Kindle Economics 2: Why Amazon should not be Apple, and Jeff Bezos is not Steve Jobs

Kindle Economics 2: Why Amazon should not be Apple, and Jeff Bezos is not Steve Jobs

Summary: Amazon CEO Jeff Bezos presents the Kindle 2 to a packed auditorium. What sort of product rollout does this remind you of?

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Amazon Kindle 2 Launch

Amazon CEO Jeff Bezos presents the Kindle 2 to a packed auditorium. What sort of product rollout does this remind you of?

So the Kindle 2 has now made its debut, with everything you'd expect of a gee-whiz product launch -- a packed auditorium filled with media types, a celebrity endorsement (best-selling thriller novelist Stephen King) and a Insanely Great-style presentation by Amazon's CEO, Jeff Bezos.

Click on the "Read the rest of this entry" link below for more.

Heck, the event was so overbooked, that when I arrived 15 minutes late to the event, I found myself locked outside the Morgan Library along with Oprah's representative, where we pleaded with the PR gatekeepers to be let into the building. "No, really, we're on the list! We RSVPed!".

We eventually got in, but there was a level of obnoxiousness, arrogance and elitism at this press event and launch  that smacked of a certain Fruit-Flavored technology company. After the dog and pony show, the devices were behind glass cases, and face time with the product nearly impossible, with crowds of media cognoscenti dying for that minute or two of handling the device, circling around the product execs cum Kindle-wranglers like hungry wolves.

Also See: Kindle 2 Up Close and Personal (Photo Gallery)

Also Read: Amazon Kindle 2, 5 Burning Questions (Larry Dignan)

Also Read: Why I Won't Be Buying the Kindle 2 (Joe Brockmeier)

Needless to say, there is a lot riding on this product launch. For starters, the Kindle 2 is being announced during one of the worst recessions in modern history. Unemployment is on the rise and is starting to approach late-1970's levels, and consumer spending on durable goods is completely in the toilet. So I find it utterly mind boggling when Bezos and crew can say with a straight face that the new Kindle 2 is going to sell for the same full retail price as the old Kindle -- $359.00. And guess what, there's a waiting list for it too.

Amazon has blown it with the Kindle on so many levels that it's difficult to elaborate on just how screwed up their business model is. Back in November, I talked a bit about the economics of owning a Kindle -- I was expecting that the new model would be $300 or less, perhaps a full $100 less than the previous model, at around $259.00, which I believe is much closer to approaching the "Sweet Spot" for mass adoption of an e-book reader. For those of you who aren't up to reading the other piece, the summary is this, and is no less valid than it was four months ago:

A Kindle at the current price level of $359.00 is a viable purchase if you read a minimum of six books per month at Amazon's NY Times Best Seller prices, at around 10 dollars a book, if you expect to break even on the cost of the unit with the savings on using e-texts versus hardcover books over the course of one year. That's 72 best-sellers a year.

Got it? Okay, great. Even with the advances in the new Kindle 2, Kindlenomics is status quo. Again, Amazon goes out and builds a Mercedes and not a Volkswagen -- or rather, an elitist product for a recession economy. Hello? Bueller?

Let's get down to the technology on the Kindle 2. 16 gray scale display as opposed to 4? A nice improvement for those of us that find value in illustrations in newspapers, but doesn't compel me to spend $360.00 on the thing. Almost 2GB of usable internal storage versus 180MB? Considering that even the longest e-books are a few hundred kilobytes total, I don't see a tangible benefit to being able to store 1500 books with me on the go versus 200.

Why is the Kindle 2 is starting to sound more and more... iPhone-like, in a BAD way?

The first Kindle was already a rudimentary MP3/Audiobook player, so why not allow me to carry a ton of work documents (PDFs, Words, text files) with me as well as a pantload of audiobooks and MP3 files, so I can use it as my primary audio entertainment device when I travel? And unlike the previous model, they've gone and released a unit with no expandable storage capabilities whatever. How big a deal would have it been to put a SDHC slot on it so I can pop in a 8GB memory card? What, are we too afraid to piss off Apple and cannibalize Amazon iPod sales? C'mon.

And again, why does a consumer NEED to absorb the cost of Amazon maintaining the "Free" 3G Sprint Whispernet service by increasing the cost of unit and cost of the E-texts? Can't Whispernet be a subscriber option?

I think a ton of us would be willing to sacrifice the instant gratification of downloading books over 3G versus downloads when they are in Wi-Fi range, if it meant a $100-$150 price reduction. What does a Wi-Fi chipset really cost these days, 5 bucks? How difficult would have it been for Amazon to partner with a dozen or more different Wi-Fi hotspot carriers for a "Kindlenet" option which was competitively priced against Sprint and their EV-DO?

With the Kindle 2, Amazon could have approached the product as a reference spec for a device, and not a product itself. It could have easily partnered with several manufacturers -- LG Electronics, Samsung, Toshiba, SHARP, Panasonic, Philips and SONY, just to name a few -- the very same folks who have brought you competitive prices on HDTV sets -- who could have all produced units with differing feature sets which were compatible with Amazon's Kindle store, and were available for sale online on Amazon.com. Instead, Amazon is taking the "We want to fully control the platform and envision a specific design" position that Apple does with the iPhone, the iPod and the Macintosh.

For a company who's primary bread and butter is the selling of content and competing consumer goods, locking down the platform and limiting the design specifications just seems like a stupid idea. What if I want a bigger screen or a smaller one? What if I need a lot more storage? What if I want my unit more ruggedized? With a one size fits all model, consumers have no choice, and it limits your market. At the end of the day, Amazon makes its money from e-Book sales, and not Kindles. At least, that's precisely where their head should be screwed on. If that's not where it's screwed on, then something is seriously wrong.

Apple does get one thing right with the iPhone that the Kindle absolutely falls flat on -- in that you can actually develop applications for an iPhone or an iPod. As I said before in a previous piece about why Amazon should NOT maintain it's own proprietary Linux OS platform and use Google's Android instead, a huge amount of computing potential on this device is being wasted. On discussing this with my colleague Larry Dignan today, he argued that Amazon sees the Kindle as a book, and nothing else. I differ with that analysis. Potentially, I see it as a game-changer computing device, if developers could have access to it and create applications that run on it. My ZDNet Open Source colleague Dana Blankenhorn agrees as does Mr. Community Incorporated Joe Brockmeier.

Besides answering the obvious "Why can't I get my GMail or browse the web on this thing" question, imagine, for example, the natural integration points if you could run Facebook or Twitter on your Kindle, which would post what books you are currently reading to your profile page, or if your Kindle reading list could be exported or shared with friends with similar interests.

Maybe with new apps, you could even create new friends on Facebook by virtue of reading the same 12 books as someone else has in the last two years, and a algorithm could match you up with someone. Or create virtual "Book Clubs" where groups of people can add annotations to the same works of literature that they are reading and have discussion threads linked from paragraphs and chapters directly from the device. Or if universities and high schools or even corporations could put up servers that can hook into the Amazon marketplace API and the Kindle bookstore and give away free e-books and other content. Missing technical manuals and user guides for every product you've ever owned, anyone?

Jeff Bezos and Amazon has the Dynabook in its hands, but is unwilling to realize its full potential by keeping the device completely closed.

Are you going to go buy a Kindle 2 when it goes on sale? Or has the device's high cost, inflexibility and closed system turned you off? Talk Back and let me know.

Topics: Apple, Amazon, Hardware, Mobility, Networking, Storage, Wi-Fi

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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Talkback

70 comments
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  • I might actually get one

    The Kindle could be a lot more, but for an avid reader, it is a nice tool. And it's not just books. I'm a fan of the NY Times and can read it on the Kindle along with magazines and blogs. It is definitely not for everyone, but then I don't think it is trying to be.
    jpr75_z
    • I definitely won't get one

      I don't like the fact that Amazon limits and chooses what is available to me by controlling both the device and media source. If the device allowed me to put other ebooks on it, read [i]any[/i] online news source, view text files, expand the storage, back it up to my PC, and play my own music, I might be more interested. Sure, I would probably still get most ebooks from Amazon, especially if it was really easy. But I want the option to use it for other things if I'm going to pay that much for it. It costs too much to use only for reading what they decide to allow me to read.
      BillDem
      • You might be more interested then...

        "I don't like the fact that Amazon limits and chooses what is available to me by controlling both the device and media source."

        I would think that Amazon does not want to limit what you can read on it, given that the more things available on it, the more money they can pull in. I would hope that the problem is most likely with the publishers and not Amazon.

        "If the device allowed me to put other ebooks on it, read any online news source, view text files, expand the storage, back it up to my PC, and play my own music, I might be more interested."

        I had a lot of similar concerns before I bought my Kindle a few months ago. For some reason this information isn't very well advertised, but after some significant digging, I found that you can view txt files on the Kindle. You can get your pdf's converted to the Kindle format so that you can read them (although with my experience, more complex layouts in pdf's don't convert nicely). This means that I've been able to grab free e-books online that are in pdf format and convert them to something usable by the Kindle. And since txt format is supported, I'm able to grab classics from sites like Project Gutenberg and read them for free.

        As for music, I haven't tried this feature, but from what I understand, the mp3's you listen to on the device would be ones you put on there. I'm not sure who else would be putting mp3s on there...

        Your out of luck on the expansion slot, but it's not like when you fill up the device you are screwed. You have the ability to "delete" your items, but they are backed up on Amazon's servers and you can get them sent to you by logging into your account and sending them to your Kindle. The books get sent back along with any bookmarks or highlights you've added. (From what I've read, this is true if you lose your Kindle and get a replacement -- all the notes you've added get transferred back to your new Kindle). If you want the ability to control backing up of the files, then you can copy any of the files from the Kindle over to your PC for a back-up (and transfer it back if you want).

        As for your wish to read any online news source, yeah, you're totally stuck on that one. Maybe someday...

        goldston
        • Useful information - thanks!

          Great response! Was filled with useful information. Perhaps the next version will address the few remaining shortcomings that are keeping folks like me from being completely sold on it. Mainly, if I'm going to take up space in my bags on trips, I want extreme versatility and functionality. Thanks for the reply!

          As an aside, I noticed that Archon just announced a new, thin, Android-based, touch-screen media device with a 5 inch high resolution screen and massive hard drive. With nothing more than a simple reader application, it could also serve as an ereader. This device looks like it might address my needs better as a "toss in your suitcase," do-it-all device for trips.
          BillDem
  • RE: Kindle Economics 2: Why Amazon should not be Apple, and Jeff Bezos is not Steve Jobs

    Yawn...
    dmills59
  • Non sequitir

    If 2 GB is overkill because ebooks are so small, why in the
    world are you griping about not having an SD slot that you
    can drop an 8 GB card into?
    frgough
    • You didn't get it

      If you're going to put hard limits on storage, I don't see how there's much of an improvement of 2GB over 200MB if all you can use the device for is books and converted documents.

      If it had expandable storage, it wouldn't matter much what the internal limits are.
      jperlow
  • RE: Kindle Economics 2: Why Amazon should not be Apple, and Jeff Bezos is not Steve Jobs

    This must be the only "job" you've ever had!
    jmb codewriter
  • Perlow, still a dinosaur

    About the only thing I could agree with you was the lack of SDHC slot. All the rest is garbage, and you you wasted your time writing nonsense in this and your other blog posts.

    Nobody else wants a Kindle without EV-DO; most people appreciate the convenience of carrying a light device with a lot of books inside that the printed counterparts; the Kindle 1.0 is sold out making your point of the recession is moot (besides other ebook readers are MORE expensive than Kindle's and several toys from Apple are more or as expensive), the Kindle does what it does well, no need to be an MP3 player, cell phone, have Google Maps and all sorts of stuff that you could get buying a lightweight netbook.

    Man, if you are so smart, why aren't you rich? Why don't you create a startup to produce your own ebook reader with all the wonderful specifications you gave? Admit you are wrong and move on, let the winners like Bezos make millions with brilliant ideas even during recessions while you maintain your blog and generate hits by bashing Vista
    markbn
    • The thing about dinosaurs

      Is that they walked the earth for about 160 million years. Compared to human beings, they've got a much better performance record.

      As to the Kindle being sold out, Amazon has yet to disclose just how many Kindles were sold. The prevailing opinion among most business analysts is that demand was created artificially by keeping production extremely low.

      And as to <i>"winners like Bezos make millions with brilliant ideas even during recessions"</i> I think you need to re-read the piece again. Amazon <b>did not make money during the god-awful holiday season because of the Kindle</B> -- it made it by selling consumer goods on-line CHEAPER than brick and mortar retail stores, who suffered because THEY could not adapt to Amazon's and other internet reseller pricing models.

      The Kindle, on the other hand, is directly opposite of what Amazon does very well, which is to sell content and competing goods at reasonable prices.
      jperlow
      • You don't give Don's enough credit.....

        For they still exist as birds. Dino's never left. They are a very impressive
        success story. Who knows when it will end or how?

        Pagan jim
        James Quinn
        • and humans were around back then

          they just lived in gopher holes
          albeit
      • OK, then I guess you still use your original IBM PC

        I am completely unsure why you are so obsessed with
        the Kindle when you can have all you wanted with a
        netbook. The only thing you would not have is the
        ink technology. Amazon has mentioned they will make
        the books available on other devices. Not even you
        boss Larry Dignan agreed with you in your nonsense
        suggestions.

        [i]Amazon did not make money during the god-awful
        holiday season because of the Kindle[/i]

        The only one hallucinating that is you

        [i]The Kindle, on the other hand, is directly
        opposite of what Amazon does very well, which is to
        sell content and competing goods at reasonable
        prices.[/i]

        I guess Bezos will follow suggestions from people
        who are successful by taking their one advice. Doing
        otherwise would be like investing in a stock market
        following the advice by a trader who has never
        invested in the stocks he is suggesting.
        markbn
      • Actually, I think You didn't get it...

        I don't mind criticisms of the Kindle - I have my own - but you really have missed the point entirely. The Kindle is simply a device that will allow Amazon to sell MORE of what they already do best, and is an excellent adaptation to a generation or two of our society that has to live at a heart-attack pace of 5am trains and 8pm dinners just to survive. Finally, a way to leverage that time in a more focused way.
        I too want to see gmail and better web browsing. I too think the device is overpriced. But since the device is perhaps the most brilliant revenue generator Amazon has come up with, since Amazon, I'm sure those things will come. Video-based content won't be far behind; Amazon sells movies too, you know. Just wait. There are technology challenges to adding capabilities, but those are always solved when someone wants them to be. There will be room for that SDHC card, and a video engine, and you'll be storing your own library of movies at Amazon with pick-and-choose download ability from your PC at night while the battery charges.
        I don't have one. I will soon. My own train ride is 70 minutes each way. It is, indeed, the better mousetrap, and if there is enough visionary capability at Amazon (okay, I admit there is still a small question mark here), it's only going to get better.
        hjk4300
    • omniscient?

      [i]Nobody[/i] wants a Kindle without EV-DO? You know this because... you have a link to all consumers?

      If it lowered the price, I'd give up the EV-DO in a heartbeat, and WiFi too. For me, books aren't impulse buys. Stuff sits on my Amazon wish list for a while. If I had a Kindle, I'd stock it with books, and not worry about more til I finished what I had. And when I needed more, I'd be happy to attach it to my PC to get them. EV-DO or WiFi only become interesting to me if they have no effect on the cost of the product. I will say, however, that I prefer the current model to a "per-use" plan. That would be a total pain in the ass.

      Also, on another note, if you don't like the article or the author, don't read it. Attacking him for not having created a successful business is like attacking a White House reporter for not being the President.
      Cyraxote
      • OK, Perlow & Cyraxote do not want EV-DO

        Fine, don't buy a Kindle, use a netbook or an
        iPod Touch

        I am happy you agree with me with the rest of
        my post, so please ignore EV-DO and let
        everybody be happy.
        markbn
    • If thats true, markbn is a fossil!

      "the Kindle does what it does well, no need to be an MP3 player, cell phone, have Google Maps and all sorts of stuff that you could get buying a lightweight netbook. " ???

      I don't really feel like I need to state the obvious, but proprietary technology is a path that was well trodden in the 20th century, but it is .... 2009. Being one of the industry drivers on open and integrative technologies, Amazon has little reason to model a product on a different philosopy. They are just opening the door for someone to release a similar product that does interact with other content and sources. This is the reason why the second product in a niche usually ends up being the market dominator. Greed.

      I am one of the few that maybe does read enough to make such a device economical, but come on, why would I pay over $300 for a piece of technology that seems like it was resurrected from a cartoon in the 1980's. Jason hits the nail on the head - that the Kindle is positioned as an elitist product. But maybe that's their market? I mean, who do you know who does not want to at least appear as part of the 'elite' that would buy a Kindle even if the price was $100? Maybe their approach to a higher price, limited functionality and lack of development actually help them market the product to the type of consumer that would buy such a thing.

      Bottom line as far as the recession goes is that, man, we sure have a long way to fall still if products like the Kindle end up in sold out demand. The current state of our economy is directly related to how messed up our priorities are as a country. There are too many companies selling the 'pet rock', and too many consumers buying it.
      solarcafe
      • Blah Blah Blah Blah

        Kindle uses a variant of Linux doesn't it? Linux is proprietary then? Wow, if I were you I'll watch for
        all the Linux wackos in this forum, they can attack
        you

        And please, don't talk garbage, an "elitist"
        product? Many new products have higher costs at the
        beginning. Was the iPod an elitist product? the
        iPhone? You may say that, but at the time they had
        high costs and not only Jobs wanted. The technology
        was expensive to produce (yeah those times have
        changed and the iPod cost is high, but that's a
        different discussion). An analogy by Perlow could be
        that the iPod was too expensive and unnecessary
        because instead you could carry around 10000 CDs and
        a CD player and thus you did not need an iPod. An
        please stop talking about the recession, this guy
        has been criticizing the Kindle before the
        recession. He has all kind of irrelevant ideas like
        using Android, or ditching the EV-DO support without
        thinking that the other eBook readers DO NOT HAVE IT
        and are MORE expensive in many cases. What he needs
        is a netbook and be done with it.

        And I am sorry you are a broken dude.
        markbn
  • RE: Kindle Economics 2: Why Amazon should not be Apple, and Jeff Bezos is not Steve Jobs

    Ok...this sounds like the rant of a p---d of media person who arrived late and missed the show. I don't find anything of substance in this entire rant, except maybe, the picture. I am no fan of the Kindle and see no value in having one unless it is a free giveaway from a bookstore that expects to eventually sell you content. Not that I have really seen a book worth having the very day it is published ......
    rsk02@...
    • I agree with the "p*ssed off media person" part

      That is your observation.

      Not so much with the rest of what you said.

      Cheers,
      -M
      betelgeuse68