Debating the Amazon Kindle

I’m having a fun ole’ debate over the Amazon (AMZN) Kindle right now. It’s taking place in the comments of a previous post between myself and Nicholas Zakas, a published author, seasoned programmer, and all-around intelligent guy.

I like debates. They give me a chance to hone my opinions and positions on various topics. I’ll do my best to defend my position, but more often than not, I’ll learn a new viewpoint that adds to my knowledge of that topic.

My post was about how great the Amazon Kindle was going to be. I likened the Kindle to Apple’s (AAPL) iPod. Nicholas commented that:

The iPod was successful largely because people wanted to replace their large portable CD players with something that could play more…it wasn’t techies that make the iPod the sensation that it was, it was the non-techies.

This implies it was the iPod’s ease-of-use that made it such a commercial success. While I totally agree, I think it was more than just the iPod’s simple & friendly form factor that made it great. It was also:

  1. iPod’s branding and Apple’s great overall brand
  2. The “complete package” that iTunes integration offers to the iPod

He argued that while this is true for iPods, it’s different for books:

There’s something about the tactile relationship between readers and their material that makes it hard to give up. I remember when people predicted that newspapers would go out of circulation when people could get their news online…

True, but the same was once said about records when first CDs came out. There was a time when people predicted the TV would replace the radio. And later, that interactive TV would replace regular TV. I’ve never believed that newspapers would go out of circulation, but I do believe their role will change—and has already changed. It’s no longer the single source of up-to-date news. People primarily go to the TV for that now. (Those that go to the web for up-to-date news are still in the minority, though it’s growing rapidly.)

He also made a comment about the Amazon Kindle falsely gaining a first-mover advantage, though the Kindle isn’t the first e-book reader on the market; there are quite a few already. While he’s probably just not as familiar with the e-book market, we both agree that first-mover advantage isn’t a panacea for success.

To that, he followed up with a simple mathematical point:

Considering you can get great books for under $10 nearly anywhere, what would you do? Buy a $400 machine to output text, or buy 40 books? I love tech as much as the next computer geek, but even I would go for the latter.

Good point. If you’re someone who will only buy forty $10 books, you’ll hardly see any cost-savings benefit in the Amazon Kindle. But if you’re someone like me, who’s been known to spend upwards of $800 on books a year, the Amazon Kindle may be worth it.

But then this goes into the question of target demographics, which Nicholas also pointed out:

Tell me who [the target consumers] are for Kindle? People who read books like books, not just the text. The divergence between book readers and technology couldn’t possibly be greater. People often read books to escape computers and technology.

I can’t disagree with that. As a bookworm myself, I also love the tactile feel of a book. However, I used to love the tactile feel of a CD booklet too. Every time I’d listen to a CD, I’d read the booklet for the lyrics or linear notes. Or maybe just stare at the album cover art. I loved doing that. When MP3s first hit the market, I didn’t see the appeal because they felt so ethereal and amorphous. There wasn’t anything I could hold in my hands.

Then I hit a tipping point and realized that the portability and physical space savings of MP3s offset the benefits of having CD booklets for me. The same went for digital movies and DVDs. Now, I love digitizing all of my media.

What may tip the balance of books to e-books are the younger generations of consumers. They’re already growing up with the Internet, mobile phones, and MMORPGs (with their virtual goods) as everyday items in their lives. It’s foreign for them to imagine a world without technology like that. They also don’t place as much value on CD booklets, DVD boxes, or books in the same way the older generations do—younger generations seem all-to-eager to accept digital media.

Just like newspapers, there will always be a role for books. When you’re chilling in a log cabin or on a beach somewhere, you’ll probably want a good solid book in your hands. But if you’re on a train commuting to work, it may be more desirable to hold a device that will allow you to read any book, newspaper, or blog you want.

Potential Initial Niche Targets

One last thought. If Amazon were to approach the e-book market with Geoffrey Moore’s advice in mind (as he writes in Crossing the Chasm), they could target graduate students as an initial niche. With graduate textbooks costing hundreds of dollars, they may find it more cost-effective and easier to lug around a Kindle rather than seven 5lb textbooks. The price point of the Kindle would have to drop from its current $359.00, however. But that is inevitable as they streamline their production costs.

Undergraduate students could be a viable initial niche as well, though more research would need to be done since many undergraduates just purchase used textbooks to save money. If a cheaper Kindle could tap into this market, the purchasers may actually be the students’ parents.

Another initial niche could be any profession that requires access to large volumes of books at any given time, such as lawyers. Imagine the mountains of books a lawyer has to go through. Now imagine being able to search through all of that easily through a single handheld device. Not bad, huh?

This is easier said than done, of course. There are lots of tricky book publisher contracts to negotiate. Without the necessary content, these niches are impossible to reach. But still, it’s not hard to imagine these users wanting a device like the Amazon Kindle, yea?

  • http://www.nczonline.net/ Nicholas

    I’ll admit to a somewhat ignorant opinion of the Kindle. I did read through several articles after spawning this discussion (“debate”) and noted the dictionary lookup but didn’t find a reference to the highlighting and note taking features. I’ll admit that this makes it a more compelling case for college students.

    To answer your question, I have not asked any college students, this is my opinion. Being just a couple of years out of grad school, however, I think my opinion holds a little more weight than your normal computer geek. I shall also take it up with the few that I know and get back to you.

    With that being said, I’ll shine the light back and ask how you’re representing this to college students? I’ve venture to say if you ask any college student, “would you rather carry a single 5lb tablet or five books to class?” most would reply that they’d like the tablet (I probably would, too). I think the response will vary greatly depending on how the question is asked.

    I refer you to the Pepsi challenge that spawned fear in Coca Cola so much that they changed their flavor to the ill-fated “New Coke.” The Pepsi taste test asked people to take a sip or two of an unlabeled cola and describe which one they liked better. An overwhelming majority picked Pepsi, and that led to a furious marketing campaign. Coke even bought into it and panicked. In reality, though, people don’t take one or two sips of cola, they drink a whole glass or can. Pepsi’s sweet taste was preferred for a single sip, against which the less-sweet Coke seemed bland. In the actual use case, though, Coke won hands down because the sweet Pepsi made it harder to finish a glass/can.

    So my question really is, are you asking these college students to take a sip or drink a full glass? Carrying books to and from class are just part of the college book experience. I’d ask them to consider the entire lifecycle of their college book. Perhaps ask them how they study now to determine actual usage patterns and then see if the Kindle can accomodate those patterns, or at the very least, not inhibit them. And then tell them they can’t resell those books. I’d love to see the reaction.

    I would happily try a Kindle if I could walk into a store and try one. Or if a fellow writer had one and would like to share. I’ll admit, as a techophile, I find the technology intriguing. I’ll even admit that it’s a cool gadget that, if I had more expendable income, I might even purchase just to play with. I just don’t believe that it’s a disruptive device that appeals to a broader audience. I do think there’s a niche, but my gut tells me that people need to be forced to use it to have a hope of selling mass quantities.

  • http://mikelee.org Mike Lee

    @Nicholas,

    To answer your question, here’s how the Kindle was presented to the college student I spoke with:

    It was handed to him by the Amazon Kindle employee with the words, “This is what I’m working on.” The student looked at it with an arched eyebrow and shook his head. He rattled off a series of criticisms. “It’s ugly. It’s not very usable. It feels too delicate. It’s too large.”

    He continued playing with it for 15-20 minutes. He looked through some books, downloaded a newspaper, played with the Basic Web browser, and scrolled through all of the menus. Soon enough, his eyes began to light up. He started spouting off suggestions. Lots of “It would be cool if it had… What it needs is a… This is pretty stupid, they should change this to…”

    It was the college student who suggested it for the college student market. He’s going to be attending medical school soon. “If this thing could hold all of my medical textbooks, that would be totally awesome,” he announced.

    Since he came up with the suggestion himself, I felt it was a pretty telling piece of anecdotal evidence. Of course, this is not a controlled study in any way; it’s still just one person’s opinion.

    I hear your doubts. I’m as much a skeptic as the next person, especially when it comes to investing my own money into it. But if you had a chance to play with the Kindle, then watch a college student play with it, then your opinion might be different.

    My gut feeling about this device is positive, based on the collective impressions I’ve heard & seen. If the only way to satisfy you is to show you empirical, conclusive evidence, then I’m not going to be able to do that. Amazon probably has such research (hopefully), but it’s not been made privvy to the general public.

    If you’ve read Crossing The Chasm and are familiar with its marketing approach to the Technology Adoption Life Cycle, you’d agree that the Kindle isn’t going to sell to the mass market anytime soon – nor should it. The suggested strategy is to aim at innovators and early adopters within specific niches first, then to cross the chasm into the early majority.

    That’s when the disruption happens. The book The Innovator’s Dilemma suggests that there are three types of disruptions: low-end disruptions, new-market disruptions, and a hybrid of both. If e-books can be priced lower than physical books (which, so far, seems to be Amazon’s strategy), then they’ve got a potential low-end disruption on their hands.

    Of course, my betting on the Amazon Kindle and not one of it’s competitors means I’m not just hoping the e-book market will grow, but that Amazon will have the knowledge & savvy to pull this off. I sure hope they do.

  • http://www.nczonline.net/ Nicholas

    This seems like a much cooler reaction than your initial post, as you compared the Kindle to the iPod. I’ll restate my belief that the Kindle will *never* be to books what the iPod is to music. Of all Amazon’s big bets, I see the least possibility in this one. I don’t equate a willingness to play with success. There have been several devices I’ve loved playing with that just really had no chance of success…my favorite minidisc player comes to mind. The problem is getting enough people to want to play with it. And then the problem is getting enough people to use it. And then, to keep using it after the cool factor has faded.

    As an author, I see my e-book sales along with other sales statistics. One would argue that the readers of technical books would be more inclined to buy electronic copies of books than physical copies, yet that isn’t true despite the cheaper price of e-books. While you could argue that that might change given a better e-book reader, I don’t think that it’s the case.

    I guess to sum up: if the Kindle is your only reason for investing in Amazon, then I don’t believe it’s a wise investment. I’d be shocked if the Kindle was still in production five years from now. If I were a betting man, I’d bet the Kindle follows the path of another Apple creation, the Newton, rather than the iPod.

  • http://mikelee.org Mike Lee

    For the record, I think you’re taking the iPod to Kindle comparison WAY too literally. I’ll say again: I was comparing the iPod/iTunes marketing strategy to the Kindle/Kindle Store marketing strategy. There’s nothing in there to equate the industries or to say e-books are like MP3s. Okay, now that that’s out of the way…

    I’m certainly not someone to give investment advice. I can tell you what excites me enough to warrant my money, but I’m sure half of my investments (from stocks to start-ups to small businesses) are things you wouldn’t invest in. And that’s okay. Investments are a very personal thing.

    And personally, I am investing in Amazon largely because of their vision for the Kindle. But I realize they have a lot of other great services too. They’ve proven themselves able & willing to try out new things, such as Amazon Web Services (AWS), Amazon Mechanical Turk, Amazon Simple Storage Service (S3), and Amazon Elastic Compute Cloud (EC2). As an investor, I like that they’re willing to try new things and fail at them. Each failure (hopefully) is teaching them a lot.

    We could talk about financials and how they compare to the rest of the industry too, but that’s a lot to get into.

    I’m not going to try to convince you to believe in the Kindle, nor to invest in Amazon. It’s obvious you’re pretty solid about your opinion. In a way, I love that you’re so against the Kindle and e-books – this topic was obviously enticing enough to get you to comment four times! If you were totally nonchalant & opinion-less about the Kindle, I would have worried a lot more.

    P.S. Again, not that I want to influence your investment decisions, but If you believe the Kindle is going to be such a huge flop, maybe you should consider shorting AMZN. They are investing quite a bit into this project. If all of that fails, they’ll experience a drop in price for sure.

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