Five lessons Apple can learn from Amazon

Five lessons Apple can learn from Amazon

Summary: The iPad has the potential of being a unifying device but because Apple claims to have the right to restrict all content on its device, the iPad can't be trusted. Apple should take some lessons from Amazon.

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Special Report: Apple iPad

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.

Topics: Hardware, Amazon, Apple, iPad, Mobility

About

David Gewirtz, Distinguished Lecturer at CBS Interactive, is an author, U.S. policy advisor, and computer scientist. He is featured in the History Channel special The President's Book of Secrets and is a member of the National Press Club.

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Talkback

132 comments
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  • Oh Brother...(NT)

    nt
    CowLauncher
    • exactly

      brace yourself for a flood of fan-boy juvenile teeth-mashing ... "so is
      your mama!" etc.
      john_gillespie
      • Most Revealing Story on ZDNet to Date! :D ..teeth mashing? haha

        I have no idea if you two are defending this
        story or making fun of iPhone/iPad fans making
        contemptible comments. But this all seems to
        me, to be very true. Will it be able to stand
        the test of Father Steve's Jobian Priest Style
        control? While at the same time being judged by
        his unpredictable predictability? haha... Doubt
        it, only Steve knows that!

        I would say #1 it wouldn't change his mind,
        however unpredictable that is!

        Will he heed any of the warnings? Steve has a
        reputation for not listening to anybody but
        himself talking in his own head!

        My guess? iBooks will be permanently locked to
        Apple Macs, iPad and iPhone platforms. Will they
        allow Amazon ebooks to be read on their iPad?
        You could make a safer bet predicting next
        year's snowfall around the great lakes. But yes,
        It'd be suicide otherwise!

        If they don't. Then you'll never see iPad iBooks
        beat out Amazon..... EVER!!! :D ...and it's
        doubtful closed will beat OPEN this late in the
        game, anyway!

        Never mind the fact iPad is a highly incompetent
        device as a true complete WWW access tool. If
        they don't open up the platform, they will die
        in their own clone of AOL Hell (in theirDRM
        Garden Walls) with it's WebTV style lack of
        full web access! ;) ....only difference? It's
        portable!
        i2fun
  • 1984

    I'll bet Amazon is really regretting it didn't do more to avoid
    surreptitiously removing "1984" from users' Kindles last year.
    Otherwise it could better keep a straight face when people
    lament Apple's content restrictions.
    dogbreath1
    • Amazon's world domination

      Amazon is kind of like Google. Google has the goal
      to index all the world's data (and sell ads on it
      ...): Amazon's goal appears to be to offer
      everything in the world for sale over the
      Internet.
      daengbo
  • RE: Five lessons Apple can learn from Amazon

    This is one of the best posts I read in a while
    FrankHa
    • RE: Five lessons Apple can learn from Amazon

      Thanks, Frank. Now, where did you say you wanted me to send my five bucks? :)

      Seriously, keep reading. I'm planning a little bit more on this tomorrow.
      David Gewirtz
      • RE: Five lessons Apple can learn from Amazon

        Mr. Gewirtz, thanks soo much for writing this,
        and yes, I will be looking forward to tomorrow's
        post. Your information here is invaluable.
        After reading Kindle's perhaps premature obit
        yesterday, I was truly saddened, I'm almost to
        the purchase point for it, and I'm not generally
        buying anything right now that isn't necessity.
        I have enough confidence now to purchase,
        understanding what you have written. And yes,
        I'm old enough to have lived through the Betamax
        vs VHS fiasco. What was that?? Those who do
        not learn from history are doooooomed to repeat
        it?? :-)
        Eleanore
        enestlerode
        • So True, Eleanore! :D

          I had forgotten about BetaMax vs VHS history
          lesson. It set a precedent on closed corporate
          hardware distribution. Smug snobery thinking
          you're all that has never been tolerated by the
          public for long.

          Sony blew it by not allowing their format to be
          licensed by other manufacturers. But they still
          haven't learned, haven't seen several of their
          proprietary formats die. BluRay is the only recent
          one that made past the chopping block. But how
          long will it last? Control is good in the right
          hands. But over control by locked closed formats
          with unforgiving DRM, will be any product's deaf
          nil!

          ....that's why they call it Digital Rectal
          Manipulation of a product's own customers! ;-)
          i2fun
          • Not exactly correct

            [i]"Sony blew it by not allowing their format to be licensed by other manufacturers."[/i]

            Not true. Beta VCRs were made by Sony, Sanyo, Toshiba, NEC, Zenith, Aiwa, Pioneer and Marantz, plus some other smaller vendors. The main problem with Beta was that early machines were limited to one hour of recording; by 1980 or so this was fixed, with Beta offering up to 5 hours of recording, but rental tapes were mostly VHS, and this sealed the deal.

            Totally agree with your dislike of DRM though!
            rahbm
          • BetaMax

            What people seem to forget is that VHS would be IMPOSSIBLE
            without patents developed by Sony.

            Is the BetaMax still in common use by consumers?

            No. It evolved, and became the professional standard used
            by TV stations.

            However, every consumer who purchased a VHS VCR was
            basically sending a nice little present of cash to Sony by
            paying for those patents.

            In my mind, that puts a different spin on the matter.

            Now VHS is dying out. But check your local TV station: are
            they totally digital, or are they still using Beta tapes for
            backup?

            Ironic, isn't it?
            Jkirk3279
          • Porn

            And of course the porn industry lead that trend in the early days. People
            tend to forget that, in the same way they forget that good business is
            about getting the whole mix right, not the simple surface stuff that's
            easily discerned in one simplistic glance, and easily mistaken as the
            decisive single factor in any success or failure.

            The question of how these myths get started is as easy to answer as how
            the people who peddle them get by in life. They simply don't bother to
            ask enough questions, and settle for half the information. And, when
            this satisfies them, they assume everyone is the same as them and
            equally easily gratified.

            It's all very well gushing at Gewirtz Eleanore, but if you really think his
            information is "invaluable", and you're about to buy a Kindle instead of
            an iPad, you're in for a shocking disappointment.

            Not only is the Kindle a horribly limited and retarded product, only good
            for reading black and white text [great for bodice rippers, C R A P for
            magazines and text books etc], it has absolutely nowhere to go
            commercially from this point on.

            One [and only one] of the reasons Apple has decided to go with the iPad
            [instead of a netbook for instance] is that Amazon have demonstrated
            there is a market for an ebook reader as a stand-alone device.

            But that's all Amazon have done. They've comprehensively failed to
            realise that people want more from any device they carry about.

            Oh sure, there will be die hard Kindle users still using their unsupported
            devices long after Apple has owned the ebook market, just as there are
            still using their Newtons. And for a while Amazon will continue to sell
            small numbers of Kindles to reclusive spinsters, reluctant grey tech
            market and those equally easily gratified by mediocrity. But that's all.

            Another device for the nearlytech museum. Make space next to the Zune.
            Graham Ellison
    • I'll 2nd the motion

      And no I don?t see this article is not blatant Apple bashing (although that is how you make apple sauce!)

      Kinda makes me glad I have yet to follow the steps of Adam and take a bite into the Apple.

      Can?t believe people stand for your purchased products to be taken from you & not be reimbursed for the purchase. Talk about biting the hand that feeds.
      jhimes
    • I agree...

      This is an excellent discussion of technology, business, and culture. Very nicely thought out and well reasoned.

      Now all we have to do is keep all the religious warfare (Apple vs MS vs Amazon, etc.) at bay!
      lostark98
      • No it isn't,

        it's utter fud
        Graham Ellison
        • Wrong...you just can't handle reality - read on

          http://www.ghacks.net/2008/08/07/apple-can-remove-apps-from-iphones/

          http://www.geek.com/articles/mobile/apple-removes-wifi-detector-apps-built-around-private-frameworks-2010034/

          http://news.cnet.com/8301-13579_3-10464021-37.html


          TheBottomLineIsAllThatMatters
          • Federal Health care plans imposes fine, possible

            jail for failure to purchase health insurance.

            Now tell me again how coercive Apple is.
            frgough
      • Too late he already responded...his "religion" was

        attacked in the article and he's upset.
        TheBottomLineIsAllThatMatters
        • No, he just identified the fallacy in the argument

          Here's the blogger's logic:

          Amazon locks you into their DRM, but lets you get locked in on many
          different pieces of hardware. This is Good.

          Apple does not lock you into any one DRM, but limits you to one piece
          of hardware. This is Bad.

          And the reason? Because Amazon might pull a wal-mart and shut
          down their DRM servers and...oh, wait. You'd be screwed. Gee, I guess
          I was fooled on that one.

          OK. But the number one consumer electronics company in the
          country, Apple, could stop making their highly successful, record
          breaking in sales and profits iPad or iPhone or iPod touch at any
          moment and you'd be screwed. Or Apple with $50 billion in the bank
          and the number one music retailer in the country could shut down
          their DRM server at any moment and you'd be screwed.

          No excuse me while I go look for my brain.
          frgough
    • 3rd (or 4th) (nt)

      nt
      tikigawd