A recent article on CNN caught my attention – the article suggests that Amazon should give away the Kindle free of charge. At first glance, it doesn’t seem like it makes sense to give away the product when they are selling millions of them – research show the Kindle has a 47% market share for eReaders.
Free Amazon Kindles?
But when you take a deeper looks into Amazon’s business model you can see why it makes sense to get the Kindle into as many hands as possible. Here’s why:
Amazon is in the business of selling books, not hardware. Amazon’s core business model is selling books, music, and other media. Sure, they have a great piece of technology, but will Amazon be able to compete with the tablets and other eReaders in the long run? Unless the Amazon Kindle comes with a web browser or other bells and whistles, many people will opt for the iPad and similar multi-function tablets – unless Amazon can get the price of the Kindle low enough that it’s a no-brainer to own one in addition to another device.
Check out the features of the Amazon Kindle at Amazon.com.
Kindle is more than a device – it is a format. Apple did great things with iTunes and in some ways, the Kindle Reader format has an opportunity to do something similar. Apple gave away the iTunes software which spurred sales of millions of iPods and the iTunes Store has become a huge revenue source. But here’s the beauty of it – you don’t need to have an iPod or even an Apple product to use iTunes, or for Apple to make money from you as a customer. iTunes can be loaded on a variety of platforms and purchases can be made directly through the app. The iTunes example is why it’s important for Amazon to put the Kindle into as many hands as possible – which is what they are working on.
The Kindle Reader is already everywhere. Folowing in the path of iTunes and music, Amazon is making great strides in making “Kindle” synonymous with “eBook.” You can get free Kindle Reader software for a variety of devices, including the iPad/iPhone/iPod, Macs, Windows PCs, Windows 7 phone, BlackBerry and Android operating systems. And the cool thing is that all of these synchronize to each other so you can pick up where you left off on any device, as long as you have Internet access. People buy iPods because they are great pieces of technology, but also because they already have the software on several devices. Making the Kindle Reader accessible on a variety of devices makes it easier for Amazon to dominate market share – people will want the Kindle for home and vacation, and can still have access to their books on their phone or other device.
Give away the razor, skin you on the blades. Razor blade companies have been doing this for decades – charge a pittance for the razor (or even give them away), then charge high prices on the blades. It’s the ongoing expenses that make the razor blade companies more money. Lowering the cost of entry gives them a long term (and more profitable) customer. Why? Because people are creatures of habit and aren’t likely to change if it means a big cost in either time or money. Amazon has the same opportunity right now with the Kindle. Get it into as many hands as possible, then continue to profit from the customers by selling them books. People won’t want to change to another device or eReader down the road because the Amazon Kindle uses a proprietary data format for its eBooks. This format can’t be transferred to other readers unless you first change the format, which most people either don’t know how to do, or aren’t willing to do. And since the format can be used on the Kindle Reader software on other devices, people are more likely to stick with the Amazon format in the long run. It’s a brilliant business model.
Don’t expect free Kindles soon – but expect price drops
I think free Kindles is an intriguing idea, but I don’t think we will see it soon. From all accounts, Amazon is still selling these at a high rate. But I don’t think it will be long before we see the Kindle in the $99 region, and possibly much lower by Christmas. I also wouldn’t be surprised to see some new features on the next version.
I don’t have a Kindle or other eReader at this time, but I’ve played around with them and I believe the technology is intriguing. I’m excited to see where it leads.
Do you have a Kindle? What are your thoughts about it?