Kindle Review – Kindle Fire Review, Kindle 4 Review

The success of the Kindle 3 and the Kindle WiFi might not be the only thing on Lab 126′s mind.

There are reports that Lab 126 is looking into building additional consumer devices it could use to sell digital content to customers. Since Amazon already sells music CDs and digital music downloads, DVDs and digital movie downloads, and games and game downloads this would make a lot of sense.

New York Times reports that Lab 126 is branching out

The Bits Blog of the NY Times reports on Lab 126′s aspirations of expanding beyond the Kindle (all of this is based on comments from unnamed sources) -

… Lab 126 has been looking into building other gadgets that it could sell to consumers.

building more hardware products would be a means to an end … enable simple purchasing of Amazon content including its digital books, music and movie rentals and purchases

“Jeff’s original goal for the lab was to build a range of other devices,” said one person, referring to Jeff Bezos, Amazon’s founder and chief executive. “There was talk of music players and other electronics.”

That makes a lot of sense. You always get the sense that the Kindle is the first part of a much more comprehensive push. Whether it’s the way WhisperNet is set-up or the closed ecosystem or the way the Kindle App Store is being given an extended Beta it’s easy to imagine the Kindle as the first step in a pretty expansive plan.

Kindle Music Player?

Here’s an Audio System Engineer job position at Lab 126 that makes it seem highly likely a Kindle music player is on the way -

You will be responsible for designing audio sub-systems, selecting audio CODEC’s and transducers, improving audio system quality, working with software/product design engineers to optimize audio performance, and initiate new acoustic designs.

Create innovative acoustic design scheme and set Audio Targets for future products.

Perform audio regression tests on shipping products and generate audio performance reports.

That really doesn’t sound like anything that would be added to the Kindle. In 2.5 years all we’ve gotten is a ‘Next Track’ shortcut.

It does sound like a position that would involve work on a Kindle MP3 player. Amazon has a music store that some would argue is better than iTunes and it did force Apple to remove DRM from its music. Perhaps Amazon feels the only way to effectively compete with Apple is to build its own mp3 player. It might as well – Apple isn’t exactly playing nice by invading the Kindle’s turf.

Kindle Gaming Device?

Amazon recently got a patent that seems like it might be for Kindle gesture recognition or for a handheld Kindle gaming device. Actually, the patent’s similarities to Microsoft Kinect suggest a gaming device is a likelier proposition.

Here are snippets from an Amazon job posting that further strengthen the Kindle gaming device hypothesis -

Senior Product Manager, Digital Video Games

We are looking for a smart, analytical, and enthusiastic Senior Product Manager to lead the development and launch of a highly visible strategic initiative in our digital video games business.

This stealth project involves inventing and building a completely new type of technology for customers

This posting was first pointed out by Engadget.

Everyone has been thinking the TouchCo acquisition was done to add touch to the Kindle. There’s no reason the technology couldn’t be used to add touch to a Kindle gaming device or to a Kindle Phone – in some ways those two would be a better fit.

Kindle Phone?

According to NY Times Lab 126 decided not to build a Kindle Phone for now -

Lab 126 briefly discussed entering the mobile phone market to compete with Apple and Google, but the project “seemed out of Amazon’s reach.” But the person said Amazon had not definitively rejected the idea of building a phone in the future.

However, it’s hard to believe Amazon is going to leave out phones when there’s a chance the mobile Internet will become more important than the desktop Internet. Apple sells nearly all the types of digital content that Amazon sells and Google might be headed in that direction too. It makes zero sense to let iPhone and Android take over the entire mobile Internet.

The 5 Types of Devices Lab 126 might branch into

There are 5 types of devices that would make a lot of sense for Amazon -

1. Kindle and eReaders – To dominate ebooks and preserve its share of the book market. This is probably the best area to start with as there is little competition and little publicity. No one is going to think much of a device that focuses on reading.  
2. Music – Amazon is gradually losing out on CD sales and its mp3 business faces the closed iTunes ecosystem.  It needs a device of its own to compete – There’s no way it can take over iPods.
3. Movies – Again, Amazon is slowly losing DVD sales. Apple is making a push with the iPad and if Amazon doesn’t come up with a device of its own Apple might end up dominating movies and TV like it does digital music.
4. Games – Amazon has to be looking at the success of Steam and the success of games on the iPhone. It has something to take on Steam though it isn’t fully utilizing it yet. To take on the iPhone and to take on handheld video game consoles it has to build its own device.
5. Shopping – There’s no way a solitary Amazon Mobile app is going to cut it. In mobile search Amazon is again stuck with the Google tax. The safest (and only) way Amazon can ensure it remains the online shopping destination is to build its own device.

Note that each of these devices can sell other types of Content and WhisperSync is probably a sign that each will. Amazon’s customers will be able to coordinate across devices. Syncing across Kindle and Kindle for iPhone might just be a test to see how well Kindle and Kindle Phone work together.

Let’s take a moment and explore why these 5 types of devices (or 2-3 devices that cover all 5 areas) are absolutely crucial.

The importance of preserving income streams/existing businesses

Amazon’s income is split three ways – media, electronics, and other. Media includes CDs, DVDs, and Books. Electronics includes, well, all sorts of electronics. Other includes things like shoes and (perhaps) Kindle and Amazon Web Services.

Media is under a ton of pressure. While Electronics is growing at a 70% rate, and Others is presumably doing very well (Kindle, AWS, Shoes, Zappos all seem to be growing rapidly), Media isn’t anywhere close and you have all sorts of competitors (Apple, Netflix, etc.) threatening to steal that business.

If you’re a Publisher or a Movie Studio you double the price of books and movies and try to pretend that HD movies are worth double the price of non-HD movies. If you’re smart you decide to build your own devices so you can preserve your income streams.

Each of Music, Movies, and Books are billion dollar businesses for Amazon and building a dedicated device for each (or a device that covers all three) isn’t just smart it’s necessary. The Kindle is the logical first choice as books haven’t been destroyed like music and it’s not a ‘sexy’ area. In music you could be losing tens of millions of dollars and you still get more praise than a books related company making hundreds of millions of dollars. Kindle was the perfect choice – You test out everything and you take over the market and no one even has a clue what’s really going on.

NY Times confirms Amazon is worried about digital rivals

Here’s the snippet from the NY Times article that by itself guarantees we’ll see new Kindle family members -

Internally, Amazon executives have been frustrated with other companies aggressively entering the digital content business, and one person with direct knowledge of the company’s plans said executives there were prepared to do whatever it takes to ensure Amazon remained a major player in the sale of digital content.

A lot of people are under the illusion that Amazon’s position is safe because everyone associates them with buying. Nothing could be further from the truth.

Anyone who owns an ecosystem looks to exploit it and expand it. Apple went from music to mobile to games to the iPad. Google is trying to enter books and music and social games and buying up dark fiber and doing all sorts of hard to understand things. 

If Amazon doesn’t build its own devices it will get squeezed or replaced by device owners. What make things even more difficult is that selling digital content is super easy (contrary to Publishers’ entreaties) – You just load stuff up on a server and sell it to anyone who wants it. Why would a device owner like Apple or Google let Amazon freely make money when it could either get a cut or set up its own business?

Anyone who doesn’t have their own device and their own Internet and their own ecosystem will get reduced to the role of a beggar.

How soon will we see a new Kindle family member?

That’s a tough question.

Ideally, Amazon would want to make sure the Kindle is in an unassailable position before it reveals the full extent of its ambition. At the same time the mobile market, the mobile games market, and a lot of the digital content channels are being established right now.

The two main options are – Wait till Kindle hits 10 million sales and then launch product 2 (perhaps Kindle Phone) which would mean mid 2011, Launch as soon as possible (Nov 2010) and let the new device grow alongside the Kindle.

My money would be on us seeing a new member of the Kindle family make its debut around mid 2011. The Kindle 3 will soon have some company.

Filed under: evolution Tagged: | amazon strategy, kindle game device, lab 126