Why I finally joined the Amazon Kindle bandwagon

Three and a half years after its introduction, the most stalwart of Kindle critics gives in not once, but twice.

Three and a half years after its introduction, the most stalwart of Kindle critics gives in not once, but twice.

I have not been very kind to Amazon and its Kindle platform.

Indeed, my issues with the company's flagship product on this blog go back to October of 2008, where I declared the device unfit for human consumption due to its very high "reduced" price at the time of $359.00, a mere $60 discounted off its full retail price since its introduction a year earlier.

My issues for the most part with the Kindle platform were not with the technology itself, but were in response to the high acquisition cost in relation to the expected consumption rate of e-book materials for the average consumer.

In the first in my series of "Kindle Economics" articles in November of 2008, where I set up an economic model for breaking even on the device investment by students and casual users, I postulated that the point at which just about everyone would be willing to jump in would be at about $125 to $150 per device.

So it would seem that unless the convenience factor of the Kindle currently outweighs its costs, the Kindle is not a huge value proposition for your average consumer today. But if its cost were to drop approximately in half, say, between the 3 and 4 book per month level at around $200 per unit, then we might start seeing greater e-book adoption by a larger segment of the population. At the two books per month level, it’s going to need to cost around $125.00 or $150.00 or so.

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Things didn't get any better when the Kindle 2 first came out -- it was the same $359 as the previous model.

I was also annoyed because the device's ecosystem and AZW DRM encrypted .MOBI e-Book format remained completely closed and proprietary, and felt that the 3G components and service integrated into the unit contributed far too much to the Bill of Materials (BOM) which translated directly into high acquisition costs for the consumer.

[Next: The war of the Tablets and the eReaders]»

But then something interesting started to happen. The Kindle started to drop in price. A lot. Down to $259.00, as part of an ongoing price-war with newly introduced direct market competitors such as the Barnes & Noble NOOK.

Now, there's no question that much of this had to do with the introduction of the iPad, which dramatically altered the landscape for e-Reading devices. Amazon clearly wasn't going to keep the basic Kindle on the market at its going rate when full-blown tablet computers from Apple could be bought for a mere $500.

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Indeed, I was still (and still am) a firm believer that dedicated e-readers like the Kindle and its competitors would one day go the way of the dodo bird -- extinct.  And I'm sure the future of the Kindle brand itself is almost certainly going to be in the form of a tablet computer running on the Android platform.

Back in the summer of 2010, when the prices of the basic readers dropped to $140-$150, and finally shed their 3G components for pure Wi-Fi versions, I conceded that the ongoing price wars between Amazon and Barnes & Noble and also-ran competitors would eliminate the weaklings from the ecosystem (Darwinism) and drive consumer pricing down to on e-readers to the absolute rock bottom, in what I referred to as "Zero Margin" or the "Margin Floor".

I wasn't completely sure where the bottom and that Zero Margin or Margin Floor exactly was, but it had to be very close to what manufacturing and marketing overhead was, which was probably around $100. As I said at the time:

I expect that around the same time in August of 2011, or maybe around the holiday season of next year we will indeed hit that $99.00 number for Wi-Fi eReaders. I believe Amazon is the only company that is able to stomach selling their device at margin or almost at a loss, because they can sell a ton of content on a ton of readers at that price. For a while, but not indefinitely.

We might even see this rock-bottom price surface earlier for “Prime” members who pay the $80 a year privilege of getting free 2-day shipping on virtually everything in Amazon’s inventory, or for new Amazon credit card sign-ups. At $99, as a Prime member, even I would have to say uncle and call it a no-brainer.

Well, it's nearly June of 2011, just two months short of August. Amazon didn't exactly hit my magic $99.00 number, but they got very, very close -- $114 with their "Special Offers" version that also acts as an Amazon product marketing mechanism.

That exact pricing/cost offset scenario did not occur to me, and it is indeed a brilliant move on Amazon's part. But be it as it may, $114.00 is right within that two book per month "casual reader" zone I talked about in my original Kindlenomics article back in 2008 that makes the Kindle a viable purchase for even some of the biggest holdouts.

We've come full circle. Today, I ordered not one, but two Special Offer Kindle 3's. Why?

Well, I'm going on vacation next week and both my wife and I plan to sit by the pool and read. A lot. And while I really like my iPad and read a lot of Kindle books on it indoors, we've established it's not particularly good for outdoor applications.

The price point has also reached a level which I deem acceptable that even if my wife and I only use the readers occasionally, that it's fine as a supplementary device.

Unfortunately, I may very well end up using the thing for my primary reader, anyway, if June 30 rolls around and Amazon has to make some tough choices regarding their commitment to iOS.

I'd also like to point out that many of the other issues I had with the Kindle in the past are or will shortly be resolved.

While the Kindle does not yet support the EPUB format for user-uploaded content -- a barrier which I have termed as the "final" one that would keep the electronic document standardization folks happy, Amazon has apparently provided for the capability for publishers to use EPUB as a book submission format, as many of them are using Adobe's inDesign and other markup tools to create books for multiple platforms, such as Apple iBooks and the Barnes & Noble NOOK.

It would seem that the next logical step would be to allow for end-users to upload their own EPUB content to their Kindles as well -- although unencrypted EPUB can already be converted to .MOBI, which the Kindle supports natively, using tools such as Calibre.

Additionally, Amazon has added personal lending and has announced Kindle Library Lending capability which will be available later in 2011. That should be pretty nice, as I have a bunch of friends with Kindles that I'd like to exchange books with and I'd like to not have to buy every book I read on the device.

Three and a half years after the Kindle's release, I finally yield to my new Amazon eBook masters. Praise Beezus, Hallelujah.


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