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 producton 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.
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.
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.
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 -- "="" 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?
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.