Yesterday, Amazon announced a new version of its popular Kindle e-reader, where in exchange for a $25 price break the device’s screen saver shows ads (ahem, “special offers”) instead of portraits of notable authors. Gizmag has a great write-up all about it, so I won’t talk too much about what you get with this new Kindle. Instead I want to comment on what this might mean for publishing.
As a Kindle owner, I’ve been amazed at how many books Amazon is giving away. They even promote a Top 100 list of free books – one of which I’m reading right now. It’s a great book that is a couple years old but easily worth much more than free. Of course, this might be a special deal from the authors, hoping the added exposure will drive sales of their most recent book which is for sale for actual money. Yet, all the same, I’ve been wondering what this might mean for Amazon.
It is a known fact that as the cost of distribution drops, so does the price of goods. Well, we’re right on the cusp of when the cost of distribution for anything digital is free. Yes, we do pay for our internet service in most cases, but we do that anyway. So anything digital we can get for virtually nothing. Businesses are struggling trying to make a business in spite of this, be it with ad revenue or selling information to marketers.
So what is Amazon doing? They’ve been destroying their competition with not only the best e-reader at the best price on the market, but also by giving so much away. But how can they stay in business doing that, when they make so little off Kindle’s in the first place? Well, now we know where they are headed. Just like broadcast television is supported through ad revenue, Amazon appears to headed toward becoming an ad-supported distributor.
So, fast forward five years. What will the book world look like? Will e-readers be given away for free with 2-year contracts like many mobile phones are now? Will you have access to unlimited content for a monthly fee like Netflix or how the music industry is headed with streaming music? How will publishers react to these revolutionary changes in the distribution model?
What do you think?
EDC
Edward D. Casey 
The free eBooks on Amazon are actually free because that’s what the publisher priced them at, not Amazon. In fact, the publisher has to use an outside eBook distributor (like Smashwords) to post the eBook for free. If you go directly through Amazon’s system, they make you charge at least $0.99 (US) so they’re making money on every sale.
I think the pricing on the ad supported Kindle doesn’t actually make any sense. Why not charge $99, a price point where they could move A LOT more units… unless they’re already losing money on the units themselves. They probably are losing money, from everything I’ve read, but that would make sense because when they sell you an eBook for $9.99, they give the publisher a cut and keep the rest, which is pure profit. So their goal is to get as many readers buying from the Kindle store as possible!
Good info on ebook pricing, though I’m still a bit fuzzy on the business model. If Amazon usually keeps 30% of every ebook sale, do publishers make up the 30 cents Amazon “loses” on their lowest priced books for giving a copy away for free? I can see that being an effective marketing cost for a publisher, but I’d almost expect a lot of “come see our latest” type ads in the giveaway books. Thoughts?
I totally agree on Kindle pricing. I suspect they are moving toward a $99 price point in the near future – probably this Christmas. It will be interesting where the ad-subsidized version will go from here. I know they’ve got a longterm plan in motion… just wondering what it is!
I think Amazon sees the freebies that come through the eBook distributors the same way the publishers do — a way to entice people to start downloading eBooks and hopefully get “hooked” on that way of reading! But if you’re going to use “their” backend system for providing your eBook, they want to make something off it.
I kept hearing rumors that Amazon might “give” a free Kindle to all of their Amazon Prime members who pay $79 a year for upgraded 2 Day Shipping. (I love my Prime membership, it is WELL worth the money with how much I order each year.)
I think that’s a really intriguing idea because these are obviously some of Amazon’s best customers who must read a lot to begin with. If you give them a free Kindle, they’ll start reading a lot of eBooks… and ultimately, everyone in the publishing business makes more money from the eBook edition because you don’t have to print, pack, ship, inventory, handle, or return them!