Why Amazon Kindle might succeed where others have failed
Amazon has a history of facilitating disruptive change. First by selling books online, they demonstrated the advantages of a well-run online store. Then with music, movies and just about everything else, they have shown that centralizing inventory and customer experience allows for reduced costs and an improved experience over a traditional distributed retail model. Today, Amazon Web Services is starting to disrupt IT operations similarly by providing a higher quality service at lower cost than most companies can manage themselves. They achieve these scale economies through centralization. With Kindle Amazon is attempting another disruptive change, this time in the way people read books. Lower distribution costs give electronic “e-books” an intrinsic advantage over physical books, hinting that e-books are inevitable. But will Kindle be able to “cross the chasm” and become a mass-market device? Amazon’s complementary assets, scale and technology all make it likely that Kindle will succeed.
Several startup companies have sold e-book readers in the past, but none successfully. Sony is the only other large company to have tried. Assurance that a risky new technology is backed by a company that won’t disappear is important for mass-market adoption, giving Sony and Amazon an advantage. This is especially important for devices that consume media, as the device’s utility dwindles without new content. Amazon is especially well positioned to offer media for Kindle through its complementary assets.
Amazon’s established relationships with book publishers are extremely valuable to Kindle. Book publishers control e-book content. Amazon’s history of selling physical books has earned them the trust of almost every publishing house, ensuring easy access to electronic versions of books. In addition to existing e-books, Amazon’s scale gives them leverage to encourage publishers to release electronic versions of books.
Beyond that, Amazon has rare technology to make electronic versions of books available with far less work on the publishers’ parts. Amazon has spent years scanning physical books to enable a feature called “Search Inside This Book” on their website. Along with Google, they have one of the only large archives of scanned physical books in the world. This enables selling e-books for books that publishers don’t even have original electronic copies of, with rights negotiations as the only remaining barrier.
Innovators have been jibbing together their own e-book readers out of laptops and PDF files for years. Early-adopters look for concrete advantages like the ability to search books. Med-students give Kindle rave reviews for this capability. The easy availability and portability of dozens of books appeal to the small segment of truly voracious readers. Kindle seems to serve these early segments well. To cross the chasm into the mass market of the early majority, Kindle must make the experience simple and reliable. Kindle’s wireless data connection sets it apart from all previous e-book readers. By leveraging Sprint’s nation-wide 3G cellular data network, Kindle can load content without the operator even owning a computer. Thus Kindle dodges the inevitable complexity that arises anytime a PC is involved. This, along with Amazon’s well-established customer service, promise to make Kindle much easier for the early majority to accept.
Kindle seems well positioned for acceptance by the mass market. If successful, Amazon will need to balance publishers’ need for DRM against consumers’ desire for open content. The music industry has exposed these issues but certainly not solved them.
[This is another recycled homework assignment. Something to keep y'all entertained while I'm in New Zealand!]