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Where next for Kindle?

Down and across. That’s the answer for those who like to read the end first.

Down: The price of the Kindle hardware looks to be in a race to the bottom with the Nook and every other eBook reader out there. I’d say that’s just fine for Amazon, and I reckon the Kindle’s selling price is almost inconsequential to the e-tailer. Kindle is all about wrapping the consumer up in its online store, after all Amazon is perfectly happy for you to read Kindle books on your compatible smartphone or computer. The overriding priority is probably to ensure that consumers choose Kindle over competing ecosystems, and in the standalone eBook reader market I’d say that means selling the Kindle hardware as cheap as chips if necessary.

The iPad has created some downward pressure since its perceived value as a multi-function device is significantly higher than that of the Kindle, which is designed to do one thing well. It’s nice that Kindle 3 will have a Webkit internet browser and some other candy on the side, but its core competency is presenting books from a huge library, which leads me to…

Across: Well, “Smooth” might be a better word. One of the things that makes companies like Netflix attractive is their smooth and partially predictable revenue stream, due to their subscription model. I think Amazon may move to offer an x-books-at-a-time tiered subscription model for Kindle alongside the existing buy-once model. This would be perfect for pulling bookworms into an unlimited plan, while Kindle newbies could experiment with a one or two books per month plan. Plenty of similar models exist for digital content distribution; Zune Pass, Rhapsody and of course the aforementioned Netflix.

Perhaps the most compelling example is the cellphone contract model. Consumers buy a cellphone for a fraction or sometimes 0% of its full MSRP and the hardware cost gets recouped by the carrier over the life of the contract. Whether Amazon would follow a contract or no-contract model is a pointless discussion since this whole article is pure speculation but, if you’re waiting for a $99 Kindle, I think it will come. Heck by my logic it may end up even cheaper than that.

Thanks to Eytan and Charlie for helping to trigger my thoughts about this.

Neil Berman

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Aug 3, 2010 - Posted by | Analysis, Mobile | , , , , ,

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