Five lessons Apple can learn from Amazon

Yesterday, ZDNet's own Jason Perlow wrote the Kindle's epitaph, claiming April 3 (the date Apple faithful will start getting their iPads) marks the beginning of the end for the Kindle.

He may be right, in that the iPad has the Kindle (at least the high-end Kindle DX) beat on price and performance. But does the iPad have the Kindle beat on a much more important factor: not alienating its customers?

Future-proofing your ebook purchases

Amazon's Kindle started as a hardware delivery platform for Amazon ebooks. But in recent years, it has become so much more. According to Citi Investment Research, Amazon sold something like 35 million ebooks in 2009 and accounting for more than 80% of all ebook sales.

Amazon's strategy has been the complete opposite of Apple's. Amazon realized that their product was really the books, not the book reader. That old saw about selling the blades, not just the razor, holds true for the ebook market. While still protecting their books through DRM, Amazon opened up the Kindle format, not by letting others write Kindle readers, but by porting the Kindle reader to other platforms.

Today, you can read Kindle books on the iPhone, on your PC, Mac, laptop, or netbook, on your BlackBerry, and -- unless Apple completely flakes out -- on the iPad. You can't read Kindle books on Android yet, but since there's no corporate-imposed friction in the process, we presume it's a mere matter of programming before and Android-based Kindle reader becomes a reality.

By making Kindle software and all those Kindle books available for devices other than the Kindle hardware, Amazon has effectively future-proofed not only its distribution strategy, but the purchases of millions of their customers.

A Kindle book purchase is a safe purchase, because you know that even if you don't read the book on a Kindle -- or even if Amazon discontinues the hardware -- you'll still be able to read your book on other platforms.

The Kindle is one of the first cases where a centrally-controlled DRM-based product actually has some level of future-proofing. When Wal-Mart initially decided to shut down their music service, millions of customers were told to either transfer their music to CD or lose it all. When MSN and Yahoo! both decided to shutdown their DRM servers, customers screamed.

While all three services have since relented, and are keeping their servers online -- at least for now -- we can see a fatal flaw for DRM-based products. The difference between these services and Amazon is that Amazon's able to keep broadening its market by letting users choose where to read their books, while these other services limited access only to PCs and certain second- or third-tier hardware devices.

Competition as profit-center

Amazon has repeatedly shown it's not only not afraid of competition, it's found ways to co-opt its competition in ways that turns potential competitors into both partners and Amazon income streams.

Amazon's Sellers program is a perfect example of this strategy. Once Amazon's management saw that there was a clear potential of losing new book sales to those reselling used books, Amazon added a used book market.

This was a smart move on its own, but rather than relegating that used book market to an unreachable corner of its Web site, Amazon instead integrated used book listings right into the main book listing for each title.

This not only gave consumers an at-the-point-of-purchase choice, but made it immediately and obviously clear to consumers that there was choice, and reduced the reasons customers might have for ever looking for books anywhere other than on Amazon.

Today, if you look up any given book title on Amazon, you can find new books sold by Amazon, new books sold by other retailers or individuals, Kindle books, and used books -- all in one place. As a consumer, it's clear that there's a wide range of choices and it's also clear Amazon is willing to celebrate consumers' choice.

Kim Il Jobs

This is the complete opposite of Apple's approach to everything except music. If you buy an iPhone, there are certain apps you can't run because they "duplicate functionality," they're violating some term of use or another, they're too racy, or the moon isn't in some predetermined, but unspecified phase.

When it comes to music, Apple seems to be open to pretty much anything, including songs with highly inappropriate lyrics. And here's another place where Apple could learn something from Amazon. Amazon is relatively predictable. You can pretty much assume Amazon will generally make sense in its strategies and communicate them to its partners and customers.

But Apple isn't like that. As Perlow says, Apple is pretty much like North Korea. It seems to be run by a relatively unhinged leader, everything is shrouded in darkness, and very little useful information leaks past its borders.

The iPad has the potential of being a unifying device, the one device that will display books in all formats, display most media, and provide a lightweight window to view the digital world.

But because of the Apple both refuses to open up (Flash, anyone?) and because Apple claims to have the right to restrict all content on its device, the iPad can't be trusted.

Will Apple censor what you can read on your iPad? Will Apple retroactively remove things you like to use on your iPad. I had a very handy WiFi scanner on my iPhone that I used for identifying dead zones on my network. One day after an iPhone update, the program was no longer on my phone -- because Apple deemed WiFi scanner programs as having "mimimum functionality."

I'd paid for that program, but I no longer had access to it -- and Apple refused to refund the measly two bucks I paid because it was a purchase over 30 days old. That program had exactly the mimimum functionality I wanted for my $2, but because Apple decided it was going to be the judge of what software I was allowed to use, I had to resort to other tools for network testing.

To be fair, Amazon pulled this stunt with a copy of 1984 (of all things). But unlike Apple, as soon as Amazon became aware of how grossly stupid it was to yank a book off Kindles (and the delicious irony of it being 1984), Jeff Bezos came out with an apology and made an explicit promise not to do it again.

Can you imagine Steve Jobs doing that?

Readers are collectors

Most avid readers have huge collections of books. Part of their pride is showing their book collections and being able to touch and feel those books. Collections are translating to the digital world, and it's likely that most readers will gravitate toward one or two large "libraries" for their books, not a fractured set of DRM-limited books provided by many providers.

Kindle may well be the library of choice. With 35 million books sold last year alone, there are a lot of Kindle libraries. I just checked my Kindle library and I have 35 books in it -- and I don't own a Kindle (I did, thought it sucked, and returned it). Instead, I read Kindle books on my iPhone.

Collectors may also gravitate towards whatever the iBooks library becomes. While you can almost definitely be assured that you'll be allowed to read whatever you want in your Kindle library (if not on the iPad, at least on other devices), there's absolutely no promise that (a) you can read what you want in iBooks, and (b) those books won't be censored or edited in some way to meet Apple's bizarre requirements.

Five lessons

Here are five important lessons Apple can learn from Amazon:

1. Don't be afraid of your competition, co-opt them and profit from them instead.
2. Don't restrict what your customers can buy.
3. Don't restrict how and where your customers can use what they buy from you.
4. Be predictable and set clear guidelines for how you're going to behave.
5. If you make a boneheaded mistake, apologize and then explain what your policy will be into the future.

This issue is bigger than just Apple and Amazon. As more and more of our information goes digital, as the books we read become digital, as the news we get comes in digital form, as magazines, radio, and TV are all distributed digitally, there exists the potential for information control.

Once these companies start to exert control over what we can and can't watch, what we can and can't read, once they start attempting to dictate what we can and can't think, this becomes an issue of civil rights, and far more than just an issue of distribution and DRM.

Think about it. While you still can.

Disclosure: the author derives a small personal income from both Apple and Amazon.