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Jeff Bezos pushes “competition” for Kindle hardware

As I’ve argued before, I think the Kindle’s success will be in providing a format and momentum for distributing books electronically — not in selling Amazon’s actual hardware devices, which I’d wager will never gain iPod-like market penetration. (I think it’ll lose out to multifunction devices like the mythical Apple tablet and to cell phones like the iPhone and Palm Pre.)

Now it appears Amazon’s Jeff Bezos is betting on something similar, promising a conference audience that he was happy to give his hardware people “competition” by putting Kindle-format books on “other mobile devices and other computing devices” at the same price as on the Kindle itself. As Gizmodo puts it, “either Bezos has something mysterious up his sleeve, or he’s come to terms with the fact that the Kindle — and indeed every dedicated e-reader — is essentially a stopgap device, awkwardly carrying out its single, simple task until something more versatile comes along.”

On the format front, Amazon is facing renewed competition, as it should when it’s taking a ridiculous 70 percent of revenue. But I have a lot more faith in the Kindle format beating out rivals than the kludgy Kindle device doing the same. Meanwhile, for newspapers counting on the Kindle as an economic savior, get ready for the same sort of platform-agnostic commoditization that drives content prices to zero.

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  • http://toughloveforxerox.blogspot MichaelJ

    For whatever it’s worth I have only one quibble with an otherwise very perceptive post.

    The kindle is not kludgy. It only does one thing. Makes it convenient to get and read books when it is presently inconvenient. Waiting on lines, riding the subway, traveling on vacation and waiting in the car while your partner is shopping.

  • Aaron Pressman

    Well, at least this post isn’t as ridiculous as your February post. If you and the Gizmodo folks were paying attention, Bezos has been saying he planned to bring Kindle-formatted ebooks to other platforms for a long time.

    Things started getting more specific back in February, when there was the AP story about Kindle coming to unnamed mobile phones. When Amazon introduced the iPhone app in March, again they said this was just the beginning. When they bought the maker of the Stanza ereader app in April, the talk was of how the real target was the programmers behind the software who could help Amazon extend Kindle to other mobile platforms.

    The REAL news here is that Bezos says he is not running a razors and razor blade business model. He is not subsidizing the price of Kindle books with hardware Kindle revenues. That can only mean one thing: higher Kindle book prices down the road.

    Despite your misleading 70% citation, a figure which is attributed to one unhappy newspaper publisher, Amazon is selling many, many of the most popular ebooks for less than a 0% revenue share. Major book publishers collect ebooks royalties of 50% to 60% of the undiscounted hardcover list price. Take a look and you’ll see that virtually all Kindle $9.99 books carry hardcover list prices of well over $20.

    There has already been some evidence of prices creeping up in the Kindle book store but I take Bezos recent comments to mean that eventually the $9.99 offerings will be limited to the very top best-sellers and most books will see higher prices. And I don’t think competition from Google’s new ebook program will present much of an obstacle to higher prices since that’s almost its whole reason for being (Google will let publishers set prices directly).

    I’d argue with your misguided notion that single-function devices like Kindle can’t succeed or your mistaken view that the Kindle is aimed at techy early adopters like yourself but I’ll save those bits for another day.

  • Joshua Benton

    Aaron, I love you too. :)

    The 70% figure is not just from one unhappy newspaper publisher; it was confirmed by the NYT. And I can also confirm it’s the deal they offer bloggers published via the Kindle, since I publish this one there and get the revenue reports.

  • Steve Weber

    Amazon is making a huge mistake in trying to profit from Kindle hardware. It should adopt the “razor blade” revenue model — give the razor away virtually for free, and make your money on the blades (content).

    I think Amazon Amazon is betting that content will be the commodity. Very shortsighted. They have already collected the content and created the community. They can charge for convenient access to that, and make money. That is the value.

  • Aaron Pressman

    The 70/30 split applies only in a few contexts, including self-publishing authors, bloggers and the aforementioned unhappy newspaper dude. But, as the New York Times has reported, Amazon loses money on $9.99 book sales and the revenue split with big publishers is not 70/30. See for example.

    I stand by my contention that it’s misleading to write Amazon “is taking a ridiculous 70 percent of revenue” without explaining that’s just in the sidelights. In the book business, they take far less – less than zero in many cases. The competition you cited in this context is Google’s ebook effort — again — not the business where Amazon takes 70% of revenue. And coming from the reader/consumer point of view that you seem to be taking, what Amazon has done in ebook pricing is extremely pro-consumer. What Google is doing, much less so.

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