The focus is on the Kindle 3 and its new, imaginary battle with the iPad. Yet, Kindle vs iPad is merely misdirection.
Today’s Kindle 3 advertisement is puzzling since a $139 dedicated reading device is about as different as possible from a $499 dedicated do-everything device.
Why would Amazon attack iPad and kick-off a pretend Kindle 3 vs iPad battle?
Well, perhaps Amazon is just setting the stage for the bloody War that will be in full swing by end 2010 or early 2011 – Apple Vs Amazon. The prize is billions of dollars a year in profits from digital movies, TV, music, games, and books. Apple and Amazon (and perhaps the company behind Xbox) are the companies best positioned to win.
Amazon and Apple both want to control all digital downloads
Apple and Amazon have been putting things in place to take over selling digital downloads of books, music, movies, and games.
Consider what Amazon has lined up –
- Amazon has the following offerings already – Amazon.com, Kindle, Kindle Store, Digital Movie & TV downloads, MP3 Store, Game Downloads.
- It also has the following confirmed and rumored technology – TouchCo’s multi-touch screen technology, whatever eInk can come up with, possibly Qualcomm’s Mirasol display, Amie Street’s music technology.
- There are also rumors and patents that suggest Amazon has some of the following lined up – Kindle Phone, Kindle Gaming Device, Color Kindle, Kindle Electronic Pen, other new products from Lab 126.
There isn’t any type of digital download that Amazon isn’t interested in selling. In fact it’s already selling movies, books, TV shows, and games in digital format. The only device it has is the Kindle 3 but by end 2010 there may be new additions.
Apple is even more invested in digital downloads –
- Apple has the following channels in place – Apple Store, iPhone, iPod Touch, iPad, Mac, iTunes Store.
- It also has a lot of technology and patents and new and upcoming products – an iPad 2 supposedly focused on reading, a new Apple TV, lots and lots of patents.
Apple is already selling apps and movies and books and TV shows. It hasn’t gotten into digital game downloads (it seems to prefer selling $1 game apps) – However, that might change.
Apple vs Amazon is inevitable – The quest for digital download domination makes them natural enemies
Apple has the advantage of having over 125 million iOS devices out in customers’ hands. Amazon probably has only 5 million or so Kindles in customers’ hands.
Amazon has the advantage of everyone already associating Amazon.com with buying things. Tens of millions of people already buy books, movies, music CDs, and dozens of other categories of products from Amazon and if Amazon offers digital downloads customers will likely buy those too.
Both Amazon and Apple are trying to become the buying destination for all things digital. Sooner or later there is going to be war and 2010 is the year both of them decided to take the first step. For Apple it was iBooks and for Amazon is was today’s Kindle 3 vs iPad ad. These are the first obvious public moves – However, they’ve probably been thinking about this for a long, long time. Apple since 2000 when Steve Jobs started thinking about the iPad and Amazon since 2003/2004 when work on the Kindle was started.
Their recent actions are great indicators that both Apple and Amazon are positioning themselves for a war
Amazon just bought digital music site Amie Street which lets you stream or download music. This adds on to its existing mp3 store. It has started hiring lots of gaming executives and there are rumors of a Kindle Phone or a Kindle Gaming Device. It started working on an app store in January of this year and released two sample apps a few months ago. It just expanded to Best Buy which until now sold only iPad and Nook. It’s most recent step is today’s Kindle 3 vs iPad advertisement.
Apple’s acquisitions are mostly hardware companies and maps-related companies. However, it has made a number of moves that target the Kindle. It’s rumored to be building an iPad 2 focused on reading. It released iBooks and has taken pains to position iPad as a legitimate reading option for readers. It’s supposedly expanding iPad retail to Target which is the only retail chain currently selling Kindle 3.
Devices like Kindle, iPhone, iPad become critical
There are a few assumptions we can safely make –
- In the absence of owning a device customers are likelier to buy digital goods from the ‘buying destination’ i.e. Amazon.
- In the presence of a device customers are likelier to buy digital products using the default store on their device.
- Customers are likelier to buy from a company that has their credit card information and from which they already buy things (Ex: Amazon, Apple).
- A company that has a direct channel to customers (via a device) not only is free of middle-men like search engines it can supplant them. Apple isn’t buying map companies for fun – it intends to teach Google a lesson.
- Apple and Amazon are painfully aware of all of these points.
Both of them know that a customer who owns an iPhone or a Kindle is a captive customer – likely to make most of her/his purchases through the device (or from the company’s website). We already have indicators of this –
- iPods helped Apple take over digital music and even become the #1 music seller.
- Amazon has talked of Kindle owners buying 2.7 times the books they used to.
- Kindle owners have turned ebooks into a threat with even Publishers admitting some books are selling more ebooks than hardcovers.
- iPhones and iPod Touches have helped Apple become a threat to gaming companies – Sony is now running ads targeting the iPhone.
- B&N has talked about sales to Nook owners going up 28%.
Every company sooner or later comes to the conclusion that owning the device is absolutely critical. Even Google is trying to find ways of doing it by releasing Nexus One – it’s supposedly also working on a Google Tablet.
It’s the new Kindle devices that will fight the War against iPhone and iPad
There are a ton of indicators that the Kindle family is probably going to get a member in 2010 (or early 2011) focused on something other than reading –
- Amazon is hiring quite a few gaming executives.
- The Kindle App Store seems far more suited to a phone or a gaming device than a Kindle.
- The patent for gesture recognition is reminiscent of Kinect and doesn’t seem like anything an eReader would use.
- The gesture recognition patent also includes images of a device that looks a lot like a smartphone or handheld gaming console.
- Amazon’s acquisition of a company that has multi-touch technology (TouchCo) which would be far more useful on a multi-purpose device than on an eReader.
- Lab 126 hiring a lot of people from Palm and Handspring early on.
- The continued insistence of Amazon that Lab 126 will build other products plus various rumors that Lab 126 is doing more than just Kindle.
Amazon has seen customers buy 2.7 times the numer of books they used to from Amazon once they became Kindle owners. There was probably also an increase in non-ebook purchases from Amazon. Any smart company would wonder what other devices it could make to tap into this loyalty/affinity factor.
Before the Kindle Amazon wasn’t a hardware company but now it most certainly is one. It also needs to be one.
Amazon needs new devices to preserve CD and DVD sales
Kindle provides Amazon a hedge against a decline in physical book sales. It needs Kindle Phone and Kindle Gaming Device and Kindle TV to hedge against a decline in sales of physical DVDs and boxed games and music CDs.
Amazon has to be worried about the decline of physical media – While its Electronics sales grew by 69% its Media Sales (books, CDs, DVDs, etc.) grew just 18% (last quarter’s earnings report, year over year).
Kindle has transformed Amazon from a company that sold a lot of physical books but was in danger of getting left behind if ebooks took over to a company that might dominate all of Publishing if ebooks take over and the current status quo (Kindle and Kindle Store both being #1) remains.
If Amazon can create a Kindle Gaming Device and a Kindle Phone and a Kindle Pad and win one or more out of games, music, and movies it’s suddenly put itself right back into a position of dominance – one that’s even better than its earlier position as the top online retailer of physical media.
The Kindle Ad is more about Apple vs Amazon than iPad vs Kindle
Amazon seems to have decided to send Apple a message – We can play the advertising game too and we aren’t shy of attacking your shiny products.
A lot of people don’t understand that Apple is far more vulnerable to attacks than a normal company. You run a million PC vs Mac ads but most people are still going to buy PCs – they just don’t care that much about social proof and popularity and coolness. However, If Amazon can run enough ‘Loser Guy with Apple Product’ ads they’ll end up taking a lot of the shine off of Apple’s shiny devices.
Apple is very vulnerable to the very strategy that helped it find success – selling coolness in product form and associating rival products with non-cool qualities. The Kindle Ad shows that people are finally becoming aware of it.
The perfect next ad would be an iPad owner talking about how the iPad taps into his creative genius and identifies him as part of the intelligentsia while a bunch of monkeys use iPads in the background while eating bananas and prancing about. Then pan out to show its hundreds and hundreds of monkeys all wearing the same black suits and all using iPads. End with a slogan – Stop monkeying around if you want to read – Get a Kindle 3.