Kindle's fate

on

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.

Multiple devices

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.

Functionality evolution

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.

In short

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.

13 Comments

  1. As a Kindle user, I am a little conflicted on this — I completely agree that the Kindle-as-software-reader will be the direction that will be most profitable and useful to them. It lets them continue to (a) receive analytics information about user reading preferences and (b) market 1-click purchases of e-books to users (which does foster the impulse buy, believe me).

    However, I wonder if they will make one final attempt to compete in the device market. In particular, I think the Kindle has two things going for it that differentiates it from other devices — e-Ink and zero-wireless-costs. E-ink has better readability (less eye strain, better clarity in sunlight) and drains less battery. So, for the casual reader (i.e., folks who love reading on trains/beaches etc.) it’s a good buy given that charge lasts for a long time and they never pay for data again. Now that the Kindle store also offers a “Free books” category, it also means that they get a lot of reading value from the base device purchase price with no added costs.

    I’m curious to know how many people have only the software reader without owning the device, and how much they use it on mobile vs. PC. I agree device costs will make it non-viable for Amazon in the long term but perhaps one option they might explore is to give the device away for free and charge a monthly subscription for access across all Kindle ‘devices’ (real and virtual) instead where subscribers get added discounts or rewards or notifications to other Amazon product deals as a bonus.

    Time will tell :-)

  2. The Kindle devices are certainly designed to maximize battery life I, but wonder if the iPad’s battery life is good enough, in particular because it trades off some of the battery life for more interactivity, which should increase the market of potential readers. Kindle could then charge a premium for more interactive & higher quality books, just like it charged more for hardcover editions compared to paperbacks.

    As far as wireless costs go, your point is well taken. If a person doesn’t already have a wireless plan, that’s a significant additional recurring cost. On the other hand, it’s a cost to Amazon as well. If they don’t have to pay a carrier for that service, they can pocket more money from each book sale.

  3. Gene — I think today’s WWDC announcement of iBook integration into “iOS” just underscored your observation that dedicated hardware eBook readers may be on the way out. I had forgotten about the other Kindle advantage of auto-sync across both hardware and software versions of the reader, but this has now been equalled by Apple with the iBook. Don’t know where this leaves the Nook though …

    Hope that was a substantial bet you made (won) :-)

  4. The bet was for a bottle of wine. It also looks like meganwinget is looking to donate a bottle!

  5. Jon EP says:

    Kindle is the number 1 electronics item sold on the Amazon website, according to Amazon. Seems like they would want to continue to sell it?

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  9. Mark Taormino says:

    Hi Gene:

    I’ve been reading much of your research about digital reading devices. I am a doctoral candidate, and am writing about e-readers in higher education. My major focus is on annotation strategies and how the current crop of devices does or does not support effective annotation. As you well understand, academic reading is active, and is characterized by interaction with text using highlighting, marginalia, notes, and other coding schemes. I did read in some of your earlier research that annotation accounted for merely 5% of user interaction, as compared to 90% of actual reading. However, recent Kindle studies (Princeton U. and Reed College) found that annotation limitations were one of the biggest inhibitors of reading devices. Surely, many other issues plague e-readers such that they offer little or no relative advantage over the printed book, but it seems that annotation functions are at the top of user needs. It seems the XLibris prototype had nice functionality with respect to annotations, yet the commercial industry has taken a major step backward in ignoring this functionality, or more pointedly, offering crude and clumsy annotation capabilities.

    I think you are spot on that the Kindle will have a limited product life cycle, for the very reasons you illuminated. However, do you think that a reading device is on the horizon that would offer any relative advantages over the printed text for use in academia?

    I’m looking forward with great anticipation to reading about your thoughts. It’s been a pleasure and privilege to read your research and blog posts. Thank you.

  10. Thanks for your comments, Mark! Have you been published any of your work yet?

    I think that the coming year or two will see the emergence of a large number of tablets (running a large number of different operating systems) that will try to compete with the iPad. In addition to the hardware, we should see many different reading apps covering various aspects of that space. The increasing variety of existing reading and annotation apps on the iPhone is an indication of this trend.

    My guess is that over the course of a couple of years these trends will converge to a small number of devices with a large number of apps, some of which will be good enough for active reading. It’ll be interesting to see what set of annotation capabilities will be required to make a significant dent in paper-based reading.

  11. Mark Taormino says:

    Gene:

    I haven’t published any research yet on this specific topic of e-readers. My dissertation will probably be my first piece of research on this subject, although I am considering submitting an article to a journal more in line with a literature review and the likely future of e-readers in academia.

    I am a bit conflicted on the hardware and technology limitations of devices, and surely that is your expertise. It seems that e-ink has been an interesting innovation, but I tend to think that issue of screen glare and computer vision syndrome might be overstated. I think it is entirely possible that if the right functionality came along to support active reading, the screen glare issue would be relegated to minor status. I’ve spoken to some ipad owners, and they have stated there has been no issue with glare or extended reading periods. If a screen supported fluid marginalia, ease of highlights, various color highlights, and notations, then it probably would not matter all that much if the screen was LCD. Surely, e-ink has the low power consumption advantage, but that again might not be nearly as important as the primary device functionality. I’m continuing to probe for the features in a reading device that would offer significant relative advantage over printed text, and it seems e-ink screens is not a big driver for device adoption.

    Do you think that e-ink technology or similar design is essential, or could an LCD screen (especially with touch features) meet the academic consumer needs? Given the ipad adoption, and the reading applications that are beginning to proliferate, I could be easily convinced that e-ink is a short term technology, or just a niche technology. Maybe even e-ink becomes like the Dvorak keyboard; proven superior but never really adopted.

    Thanks again for your comments!

  12. I think e-ink is a red herring: its selection is driven primarily by the need to save power to increase battery life, but this design sacrifices almost every aspect of interactivity at the altar of being “book-like.” I think the iPad demonstrates clearly that it’s possible to have a day-long charge and full-motion video in the same package.

  13. […] application to read books on Android devices. I take this as more evidence in support of my earlier assertion that dedicated book reading hardware is not useful for customer who also carry other  devices such […]

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