Posted by: Peter Burrows on August 25, 2008
I can confirm what McAdams Wright Ragen analyst Tim Bueneman is saying — that Amazon.com plans to unveil a larger-screen model of its Kindle e-book player, aimed at students, in the coming months. And I’m also hearing some details, similar to TechCrunch in July (my apologies to TechCrunch for the use of “Kindle 2.0” in this headline; I somehow missed this post that uses the same phrase while writing this post), about an upgrade of the base model, that I’m told is coming in September (though Wright Ragen thinks it may be in October). My sources say the new version is significantly thinner, has a better screen, is more stylish and includes fixes to some of the user interface annoyances with the first version. One person that has seen the device says it is as big a leap from its predecessor as the iPod mini was from the first iPod. “They’ve jumped from Generation One to Generation Four or Five. It just looks better, and feels better,” says the source.
It makes me wonder whether the device will finally start living up to Amazon CEO Jeff Bezos’ rarified talk about the Kindle.
In recent months, he’s talked up the devices’ potential during his public appearances so much that you’d think the device is set to revolutionize the world of the written world much as Amazon rocked the retailing world in the last decade. My sources insist this is more than marketing on his part. They say Bezos is genuinely ecstatic about the progress of the business.
I must be missing something. I’m told the company has sold 280,000 or so Kindles since the device went on sale a little over a year ago (this is in the ballpark with what TechCrunch reported a few weeks back, although Amazon is suggesting the number is too aggressive). Regardless of the actual number, the Kindle is certainly not a bomb. Any new venture that puts up $100 million or so in revenue in year one is not to be ignored (I’m basing this on an average selling price of around $360, factoring a price drop from $399 to $359 a few months ago.).
Still, the Kindle revolution feels awfully evolutionary…if it exists at all. I don’t see Kindles around in the real world, and I’ve never heard anyone express the desire to own one (that includes people who have tried loaners). Even if the Kindle matches the first year sales of the iPod, as Citicorp analyst Mark Mahaney thinks it will, I can’t imagine the Kindle approaching the unit sales or cultural impact Apple’s music player went on to have. After all, iPod sales took off once Apple unveiled a compelling content strategy—with an online store, available to both Mac and Windows users. But it seems to me Amazon has already figured out a great content play. The most revolutionary thing about the product is the ability to wirelessly get almost any book and many newspaper and other subscriptions in a matter of seconds.
It makes me wonder what powerful levers Amazon has to pull to make the Kindle into a true megahit. Certainly, the device has to be thinner. From what I’m told, that’s going to be the case. It needs to be cheaper; I’m told the price of the new model will come down to $299 or maybe $249. And it needs a more intuitive, infectiously-cool interface. I’m told there’s been big progress here, as well--including changes to the oversized buttons that make it too easy to inadvertently move on to the next page.
The new product was not designed by Ammunition, the design firm started by former Apple chief designer Bob Brunner. Rather, Amazon hired a designer from frogdesign (I'm not sure if its one of these guys) to lead an in-house design team—another sign that Bezos is dead serious about making the Kindle a long-term success. Earlier this year, Kleiner Perkins VC John Doerr, an original backer of Bezos, told me he thinks the Kindle will be a $1 billion business before too long. “I think they did a brilliant job in version 1.0 product, in meeting an unobvious need.” Rather than hardware product, “I think of it as a seamless and effortless way to get visual content. And honestly, they’ve just begun. They’ll leverage all the same cost curves [that benefit all hardware products]. Imagine what a Kindle will be like five years from now,” with models in different colors and sizes.
Truth be told, I have a tough time imagining quite so glorious a future. Instead, I can imagine e-reader technology being built into other, more versatile products—such as Web books or whatever Apple has up its sleeve in the way of new form factors that use the multi-touch technology introduced with the iPhone. And the cynic in me thinks Amazon may be forced to talk up the Kindle beyond its potential: because it may be the company's best hope to become a true digital media power. After all, Amazon's unbox video service has not taken off. And despite high hopes that its DRM-free music site would become a strong No. 2 to Apple's iTunes, my sources suggest that hasn't panned out so far. "Bezos needs to plant his feet somwehwere in this digital world, and books are something Amazon really understands," says one source.
To me, there are two intriguing opportunities that could make Kindle truly huge. One is education. My niece Jenny just went back to college, and was hit with a bill for $700 for big bulky text books. I haven't spoken yet with my colleagues at McGraw-Hill Education (McGraw Hill also owns BusinessWeek), but the Kindle would certainly be an efficient means for her and other students to get their text-books, and for teachers to easily distribute real-time information such as newspaper articles and new research papers.
The second opportunity relates to Audible.com, the audio book company it purchased in January. In a multi-media world, Amazon could provide an experience to let consumers purchase a book or other copyrighted work, along with the rights to consume it in multiple ways. So if you start reading the book on your Kindle at night, you could pick up where you left off during your commute--having the book read to you via Audible. It may sound trivial, but I think this would enable far more people to actually read and finish far more books. That'd be good for Amazon, and just plain good, in my humble opinion.