Last week I made a handshake bet that Amazon will stop selling the Kindle device in a year’s time. Today I am putting it in writing. Amazon will stop selling its devices for several reasons: because the margins are higher on books, because ultimately people won’t want to have multiple, specialized devices with significantly-overlapping functions, and because the devices themselves are quite limited.
The value proposition
Amazon makes money by selling books, not by selling devices. The existing devices have served a useful purpose in that they introduced the lay public (once again) to online reading, and they allowed people to buy ebooks from Amazon. But Amazon recognizes that people who don’t have their dedicated device should also be able to buy electronic titles from Amazon, which is why it has released free Kindle reader apps for a range of devices, with more to come. The number of customers with iPads, iPhones, PCs, laptops, BlackBerrys, Androids, etc. is far greater than the number of people who have bought (or will ever buy) a device that can only read Amazon books, and rather poor gray-scale versions of them to boot.
The proliferation of competitors—the Nooks, the Kobos, etc.—will only serve to drive device prices lower, further reducing the incentive to produce dedicated devices. Since these devices are limited by design (they’re basically designed to be efficient page-flippers), it will be difficult to provide much differentiation in functionality.
Since so many people already have small (or smallish) portable devices that they use for a variety of purposes, it seems unlikely that given the choice they would rather pack two similar devices (and their power supplies) than one. And if only one, which will it be: a device on which they can read books, or one on which they can read books, send e-mail, play games, talk to their friends, watch movies, do work, etc.?
Ten years ago, when we ran some focus groups around a reading/note-taking device aimed at executives, we heard repeatedly that if they were going to carry a device for reading, it should also handle their e-mail, some document processing, etc. Nobody was keen on a dedicated device, no matter how well it was designed. This accounts for the success of the iPhone/iPad model, which is based on a generic platform for applications, not on a dedicated, single-purpose device.
It is much easier to release new versions of software (even for multiple platforms) than to build new hardware that embodies your product’s interface. As users’ expectations evolve, as new competitors appear, as Amazon decides to grow its market, it will be much easier to introduce new functions into its application family rather than to commission and sell yet another device. This will not only reduce the product development costs, but also allow Amazon to leverage the evolution of capabilities of computing devices.
Electronic reading is here to stay. The availability of large numbers of popular titles sets apart this generation of devices from earlier ones such as the Rocket e-Book and SoftBook. With the reading public sufficiently sensitized to reading e-books, and with titles they want to read now readily available in electronic form, retailers such as Amazon can now concentrate on their core competency—selling books—rather than trying to compete with hardware manufacturers over device functionality.
That’s my bet, anyway.