Capitalogix

Does the Kindle 2 Make Sense?

The world is changing quickly. Just because you made money a certain way for a long time doesn't mean that this is how you'll continue to make money in the future. In fact the practical realities of time and technology suggest that this is not the case.  In this environment, you have to adapt and re-invent yourself.

Creative Destruction in the Publishing Industry:

Think about what has happened to publishing in the past decade. I'm talking about: television, movies, and music ... but also newspapers, magazines, and the book industry.

Personally, I read more than I ever did before; but I hardly ever go to a bookstore. I buy a lot less magazines than I used to; and I have to think hard to remember the last time I purchased a CD.

That doesn't mean people aren't making money in these areas. I suspect it just means that different people are making the money. The industry is changing. It's a new game, with new rules, and new opportunities.

How the Kindle Changes Amazon's Business Model:

I've had the new Kindle 2 for about two weeks; and I like a lot.  I'm impressed by the machine, but I'm more impressed with the business platform that Amazon is creating.

Yes, they're going to sell a lot of books on the Kindle.  Amazon will build a base of brand-loyal Kindle users.

Plain and simple, though, the Kindle is going to change Amazon's business model.

Right now bestsellers cost $9.99 (which I suspect is a loss leader because they still have to buy the book from a traditional publisher) and certainly cannibalizes their business of selling paper books.

They are signaling that they expect to make money differently in the future. That is part of the reason I like Amazon's decision to invest so heavily in the Kindle platform. It's a subsidized campaign to bridge to a new business model.

You Will Have Access to New and Extended Forms of Content.

More avenues will open to profit in different ways.  For example, I expect that Amazon will soon sell a paper copy of the book along with an electronic version for premium price. And you'll also soon have the ability to unlock more features.  That means that you'll be able to pay to consume what you choose (whether that's a one-time viewing, a permanent license, the right to print, share, or listen to the audio version or watch the multimedia presentation version of the content).

They have an opportunity to re-define what you consider a "book" as well. And I predict that it won't be long before you can buy a book that is electronically enhanced with expanded content. Here is how I envision that might work. For example, let's say you buy a book on blogging. It might describe how to set up an account with TypePad or WordPress. The enhanced version of the book, which you paid extra for, could have links and setup wizards to do a lot of the heavy lifting for you. Do you want to allow search engines to index your new posts? Here's how to do it, and click this button to have us set it up for you.

Think about how many areas would benefit from this marriage of content and skills transfer what about a book on trading that helped you build the pattern recognition or money management rules into your charting software or trading platform?

Trojan Horse Strategy: This Will Turn the Publishing Industry Upside-Down.

I think the bigger opportunity is the Trojan horse that turns the publishing industry upside down.

Think about how hard it's been for a new author to get a book published. Even before that, they had to find an agent. If that happens and they withstand the countless rounds of rejection, then the publishing house decides if one and how the book is released and the artist gets perhaps a dollar per book.

In the near future, an author who understands social media and generating buzz published their book or pamphlet through Amazon's Kindle channel and keep the majority of the money. It's faster, frictionless, and more lucrative. 

And Amazon can start to cut-out that pesky middle-man.  Why deal with a publisher, when you can let the author believe they are the publisher?  With this model, there is more margin for everyone (except the old-line publishers, who better be re-inventing themselves with a new value proposition).

It's Not Just About the Publishing Industry; They're Out To Change Your Industry Too.

As Amazon builds up the infrastructure to run their business, they've decided that they're willing to sell their excess capacity to you with a new product line of Amazon Web Services. It's on-demand technology capacity that is flexible, state-of-the-art and cost-effective.

Yes, there is still a need for humans. So it's no surprise that Amazon has a new line of business they call the Mechanical Turk. And it's a marketplace for humans to do the work you want to outsource. It leverages Amazon's marketplace catalog and is another example of how they're becoming vertically integrated and well-positioned for the future.

As a consumer, I like what I see; and it's only going to get better.

Bottom Line:  Amazon's competitors and suppliers are going to have to adjust their business models.

But the real point wasn't just about Amazon's foresight or skill. It's a challenge and a a wake-up call-to-action for you to look at what you do, and what you need to do ... and for you to figure-out what your future company and the future you is going to focus on and do to succeed.  The environment is changing.  It is time to adapt and re-invent yourself.

First Impressions of the New Kindle.

Frankly, I didn't think I would love it. I was wrong.  Perhaps more important than just "loving it", I like using it.

It's thin, light, and easy-to-read. At first I wasn't sure it felt right ... But, at first, I didn't buy the leather cover. Believe it or not, that made a big difference. I like that it now feels like a "book" in my hands. There is a lot to like, and I got used to it very quickly.

A Mini Feature Review:  Here are the basics.

• Terrific Display: it uses fast and crisp E-Ink technology;
• Huge Capacity: it will hold over 1,500 books;
• Wireless: it has built-in free access to Sprint's data network;
• Great Battery Life: it lasts for more that 4-days worth of reading, even with the wireless on;
• Built-in Keyboard: to annotate text, or to use search capabilities and the Internet;
• Text-to-Speech: surprisingly well done and useful while driving or doing things.

Looking Good Is A Good First Step.  While I was waiting for my Kindle to come, I guess the thing I questioned most was whether I'd actually read on it.  Right out-of-the-box, my first impression was that the Kindle had a great display.  I took it outside, and it still looked terrific, even in the bright sunlight. I did have to adjust the font size for it to feel "right" to me. However, it was easy to figure out what felt natural (and here is a hint for the older readers ... at night, a slightly bigger size is what feels natural to me).

Having Lots Of Things To Read Is Nice Too. Carrying a bookcase full of books in pencil-thin package is pretty cool.

There's over a quarter million books available for the Kindle, and that number is growing rapidly. Many best-sellers are just $9.99, which is much cheaper than the paper versions.  In addition to books, Amazon has made it easy to read web and blog content with the built-in browser and free Sprint data network. Also, you can convert and transfer Microsoft Office and PDF files by e-mailing them to your Kindle's e-mail address.

Cheap Is Good, Free is Better.  To get you used to reading on the Kindle and using Amazon's store to get the content, they've made an impressive amount of books free. The first book I downloaded was a free copy of the Bible. I heard it was a Good Book. That's good business on many levels.

Download Sample Chapters To Make Sure You Like It.  Taking that concept a little further, Amazon also makes it easy to download a few sample chapters of many books to your Kindle before buying. This has already changed how I use Amazon, and it adds a key benefit that the storefront bookstores relied on, browsing several books to find the one that suits me. Now, I can do that anywhere and anytime.

And once the sample is on your Kindle, it's only takes one-click to get the whole thing. It's all very fast, very convenient, and very clever marketing.

Yes, I sense it's the future. And I'm a gadget guy who loves to play with the future early. However, I'm also a gadget guy who has a pretty big gadget graveyard for things that didn't work so well. The Kindle works well. I can tell because I'm using it more, not less.

All-in-all, I'm impressed.  Next time, I will talk about the business implications of the Kindle on Amazon and its customers, competitors, and suppliers.  Till then, here are a few other links worth exploring.

• Amazon's Kindle 2 Page With Pictures and Demos
• RadarFarm's News Links about the Kindle 2
• MobileRead's Wiki Page for the Kindle 2