Flips, Kindles and bumps along the content distribution channel

For years, at different publishing industry gatherings, I’ve heard people say things like, “at our company, we’ve discussed giving our subscribers free [eBook readers, netbooks, Kindles, iPads, or whatever else was the current technology] who will agree to continue their subscription for [insert length of time].” At big media companies, they’ve gone as far as investing millions in creating such devices that, well, you don’t hear about later.

I always try to be polite when I hear ideas like this, but in my mind, I’m thinking: “Why not offer free Lazy Boy recliners for them to sit in while reading the newspaper, instead?”

A couple of news items this morning made me think of those conversations: First, that Amazon has cut the price of its lowest priced Kindle to $114. Mashing up two of the trendiest tech-commerce fads ‘o the nanosecond, Amazon has named the $114 version the “Kindle with Special Offers” — the “special offers” are screen saver Grouponesque offers for Amazon products. (Despite being an investor in Groupon’s competitor, Living Social, I can’t help but call this $114 version, the Kindle Groupon.) [Or (for you old-schoolers, a reference to the “screen saver” feature), the Pointcast Kindle.]

The other news item involves Cisco shutting down the USB digital video camera, Flip (Who knew they even owned it.)

Why do these news items remind me of publishers who think giving away hardware is a successful strategy for selling content subscriptions?

There are very few companies that dominate more than one intersection along their industry’s supply chain — or, if you are in media, their content distribution channel. However, that doesn’t stop executives in companies who are dominant at one intersection from coveting the control other executives have whose company dominates a different intersection. Dreams of vertical integration have been, in the words of Ledbelly or, if you prefer, The Animals, the ruin of many a poor boy

I’m an Amazon fanboy, but I still have my doubts about the longterm prospects of the Kindle. I’ve predicted — I’ll link to some later — that the price of the Kindle will drop to free before long, at least for those who pay for a Prime account.

Let’s get this straight: I want the Kindle to succeed over the long haul. I just doubt it will.

As much as I think those of us locked into Apple’s iOS devices benefit from the competition of others, I think end-user devices are a stop on the distribution channel that will be harder-and-harder for Amazon to compete in — despite their dominant position in several other intersections along that way.

Cisco acquired the Flip camera a couple of years ago for nearly $600 million. Cisco has now displayed how to take a hot consumer product & brand and destroy it within months. (It would have taken twice that long for most gigantic companies.) While there are those who say the iPhone and other smart phones have killed the need for the Flip, those people tend to be the same people who won’t agree that the iPad has killed the need for the Kindle.

In other words, can’t there be innovations in one-utility devices — maybe a Flip Flickr with autoload to the web via wifi? Or cameras in different shapes, for different purposes — all sorts of HD wifi enabled webcams. Cisco obviously didn’t care — that spot on the supply chain of content exchange wasn’t seeming sweet, or even desirable, to them anymore. But a company like Griffin Technology (in Nashville) could take the Flip brand and innovate all sorts of one-feature cameras that could look cool and blow away the functionality of “web cams.”

Bottomline: Giving away Kindles, or killing off Flips, isn’t about technology or gadgetry; such decisions are about wanting to be the crossing guard at the next intersection along the content distribution highway.

Related: It’s not the gizmo that makes the gizmo successful

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  • I’m a little puzzled by the $25 discount — seems like a $40 discount to $99 would have been more compelling — but Amazon is the king of pricing and pricing experimentation. Perhaps there is some difficulty in setting a price with potential advertisers because no one knows how Kindle users will react to this new ad format?nnWhen you say the Kindle isn’t viable long-term do you mean just as a stand-alone hardware device or the whole ecosystem? I’m pretty confident even the hardware will have a good long run as it’s so much cheaper than full-blown tablets and better in many situations. We have Kindles and iPads in the house and I think that’s pretty common. We have two cars, one fancy and one for schlepping kids. We have a couple of cheap digital cameras and one D-SLR. nnAll that being said, I didn’t foresee the agency pricing curve ball, which Random House finally caved on, and Apple is rumored to be moving to cut competing ereaders out of the iOS app store by June 30.

  • I definitely believe the Kindle eco-system (apps, store, Singles) will survive and thrive and will continue to dominate the retailer intersection of the ebook distribution channel. What I’m referring to when I say I doubt (reluctantly and hoping I’m wrong) that the Kindle will survive is referring specifically to the hardware “device” intersection on the channel. I’m guessing that as the iPad will continue to iterate and fall in price, the gap between pricing of pads and the kindle will shrink. At some point (and if you believe rumors, sooner rather than later) Amazon will Androidize the Kindle. When that happens, I doubt Amazon will be able to innovate at the same pace as Apple. Hope I’m wrong, though.

  • I definitely believe the Kindle eco-system (apps, store, Singles) will survive and thrive and will continue to dominate the retailer intersection of the ebook distribution channel. What I’m referring to when I say I doubt (reluctantly and hoping I’m wrong) that the Kindle will survive is referring specifically to the hardware “device” intersection on the channel. I’m guessing that as the iPad will continue to iterate and fall in price, the gap between pricing of pads and the kindle will shrink. At some point (and if you believe rumors, sooner rather than later) Amazon will Androidize the Kindle. When that happens, I doubt Amazon will be able to innovate at the same pace as Apple. Hope I’m wrong, though.

  • Maybe it’s just too early for me to attempt to think this hard or I’m misinterpreting something or you’re missing something.nn1) Are you saying that hardware is a monopoly lock-in point?n2) As far as we know, there is a June 30th deadline where everyone believes Amazon’s Kindle app for iOS will be given the heave-ho in some form — either outright or locked-down to prevent buying — to avoid the outrageous 30% vig Apple wants.nnSo, are you saying you expect iPad to *also* triumph due to monopoly lock-in to Apple?nnThere are plenty of people out there who view their eInk devices are iPad companions these days. Leave the expensive and large iPad at home, take along the cheaper eInk device (Kindle, Sony, Kobo, Nook).

  • Here’s what I think I’m saying.nn1. In the near-term, Amazon has plenty of upside sales potential if it continues innovating a one-utility (e-reading) device that is compelling. If, as you suggest, Apple does something that kicks the Kindle app off the iOS, then Apple is merely lengthening the period of time Amazon can innovate the Kindle and sale (or give away) them to heavy readers like me. I certainly will see an iPad w/ no Kindle app as enough of a reason to purchase a new Kindle (I own a first-generation one, but don’t use it).nn2. Overtime — and I’ve been pretending to play forecaster for two decades, so my time horizon is years, not quarters — I think that touch screen devices will come in all sizes and shapes and weight (and some will have jet packs that let you fly). At some point down the road, the notion of an ereader for books-only will seem as quaint as a Compurserve account. I doubt that Amazon will decide that’s an arena in which it wants compete at the level it would need to to justify shifting investment from the businesses it can and already does dominate: online retail, fulfillment, logistics and certain niches of cloud-based data services. Those businesses are only going to grow larger and larger and Amazon will benefit from multi-platforms, not innovating for just its own. Bezos will be able to declare victory for what his real goal was: To crush the book publishing cartel’s desire to keep eBooks from ever being a viable alternative to print. He did this with the Kindle and Amazon will prosper for what the Kindle did, even if the product itself goes away.nn3. I think Apple will triumph due to a lock-in monopoly for the short term, but I am hopeful that the Android ecosystem will become a serious competitor in pad devices, not just smart phones. And in smart phones, a serious competitor for revenues, not just for share of units.nn4. It’s no secret I’m an Apple user, but I also have seen what happens when a company (let’s say, Microsoft) has the ability to stomp out innovation by others. At some point, the people will rise up and demand change.

  • >>>the notion of an ereader for books-only will seem as quaint as a Compurserve account.nnYes, OK. I understand now. And agree!

  • “…the iPad has killed the need for the Kindle.”nnWe won’t know that until the vig does or does not go into effect because, as a reluctant iPad owner (first Apple product ever), I can tell you this much:nnThe iBookStore is pathetic. If the only way to get books on your iThing is buying through the iBooks app or sideloading them, people won’t do it. The reading interface is functionally meh, but it’s uglier than sin. nnEven if you’re willing to sideload your ebooks, it would require you go somewhere else to purchase them; that somewhere else might as well be Amazon, who’s got content up the wazoo. Look at the bestselling self-pubbed authors on Amazon’s list. They are nowhere else. They’re making money in Amazon alone and their motto is: If it’s not in Kindle, it doesn’t exist. iBookStore can’t compete with that if they continue as they are because…nnIf the vig IS implemented, no one will shop there. Apple is apathetic to ebooks to the point of hostility. For people like me, whose only real reason for reading on the iPad is that I can collect all my ebooks in one place (making my OCD very happy), ereading on an iThing will become a thing of the past. UNLESS they get a better attitude about ebooks.nnNo one, least of all Amazon, will be stupid enough to keep their distribution chain running into the Apple ecosystem if they aren’t making any money. If you’re giving out razors so people will buy the blades, why would you willingly lose money on the razor if you know you’re gonna lose money on the blades?nnIf the vig isn’t implemented, yes. The iPad will kill the Kindle, especially if it comes in a smaller size (i.e., fits in my purse). Because people can get the content elsewhere and they will tolerate having their ebooks scattered hither and yon to do it.

  • For the record, the phrase, “the ipad has killed the need for the Kindle” is not something I believe but refers to those who question the viability of any one-utility gadget in the era of iPad/iPhone/Android … I have yet to purchase an ebook from the iBookStore and wouldn’t, even if it were NOT pathetic (I’ll take your word on it). I’ve written before that Amazon has 15 years of knowledge of my book-buying preferences that influence their recommendations — that’s far more important to me than anything Apple has to offer when it comes to eBooks. nnHowever, as I’ve said in a thread below, I’m referring to a long-term horizon.nnMy desire is for the Kindle App to dominate the iPad to such a degree that Apple will view it as an impossible (and sideshow) consideration to kick their app off the iPad. nnIf there’s no Kindle App on the iPad, I won’t be purchasing any books there.nn (Except, I do find ebooks read in iFlow intriguing.)