Kindle outgrows its ambition

Posted by Carmi Levy

Analyst Opinion - A couple of months back, I raised a bit of a ruckus with my column – Kindle shmindle – that suggested the high up-front cost of Amazon’s book reader would be its ultimate downfall. As Amazon prepares to launch an even bigger-screened version, supposedly to cater to the newspaper market, my original thesis still stands. Consumers don’t need yet another expensive, limited-function device to buy, maintain and keep charged.

As much as the newspaper industry needs a savior these days, fans of traditional media shouldn’t hold their breath waiting for Amazon to save their beloved broadsheets and tabloids.

The dream is simple: A robust, inexpensive device that’s as easy to read on a kitchen table as it is in the subway. Said device would support seamless content updates, have enough battery life to allow extended reading sessions without worrying about finding a wall outlet, and have a screen that looks more like paper and less like a screen. On all of these fronts, both versions of the Kindle have already hit it out of the park. But the cost factor spoils the party.

The question remains whether users will spend a few hundred bucks up-front for the right to then pay subscription fees for newspaper-based content. Highly doubtful. If the cell phone industry has taught us anything, it’s that consumers like a good deal, and they’re often more focused on initial purchase price than the monthly fees that come afterward. In the big-screen Kindle’s case, even if a $10/month online subscription costs less than the dead-tree edition that’s shipped to their doorsteps each morning, consumers will balk at having to pay top dollar for the device itself.

Change that model to a free or low-cost device – something akin to the $50 carrier-subsidized netbook – and suddenly everything changes. Consumers think they’re getting a deal, and they no longer have to hold their breath waiting for their initial investments to pay off.

The not-so-distant-tech-past is filled with examples of single-use, single-vendor devices – like 3Com’s Audrey and Microsoft’s WebTV – that slipped beneath the waves after the original business model faltered. Customers ponied up triple-digit dollars up-front, then remained stuck paying monthly subscriptions until the devices inevitably failed.

These days, most of us happily use our laptops – ergonomic and usability limitations and all – as makeshift reading devices. Although netbooks get all the attention these days, they’re really little more than cheap, smaller and slower laptops. And they’ll only change the PC market landscape after wireless carriers begin applying the same heavy subsidies traditionally used to move cellphones off the shelves. Give the devices away and reap the rewards from subscriptions.

Amazon holds the keys to this revolution if it has the courage to give up some up-front purchase-based revenue in exchange for a cut of longer-term subscriptions. While these devices clearly have a way to go to be truly world-beating, they’re close enough now. Even without color screens, video, and a laptop-like ability to do more than just read, a $50-with-subsidy big-screened Kindle could very well be the newspaper world’s iPod equivalent.

Amazon would do well to negotiate something truly revolutionary with the wireless carriers and the newspapers before someone else comes along and steals its thunder.

Carmi Levy is a Canadian technology analyst and journalist covered with scars from his years leading IT help desks and managing software development projects for big bad insurance companies. He comments extensively in a wide range of media, and works closely with clients to help them leverage technology and social media tools and processes to drive their business.