Jeff Bezos from Amazon has revealed the next version of the Kindle, called the Kindle DX. I’ll take a moment to got down my initial thoughts about the device and Amazon’s greedy plans …
On the plus side, this model will have a bigger screen that appears to be about 5.75″ by 7.75″. The new design and the graphics at the presentation are so much better than the previous work that it appears Bezos finally decided to hire a real industrial designer and ad agency (the previous work must have been done by a relative or neighbor’s kid, or Bezos himself).
Another plus will be Kindle DX’s ability to show PDFs.
On the minus side: no color and no video. No cell phone or PDA. Not a notebook PC. High price tag for a proprietary product.
The biggest minus — and this will be the knock-out punch to Jeff’s world-domination ambitions — is the financial model being used. Amazon is simply being way tooooo greedy. Here’s why, examining the three main areas: trade books, newspapers and textbooks …
Consider that Bezos has no content of his own. No stories, no news, no lessons. He needs others to provide it. He is bullying book publishers to provide their content and receive only 35% of the list price. Amazon gets 65%! Amazon already has its development and manufacturing costs paid by the user who will pay a hefty $489 US for the Kindle DX. Amazon getting between 20% and 25% would be more reasonable for eBooks. [Within the book trade, a bricks-and-mortar retailer typically gets between 40% to 45% of the retail price, and has to handle and display the physical books, pay rent, have sales staff, heat the building, etc., etc. Selling eBooks is comparatively expense-free.]
Bezos has extended his overly greedy plans into two new areas: newspaper subscriptions and textbooks. For newspaper subscriptions, he is keeping 70% of the annual subscription revenues! The newspaper would only get 30%! Ouch! A few newspapers are desperate for any revenue, and have agreed to trying this, although only “outside their normal print circulation area.” The agreements are apparently non-exclusive, so the newspapers can make better deals with other device makers to come.
For textbooks, Bezos is grandly announcing the participation of three large publishers and some name universities. Yet the size of the trials will be very small (50 students at one university), and the titles offered will be few. One must remember that, even though textbook publishers feel threatened by the fledgling free textbooks movement, this is one segment of the publishing industry that still makes billions selling books the old way — in print, through college bookstores. College bookstores only get 15% to 20% of the retail price. Yes, the publisher gets 80% to 85% of the $125.00 to $150.00 a student pays for those required texts, for printed copies sold through college bookstores! How keen will those publishers be to get only 30% or 35% from Kindle sales of their prime titles? Not very, I expect. And a recently completed study in the UK revealed that the students participating in a year-long trial hated using DRM-protected e-textbooks. Students also hated having to pay essentially the same amount for an e-textbook as the printed version — which is what Bezos is planning to charge. Hate is a strong word to use in a research study, yet that was how the students’ reactions were recorded. Why the universities are participating at all is puzzling to me, since Amazon would dearly love to gobble up all the universities’ own bookstores’ sales for the printed versions of textbooks as well.
The reality is that content producers are united about very little, except in their opposition to and fear of any one retailer controlling the revenue split — especially when Amazon is going so far beyond historical business margins. Amazon can only dictate the terms if, and as long as, it CONTROLS the eBook distribution channel, as Apple did for a while with iPods and the Apple Store. The problem for Amazon is that it won’t control eBook distribution. Competing devices will also be available this summer — that’s why Bezos made his early announcement, trying to get a publicity jump on potential competitors. Sony, Plastic Logic, and likely Apple, will have large-screen tablet/readers — likely with many features missing from the Kindle DX — and the manufacturers will certainly negotiate a more content-provider-friendly margin with all the trade publishers, newspapers and textbook publishers.
One company to watch is Smashwords.com. Mark Coker’s start-up eBook store is setting aside a magnificent 85%(!) of the retail price for the content producer. And he is committed to having versions of the content available in multiple formats, so you can read it on a Kindle, PC screen, cell phone… any of the existing and coming devices. Mark’s business model is the complete opposite to Bezos’ screw-the-content-provider approach. As long as entrepreneurs like Mark are willing to offer an alternative to the monopolize-the-distribution-channel-and-screw-the-content-providers model, Amazon’s domination plans, and its Kindle DX, are doomed to fail.