope more people are reading, whether it’s online or in a book. People have been what i think is dormant with books due to this new age of tech. But if this makes people read then it will somehow enhance the intelligence and reading capabilities of young readers and some older readers.