Amazon's Kindle 2: No iPod for Books

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Focusing on Dedicated Readers

Many analysts agree that the Kindle should avoid being perceived as a mass-market product, since emerging platforms like smartphones and netbooks—which are both capable of some of the same functions as the Kindle—are already there, battling for wallet-share. "There are already so many ways for a consumer to spend free time in front of a mobile device or PC," says Michael Norris, senior analyst with media and publishing researcher Simba Information. "People have no need for an iPod of books."

At least most people don't. Norris says a majority of consumers buy fewer than five books a year and would have little need for the Kindle's ability to constantly add new troves of content. But a smaller group of dedicated readers do "anticipate the need of buying a lot of books and like the idea of having access to a library," he says. That's the group that has already taken to the Kindle, according to Norris, and the group Amazon will continue to focus on.

Still, deeper niches may exist, such as within the education market. Last August, BusinessWeek reported that Amazon had plans for a Kindle-like device aimed specifically at students. Though that plan never materialized, it remains a viable option, according to Gartner's Baker. "If all [a college student's] textbooks were available in e-book format and much less expensive," that would make for a compelling business model, Baker says.

Paying for Extras

If one device does become the iPod of books, it's likely to be the iPod itself. Last week, Google (GOOG) announced a version of its Book Search that's compatible with the iPhone and iPod touch and gives users access to more than 1.5 million public-domain books. And another application, Lexcycle's Stanza, has been downloaded at least 365,000 times, according to October reports.

And unlike most other mobile devices that have been populated with free content and applications from communities of developers, Kindle 2 makes a steep demand of new users: that they pay up for more. Says Citigroup analyst Mahaney: "It's the gift that keeps on asking."

Douglas MacMillan is a staff writer for BusinessWeek in New York.