Amazon Kindle: Not a home run, but an interesting start

By now I assume you've read about Amazon's Kindle e-book device. I think it's interesting and important, but more for its business infrastructure than for the device itself. And I'm not at all sure that it'll be a commercial success, unless it gets a lot more content quickly.


What they announced

Kindle's hardware is a lot like that of the Sony and Iliad e-book readers. I won't bother repeating all of the specs; you can find a good summary on Engadget here and here and in a lengthy Newsweek essay here.

The industrial design of the device looks uninspiring to me. It's made of white plastic, a color scheme that most people associate with ease of use, low price, and limited features. Considering Amazon's strong emphasis on ease of use in its announcement today, I guess the color makes sense, but it's at odds with the $399 price.

I haven't touched a Kindle yet, so maybe it looks nicer in person. But in the photographs its sloping edges and slant-key keyboard do nothing for me. It looks a bit like a badly-carved wedge of Parmesan cheese. There are a total of 54 buttons, controls, and keys on the face of the device, so naturally it looks cluttered. There's virtually none of the lust-inducing elegance of the iPhone; the design screams "utilitarian."

"Is it just me or is that thing one hell of an ugly thing to walk around with?" --Comment posted to Newsweek's article on the Kindle

The design is not necessarily a bad thing; the device is going to live or die based on its usefulness, not its looks. But the lack of a lust factor makes people much more willing to nit-pick its features and price. So far Kindle is rated 2.5 out of 5 stars on Amazon's own website, with most of the negative ratings coming from people who have never even touched the device.


Clever wireless, vulnerable business model

Interesting use of the network. Things get a lot more elegant when you look at the services attached to Kindle. Amazon has built in a radio that talks to Sprint's EVDO data network. Wireless is used to deliver almost all content to the device (except for MP3 files, which sync via a USB cable). This is both attractive and disturbing.

The attractive part is that Amazon can pre-test each Kindle device to make sure they connect to the Sprint network before they get shipped to the customer. This is a huge advantage over WiFi. One of the dirty little secrets of WiFi is that non-PCs often have a lot of trouble connecting to WiFi routers in homes and offices. I don't know why this happens, but I suspect it's because the router vendors test their hardware mostly against PCs, and never find the bugs in connecting to other devices. Trouble-shooting a Kindle that couldn't find the network would be a nightmare, and Amazon has bypassed the whole issue by leaving WiFi out of the device.

I also like Amazon's decision not to hit its users with a monthly fee to access the network. Instead, the charges are embedded in the cost of downloaded content. This means that users who buy a lot of content will be subsidizing the ones who read only a little, but Amazon has hidden the charges so well that I don't think anyone will notice. Kindle makes the wireless network do what it should do: Disappear.

I have two worries about the use of EVDO. The first is that if someone lives outside of network coverage (like at my house) their Kindle won't work properly. I would have preferred to see WiFi included as a backup. The second problem is that because Amazon has to pay for that wireless connection, it has to tax virtually any information transmitted to the device. You can load documents onto the device by sending it an e-mail, but you'll pay 10 cents for every message. That doesn't sound like much, but it's annoying to have to pay anything at all for something that's normally free.

Likewise weblogs: You have to pay $1-2 per month for every weblog that you want delivered to your device. That's understandable if you look at Amazon's expenses, but it's astonishing for something that's free on a PC. What's worse, the most enthusiastic readers -- the people most likely to buy Kindle -- are the people likely to be scanning 20 blogs a day. They won't pay $20-$40 a month just to read blogs.

One workaround would be to subscribe to an e-mail blog aggregator like Feed Blitz and have it send a daily digest to your Kindle. That'll presumably cost 10 cents a day -- $3 a month, for unlimited blogs. That is, assuming Amazon doesn't put a size limit on the messages sent to Kindle.

The relatively closed nature of Kindle has led to some angry commentary on ebook enthusiast sites that you'd expect to cheer the product. For an example, there's an essay on Mobile Read here.


Self-publishing: Nice idea, but...

I was delighted to see that Amazon is allowing authors to self-publish e-books for the Kindle. You just submit them to the Amazon Digital Text Platform, set the suggested price, and Amazon adds them to its catalog (link).

The catch is that Amazon pays you only 35% of the suggested price of the book (link). They keep 65% -- for the amazing service of adding your book to their catalog (basically, they shift some bits around on a server). And by the way, if there is any bad debt, Amazon doesn't pay you any royalties at all on that sale, even though they're the ones who failed to collect.

By comparison, Apple takes 30% of iTunes revenue, and NTT DoCoMo takes about 11% of revenue from content and apps sold over its network.



I'd love to hear from the folks at Amazon if there's a reasonable business justification for keeping such a huge cut of self-publishing revenue, but I think it's probably for two reasons:

--Amazon is greedy, and/or

--They don't want to completely undercut the royalty structure of print publishers (who typically pay up to 15% royalties on a printed book)

Either way, Amazon's royalty structure is outrageous. And it won't last. One of the most important aspects of electronic publishing is its ability to change the wretched economic structure of the industry so authors get the majority of the revenue for their work (I've written about the economics of it here). The change is inevitable, and if Amazon tries to hold its current royalty structure it'll eventually just drive people to other e-book platforms that don't rip off authors.


Will it succeed? It's the content, dummy.

All of the issues covered above will affect the success of Kindle, but ultimately the sales of an ebook reader depend on having a huge library of reasonably priced content -- books and periodicals. Lack of sufficient books is what killed the last generation of ebook readers, Rocket eBook and Softbook (I worked at Softbook for a short while, so I saw the situation there first hand).

Judged by that standard, Kindle is off to a surprisingly mediocre start. There are some promising signs. For example, people don't like paying hardcover prices for intangible ebooks, so Amazon is pricing current best-sellers at $9.99, compared to about $15-$16 for hardcover. There are hints in some articles that Amazon is even subsidizing some books to hit this price. The price difference isn't big enough to make people buy Kindle, but it helps to overcome resistance. Good move.

The problem is in the library of other books. Or I should say the non-library. There are supposedly about 90,000 books available for Kindle currently, which sounds like a lot but actually makes for a poor selection. To get an idea of what was available, I took a quick look at the titles available from several prominent science fiction authors -- Niven, Brin, Asimov, Simak, Vinge, etc. (hey, I work in the tech industry, that's what I read). The selection is quite bad -- for many authors, the only Kindle editions are their second-rate books. Or there are a bunch of individual short stories available for 99 cents each, but not most of the novels. I strongly suspect that Amazon is counting each of those short stories as one of the 90,000 "books," because they are all labeled as books in the website. If true, that means the actual number of real books for the device has been heavily exaggerated.

Try the test yourself -- go to the search page here and type in your favorite author's name. Let me know what you find. Maybe fields other than science fiction have a better selection. I hope so.

There's nothing that makes an ebook customer angrier than paying $400 for a device and then finding that most of the things they want to read on it are not available. The iPod succeeded even though a lot of songs were missing from iTunes at first -- but remember that people could rip their own CD collections, and install MP3s for free. Amazon doesn't have a base of content that its users can shift to the reader, and it charges money for any document transferred to the device. So it has to fill the library on its own, quickly.

I think Amazon has a lot of work to do here.

I'm intrigued that about 16 newspapers and magazines are available for Kindle. Unlike books, newspapers and magazines are viewed as disposable, so people are less resistant to buying them electronically. And getting instant delivery of a weekly magazine is a significant advantage over waiting a few days for it to appear in the mail.

Judging by Amazon's price to receive the San Jose Mercury News (Silicon Valley's Incredible Shrinking Newspaper) on Kindle, prices are about 40% less than print subscription. That's not bad. What I don't know is whether the Kindle editions of the papers and magazines will be the full text of the print version, or just excerpts. If anything's left out, people will be turned off.

Amazon must get a critical mass of content -- meaning a lot more magazines and newspapers, and rapid growth in books. If it can do that, Kindle may finally jump-start the ebook industry. It won't explode overnight, but Amazon has a long history of forcing its investors to wait years for the full payoff on investments. If Amazon can maintain that patience, I think it Kindle has a chance.

But I sure hope they make the next version of it look nicer.

17 comments:

Bertil said...

For blogs, I'm assuming you could use Google Reader or Yahoo Pipes to (freely) all merge them into one blog.

Elia said...

This seems to be as close as we have gotten to the "info pad" I would love to see. I am less concerned with the lack of titles (I too had a hard time finding appropriate materials) IF the "self publish" options were better.

See, I can email a Word file to myself, which means I can self publish, just like we "self-published" our own CDs to iPods in the early days. The problem I have is that it doesn't appear to support PDF documents. With PDF conversion, I could in essence build my own library of electronic books and publications that would make the thing very attractive.

I do agree that Wi-fi and free web browsing with wi-fi would have been a big missing piece for me, but for version 1 the Kindle would do the trick with PDF support.

Elia Freedman

Flash Sheridan said...

> the titles available from several prominent science fiction
> authors -- Niven, Brin, Asimov, Simak, Vinge, etc....
> The selection is quite bad

Looking at the backlist misses the point, I think. (And I have to note that, despite his continuing prolificity, Dr. Asimov is technically still dead.) What matters is books you haven't already paid for. My highly unscientific sample of one science fiction title and one mystery title (George R.R. Martin and Robert B. Parker's latest) looked pretty compelling. Not only would I save a significant amount of money on books I'd buy anyway, but (an especially important factor given the width of Mr. Martin's books) I'd also save shelf space.

Flash Sheridan said...

> Amazon's [self-publishing] royalty structure is outrageous

Uh, consider the alternatives—for books, not music. If I want someone other than my wife and mother to read, say, a brilliant but neglected treatise in an obscure but important branch of mathematical philosophy, my royalties will be either zero (on the web, via semi-moderated sites such as ArXiv), or highly negative (dead-tree vanity publishing.) The former may be starting to matter (google "surfer dude physics"), but the latter never did.

From the vanity author's point of view, this could be huge if Kindle succeeds—enough so that Amazon may need to segregate the vanity authors from the real ones. Their default sort order of "best selling" may help with this, but my browsing of the Kindle Bookstore suggests it's not yet sufficient.

Michael Mace said...

For the weblog at Rubicon, I posted an analysis of the Kindle strategy and its lessons for other tech companies. An excerpt:

"Unlike the early Macintosh, there's no technolust factor driving creation of electronic books. We don't think Amazon can get a lot of Kindle-only novels written. And at $399, Kindle is definitely not a giveaway product. So that leaves money-lust as the other motivator. To succeed, Amazon probably needs to convince the publishing world that Kindle is destined to sell in mass volumes. That is a high-expense, high-effort strategy..."

You can read the whole analysis here. There's no registration required.

Michael Mace said...

Good comments, folks!


Elia wrote:

>>The problem I have is that it doesn't appear to support PDF documents.

I'd love to know if Amazon talked with Adobe about that issue. You'd think that Adobe would love to have PDF compatibility in the device; that would just encourage more use of Acrobat. Maybe Amazon wanted to keep the device closed. Or maybe Adobe wanted royalties.


Flash wrote:

>>What matters is books you haven't already paid for.

Good point. A lot depends on the book buying patterns of Amazon's target customers. If there's a substantial number of people who just buy off the bestseller list and don't care so much about backlist, then maybe Kindle works. You've got to assume Amazon knows the behavior of book buyers better than anyone else on the planet.

On the other hand, even if people don't plan to buy a particular type of book, how will they feel knowing that they can't do it? Will the perceived loss of versatility make them hesitate before buying? We'll see.


>>Uh, consider the alternatives—for books, not music. If I want someone other than my wife and mother to read, say, a brilliant but neglected treatise in an obscure but important branch of mathematical philosophy, my royalties will be either zero (on the web, via semi-moderated sites such as ArXiv), or highly negative (dead-tree vanity publishing.)

Another good point. But the number of people who own Kindles is going to be only a small fraction of the public for a long time, so your potential audience is tiny. The situation is bad for authors no matter what.

By setting the royalty rate so low, I think Amazon is leaving a big opportunity for competing e-book companies to come in and create a better market for authors.

Tamas Simon said...

There is one thing that is badly missing from the Kindle in my opinion.
Even though it can be hooked up to a computer (both PC and Mac) there is no software provided at all.
from the Users Guide it sounds like the Kindle is a USB mass storage device, so users can copy documents onto it just like they would into any other folder.
I think a dock and an iTunes like program that syncs blogs etc. from a computer via USB would be a big deal and would boost sales...
I suspect that most buyers of the Kindle already do own computers, so why should they have to pay 1$/blog/month unless they're traveling?

Anonymous said...

I really do not see much of a future market for ebook readers. I see it in a similar segment to the dedicated word proccesser 20 years ago. That was an office appliance that was beleived to be unreplacable by the PC.

What I do like is the bussiness model of having the vendor pay the EVDO data charges. I was expecting this to be the model of the gphone when speculation was that it would be an ad supported handset. I truelly belive that the future of the big teleco will be as bulk airtimes provider to the actuall content providers. This is a start. The next step is that all cariers(in this case all CDMA carriers) should be supported so that coverage is a wide as possible. I am also a sceptic of WiFi or femtocells becoming a common access method. The technical support would become to complicated. Society wants to ditch there DSL anyways and goto an all wireless everywhere environment. Amazon is moving in the right direction there.

NEXT STEP: for amazon to offer the same service to users of sprint smartphones free of any data charge or FUP deduction from sprint.

Anonymous said...

i just do not see a mass market for this type of device.

but maybe there is one in textbooks. textbook publishers would certainly want as closed/proprietary device as possible to minimise the potential piracy; and a textbook device may not need the high tech gadget look and feel. it would just need a few big universities to make it the standard.

and there is A LOT of money in textbooks.

Tamas Simon said...

re: dedicated device
the big deal about these ebook readers is the eInk screen.
I believe they should be an add on to a PC, an iPod or a PDA.
Something like the
RicaVision eReader that uses (or rather will use) Windows vista SideShow technology.

mark said...

Pretty much agree with you on the ugly aesthetics and the annoying cost of the blogs/periodicals/ messages, etc.

As for books, I looked up Lee Child and almost all of his books are there. The most recent is 9.99; all the others are 5.59 or 6.39. Same for John Sandford; 18 books. Not bad.

Anonymous said...

I am new e-publisher for the Kindle. I also publish printed books via Ingram, and Amazons DVD and book manufacture venture CreateSpace.
Since I publish esoteric, new age content I do not do it entirely for the money. I agree with most points in your article and looking forward Amazon making positive changes next year.

Andras Nagy
www.andras-nagy.com

Michael Mace said...

Thanks, Andras.

Please drop by again in a few weeks and let us know how sales are going.

Graham said...

Good read,strange how operation companys vary their service in other countries though. Graham - www.logo-n-stitch.co.uk

Bradley said...

It appears John Grisham and Tom Clancy are boycotting (for now) the Kindle. That leaves a pretty big hole in your "virtual" popular fiction rack.

On the plus side though, I saw a good selection of David Baldacci and Nelson DeMille novels (including Gold Coast--arguably DeMille's finest work), so don't give up on the Kindle yet.

Anonymous said...

Hmm.

..Uh, consider the alternatives—for books, not music. If I want someone other than my wife and mother to read, say, a brilliant but neglected treatise in an obscure but important branch of mathematical philosophy, my royalties will be either zero (on the web, via semi-moderated sites such as ArXiv), or highly negative (dead-tree vanity publishing.)>

Uh, this just isn't so. You can self-publish your eBook on, for instance, Lulu.com for no upfront charge. Anyone can download for the fee you've set, and you keep 80%. Sounds like a much better alternative to me.

Anonymous said...

I was one of the "test subjects" for the device. I have been using it for about 2 months and it has changed the way I read. The only complaint I had was that I was not able to use the device outside of my home. The books/mags/newspapers appear for all intents and purposes "instantly". It is actually more pleasant that reading a book. The screen adjusts for the light and the the ergonomics are perfect for me. I have a large library and can only see buying a "book" now if it does not offered on the Kindle or if it has great sentimental value.

Amazon Kindle