Technology

Amazon's Widescreen Kindle DX: Winners and Losers


As e-book rivals look on and early adopters wonder if they'll get discounts, advertisers who hoped the device would serve ads are left out

Amazon (AMZN) Chief Executive Jeff Bezos makes no bones in singling out a group likely to lose out as a result of the introduction of the company's new e-book reader: ink sellers. The Kindle DX, unveiled in New York on May 6, features a 9.7-inch screen designed to make it easier to read electronic versions of newspapers, magazines, and educational textbooks.

With a bigger screen than previous iterations, this Kindle is also intended for reading PDFs and other documents frequently printed on paper. If users are reading electronic versions of documents, they may not need to print as many. That in turn may curb demand for the toner cartridges Bezos laughingly referred to in remarks to journalists as "evil companions."

But purveyors of high-priced printer ink may not be the only ones on the losing side of the new Kindle. At least for now, advertisers appear to have been cut out of the Kindle picture. Early in May, when rumors began circulating that a new Kindle was on its way, the advertising industry speculated that it might contain space for digitized marketing messages. Publishers such as The New York Times (NYT) or The Huffington Post news-and-blog site, the thinking went, might be able to channel ads based on a reader's geographic location or characteristics that could be gleaned from their use of the Kindle DX, says Garner (IT) analyst Mike McGuire.

No mention of advertisers was made at the product's launch. "Is there an opportunity for advertising? It wasn't brought up," McGuire says. That likely means it won't happen in the foreseeable future. An Amazon spokesman confirms that no method for serving ads on the device is currently in place.

no deal for existing owners

And what of the owners of smaller, previously introduced Kindle devices? Do they get any discount on the new Kindle, which after all was unveiled less than three months after the most recent iteration, the Kindle 2? "I'm sure some of those people would want the option of having a device that's bigger and has extra capabilities," says Michael Norris, analyst at media researcher Simba Information. According to Jay Marine, Amazon's director of product management, "There's no special deal that we're offering today" to existing Kindle owners, such as a store credit or trade-in offer.

In September 2007, Apple (AAPL) lowered the price on its iPhone by $200 just three months after its launch. At first, Apple refused to offer discounts to existing owners, but later relented, offering them a $100 credit to use in Apple stores.

Some analysts speculated that Amazon initially wanted to wait before introducing the Kindle DX but stepped up its timetable amid rumblings that other companies are due to release their own e-book readers. In recent months, companies such as Plastic Logic and Hearst have talked up their own e-reader plans. "There is a first-mover advantage, and Amazon is feeling the heat of competitors advancing," says Forrester Research (FORR) analyst Sarah Rotman Epps.

Several groups stand to gain as a result of the Kindle DX introduction. In hopes of jump-starting orders, Amazon partnered with universities and newspaper publishers that plan to subsidize its otherwise hefty price tag of $489. Schools and publications will respectively absorb part of that price for select groups of students and subscribers.

e-book rivals are learning, too

Students could be among the biggest winners, say participating schools. "In the long run, we think students will be able to save money" buying textbooks on the Kindle DX, says Barbara Snyder, president of Case Western Reserve University. Her school, along with five others, including Princeton University, is participating in a pilot program to provide Kindles to students and observe how viable the readers are in an academic environment. Although this program is subsidized by Case Western Reserve, Snyder believes the lower costs and reduced bulk of books could entice more of the school's population to buy similar devices in the future.

As much as the Kindle helps Amazon, rivals may also benefit by seeing how well the Kindle DX fares in the market. "This is a tactical break for [competing e-book makers]," says Gartner's McGuire. "It's nice to get a look at this thing, probably a little ahead of where they thought they were going to see it."

Since the Kindle's launch in 2007, Amazon's quiet partner in the wings has been Sprint Nextel (S), which runs the Whispernet service that lets the devices wirelessly download e-books. Financial terms of the deal have not been disclosed, but its success may turn the heads of other wireless carriers. "Sprint's competitors also are looking at business moves like that and want to find opportunities to sell the content more directly," says Forrester's Epps.

Virgin Group, which owns both a wireless company and an air carrier, might create an electronic reader to put in its planes, Epps speculates. "Where do people read, but trains and planes?" she asks.

Arguably, smartphone makers such as Apple are also happy with Amazon's plans, since the company looks to be sticking mainly to e-books. Rather than unveiling a new device with a sophisticated Web browser, camera, or other competing features, Amazon is focusing on making a single-use product better. Says Epps: "Amazon has built a model [around Kindle] that benefits mostly Amazon."


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