Oct 19, 2009

New Kindle Price. Same Kindle Problem.

The Amazon Kindle has a new lower price: $259 for the US model, $279 for the International model. There's also a $489 Kindle DX. $259 is $40 off the $300 price which was $100 off the introductory price of $399.

Carry the 2, add some sales tax, factor in shipping, divide by book, adjust for inflation, and round up the remainder and the final price is:

Still Too Much.

Amazon is getting closer but they still don't have it. It's not the price of the device, it's the price of the content you put on the device. I'm willing to spend a lot for a large, touch-screen, video capable iPod but that's only because I have the ability to fill it with content that I previously own and that I can get for a reasonable price. I don't have that ability with the Kindle. I can't burn my existing library onto a Kindle and rebuying everything is cost prohibitive. It's not necessarily a deal breaker because of the nature of books (many of which I will only read once) but it's still enough of a disincentive to keep me from attempting a Kindle transition. But even that isn't a huge deal in the long run.

eBooks are expensive.

Until the eBooks themselves are priced for what they are, nontransferable DRMed copies that can be endlessly reproduced at zero additional cost with miniscule storage and distribution fees, I can't get on board with them.  I don't know all the ins and outs of the publishing industry but I do know that the raw materials/printing/warehousing/shipping/etc. physical fees are significantly larger portion that the discount they are offering to the readers. After you make back your initial investment to the editors/digital production/author advance, everything (minus an almost zero per unit cost for servers/bandwidth) is pure profit split between Amazon, the publishers, and the authors. Unless the authors are getting more than they are letting on, the Publishers and/or Amazon are making a killing. And the market will only going to grow.

So why doesn't Amazon try to aggressively pursue the market before Apple/Microsoft/whoever debuts their inevitable devices. Why don't they cut the eBook prices and get everyone on Kindles before competitors can release their own next gen eReaders? It doesn't make a whole lot of business sense if Amazon is in it for the long haul. The only rational explanation I can think of is that Amazon is trying to set themselves up as a distribution network across 3rd party platforms, similar to what they already offer as an iPhone app. They want to be the iTunes for books. Not the iPod for eBook readers.

Now I don't know if Apple would go with Amazon or with a new iTunes substore but Amazon already has a tremendous head start when it comes to selling, marketing, and recommending books. Internet books are synonymous with Amazon in the same way that internet music is synonymous iTunes. Microsoft on the other hand would be crazy not to go with Amazon. As of right now they don't have anything close to Apple's iTunes distribution system unless Windows 7 is hiding some stuff. They would get a proven distribution system that would rival iTunes level of exposure.

So is Amazon sitting on high margins and slowplaying the device market rather than developing that killer eReader and aggressively pursuing market share with low profit margins for the heck of it? Or is it more likely they are going to keep the price points high, monopolize the distribution system and split the high profit margins with Apple/Microsoft and anyone else willing to sign on to Amazon's whispernet eBook delivery system and proprietary format while getting out of the expensive and continually demanding hardware market.

My money is on the money.

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