Why Amazon needs Kindle 2.0

Kindle-mania has arrived this holiday season -- but will it stay for good?In a recent article on Forbes.
Written by Andrew Nusca, Contributor

Amazon KindleKindle-mania has arrived this holiday season -- but will it stay for good?

In a recent article on Forbes.com, Andy Greenberg writes that Amazon's next e-reader won't be a game-changer, but it will keep killing the competition -- and that's why Amazon needn't upgrade its fabled gadget.

I respectfully disagree.

Greenberg writes that the next generation Kindle, rumored to come in 2009, doesn't need to be a revolutionary device for Amazon to keep its spot atop the budding market for digital books. Why?

Several reasons: First, because E-Ink, the company that provides the displays used by Amazon, Sony and other electronic ink device makers, doesn't plan to release a new display technology for about a year, according to the article. That means the next Kindle isn't likely to have any display technology that the latest Sony Reader doesn't.

Second, because the Kindle's wireless connection, powered by Sprint's EVDO network, isn't likely to get an upgrade soon, either. EVDO is already equivalent to 3G cellular connection speeds, and can download the average book in less than a minute. 4G technologies like WiMax and LTE aren't quite ready for the limelight, either.

In other words: Amazon's dependence on partners like Sprint and E-Ink means that the next Kindle's real improvements will likely be facelifts to the original machine, rather than an overhaul.

It's my opinion that Amazon should take a page from Apple in the "gadget-monopoly" strategy book and push forward with the drawing board as hard as it can. Think about it: Had Apple not reinvented its iPod over and over -- introducing the mini, then the shuffle, then a model that could play video, then the nano, and finally the touch -- the Zune and the Walkman would easily have overcome its popularity.

That is to say that, in a way, the iPod's visual appeal was used to tide people over until the tech got an upgrade. And every time the iPod got an upgrade, it was a leap ahead of the competition.

Problem is, the Kindle isn't the sexiest kid in school. And that factor, plus lots of smart marketing, is what arguably kept iPods ahead of their competition when reviewers noted that iPods didn't have the greatest sound quality, were pricier than other models, less reliable than others and came with the bloated ship that is iTunes.

Now, e-readers aren't nearly as ubiquitous as MP3 players. But you catch my drift -- when you're in first place, you can't afford to rest on your laurels. Unless you're Usain Bolt.

Judging by leaks, the new Kindle appears to be sleeker and thinner, losing the oversized page-turning buttons of the previous model. But not much else has changed, which is why any changes to the Kindle ought to be played down.

Better to set up for the next big announcement, I think.

Would a price drop help? Some say that means Amazon would cannibalize its own sales. On the other hand, if it can introduce a completely new model at a different price point -- again, think iPods here, people -- it would only grow what could be a Kindle family.

For the time being, the Kindle is still outselling Sony's LED touch-screen PRS-700, thanks to the Kindle's wireless connectivity, a feature that Sony has yet to match.

Sony PRS-700Amazon sold out of the digital reader last week, and customers looking for Kindles have turned to eBay, some bidding more than $500 for the $360 year-old gadgets. According to the Forbes article, Forrester Research roughly estimates that around 400,000 Kindles have been sold in all--a small number in the world of consumer electronics, but around 30 percent more than Sony's sales of its competing device.

Plus, the Oprah bump didn't hurt, either.

So why does Amazon need a true Kindle 2.0, and not just Kindle 1.1? Because in due time, Sony will get the formula right -- and Amazon can't afford to play up a joystick versus a touchscreen once Sony narrows the gap in the wireless category and has the bright idea that a gadget can't take off with a name like "PRS-700."

Amazon's unique challenge is to increase the popularity of e-readers while increasing the adoption of its own devices. It must win over new consumers as well as Kindle converts. To do so, the Kindle stone must gather no moss.

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