Should Amazon give away Kindles?

Should Amazon give away Kindles?

I’ve been having a fairly lengthy exchange with S. Hawthorne in the Amazon Kindle community:

Amazon thread

The proposal that started it was this:

Amazon gives people Kindles…and a few free downloads.  In exchange, the person agrees to buy three books in the next year.

I don’t see it.

I have seen people projecting that Kindles would be free this year or next…and that appears to me to have started with John Walkenbach in this

post in the J-Walk blog

That prediction came in October 2009, and figured that Kindles would be free by this June (2011).

It was only based on three data points though…prices of the K2. 

I find using that data a little arbitrary…why not continue projecting and say Amazon will eventually be paying us two hundred dollars to take a Kindle…or a million dollars, if you keep going?

That doesn’t make sense, right?  Amazon would be losing money if they paid us a million bucks to accept their gift of a Kindle.

I ran a few more numbers:

Date
Model Price Days Reduction
11/19/2007 Kindle 1 399    
5/27/2008 Kindle 1 359 190 40
2/9/2009 Kindle 2 359 258 0
7/8/2009 Kindle 2 299 149 60
10/7/2009 Kindle 2 259 91 40
6/2/2010 Kindle 2 189 238 70
7/28/2010 Kindle 3 189 56 0
7/28/2010 Kindle 3 wifi only 139    

Looking at that, the average number of days between price drops is 164. 

The average price drop (when there was one, and not including the wi-fi only, which to me is a different device) is $52.50.

So, if we took four more price drops of $52.50 (to get $189 to zero) at 164 days apart, a Kindle would be free by May 14, 2012. 

I don’t see that simple progression happening…the price changes have been driven by the introduction of a new model, for one thing…and I’m not sure the pace of new models will stay the same.  I do think there may be an Amazon tablet soon, but I would consider that not a Kindle (unless they chose to call it that).  Even so, I think it would delay the introduction of another Kindle.

I could see Amazon giving a Kindle to Prime members (most of whom pay $79 a year for a deal on shipping).  Amazon wants us to rely on them for pretty much everything (is health care in their future? ;) ), and Prime members are pretty tied into the system.  They get all kinds of things from Amazon.

That’s different from just giving it to anybody, though, even if they agree to buy “three books in a year”.

Why?

I think people already average a lot more e-book purchases than that from Amazon…without being bribed.

Now, I’ve always believed that first-place companies lose that position not by underestimating their competitors, but by overestimating customer loyalty.

When Sony’s Beta lost to VHS in the USA, I do think part of it was that they didn’t realize they’d have to promote it.  I think they figured that their format was better (it was…except it didn’t record long enough for American football games, which was part of the problem), their name was bigger…people would naturally pick them.

I don’t think Amazon is going to do that, though.  They are a very innovative business (even if Barnes & Noble has beaten them to a couple of things with E-Book Readers…EBRs), and their three tenets (Service, Selection, and Price) keep them motivated and on their toes.

However, doesn’t it seem like a Book-of-the-Month club type arrangement would be successful?

As I’ve been saying with S. Hawthorne, I don’t see it.

First, book clubs are really built around paper.  Why can book clubs give you a lower price?

They use cheaper materials.

That’s not always true, but traditionally, book club editions are smaller and printed on inexpensive paper. 

There might also be pluses on delivery.

Neither of those apply to e-books.

Yes, I can see e-book book clubs working…but they are to attract people who don’t already buy 100 books or more a year. 

As I’ve mentioned before, I can also see subscription services.  You join a science fiction or romance book club, and you are automatically sent books.  They might be independents of which you’ve never heard before, but you would get a discount and automatic delivery.

Of course, to get a discount, they pretty much have to be independents.  Not quite, but the biggest six US trade publishers are under the Agency Model, meaning Amazon can’t discount the books.

Yes, I think indie publishers could do themed subscriptions.

However, I don’t think Amazon needs to give away Kindles to keep customers.

I know, I know…Barnes & Noble has gotten some marketshare…but that’s because the market is growing so much.  Amazon still seems to be increasing sales of the Kindle…at least when they tell us something, it’s usually to tell us it was the best month ever.  :)

What do you think?  Should Amazon give away Kindles?  Will increasing competition force them into new models?  Does it matter that Book-of-the-Month club in Canada went into receivership?  I told S. Hawthorne I would take a bet that Amazon would still be number one in dedicated E Ink EBRs in a year…I don’t really do bets, but is that overconfident? 

Feel free to tell me what you think.

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

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13 Responses to “Should Amazon give away Kindles?”

  1. Sherri Says:

    I think that’s a safe bet.

    Little annoys me more than people drawing a line through a few points on a graph and assuming that makes for a reasonable prediction. Data follows that curve, right up until it doesn’t.

    I don’t see much reason to believe that Amazon is going to give away Kindles, and I don’t think they need to in order to fight off B&N. I think the strongest thing B&N has going right now is the Nook Color. I do believe, like nearly everybody else, that Amazon is going to do an Android notepad, but I think Bezos believes in the eInk Kindle.

    • bufocalvin Says:

      Thanks for writing, Sherri!

      Sure…I think if you graphed a baby’s weight at, say, birth, 6 months, and twelve months, you’d project ten-year olds the weight of three elephants. :)

  2. Tom Madsen Says:

    Glad you brought this up Bufo. I’ve been wondering the same since the rumors began. I can’t see them ever giving it away for free (without a catch). Can I see it going down to $50-$75 soon? Absolutely, and I’m sure the holiday season will have retail outlets having ‘door buster’ black Friday promotions.

    I’d really like to see them push these in schools though. Where my daughter is reading classics in her small school. The books she has are free or nearly free on Kindle. She loves using the kindle, but if Amazon came up Educational discounts etc. I remember your writeup on that also! Benefits of schools book purchases.

    Whoop I went on a rant.

  3. Laura Says:

    I think it would be interesting to know how much more people spend at Amazon after they get their Kindles. The covers, the lights, the skins, not to mention the books. If Amazon could zero in on the people who are most likely to spend more once they get the hardware, it might be worth it to them. Prime people might be that target group.

    I have bought ebooks (including yours, Bufo) that I would not have bought in paper since I got my Kindle. Plus a cover, and I’m going to order a light.

  4. Common Sense Says:

    I don’t think they’ll ever be free. Cheaper, yes, but not free. Like any other device, the price drops when newer models come out.

    You can compare the Kindle to an MP3 player. The price has dropped significantly on the device, but you still pay in the $200+ range for the newest technology with the greatest capacity. No one gets a free player just because they purchase music, why would books be any different?

  5. Laura Says:

    Common Sense, it *could* be different because this device is hooked to Amazon. *If* they find out that people having Kindles causes them to spend more money at Amazon over time, or at least if some easily-targetable group of people will spend more, it could be worth it to them to lower the cost significantly below the cost of the device.

    It’s like the cheap printer (but then you have to buy the cartridges), cheap blood glucose meter (but then you have to buy the test strips) sort of thing. It would be purely a data-driven decision, and Amazon gets lots of data.

    • bufocalvin Says:

      Thanks for writing, Laura!

      Yes, that’s certainly a justification…providing that people spend enough more when they are given a Kindle by Amazon than when they buy a Kindle themselves (or get it in another way for free).

      I think that’s the crux of the question. The population that will buy 100 books in a year (and that’s the group you want) may already get Kindles. Giving Kindles away will get you a broader market, but not necessarily one with the same buying habits as the initial group.

      They may want to develop that kind of data by giving away a few Kindles to see what happens…

      • Laura Says:

        Bufo, I suspect you live in a rarefied world. :-) I know lots of people who read a lot (maybe not 100 books per year, but easily 50), and only a small fraction have ereaders of any kind – but veery slowly more and more are getting them. Most of them are interested, but far from convinced. Someone brought an Ipad to book club last month, and everyone was fascinated. Mainly, people just don’t think it would be worth the money – until they try one, and then many become converts.

        There is still a huge untapped market.

        As I said, Amazon would have a better idea that I would (to say the least), but it seems conceivable to me. I know I have spent a lot more at Amazon since I got my Kindle. :-)

      • bufocalvin Says:

        Thanks for writing, Laura!

        I do tend to fly with the flock. ;) It’s worth noting, though, that e-book sales have roughly two thousand percent of the maket share that they had pre-Kindle: from half a percent to ten percent (and it may be higher than that now).

        For serious readers (and it’s book buyers that matter here, not readers), I’d guess (and it’s completely a guess) that oh, a third of them might have made the transition. That might be very high or very low, though. :)

        The problem with giving them away is that lots of people will get a free one who buy very little from Amazon. It may be people who don’t buy many books at all, or who get them from other sources and read them on their Kindles (including the Google eBookstore, where you can read them in the browser on the K3).

        Let’s just make up some numbers for illustration purposes.

        Let’s say that…ten percent of the US population (about thirty million) are these high-volume book buyers (that’s probably high, by the way). Let’s say a third of them (ten million, roughly) have switched to EBRs (E-Book Readers), or at least are reading e-books regularly.

        Next, you make the Kindle free. You’lll probaby get a large hunk of the remaining twenty million serious buyers…but it wouldn’t surprise me if you got…oh, another hundred million or so (let’s make it 120) who get the Kindle…but don’t buy enough to make it profitable for Amazon.

        That could be a bad deal for the company…

        Charging for them (and I think the wi-fi could get to $99 within a year) makes it a more selective group.

        Of course, other people giving them away is fine…I’ve seen something like “open a checking account, get a Kindle) for example.

        Just my thoughts on it, though…

    • Common Sense Says:

      Perhaps. But the iPod is “hooked” to iTunes and you sure don’t see Apple giving them away for free, they’re more expensive than any other MP3 player. And music is much more universal than reading, even at the volume all of us bookworms read at.

  6. Should Amazon give away Kindles? | anythinganyhow2 Says:

    […] Source: http://ilmk.wordpress.com/2011/04/07/should-amazon-give-away-kindles/ […]

  7. Laura Says:

    (Back from a trip wherein I got lots of use from my Kindle. It turns out that I love Calibre too! It send me the newspapers of the cities where I was and lots of magazines for the plane. Additionally, I used SendtoReader from Google Maps for my directions to various places, and mailed myself itineraries, confirmation numbers, etc.)

    Bufo, I think your point differentiating book readers from book buyers is a good one. A lot of the serious readers I know use the library a lot, and this probably factors in to whether or not an EBR is an attractive purchase (it’s one of the main things that held me back for a long time). I frankly don’t know many people who buy a book a week, certainly including myself.

    And I’m sure you’re right that a greater percentage of serious readers than casual readers have EBRs.

    Anyway, interesting questions to think about! Thanks for posing!

    Common Sense, I have an ultra-cheap mp3 player upon which I play mostly podcasts, and I don’t use ITunes at all, so I don’t have a very good grasp of that whole world. Hasn’t the Kindle price already dropped a lot more than Iphones, Ipods, etc? In any case, I was more arguing the possibilities of the other side of the coin more than making a prediction. To be honest, I think it’s more likely that the price will be dropped quite low for some group or other than it actually is given away.

    • bufocalvin Says:

      Thanks for writing, Laura!

      I think the library use issue is a very valid one. Some people who read a lot are heavy library users…and not necessarily heavy book buyers. How much overlap is there? An important question, and some people think that’s why Amazon doesn’t work on a way to easily borrow books through a public library to a Kindle.

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