Posted by: Aaron Pressman on November 19, 2007
A simple message today: Amazon’s (Symbol: AMZN) new electronic book reader, dubbed the Kindle, looks like a hit that will bring in several new revenue streams. But the digerati don’t get it and don’t like it and that creates a compelling investment opportunity to buy Amazon shares now. The stock market doesn’t appreciate this game changer. Kindle will be the iPod of books — you read it here first.
Back on October 23, 2001 Steve Jobs introduced the iPod. There were already lots of digital music players at the time and the digerati pooh-poohed the iPod. Three hundred and ninety-nine dollars for a music player? Too expensive, they said. Lacking features like an FM radio or a microphone, they said. Existing “good enough” products prove there’s no big market here, they said. Turned out they were wrong on all counts. Apple shares (AAPL) stood at $9.51 (adjusted for a split) the day before the launch. I don’t need to tell you where they are today. Ok, I will: $166.
So enough of the dusty history lesson. Here are five reasons why the Kindle is the next must-have gadget akin to the iPod.
1. Solves real “problems” for consumers and readers
I have no need to carry around 80 hard cover books with me at a time, let alone 1,000. Sony’s dud e-book reader’s main benefit: carry around 80 hard cover books at once. I just want to read one book at a time. But sometimes I finish my book and I wish I had one more. Maybe I’m in the mood for something different than what I just finished. Or maybe it was so good I want something else by the same author. Kindle is the first ebook reader with its own cellular wireless connection to let you get new books anytime, almost anywhere when the mood strikes. It’s not wifi, you don’t need to find hot spots — it’s like a cell phone. What about periodicals? I want to get my newspapers and magazines quick. Wake up in the morning, grab some coffee and the paper. Kindle’s wireless connection puts them there before I wake up.
2. Moves the value equation in favor of consumers
Want to buy a digital book from Sony? It’s about the same price as in the book store — or MORE. Want to read Clive Cussler’s new thriller “The Chase” in hardcover? It costs $16.17 at Amazon.com or $21.56 at Sony’s ebook store. Ouch. What the heck? No paper or printing or shipping costs and it’s still more? Kindle books
top out mostly top out at $9.99 and many are less. Oh, but the cellular wireless connection must cost a fortune. Nope - included in the price of the device and the downloads. And Amazon’s Kindle store already has 88,000 volumes versus Sony’s 20,000. What about periodicals? Also big savings. A year of the Wall Street Journal in print is $249 versus $9.99 a month ($120 a year) via Kindle (sure there are web sites, but this is more like the offline, full package, take it to the bathroom version).
One feature that has bloggers up in arms, however, are limitations and fees for getting blogs onto Kindle. Not ideal, I’ll agree. You can only subscribe to blogs that Amazon has included in its store and there is a monthly charge of 99 cents to $1.99 each for wireless delivery. I’ll concede that’s not very bloggy but sounds like the iPod complaints that adding an FM radio receiver cost extra. It’s not the core use. And it could always be improved down the line. Getting your own documents onto the Kindle can be done via email but also includes an extra charge, just 10 cents though. The email service supports several formats of open-source books as well as Microsoft Word
but not PDFs and text-based, but not image-based PDFs (as colleague and reviewer Steve Wildstrom pointed out to me). That’s again a hole but not a disaster.
3. Smart design changes the existing product landscape
I’ve already noted how the free wireless cell connection changes the game completely. And Kindle is filled with a bunch of smaller smart design features, like a real keyboard to let you search in a book or document or page turning buttons on both sides of the screen (lefties like my wife say thank you). But another major decision will also help Kindle take off. It’s not hanging off your computer. You don’t need to sync it with a computer. Purchases are backed up online by Amazon so you can delete and recover any book you bought.
As important as what’s included is what’s not included. Sony’s ebook reader plays music files. Why? (As one commenter notes, Kindle can play music but only as background music in random order — it’s not meant as a music player) Sony’s ebook reader lets you load PDFs from your computer into so they can appear as nearly unreadable scrunched text files. Why?
4. Bezos has an established track record as a visionary
Jeff Bezos packed it all up and moved to Seattle last decade to build his online superstore, beating out zillions of more (and less) established competitors. Amazon.com got many things right, including the important focus on reader reviews, cheap shipping and giant selection. Sure, not everything Bezos has ever conceived has been a hit. I’d say that puts him in Steve Jobs’ camp.
5. It’s cool
If you still don’t believe me, go and watch the video on Amazon’s site. This is a nifty gizmo that elegantly solves real problems for consumers.
As a final note, there is one big difference between Apple in October 2001 and Amazon today. Apple was trading at a depressed valuation and the stock was in the dumps six years ago. Amazon is trading at a premium valuation (its price-to-earnings ratio is listed over 90 on Yahoo Finance right now). That ups the risk a bit, no question. Nonetheless, Kindle as a hardware product plus digital services is going to bring in two high margin revenue streams versus Amazon’s current lighter margins on physical goods. It will improve over time and manufacturing costs will drop. It’s the new iPod — really.
UPDATE: There’s one particularly misleading notion floating around in the blogosphere that the Kindle is closed to free content or that you can only read what you buy from Amazon. Totally wrong. You can load any file you want in a couple of formats including plain text and HTML. You can email those to your Kindle for a dime or load them free using a USB cable or SD memory card. Check out the gazillions of free offerings at Project Gutenberg, for example. They’re available as plain text or HTML. Available book formats varies over at Archive.org but there is always plain text. And anything you write yourself or get from friends can go right on the Kindle. It’s open for reading.
UPDATE2: Getting lots of comments about the supposed closedness of the Kindle. It’s open just like the iPod. Purchased content with Kindle/iPod DRM only plays on Kindle/iPod. Purchased content with competing DRMs won’t play on Kindle/iPod. A variety of formats of content with no DRM will play fine. And, using free software from Mobipocket (MobiPocket Creator 4.2 Publisher’s edition) you can convert unprotected PDF files into unprotected Mobi files that Kindle can read. It’s no more burdensome than ripping a CD in iTunes. And unlike the iPod, you don’t need any special software to get content on and off the Kindle. Plug it in and it shows up as another drive.