Moderator’s note: Joe wrote this for Kindleville, but some concepts here are generic. One issue, beyond cost and content selection, is how well e-readers can blend in with schools, libraries, jobs and general lifestyles. – D.R.
Brier Dudley writes a tech blog for The Seattle Times and he made this recent post about his trip to the CES show in Las Vegas. The post features a picture of what is apparently an upcoming e-book device from Sungale, a Chinese manufacturer. Brier points out that Sungale is known for their cheap DVD players and that this e-book device is likely to be very inexpensive as well.
I like the idea of more e-book device competition, but cheaper hardware is only one part of the optimal formula. Sure, I’d love to see the Kindle for $200 and I tend to think it won’t be a mass market success until it gets below $100 (more on that in a moment), but the eventual leader in this space will have two other key attributes: breadth of content and outstanding service.
The list of titles available for the Kindle will grow by leaps and bound in the coming months. I have no doubt Amazon will put as many titles into this format as they can; they’re the king of title breadth/depth in the print world, so why wouldn’t they be on the same track for the e-book world? And when it comes to service, Amazon is very, very hard to beat. I still think that’s the primary reason why Kindle remains out of stock: Amazon wants to test their systems with a limited number of devices in circulation before they open it up for a larger audience. They realize they’ll probably only have one chance to get this right and a network glitch would forever stigmatize the Kindle, so I applaud their efforts to limit distribution (for now). When it comes to content breadth and outstanding service it’s hard to go wrong with Amazon. (Btw, I don’t work for Amazon…I’m just a huge believer in their operation.)
Back to the sub-$100 opportunity… The underlying technology is always going to dictate how low Amazon can price the Kindle. As long as there’s only one e-ink technology provider we’re probably faced with higher manufacturing costs than anyone would like to see. But, there’s nothing stopping Amazon from adopting a razor/blade approach to Kindle and giving customers a discount on the device as long as they commit to a minimum number of book purchases in the future. It would require some careful negotiations with publishers, of course, but it could be done. Supply and demand will ultimately dictate this though. As long as Amazon is out of stock or at least exceeding their sales expectations, there’s no incentive for them to get creative on hardware pricing.
I think the problem is that Amazon doesn’t really have a special relationship with publishers. People think they do because they sell bestsellers at low prices. They really just sell their bestsellers at below cost as bait to draw in customers for the less popular works. Assume that the kindle costs $300 to make, and Amazon sells it at $100. That would mean that they were losing $200 on each sale, and they’d have to make it up with book sales. If they sold 50,000, they’d have to sink $10,000,000 into it in the short term on the hope of making it up on the book sales. Even if they made people contract to buy a certain number of books above $7, they might have to wait a year or two to break even.