Amongst all the rumors and controlled leaks about the Kindle Tablet the one thing that has begun to gnaw at me is the lack of news or rumors about the Kindle 4.
Quite a few Kindle owners have mentioned their concern over whether Amazon will stop focusing on the Kindle as eReader and start focusing on either Kindle Tablet as Tablet or Kindle Tablet as Reading Tablet.
It’s a very valid concern and this post is just some thoughts about what direction Amazon might take.
Reasons why the Kindle should be safe
There are some very good reasons why the Kindle should be safe (reasons why a Kindle 4 should be out either by November 2011 or, in the worst case, by February 2012) –
- The Kindle is undoubtedly a success. B&N’s Nook is a billion dollar business now (just check their last two earnings reports) so it’d be safe to assume Kindle is a $2 billion or more business for Amazon.
- The Kindle protects the huge revenue stream Amazon gets from physical books. As people transition from physical books to ebooks they transition from being 25% Amazon.com to 75% Kindle. There is no way that Amazon would risk a revenue stream that has played such a huge part in its success.
- The Kindle gets people to Amazon.com. Kindle eBooks are in many ways a loss leader that get people to Amazon.com where they buy 42″ LCDs and watches and other big-ticket items.
- Books hold great nostalgia for the company. Imagine a world where people think of Apple when they think books – Amazon would be loath to let that happen. The Kindle is safe because Amazon is probably emotionally attached to being the destination for books.
- Kindle is the best device for reading books largely due to eInk and LCD based devices can’t really compete – unless you are LCD compatible or wedded to the Church of Free or the Church of Special Aesthetic Sensibilities. Which means that a company that wants to be the #1 source for books and booklovers needs to have a device built on eInk. Basically, Amazon will have to always have a reading device built on eInk and that makes Kindle pretty safe.
- It’s unlikely Amazon would be naive enough to end a product line that is a HUGE hit. If you’ve managed to sell 4 to 8 million devices in a year it makes little sense to stop investing in the device.
- Qualcomm has a company interested enough in its Mirasol eInk/ePaper displays for Qualcomm to invest $2 billion into an eInk/ePaper screen manufacturing plant. Whether that’s Amazon or a rival it will force Amazon to use color eInk in a future Kindle (whether it’s Qualcomm or eInk Triton from PVI/eInk). Amazon will have to cover that angle of attack even if it plans to focus on Tablets. And the only way to defend is with an improved Kindle that has a color eInk screen.
- B&N and Sony are both improving their eInk Readers. That forces Amazon to play catch-up. If its competitors were letting it waltz away then Amazon could have ignored the Kindle and treat it as a cash cow. However, both B&N and Sony have released touch eInk eReaders and that forces Amazon to improve the Kindle.
- The Kindle is a mini Amazon Store in people’s hands. Amazon isn’t going to reveal the full extent of its plans until there are 20 to 30 million Kindles in people’s hands. Then the full power will become obvious.
- The Kindle is now very, very cheap. Once it hits $100 we can
- The Kindle is quickly reaching a price point where it has a shot at literally replacing paper.
The combination of –
- The scope of the Kindle’s success.
- The strategic importance of Books – both as a revenue stream and to get people to Amazon.com.
- The nostalgia Amazon probably has for selling books and being the top online bookstore.
- The imminent arrival of Qualcomm Mirasol color eInk.
- The continuing improvement of Kindle Rivals.
- The role of Kindles as mini Amazon Stores.
- Kindle now hitting very tempting price points.
- Kindle as a potential replacement for paper.
Leads to the Kindle being in a surprisingly strong position. It would be madness for Amazon to stop making eInk based Kindles that it can sell as $100 pathways to Amazon.com.
That brings us to a far more realistic threat to the Kindle – death by distraction.
Just how much focus will Amazon keep on the Kindle?
The real threat to the Kindle is not that Amazon abandons it – It’s that Amazon takes the continuing success of the Kindle for granted and starts focusing Lab 126 and the Kindle Team on the iPad/Nook Color-targeting Kindle Tablet.
Amazon has just one team that knows how to design and sell hardware – The combination of Lab 126 and the Kindle Team. While we (and Amazon) would like to believe that this team can magically grow and evolve and build Kindle Tablets while still focusing on Kindle 4 and Kindle 5 – that is going to be really, really difficult.
Let’s start by looking at why Amazon might prioritize a Kindle Tablet over the Kindle.
Kindle Tablet is strategically very important
With the Kindle Amazon has prepared itself for the shift from books to ebooks. That still leaves the shift from CDs and DVDs and boxed video games to music downloads and movie downloads and game downloads.
Amazon has no device for that shift. It could leverage iPad and iPhone – if it’s willing to pay Apple’s 30% tax. However, sooner or later Apple would kick it out and take over completely. Amazon has to take over the entire pipeline. It can’t be dependent on another company.
Amazon’s only options are to –
- Build its own device. Which is what the Kindle Tablet really is.
- Take over a competing Ecosystem. That’s what Amazon’s Android App Store is about (in addition to supporting the Kindle Tablet).
If Amazon wants to preserve its huge revenue channels of music CD sales and movie DVD sales and video game sales – then the Kindle Tablet is the savior. Perhaps the only one.
That instantly makes it very important. More important than the Kindle because Music+Movies+Games is worth more than books. More important than the Kindle because a Tablet is better suited for shopping. More important than the Kindle because the Kindle has already carved out the top spot in its market and keeping that spot should, in theory, require far less effort than fighting the iPad monster.
Can Amazon be as effective focusing on two areas?
It’s debatable. My gut instinct says that an increased focus on the Kindle Tablet (due to its greater strategic importance) will eventually have a negative effect on the evolution and quality of the Kindle. You could even argue that we are beginning to see signs of this.
Kindle is already a step behind other eReaders technologically due to its lack of touch. It has a better store and a much better infrastructure – However, the device is over a year old and needs a refresh. Would that be the case if Amazon weren’t focusing so hard on the Kindle Tablet? Probably not.
Even if Amazon were/is capable of balancing the needs of the Kindle and the Kindle Tablet there is another factor that almost guarantees the Kindle will suffer from a little neglect.
The Kindle Tablet battle is a far tougher one (in addition to being more important)
Both iPad and Nook Color are very strong competitors. Far stronger than Nook 2 or Sony’s T1 Terminator eReader.
Nook Color is scary because of its great screen, low price ($249), and relatively rapid update path (it’s added features at a very healthy clip). iPad is scary for all the reasons the Press spends all its time salivating over. Far worse, both have an early mover advantage – iPad is the first Tablet and Nook Color is the first reading tablet.
Not only will Amazon be tempted to prioritize the Kindle Tablet (due to its greater importance), it will be forced to throw a lot more resources at the Kindle Tablet due to the quality of the competition and their early lead.
Kindle Tablet will probably see an incredible amount of resources devoted to it over the next 3 to 5 years. Amazon doesn’t have a choice – Jeff Bezos is unlikely to want to bow before Apple’s CEO’s whims and fancies.
Are all resources devoted to Kindle Tablet resources not needed by the Kindle?
Obviously not. There’s no rational way to argue that the Kindle, after establishing an entire new market and selling 10 million+ units, doesn’t need all the resources it can get. Amazon should be doubling down and expanding the category as much as possible. It can’t – Because those resources are tied up in making the Kindle Tablet.
The Prize of Winning the Tablet Wars is the Nail in the Coffin of Kindle getting a Fair Amount of Attention
Amazon almost has the eReader war won. The prize is rich but it doesn’t compare to the prize of the Tablet Wars.
There are a few things to consider here –
- The Tablet Wars are still in their infancy. And by ‘Tablet’ we mean the personal consumption device that users will use to buy digital goods (and eventually all sorts of goods).
- The low-priced Tablet market is there for the taking.
- Without Steve Jobs Apple is a shadow of its former self when it comes to envisioning the future and leading customers to it. iPad might keep growing but the next big step in the evolution of the Tablet/Personal-Consumption-Device Space is unlikely to come from Apple.
- Amazon’s ambition is immense. It’s not going to be satisfied to control ebooks while Apple controls everything else and Valve controls game downloads. It sees that big gaping hole waiting to be filled by a non-iPad Tablet.
- While winning the Tablet Wars is critical for Amazon to preserve music and movie and game revenue streams, it leads to far bigger prizes.
There’s just no way that Amazon can ignore the scope of the opportunity.
It’s not only a huge threat to Amazon’s existing revenue streams it’s also the possibility that Amazon absolutely fortifies its position as the Omnipresent Store of the Future.
Tablets just make for much better Personal Shopping Devices than eReaders. Not to mention that only people who actually read will buy eReaders.
Unless Kindle Tablet is a failure the Kindle is going to be massively deprioritized
If Kindle Tablet comes out, sells 5 million units at $249 each, and takes up a big part of the Tablet Market – then its going to become Amazon’s main focus. The #1, #2, and #3 priority. There’s just so much at stake.
Then Kindle gets deprioritized and a small skeleton team keeps doing updates and making sure Kindle continues to narrowly edge the competition. There’s enough room for a little complacency.
Meanwhile the lion’s share of resources go to the Kindle Tablet as Amazon fights with Apple (and B&N and Samsung and Microsoft) to be the Tablet of the Future.
Basically, we are going to see one of two futures unfold –
- Kindle Tablet is a hit and Amazon tries to use a $200 or $250 Tablet to upend the iPad’s lead in Tablets.
- Kindle Tablet is a failure and Amazon tries to evolve Kindle into a color eInk device and attack Tablets on fronts such as battery life.
In either case the Kindle’s continued evolution as a reading device is under threat.