Munster’s Kindle at $149 strategy is typical non-reader thinking

Eric Savitz at Barron’s and Jeff Bertolucci at PC World talk about Apple cheerleader analyst Gene Munster’s suggestion that Amazon cut the Kindle’s price to $149 and that such a price cut would save Kindle Sales.

The first thing to point out is that Amazon tends to reduce the price of the Kindle remorselessly and consistently – Prices are down from $399 at launch to $259 – So there’s little downside for Mr. Munster. He’ll just claim that any price-cut Amazon makes on the Kindle is what saved its sales.

Mr. Munster feels Amazon should abstain from competing with the iPad -

Munster adds that he would discourage Amazon from trying to compete more directly with the iPad, a battle he thinks they would almost certainly lose. “They should stick to what they’re good at,” he says.

He’s missing a key point.

It’s Apple positioning iPad as an eReader and not Amazon positioning Kindle as a Tablet

Amazon have no choice but to fight back – There are a lot of people (press, Apple, analysts) claiming the iPad is an eReader and trying to paint the eReader market as Kindle vs iPad.

There is a lot of buzz around eReaders and lots of companies (not just Apple) are trying to get a share of the eReader market by drumming up the reading capabilities of their non-ereader device. It won’t be long before electronic weighing scales, clocks, and calculators start pretending to be eReaders.

Companies are trying to pollute the eReader market and change the definition of what an eReader is

It’s all very straightforward – eReaders are a booming market and companies that don’t have a dedicated eReader want to shift it to reading on any device. They want to take a device they already have or are making for some other purpose and capture the eReader market with it.

The Press are happy to help them do this because they’re desperate (for new sources of revenue), they’re not into books (all the tech blogs), and they’re scared of Amazon’s huge lead (which they keep claiming doesn’t exist).

The First War is to keep the definition of eReader pure

More important than price-cuts and as important as new features is the battle to keep the definition of eReaders pure and focused on reading books.

If eReader means a device dedicated to reading – Then eInk devices win.

If eReader means a device you can read on – Then suddenly there is infinite competition.

A $100 price cut is not the answer

Let’s look at three groups of users -

  1. Users who want a dedicated eReader to read books on and for long form reading. If people are still buying the Kindle DX (they are) then the $259 Kindle does not need to cut prices. 
  2. Users who want a multi-purpose device or a multi-purpose device that also lets them read books. These people will NOT buy a Kindle even if it’s $149. Look at comments on various articles and this is painfully obvious.
  3. Users who are unsure. 

A price cut for the first or the second category of users makes no sense. They are not going to change their decision. For the third category of users let’s look at a comparison sans price.

Even excluding price it’s not an easy decision

Let’s put aside price - the 6″ Kindle eReader still has a lot of advantages over the iPad.

  1. eInk screen. The Press keep claiming this may or may not be an advantage because it’s the single biggest advantage. It’s like elections where you keep attacking a candidate’s qualities – take his war record and attack that or take his family and attack them. 
  2. Much more portable – smaller, lighter, more compact, can be held in one hand.
  3. Much better range of books.
  4. Lower Prices on Publishers that don’t go with Agency Model.
  5. Free 3G – Very limited but includes wireless delivery of books, free Wikipedia, free basic browsing. No subscriptions.
  6. Focused on Reading. No distractions.
  7. Great battery life – 2 weeks means you can take it on a one week trip without the charger.
  8. You have apps that let you read the same book across PC, Mac, Blackberry, iPhone, and more. 
  9. You can read the Kindle in direct sunlight. 
  10. With a $5 or $10 reading light you can read it at night (or you can turn on your bedside lamp). People keep talking about reading in the night on the iPad as if Jesus shines a beam down on your iPad.
  11. There’s a Kindle App Store on the way.

We’re not talking about a device whose only advantage is a cheaper price and that has to desperately cut prices to $149 to compete.

Mr. Munster fails to point out that Apple was losing market share to netbooks and that’s why it’s come in with a $499 iPad. That’s a long way down from the traditional $999 and up Apple laptop price points.

No – Apple didn’t have to compete with netbooks that are selling 20 to 30 million units a year. Apple just wanted to create a new category of device and revolutionize computing.

eReaders on the other hand are not creating a new category of devices – they are just creating useless devices that only do one thing. You should pick something that does more than just read.

Cutting Price would devalue the Kindle

A price cut to $229 or $199 in the course of a gradual reduction in prices(ongoing since the original Kindle was launched) is fine. It’s more value for money.

If Amazon cut the price of the Kindle by $100 in reaction to the iPad it just makes the Kindle seem worthless.

The third category of users (the ones who are undecided) are going to be looking at value for money and what the better device is – Increasing value for money is pointless if you do it in a way (and at a time) that makes the device seem worthless.

It all comes back to people who don’t read projecting their wishes on people who do

Stephen Fry has written a love letter where he talks about how important the Mac was to him and all the intangible things the iPad represents and how perfect it is. It captures the pro-Apple sentiment perfectly.

Apple lovers are allowed to feel that way about the iPad and people who love to read aren’t allowed to feel that way about a device built for them?

It’s amazing that the same people who feel so strongly about their passions aren’t willing to accept that other people could be passionate about different things. They’re defending Apple because Apple produces products that make them happy.

Well, eReaders are products that make readers happy. It’s a huge leap for pro-apple people to imagine that someone could be as passionate about eReaders and books as the pro-Apple people are about Apple and the iPhone – but it’s absolutely true.

Why do people who don’t read want to dictate to people who read what the latter should buy?

The Gene Munster recommendation is exactly that – Someone who doesn’t really get reading dreaming up some crisis for $259 eReaders because a $500 device not built for readers has been released. He then applies more of his ‘I don’t read books and don’t know what I’m talking about’ mentality and suggests a $100 price-cut.

Now dozens of other people who don’t really read books think it’s a splendid idea and suddenly we have a bunch of people who don’t get books or reading advising us on what’s good for us.

9 Responses

  1. http://www.theatlantic.com/business/archive/2010/03/why-do-publishers-think-the-ipad-will-save-media/38283/

    Why Do Publishers Think the iPad Will Save Media?

    Atlantic comments are interesting, coming from a magazine publisher. To wit, Magazines are gaining readers and losing advertisers.

  2. Great Article. I would have also stressed more on the 1st category of people.

    I am one of them. I am a reader & would like to have several books around without having to hold them where ever i go. Its called an eREADER, that’s a device for reading NOT watching vid’s & browsing the web. there’s a computer for that.

    Adding the “annotation” w/ stylus is great, but it would be greater if they could make the device more efficient at taking heavy notes; this way lots of guys like me would take it to lectures (specially sci ones) instead of notebook/pads.

    I think the IPAD is simply stupid for one main reason. Its a multimedia device, but still you can’t do 2 thigns at a time. What about listening to music while reading ? Or listening to an audio boo while reading/following up along by reading th book ?

    Thanks again for the article

    keep up writing ;)

  3. I submit that there is a fourth category of person: someone who wants a dedicated eReader (and/or a Kindle specifically) but cannot afford or cannot justify spending $259 on one. For example, my mother. She wanted a Kindle quite badly, especially after seeing me use mine. But she moved just before the housing market crashed, and so wound up unable to sell her previous house, meaning that she has been tapped out paying for the mortgages on both, and certainly not able to justify a significant but ultimately not necessary expenditure like an eReader. (I wound up giving her one with part of my tax return, and she loves it.)

    Now, I can’t say that she would probably have been any more able to drop $150 on a Kindle than $260, but it’s definitely a distinct difference in affordability.

  4. I got the Kindle to READ and I am! I don’t need all the bells and whistles, thank you very much. Go Kindle!!

  5. I’ve read your comment and disagree, I feel a price drop for the DX would be a wonderful asset in letting people who have been waitting to afford this marvelous device, buy it. I know I would not hesitate in ordering it. I wish, as others I’m sure, that this would happen.

    Liz

    • Liz – the price of the kindle dx does need to come down. Perhaps the Kindle too. However, a $100 drop in kindle price is what I’m arguing against.
      The whole Munster point of view is not about best value for money which would be OK. It’s reading isn’t worth much – which is obviously wrong.

  6. Interesting point, except you’re completely wrong on one point: “Much better range of books.” Sorry, but the iPad can display any book the Kindle can because of the Kindle app. In fact, some Kindle books actually display color photos on the iPad.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 9,855 other followers