The Revolution of You!

I think we are seeing two types of ‘You’ revolutions.

1. The first is the one where the company tries very hard to portray it as a focus on ‘YOU’.  But what they really mean is a focus on ‘Information About You’. So you have sites that offer free services that let you work for them (creating content) and provide them information (again for free) they can sell to advertisers. A very enlightened form of information colonialism. It’s a powerful concept – to create databases of information about people and then package people as products – and it’ll be somewhat interesting to see where it goes. Surely, the logical end goal would be telling people (subliminally or directly) what they should do. You could argue TV started it and that the great information stealing companies of our times are just carrying things to their logical conclusion.
2. The second is the one where YOU (and that includes us) take over. This is what is happening in books. If you consider the Top Indie Authors list from last week. We had Barbara Freethy sell over 100,000 ebooks in 1 month. We are seeing similar signs elsewhere – in video games almost anyone can reach a huge audience now, in music the same thing is beginning to manifest. With eBay and the Internet we have almost anyone able to sell products and start a store. One of the latest examples is the funding of Wasteland 2 (an old-style RPG from the makers of Planescape Torment and Baldur’s Gate). The Publishers would much rather have people playing Gears of War 27.7 or World of NeverEnding Craft. Yet, now that people have the power, they’ve funded a project that really doesn’t meet the bar of making Game Publishers richer.

The good You Revolution might be as impactful as the Industrial Revolution

The ‘good YOU revolution’ is illustrated by a few interesting features -

1. Customers decide who wins. This was always there to an extent – However, now they get to decide without the ‘advice’ and ‘blessings’ of gatekeepers.
2. Creators get a larger share of the earnings.
3. Customers have to pay less.
4. We’re seeing Quality in flux. The very definition of words like ‘hit’ and ‘quality’ and ‘popular’ are changing.
5. Middlemen are getting slaughtered. If your business model is based on scarcity (and that’s what some gatekeepers are – manipulators of supply and demand) then in a world where everyone is connected it’s suicidal to think it’ll survive.

So we have a world where the creators and the appreciators are in direct touch with each other. They still don’t realize the extent of the power in their hands. The illusion that a music company or a device company or a distribution company is the ‘Supplier/Creator’ is still strong.

The creators still don’t fully realize that they create everything. The users still don’t realize that they decide and nourish everything.

We’re moving towards a world where the distributors will be eaten up by platforms and then the platforms will be eaten up by Intelligent, People-centric platforms like the Internet and sites like Craigslist and Wikipedia.

At the end of the day there’s no means left to regulate or limit supply. At all. The platforms are all about convenience now and as soon as convenient people-centric platforms come up the existing platforms will be eaten alive.

The bad You Revolution might be even more important

In The Time Machine H. G. Wells envisioned a world where humanity had morphed into two species. One feeding and preying on the other.

H. G. Wells’ vision is really what we are going towards. Companies that covet our information and our hopes and dreams and desires (to sell us more and more of cars and jewellry and magazines) claim that ‘people don’t want privacy’. In a few years they’ll claim ‘people don’t want to think about what they should do’. And after that ‘people want us to tell them what to do’. And then we’ll keep going down that road towards a Wellsian split with a child-like and innocent flock that cares not about things like privacy or liberty or free thought. Surely, it’s far more important to amuse ourselves.

Where does it leave us?

It leaves us in a very interesting quandry.

Will everything be OK. Will everything fall apart. Will we have two layers – the 1% feeding on the 99%. Will we have the destruction of the 1%.

Perhaps it’ll be a boring equilibrium. Where the 1% feed on an enthralled 25% while the other 74% live a more regular life.

The juxtaposition of these two trends is disturbing and refreshing and amusing -

1. In areas like books and video games we suddenly have people taking over completely. Wasteland 2 is funded $2.3 million and doesn’t have to worry about the gatekeepers. Imagine that – 100% creative freedom. The royalty (us end users) are your patrons. Indie Authors are making so much money they could be hiring Publishing company survivors in 5-6 years.
2. In other areas we see an alarming rush by people to not only work for free creating content, but to also give away all their personal information without a second thought.

Will the two effects balance out. Is the first group of users different from the second group?

My money is on a split. The very smart and evil 1% feeding on 25% to 40% of the population while the very smart good and smart good parts of the population (the remaining 59% to 74%) cooperate and work well together. A world split apart based on polarity and street smarts and takers vs givers vs sharers.

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Did DOJ just hand the eBook and Publishing business to Amazon and B&N?

I certainly think so.

The Department of Justice has sued Apple and 5 Publishers and announced terms of settlement with three Publishers (Hachette, HarperCollins, Simon & Schuster).

Let’s consider the things that are happening and the DOJ stipulations for Apple and Publishers -

1.  7 days to terminate contracts with Apple. Publishers are going to be really stressed about losing their ‘special contracts’ with a company that is perhaps 10% of the ebook market. NOT.
2. Terminate any contracts with ebook retailers that limit the ability to set final prices OR contain a ‘most favored nation’ provision. Ha ha ha ha ha! That would mean every single Amazon contract with – don’t price ebooks cheaper anywhere else – would have to go. This kills the Agency Model and also puts Amazon in an uncomfortable situation. 
3. 2 year prohibition on any contract that prevents retailers from discounting retail prices. The destruction of publishing companies is guaranteed now. In 2 years things will accelerate and soon we will have $1 and $3 as the new normal for book prices. What publishing company can survive on $3 per book?
4. An anti-trust compliance officer will see all contracts for 5 years. I’d bet anyone an ice cream sandwich and 2 vanilla milkshakes that by the end of 5 years the Big 6 would be down to Big 4 (perhaps just the Big 2). The next 5 years would see the sort of destruction that would make newspapers seem lucky. 

Here are the things that people aren’t going to notice until later - 

1. DOJ has just guaranteed that Amazon and B&N will end up with a duopoly. Amazon is going to really, really regret not buying up B&N when it had the chance. Even more so if B&N keeps improving at the pace it has and keeps innovating like it has.
2. Just to be very clear here – The grand ‘collusion’ between Publishers and Apple was a desperate attempt to prevent Amazon (and to a lesser extend B&N and Kobo) from replacing Publishers as the Kings of Publishing and Books. DOJ has struck down this collusion agreement and thus made it inevitable that Publishing Platforms 10 times more powerful than Publishers arise. Platform = Publisher + Services Provider + Distributor + Retailer.
3. Leonard Riggio and Jeff Bezos are probably having a ‘Party like it’s 1999′ celebration in Aspen. Sony’s CEO is trying to convince the bouncer that he used to appear in a daytime soap opera 5 years ago.
4. Apple’s motivation to sell books went from low to abysmally low. For a company that has to be really careful not to let the Government eat into all its money and profitability, Apple sure wouldn’t have thought trying to sell books would lead to the start of it becoming an anti-competitive poster-child. Mark my words – they’re coming after Apple and Apple, rather stupidly, is supplying all the ammunition (ebook collusion, patent wars, a focus on making Wall Street happy). It would be doubly amusing if the pointless patent war Apple started ended up eating it alive down the road. Dance with the devil, devil don’t change, devil changes you.
5. It’s bad for indie authors in the short-term and very good in the long-term. In the short-term established authors’ book prices will fall and there will be more competition. In the long-term the Publishing companies will be destroyed and it’ll be a much more level playing field.
6. Published Authors are in big trouble. This has to be yet another sign that their privileged days of letting other people worry about the tough stuff like marketing and customer relations are disappearing. In the future every author is going to have to be an independent corporation and address all the issues and headaches that come with that.
7. The Net Revenue generated by books is going to absolutely plummet. More on that later.
8. It’s an absolutely great time to be a reader of books. Of course, we have to be prepared for huge changes in the quality of books (who knows in what direction).

The Net Revenues and the Net Number of Jobs in the Publishing Industry are going to Plummet

Here’s the thing that no one likes to talk about. Everyone notices it at some level but it’s awfully inconvenient.

As things become a lot more efficient, as books drop from $10 to $15 prices to $1 and $3, as things become more convenient – A LOT less revenue is generated. That means a lot less jobs.

All that efficiency translates into lost jobs.

1. We don’t have to ship and store books any more – Drivers, Postmen, Shippers, Warehouse workers.
2. We don’t need big Publishing and Distribution companies any more – Editors, Artists, Cover Designers, Managers.
3. $1 books instead of $10 books. It means authors will do things themselves, or get volunteers, or pay low rates. Editing, covers, proof-reading, design – These jobs are all going to be GONE.
4. No more bookstores. That’s a lot of jobs and it will have a ripple effect on other stores and on malls.

This is happening EVERYWHERE. Technology is destroying jobs everywhere. Publishing and Newspapers are just two obvious examples. And those jobs are NOT being replaced.

You can dream up whatever hypothetical situation you like – There will be hundreds of thousands of jobs lost in the Books and Publishing industry and those will be replaced by tens of thousands of jobs or perhaps just a few thousand jobs. I don’t think Amazon and B&N’s ebook divisions are more than a few thousand people combined.

There are no more jobs in Publishing. Literally. It used to be a $25 billion a year business in the US with perhaps a few million (or at least a few hundred thousand) indirect and direct jobs. Now it’s going to be a $5 billion a year business in the US with just a few thousand people. You don’t need a lot of people to run 5 to 10 major platforms/websites.

That’s the cost of efficiency. It’s doubly true because we are in a leisure economy. There just aren’t that many jobs left because we are so focused on not doing anything. Because the advances in technology are uniquely suited to eliminating jobs and there is no bigger goal left. People are just happy to stay where they are.

If we had some big undertaking then it would create jobs. But we don’t. So we have a lot of efficiency and no big grand plans to work on. It’s happening everywhere. Perhaps that’s what led to the extinction of the dinosaurs – not being able to find a good enough means to entertain themselves.

1. Products you create, create Value for Users. That value cannot be destroyed.
2. The Value your Products create cannot be Destroyed – but it can be Stolen.

Hand in hand are a few corollaries.

1. If there are middlemen between Creators and Users, they will almost always try to steal value. The more ‘intelligent’ or ‘noble’ or ‘creator-focused’ the middleman – the more likely that value will be stolen. These middlemen will also try to steal from users. Basically, they steal from both sides if given the opportunity.
2. If Creators and Users have a direct channel to each other, then neither can be taken advantage of.
3. There will always be a small portion of users who will pretend that no Value is created. They will try to steal value. Part of their justification/strategy for stealing will be to convince other users that no value is created. These bad users will often try to steal from both sides. Think of bad users as ‘middlemen with less ambition’.
4. The majority of users see the Value created and value it. However, they are all susceptible to the bad agents in the ecosystem i.e. middlemen stealing value and bad users pretending no value is created. Perception becomes reality.
5. Value you create for good users will always come back to you. Unless you let middlemen steal that value. Unless you let bad users create the illusion that the value does not exist.

The following is a simplified explanation of the laws and a very basic model. However, it should help illustrate the laws.

The Ecosystem of Value Creation and Delivery

1. We have a creator John who creates a product that will create solid value for users. The product can be anything (a chair, a book, a movie, a sandwich) and the value can be anything (utility, entertainment, date night, food). The crux is that John is creating value and then delivering it to users via some means.
2. We have a middleman, Company X, that delivers the product to users. Note that due to its position as the company delivering the product to users, it is in position to create the illusion that it is also creating the value. If it can trick John and customers, then it can create the illusion that all the value creation is due to Company X.
3. We have good customers. These are customers who recognize that value is being created and are willing to pay for it (to reciprocate).
4. We have bad customers. These are customers who either are not willing to pay for the value they get OR they are willing to trick themselves into thinking that no value is being created.

In a perfect world, John would sell directly to good customers and get back value for the value he provides. He would probably avoid bad customers.

Alas, we live in a rather imperfect world.

Why creators and users should be wary of Company X

There are two things that benefit Company X greatly:

1. If John and other creators start believing that Company X delivers most of the value OR if they start believing that their product has little value. 
2. If customers start believing that Company X delivers most of the value.

The Kings of stealing value are technology companies that work hard to create the illusion that movies and music and books and content of all sorts is worthless. That everything is due to the device or the platform or due to some algorithm.

Aggregators, file-sharers, p2p networks – these are all great examples of companies trying to push the notion that ‘content’ is worthless.

The perfect world for middlemen companies is a world where all the products are free and customers are paying only Company X for the value they get.

Imagine if your neighbourhood BestBuy started expecting Apple and Microsoft and Samsung to produce phones and computers and hardware for free. It then charged you the same money for these products and claimed that all the value creation was being done by it.

That’s exactly what Internet companies are doing. Because content creators don’t understand technology, and because it benefits users to imagine that content creators might not want to get paid for their products, it becomes easy to detach digital content from reality. To start believing that unlike a physical chair, it costs nothing to make a digital game or to produce a digital movie. It just grows on trees in writers’ and directors’ and engineers’ back yards

Company X constantly works to create the illusion that content is worthless and abundant and that creators are a dime a dozen. Why? Because they want to take credit for all the value customers get from the creations of creators. They want to get 100% of the value that customers give back.

Company X = Pretty much every technology company.

There’s no way to avoid this stealing of value other than to lock Company X out of the ecosystem.

Why creators and users should be wary of Bad Customers

Far more dangerous than Company X are Bad Customers. Company X is just a channel to users. You can always find another means to get to your customers.

The real danger is bad customers who infect good customers with their thievery-justifying ideas.

Bad customers have two great gifts:

1. They have an inability to acknowledge the value they get. Or, to be more precise – They have the ability to rationalize the value stealing they do.
2. They have a great hunger to spread their attitude to others. It’s not enough for them that they didn’t pay the Creator for Value – they insist that other people don’t pay either.

The percentage of Bad Customers is low. The real problem is that Bad Customers need so desperately to compensate for their stealing that they put a ton of effort into trying to get Good Customers to become like them.

It’s some sort of human need to ‘appear good and justified to yourself’. Even if you are the bad guy.

Instead of the simple reality i.e. ’I'm a thief and I stole this product’, they want the fantasy of ’I'm the Grand King of Generosity and I deserve a Medal for Using the Product these Creators Made – They should send me gifts of gold and silver to thank me for Using their Products’.

The simple solution would be to pay for products and thus reciprocate the value they get. Or to not pay and then not use the product. However, Bad Customers want to use the product and get the value and then not pay for it.

Thus they start believing that content creators should share everything for free and live on free air and sunshine.

What can Creators do?

Creators have to take responsibility for both delivering value to customers and getting value from customers.

1. Build direct channels to customers and avoid middlemen – especially the ones that are very powerful and the ones that are very noble. In Particular: The less someone seems to be acting in self-interest, the more likely it is that there’s a BIG hidden agenda.
2. Reward Good Customers. Make it easy for good customers to get the products they pay for. It’s absolutely critical to reward good behavior. If you can identify good customers, then go out of your way to provide them additional value and treat them super well.
3. Ignore Bad Customers. It’s a waste of time to do anything with them. At the same time, make it difficult for Bad Customers to spread their beliefs. Note: You can never ‘attack’ bad customers (what the music industry seems not to realize) – because then you provide a rationalization for stealing. Instead, go after the ‘enablers’ that make stealing possible.

Your approach should revolve almost completely around reaching good customers directly, getting value from them without middlemen, and keeping them safe from bad customers.

1. You cannot make it too easy to steal. So that good customers aren’t tempted to become bad customers.
2. You have to make it easy to get the product and to get value from the product once users have paid. Keep rewarding good customers.
3. Avoid middlemen. If middlemen are necessary then start building your own channels in parallel. Can’t stress this enough. Look at what happened to newspapers. What is happening to other content creators. If you don’t have your own channel then you’re just a serf.
4. Avoid middlemen like the plague – especially if they seem too good to be true. There is no free lunch.
5. Don’t let bad customers influence good customers. This is easy if you have direct communication with good customers and if you make it easy for them to get the value they paid for (and perhaps a bit more). Hand in hand with this is establishing a connection so that your good customers understand that it costs you money and time and effort to create products.
6. You can never eliminate bad customers. There’s absolutely no way to get them to become good customers. So just ignore them.
7. Be wary of perceptions. Good Customers should have a very clear idea of the value they are getting and that you, the Creator, are providing 99% of the value.

That last point is basically the crux. It also ties in with the two main Laws of Creation & Value i.e.

• Products you create, create Value for Users. That value cannot be destroyed.
• The Value your Products create cannot be Destroyed but it can be Stolen.

Whether you write a book or grow apples or make a movie or harvest wheat or create a song or bake bread or make chairs or write software – there will always be middle-men trying to steal value from you, there will always be bad customers trying to pay you less than you deserve.

It always starts with noble intentions. It always ends with the apple farmer getting 5 cents per apple and middlemen making 25 cents.

Creators today have to ensure they deliver value to good customers while avoiding all the potential pitfalls. The reality is that with a digital product it’s very easy to create the wrong perception that ‘it should be free’ or ‘it’s not stealing since making a copy costs nothing’.

You have to make it clear that it costs time and money and effort to create products. You have to make it impossible for customers to steal easily and you have to make it hard for them to fall for the fallacy that it isn’t stealing. You have to do it while bad customers and middlemen are trying their best to pretend that no value exists or that all value is attributable to someone other than you, the creator.

The biggest help you have is that you can now connect directly to customers and build direct channels and thus create two critical reality-perceptions -

1. You are the content creator and you are providing the value.
2. It costs you time and money and effort to provide that value and you expect a fair reciprocation of value.

Basically, it’s become much easier to fool content creators into giving away their products for free and it’s also become much easier for content creators to establish a win-win value exchange with good customers that is free of both middlemen and bad customers.

Here are some very conflicted thoughts:

1. Great Idea. If you’re a company that likes to throw out lots of ideas and see what sticks, this is definitely worth trying out.
2. Kudos to Amazon and Jeff Bezos for having so much ambition.
3. Don’t think Mr. Bezos has ever seen a technology pie he didn’t want to stick a finger into.
4. Amazon Studios might end up being Kind of a Big Deal.
5. First get books right. There’s a grand curation problem in books – partly due to what Kindle has enabled. There’s a huge value perception problem in books – mostly due to what Kindle has enabled. It’d be really nice to see Amazon focus its attention on fixing that first.
6. The line of logic that ‘we can still give as much attention to books, while also doing movies’ doesn’t make sense. Resources, especially time, are finite.
7. Amazon Studios is to Movies and Kindle Fire what Kindle DTP is to Books and Kindle.
8. Amazon’s ambition is eventually going to get it killed. My vote would have been with ‘Amazon’s reluctance to build up a huge cash hoard or a huge patent hoard’. However, increasingly it seems that Amazon’s reach might exceed its grasp.
9. Amazon Studios should have begun to scare a LOT of movie producers. Not necessarily because it will replace Avatar – because it might be able to replace Paranormal Activity.
10. Perfectly efficient markets kill the participating content producers. Amazon Studios is almost certainly going to end up being a close-to-perfectly-efficient market.
11. Not sure why so many technical companies think algorithms can solve everything.
12. Not sure why so many technical companies think getting people to work for free or cheap and then making money from that (due to scale/volume) is a sustainable strategy.
13. It worries me that so many people and so many companies are now moving to an attitude that – ‘getting to have their books read/movies seen’ is enough reward for artists.
14. The contract is laughably one-sided IF your movie becomes a big hit.
15. If Amazon doesn’t option the rights - you have to still give it rights to use your movie.
16. At one level it just seems a way for Amazon to be able to win the mythical Who has the most free movies? contest. Never mind that 70% of Amazon’s ‘free’ Prime Movies will be produced by 15 year-old-kids and will star Mentos and Coke.
17. Amazon is like the jealous spouse who doesn’t even want you looking at someone else. Consider this:
    

    … for 18 months after you create a project at Amazon Studios, you cannot display, sell or license your script or test movie elsewhere, or withdraw it for any reason. However, when the option term ends, if we haven’t exercised our option and purchased your work, you will get back non-exclusive rights to your original material.

18. That last phrase is genius – ‘you will get back non-exclusive rights to your original material’. There’s a pretty strong vein of ‘We’re doing you a huge favor and you better not forget it’ running throughout the FAQ.
19. Amazon is the equivalent of a Stage 5 Clinger. Except, you have to take a blood oath that even if you break up, you will spend one weekend together in Paris every month.
20. Content Creators are probably so desperate Amazon could have introduced a ‘You will swim with sharks before we read your script’ condition and they’d still sign up.
21. There’s got to a more sustainable strategy than ‘let’s mass-produce cheap content and hope we get lucky’.

The one thing that really bothers me, and perhaps should bother anyone who loves books, is that Amazon doesn’t have the ends wrapped up with books yet.

Amazon should get the Kindle Store right first

There are lots of things that need to be fixed with books. The two biggest ones are:

1. How do authors get paid? And No – sharing out $700K amongst 7,000 indie authors every month is NOT a solution. 
2. Who does the curation?

Right now Amazon is just thinking – Wow, we figured out how to blow up an entire industry. Figuring out a new viable model is difficult. Let’s just go blow up another industry.

That’s a really strange way of looking at things. It’s very Amazon centric i.e. it doesn’t consider what happens to content creators or people or to quality.

You can’t make everything a loss leader

This is another example of what seems a strangely short-sighted Amazon attitude towards content.

1. Content Makers are desperate. Content Publishers are inefficient. Let’s blow up the market and turn content into a loss leader that helps us sell other stuff.

It’s become a bit much. History will look back at the rise of the Internet companies and perhaps consider them the biggest value destructors for people who create content.

1. Some tech companies want your creations for free so they can run ads against them.
2. Some tech companies want your creations for free so they can use them as a lure or as loss leaders.
3. Some tech companies want your creations for free so they can sell them for profit. 

Where on Earth are the tech companies that are willing to build sustainable business models? Internet companies make Microsoft and Apple seem absolute saints in comparison. To be honest – they really are. When you think of the number of HUGE companies that grew up based on the Personal Computer ecosystem. And the number of people who did well selling software and other things.

With Internet companies, it’s an anti-ecosystem. It’s a giant leech sucking all the blood out of content creators.

It’s great for consumers of content – until the malnutrition of content creators trickles through the system and blows it up.

Why do so many companies look for the easy solution?

It escapes me why the vast majority of tech companies want to build a model where they profit from other people’s hard work.

Capitalism is glorious. However, capitalism usually meant paying the people who made the products. The Internet in general, and Internet companies and people who have never had to sell anything in particular, are creating an environment where the creators aren’t getting paid. It’s just not sustainable.

And everyone is caught in the trap now. The glorious thing about it is that most of the tech companies using these strategies aren’t very profitable either. The Internet is just a huge destructor of industries.

At some point we won’t have people left who make a decent living. There’s not going to be a middle class. It’ll just be very rich people and poor people who’re supposed to feed themselves on the knowledge that invisible people on the Internet enjoyed their work and they got nothing at all from it.

Whether you sell a physical product or a digital one – It’s time to start wondering. What are you going to do when your arguments (an extra copy costs nothing, volume makes up for it, Internet makes everything cheap and efficient, X/information/value wants to be free) are used against you?

Whether you like it or not – The argument extends to whatever you do. There’s always some idiot somewhere who’s willing to do your exact job for free. And there are more than enough companies willing to leverage that into creating Giant Leech ecosystems that will slowly suck everyone and everything dry. Movie Producers and Book Publishers are evil – but they don’t make money if they don’t sell movies and books for profit. That’s the one big lesson – Be careful what you wish for, you just might get it.

Because, it’s not the iPad.

This review is totally about this new $57 Tablet. We promise. We only refer to the iPad once or twice, and only because it’s like the Gold and Legal Standard to which all other squarish computerish devices shall forever be held. 

Patent Violations of Patents

Firstly, the $57 Tablet steals its rectangular shape from the iPad. It calls itself a Tablet and pretends it’s like an iPad. It even steals the idea of putting a computer behind a glass screen and having people touch the glass to control the computer from, you guessed it, the iPad. 

But it’s not the iPad.

Apple needs to call its lawyers already. Apple has patents - on Tablets being square, on touch screens, on touching a screen (hands off your TV, you little kid). All your Tablet are belong to Apple.

This $57 Tablet isn’t as good as the $499 iPad 2

The $57 Tablet is $57. That just screams cheap and low quality. Just the iPad’s smart cover is nearly that much. To be fair – it is smart, and it even has magnets. So it’s like totally 100% cooler than a $57 Tablet. Anyways, this $57 Tablet isn’t as good as the iPad 2 -

1. It only has a 7″ touchscreen. As any self-respecting Tabletophile will tell you – if it’s not 10″, it’s not awkward to hold. Then you forget how much you value holding it.
2. It uses Android. OMG – that’s like the biggest reason not to buy it. Android is just so slow. Like you touch the screen and it takes like 12 milliseconds before it responds. It’s like they are still using steam engines in there instead of the fighter jet engines iPad 2 uses (with a Tom Cruise in Aviators photo on it for like extra aesthetic impact).
3. Talk to the Hand. Yes, TALK to the Hand.
4. It only has 3 hours battery life. OMG OMG OMG. You can’t even see a full season of Jersey Shore. You might miss out on the life-changing moment that totally like changes your life or something. All because you were shallow and materialistic enough to buy the $57 Tablet. Be deep – go with an iPad.
5. It only has 2 GB of internal storage. It has something called an SD card but that’s too technical. I want 16 GB because that’s the gold standard. The Gold Standard that iPad set. It’s like 2 years and even now companies can’t meet 16 GB. Apple is so far ahead. It’s like it’s 40 years ahead of everyone else and everyone else is runnning in the wrong direction.
6. Except for like Samsung because they copied everything from Apple. What’s that you say? Imitation is the sincerest form of flattery. Stop using big words to confuse me. iPads are the sincerest form of Tabletry. Or something like that.
7. 256 MB RAM. Ram? No, I’m a Pisces. Anyways, whatever it is, it’s half of what iPad 2 has. And getting only half when you pay like $57 is terrible. It’s like you pay 1/8th and get 1/2. That just sounds like they’re stealing from your pockets. With both hands.
8. Look at how unaesthetic the bezel is. It’s like someone messed up at the factory and the top bezel stole half of the bottom bezel. That’s just hideous. That’s like whoever designed it never went to Art School or even to drawing class. This is what happens when you design paper planes instead of learning your drawing lessons.

The list is so long but I’m getting tired of all the big words like unaesthetic and hideous. That’s why iPad is so much better – cool, pretty, $499, good. It’s all simple words. Easy to understand. With $57 tablet you have words like open – What does open even mean? Would you want an open umbrella? Guess Not. Then why go for an open Tablet. My mother always used to tell me – don’t be so open-minded your brains fall out. Stop being so open minded and buy an iPad already.

The Apple and Oranges Review

Enough of all that technical mumbo jumbo. Let’s talk in terms that everyone understands.

1. iPad makes you feel like your life has meaning beyond having meaning.
2. $57 Tablet just makes you feel cheap. Would you wear $10 shoes? Obviously not. Then why be seen with a $57 Tablet. Gucci, Prada and iPad. The holy trifecta of external validation – don’t you forget it.
3. iPad 2 is the best computer ever created. It’s so cool how they fit everything into a tiny 10″ screen. And they even added a metal stand for the screen so it’s easy to hold. Don’t you want a part of that? To hold and caress it. To be one with the poetry of it. It’s like pleasure in a tablet. You just touch it and you feel amazing. It’s like a baby tiger in your hands.
4. You get what you pay for. Hence you should pay more.
5. Can you imagine the look on people’s faces when they have their tiny $57 and $199 Tablets and you walk in with your gigantic $499 Tablet. Isn’t that cool – not only is it more expensive, it’s also big and hard to miss. It’s like driving a muscle car while everyone else is in those awful Smart Cars.
6. You have to have it – all the cool people have it. Do you really want to be left out?
7. It’s a lifelong bond. Any other tablet and it’s like you’re buying just a device. With iPad it’s like you get a new family member – who’s cool and charming and sassy.
8. You can stand in line. You’d feel like an idiot if you had to stand in line for a $57 Tablet. They probably don’t even have lines – how inconsiderate of them. You can stand in line for an iPad and everyone will know how cool you are. You’ll be able to tell your grandchildren – Forget the Great Wars. Do you know what granddaddy did? He spent 16 hours camped outside waiting for an iPad 4. It even rained for a few hours but granddaddy stuck to his guns. That’s what real men do – camp outside stores whether it rains or shines.
9. Get the love you deserve. Is your dog not running to fetch sticks? Is your boyfriend not caring about your feelings? iPad cares. iPad fetches. iPad even wags its imaginary little tail.
10. Bring About World Peace. If the whole world had iPads they could channel their anger into Angry Birds.
11. Solve the Population Problem. Make it mandatory to take the iPad to bed and birth rates will decline as people watch movies in bed instead of making babies.
12. End Global Warming. People can spend all their time on their iPads instead of driving to work or flying for vacations. It’s work and vacation in your hands. Plus you save paper since you stop reading books.
13. The end of poverty. If you have iPad you don’t need anything else. Food, water, shelter – iPad channels all of those wirelessly into your bloodstream.
14. Save the World from Killer Asteroids. Pretty sure there’s an app for that.
15. Bring back Dinosaurs. Actually, this isn’t 100% guaranteed but sooner or later iPad is going to cross-breed with frogs and chickens. Anything could happen.

The $57 Tablet cannot do any of these things. It really is an Apple and Oranges review. An Apple a Day Keeps all the Evils Away. The only thing Oranges keep away is scurvy and what’s the point of that - With a $57 Tablet in your hand you’ll look like you’re suffering from much worse.

Don’t hesitate – buy that iPad 2 right now. Buy today and you will get the added satisfaction of buying an iPad 2 right before the release of iPad 3 and showing just how much money you have to throw away. Nothing says ‘well-fed and well-off’ like buying a device a couple of months before the newer version is set to be released.

The Zero Click Patent (in response to Amazon’s 1-click Patent)

• There’s a Buy With Zero Clicks button. You just hover your mouse over it. A small window comes up that says – Slide Mouse Up to Purchase. Do that and your purchase is done.
• Zero Clicks = Hover on the Button and then wait for a second and do an Up Swipe Gesture. Done.
• If you want to make it simpler you can make an upwards pointing arrow and just ask users to move their mouse upwards along that arrow.

Circle to Unlock (in response to Apple’s slide to unlock)

Apple has gotten a patent on slide to unlock. This is pretty strange since who would have thought ‘slide to unlock’ was patentable. Not to worry – there’s something easier.

• Circle to Unlock.
• There’s a green dot at the center of the screen. Just circle your finger around it to unlock.
• Or you could use a mix of fingerprint detection and two fingers pressed on the screen at the same time.

Patents are getting completely out of hand

Sometimes, it’s interesting to compare software patents to real world scenarios to see just how ridiculous they are.

• 1 Click Patent = 1 Swipe with Credit Card.
• Imagine if a patent was granted so that you could no longer pay by swiping your credit card once unless you paid Company X 5 cents per swipe. Your only other option – to swipe the card multiple times.
• Swipe to Unlock = Slide Garage Door vertically.
• Giving a company a patent that says no one else can use ‘swipe to unlock’ to unlock a phone or Tablet screen is like saying – This Garage Door manufacturer applied for a patent and now no one else is allowed to use Garage doors that open vertically.

Imagine a world where companies would patent handshakes and the words ‘Hi’ and ‘Hello’. If you meet someone, you aren’t allowed to use any of the preceding options – unless you pay 5 cents. That’s literally what software is turning into. Every single thing is being patented no matter how obvious or trivial it is.

Patents are, for the most part, attempts to keep out other companies

Patents were meant to preserve actually valuable technology.

However, big companies have started using patents as a means to keep out other big companies and especially small companies. Whether you look at Microsoft suing Android phone makers or Apple attacking Samsung – it’s the same common thread.

Established companies want to compete on terms that favor them. It’s not enough that they have first mover advantage and their war chests – they want to prevent other companies from even launching in the market. Patents become one of the easiest means to do that. Why waste money on making your product better when you can just prevent other companies from making competing products?

It should be a big warning sign for the Patent Companies themselves. If you have to start patenting trivial things to compete then it suggests your products are going downhill. In fact, even if your products aren’t going downhill, patents provide an incentive to get lazy about quality. Not to mention the opportunity cost of all the time spent in bed with lawyers and the patent system.

1. Dave Winer says: Apps are not the future because they can’t link to each other (Yes, that confuses me too. Apps being such unfriendly lone wolves with brooding demeanors and chiseled granite jawlines).
2. Brent Simmons at Inessential (the irony) has a very well-written counter-argument: The Future is Tangled (Isn’t everything tangled – our lives, electronic cables, yarn – and cursed to be tangled forever).

You know what this argument is similar to – iPhone vs Android, Kindle vs iPad, iPad vs Kindle Fire. Discussions that are nonsensical because they focus on things that don’t really matter. Somewhere in all the magical technological evolution and revolution we seem to have forgotten that devices are:

1. Meant to serve us. We are more important than devices or technologies.
2. Meant to do things for us. Devices and Technologies only matter as far as what value they provide us human beings.

The point Brent Simmons ends with is very interesting -

There are multiple tracks of evolution, but those tracks are heading to the same city. And there are plenty of hobos like me that love hopping trains — for fun, to satisfy curiosity, to tell stories and hear stories — on the way there.

My thought on that would be – While very elegant and nicely put, this still isn’t the right way to think of it. This is a case of an artist or a craftsman valuing the tools over himself and users, of the artist valuing the tracks and the train over the journey and the destination. It is, sadly, a disease that almost everyone in the software business seems to be afflicted with – loving the trains instead of the journey or the passengers.

The important thing isn’t the tracks or the trains or even the evolution of track mapping technology - it’s the passengers you are carrying to their destination and the shared journey.

Software and even Physical Devices are just a means of Delivering Value

A Kindle is a way to get books to users and to let them read books. It isn’t the destination. It’s no more the essence of books than a scroll or a paperback’s spine and paper. Writers write books and readers read them. For too long we’ve associated too much importance with ‘the act of getting the book from the writer to the reader’. Technology, and especially the evolution and magic and revolution in technology, should help us to eliminate everything in between the writer and the reader – not glorify it.

Three Rules for Software and Devices worth Considering

1. Focus on providing value to users.
2. Focus on being a great and efficient provider of value.
3. Stop taking your devices and technology too seriously.

It’s about time the makers of software and devices focused on value and on users. There’s a lack of purity in how software and devices are portrayed these days – as more important than end users, as the core value (versus being providers of value). Mostly because software and device makers are delusional and because companies are focused on capturing the value transmitted – as opposed to focusing on transmitting value.

If doctors started thinking the way we software makers think 50% of patients would die because the doctor was arguing about which surgical procedure is the most sophisticated. Instead of curing patients doctors would focus on philosophical arguments on Tylenol vs Aspirin.

Rather than saying – How can we make devices that transfer 99% of the value that authors create to readers? Device Makers and Software makers are saying – How can we capture 80% of the value that our devices and software transmit?

It’s completely the opposite of what software and devices are supposed to do.

Software and Devices exist only because Users use them

This is common sense. A software isn’t excellent because it has the most lines of code or because it uses the toughest technology or because it is very elegantly made. That would be like claiming a hammer that is nothing but an exquisite handle is the best hammer ever made.

Software applications and hardware devices are excellent to the extent that they benefit users i.e. provide value to them. If a tree falls in the forest and no one hears it …

Software and Device Makers focus so much on devices instead of users that they fail their core purpose

It’s very easy to stay stuck in the domains you understand, and to keep working in those domains. That’s the temptation. A temptation that more and more technology makers are succumbing too.

1. Do we really think TV remote makers make terrible remotes on purpose? No, they just choose to forget that the core value the TV remote provides is to let users change channels and interact with the TV. It’s not a contest of how many buttons or how much technology you can fit in - It’s a TV remote.

That’s exactly the mistake everyone making devices and software is falling prey to – they are focused on how elegantly the tracks are laid out, what material the tracks are made of, whether the train has wood panelling, who the driver of the train is, and other such nuances that are secondary to the task at hand – delivering value.

Software Companies and Device Makers have users, their passengers, and they have a destination (providing value to users in the most efficient and user-friendly manner). Those are the only two things that matter. If they aren’t delivering value then they don’t exist (like the Squirrel scurrying along the tree that just fell in the forest … perhaps). If they aren’t focused on users then they are messing up the value delivery part – their core purpose.

While everyone in technology is fighting over which tool they should anoint as the magical tool that solves everything, and which everyone must absolutely use, users are just standing there wondering when people in technology will realize that without providing value to users, software and devices might as well not exist.

It’s a pleasure writing for you.

Thank you very much for reading the blog. And for sharing it with your friends and family.

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Secondly, thinking about the future of books has made me realize that the blog’s actions and aims are pretty deluded at this stage. Reality has a way of punishing us for our delusions and perhaps it’s time for me to be super forthright with myself and everyone else – before the punishment arrives.

1. This blog needs to focus 100% on what’s best for readers. That means you’ll see a few changes – links to Nook Touch and Nook Tablet on every page (which I make no money from, though I do from Kindles). Honestly think they are (along with Kindle Fire and Kindle Keyboard) the best eReader and Tablet choices – so not linking to them all this time was being dishonest.
2. Removing links to Kindles that are not 9 stars out of 10. Kindle Touch and new Kindle are good but they aren’t the very best. So the multiple links to them on every page are now gone. Might go through various review posts and make updates in the posts themselves too – However, there are 3,000+ posts on this blog so it’s probably not going to happen soon. A $99 Nook Touch with physical page turn buttons and no ads is better than Kindle Touch – so it gets the link on every page.
3. This blog needs to switch to either – Link to all eReaders (to avoid financial bias to one company) OR Link to all eReaders without associate links.

I think money always leads to a loss of purity and the hope is that we can make our apps business big enough to end all the associate earnings from this blog and focus it purely on books and readers and authors.

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Thirdly, as far as the focus on free books – it’s a difficult choice. There is value to readers. At the same time, the tons of free book offers are definitely destroying the value of books. In the short-term, they benefit readers and hurt authors. In the long-term, they hurt everyone.

There’s also some fundamental flaw in me linking to free books that make authors nothing but make me a commission (due to other things bought at Amazon). It’s treating books as loss leaders and goes against my love for books and the desire to see them valued for what they are.

By January 1st, 2012 I’ll make a decision (and will let you know) between:

1. Option 1: Only mention free books that are (ironically) from Publishers and rated 3.5 stars and above OR are indie but rated 4 stars and above. Not mention short stories.
2. Option 2: End the free book updates. There are lots of good options like eReaderIQ and Kindle World so it’s not a big loss.

In either case, I will stop using associate links with free books – If the author is not making money, then I don’t want to either. This whole concept of giving away books for free for the imaginary carrot of future sales is a delusion. There are no future sales – only tons of hungry authors willing to be the next group of idiots giving away their work for free.

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Fourthly, disclosing all conflicts of interest.

I’m part of two companies and together we cover:

1. This Blog.
2. Apps for Kindle.
3. Apps for Kindle Fire.
4. Apps for Nook Color. Pretty much equivalent to 3. since both use Android and have the same screen. When we have our apps polished enough for Kindle Fire, I’ll let you know.
5. Blogs for Kindle Apps (more than one). We can’t really compete with companies like EA unless we reach customers directly and that’s why the blogs.
6. Blogs for Nook Apps (one). Same motivation – to reach customers directly.

As small companies we have very little control over things. Hence the need for direct channels to our customers.

When you come to the blog you should be aware that every Kindle sold and every Nook sold and so forth has a benefit and thus introduces bias.

The various conflicts of interest probably cancel each other out in Kindle and Nook Land but are probably HUGE when it comes to Kindle+Nook vs iPad.

*****

Fifthly, the blog’s aim of helping readers and books has devolved into helping Kindle sales. That’s sad and it’s far less than what the blog could achieve. It would be a pity to have a chance to do something good for the future of books and not take opportunity of that.

So it’s time to change direction of the blog.

What is the new direction of this blog?

Well, actually, it’s what the original direction and aim was. Before it got thrown off by getting too attached to Kindles and forgetting the larger issues and getting distracted by financial considerations.

To Help Readers and Authors and play whatever positive part possible in the Democratization of Publishing. To help positively in some way to build a better future for books and for readers and authors.

The Old Man and the Wasteland (in a good sense) and The Hunger Games (in both a good sense and a bad sense) are the two books which motivated me to rethink what this blog is doing and the net conclusion was that it’s not really doing a net positive for books.

If the authors of these and other good books have to still struggle with gatekeepers. If they still have to struggle to earn what they deserve. Then as readers we should be sad at the missed opportunity.

We are in danger of ending up in a world where authors exist (yet again) at the mercy of a gatekeeper and where books are devalued to almost nothing – and it’s time for this blog (and hopefully all of us) to join the resistance.

The one real good that has come out of all of that has happened with eReaders and eBooks is that readers own their Kindles and Nooks and Tablets. Readers are very smart people. So the only thing missing is an intelligent, social crowdsourcing engine. That, along with old Publishers and new Publishers and platforms, would form a really good basis for a healthy Publishing world.

Now I’m going to figure out a way to focus this blog on the only three things that matter in Publishing: readers, authors, books. And to keep that focus and act in the best interests of these three parties.

Scenario 1:

• Publishers and Booksellers Control Everything.
• Authors get only 8% to 15% of earnings.
• Readers have to read what Publishers decide is good enough.
• Publishers have almost complete control over authors and their art.
• A huge chasm between the creators (authors) and the appreciators (readers).
• Value of Books is preserved by artificial scarcity.
• Curation is done by Publishers with the downside of them having control.

for Scenario 2:

• Amazon and B&N are Beginning to Control Everything.
• Authors get 70% if they self-publish and take on a ton of headaches.
• Value of Books is going to zero as Amazon increasingly uses books as a loss-leader to get people to Amazon.com. The Library Lending program is the perfect example of how making a user a Prime customer is more important to Amazon than what happens to the value perception of books.
• Readers get to decide what they read – but the lack of curation is overwhelming.
• The Bestseller lists take on a totally crazy amount of importance.
• Instead of the Gatekeepers’ approval, it is now the crushing number of available books that is the author’s primary barrier.
• Value Perception of Books is taking further knocks as desperate authors burn down the entire structure to be able to get someone to read their books.

Basically, the problem we are solving is:

How do we get books from authors to readers freely while allowing platforms to take over control from Publishers? How do we let books become a bargaining chip or a loss leader that platforms can use to establish their dominance?

The problem that we probably should be solving is:

How do we get books from authors to readers with minimal waste of time and money while maintaining the curation aspect and maintaining the value of books?

This latter problem, in my opinion, is the real Publishing Problem. The one that the eBook revolution should be solving. Publishers were only bad because of the share of the profits they took and how wasteful they were – everything else they did was good, and was necessary.

Instead of exchanging a bad situation for a better one, we are exchanging it for one that is as bad. Plus it promises to get a lot worse.

We are exchanging one set of gatekeepers, who took most of the money but kept the value of books intact, with another set of gatekeepers who are detached from the future of books (i.e. they will still survive – even if books blow up). This latter set will be, without a doubt, more damaging in the long run since they are removing quality control (which is bad for readers) and lowering the value of books (which is bad for authors). They are treating books as a means to an end rather than the end itself.

The new Gatekeepers of Publishing are, in their rush to capture the crown of Publishing, drastically reducing the value of books. It’s going to cause huge problems down the line. You could argue that it’s already causing hugs problems.

Books and Publishing are a glittering ‘tens of billions of dollars a year’ prize. Unfortunately, as Internet companies and technology companies are wont to do, the competitors for this prize are not thinking of the ramifications of their actions. They seem either unaware of, or uncaring of, the fact that, in their attempts to win it, they are destroying the prize itself.

There is no doubt that the Kindle Single will suit our culture’s literary wants and needs.

Writers of articles often have an issue with being unable to delve deep into their arguments and observations. The pages of magazines and newspapers simply don’t have room for twenty-thousand word articles. Kindle Singles make it possible for these writers to share their work without the constraints that usually come from article writing.

There has been some debate regarding the intentions of the authors of Kindle Singles which are filed under fiction. Some people have asked whether those releases are lazily written novels that are so condensed because the author did not know what he was doing; however, many writers of novels struggle far more often with editing out the unnecessary parts of a novel. The Kindle Single takes a lot of effort because of the need to fit in the story in such a short format; thus, forcing the author to consider which passages help the story and which are irrelevant. The process of writing a novel, long or short, is such a tedious one that anyone lacking real passion for the craft would simply not attempt it.

Heart of Darkness by Joseph Conrad is a book with huge critical acclaim and a word count of less than fifteen-thousand. Books like it, classified as novellas, would be a rare find today. Kindle Singles is trying to change that and make Novellas more popular. Novellas tend to explore the character and the plot in detail while leaving out a lot of the things that function more as embellishments. They also are much more accessible in terms of time committment. The authors of these shorter works realize that their writing and words must be tight and engaging.

There are thousands of longer novels that have stood the test of time just as well as novellas; however, those novels seem to be read less often these days. How many people do you know who have read James Joyce’s Ulysses in its entirety?

Our fast-paced society does not leave time or allow for an attention span long enough to read such epics. If the smallest good action is worth more than the noblest thought, perhaps a novella read is worth more than a grand novel left untouched.

The Kindle Single fully fits our culture’s tendency to want our entertainment to be quick and easy without sacrificing quality. The tightness and detail of the story really allow for the reader to be consumed for an hour or so and then be on her way. Upon deeper consideration, Amazon pushing Kindle Singles so heavily is not a surprise.

A particular section has been stuck in my head and tonight (thanks to reading The Strain for half the night) it finally struck me why. First, let’s consider what Mr. Jeff Bezos wrote:

There are two types of companies: those that work hard to charge customers more, and those that work hard to charge customers less. Both approaches can work. We are firmly in the second camp.

This is really, really interesting. Particularly when you take a look at the diagram in this article on why the iPad and Kindle Fire are Mirror Opposites.

1. iTunes feeds the funnel for iPad. Apple makes most of its money from the iPad.
2. Kindle Fire feeds the funnel for Amazon.com.

So, and we are taking major liberties here, we could translate Mr. Jeff Bezos’ statement into -

There are two types of companies: Those that work hard to create a very attractive ecosystem where the price of entry is a premium device, and those that work hard to create a very attractive and low-priced device that brings you into their ecosystem.

Both approaches work. We are firmly in the second camp because we think we can sell people everything.

Both approaches do indeed work. Amazon is certainly in the second camp.

Why else would it sell the Kindle Fire (whose bill of materials alone is around $191) for $199? Why else would it sell the new Kindle for $79 (an insane price no matter how you look at it)?

This strategy is a very dangerous strategy and my gut feeling is that it’s not going to work the way Amazon intends and it is going to cause a metamorphosis of Amazon.

The Coming Metamorphosis of Amazon

Going back to the excellent Apple/Amazon/Funnel article, we get this gem -

• Apple can happily ‘just about break even’ on music downloads because of the way it helps sales of their high margin i-devices
• Amazon can happily price the Kindle Fire so aggressively that it is priced more like an MP3 player (and expect to lose money for the near term at least) because of the volume of sales of content it expects / hopes it will drive

Notice the rather critical part -

… expect to lose money … because of the volume of sales of content it expects/hopes it will drive.

Hopes and Expectations don’t make a good bedrock for future profit. Especially when the Internet and the common people are busy driving the value of content to zero.

Amazon can’t let that happen (except perhaps in certain loss-leaders like music).

To Guarantee Profits, Amazon has to Build a Very Closed Ecosystem

If people start buying Kindle Fires and Kindles and buying/getting content elsewhere, Amazon will never make a profit.

This forces Amazon to do some interesting things -

1. Amazon has to lock users into its ecosystem. That’s why we have no ePub support. That’s why there is unlimited Cloud Storage for Amazon content but just 8 GB storage on the Kindle Fire. That’s why Kindle Fire doesn’t have an SD Card slot. That’s why Amazon has to build a custom version of Android and its own Android App Store.
2. Amazon has to figure out how to make money from content. Amazon has to ensure it makes money from content because it’s selling Kindles and Kindle Fires at a loss. It’s a painfully amusing situation - content owners themselves can’t make profits from their content and yet Amazon is expected to make a profit from its 30% cut.
3. Amazon has to figure out how to sell more and more things to users. Since there is no guarantee that selling content will make up for subsidized Kindles, Amazon has to sell people everything it can (including kitchen sinks and designer shoes).

Amazon wants to become ‘The One Shopping Destination’. However, it is taking such big risks to achieve this that it is putting itself into a position where it MUST become The One Shopping Destination.

A closed ecosystem is one way to try to guarantee things don’t go to Hell. Amazon is, perhaps to a larger degree than it realizes, trapping itself into this ‘Closed Ecosystem’ requirement. It’s already at a stage where it needs the Closed Ecosystem just to make a profit.

What if the Profits from Content don’t materialize?

Amazon has been delaying gratification and growing bigger and reinvesting into growth. There are a few possibilities:

1. It doesn’t want gratification. It’s OK with forever delaying gratification. In that case all bets are off.
2. It expects that all this delaying will lead to amazing gratification at a future point of time.
3. It expects gratification at a slow but steady pace for many, many decades.

If Amazon is trading instant gratification for constant gratification over a long period of time, or even if it is trading instant gratification for huge gratification at a future point of time, it needs to find a way to profit from existing customers.

Every customer getting a subsidized Kindle or Kindle Fire has a ‘Delayed Gratification Tax’ attached to her. What happens if the Content Strategy fails? What if all these customers turn around and say – We never signed up for the ‘Delayed Gratification Tax’.

The funny thing about us (as humans and as customers) is that you can almost guarantee that all of us will forget we got a subsidized $199 Kindle Fire  as soon as we get it. As soon as Kindle Fire is in our hands we will simply want content for free or for ridiculously cheap prices (perhaps not all of us, but enough of us to make profiting from content sales rather difficult).

Update: Thanks to gous for a wonderful comment. First, this gem -

What strikes me is how vulnerable to disruption the digital content side of Amazon looks. The Google that created Android would scent blood and attack by attempting to drive the selling price of that content to zero so as to sell ads. Whether that Google still exists is another story.

And then this great link: Musings by Michael Mace on Amazon and Apple.

Gous’ comment above really is what I meant to point out and didn’t do a good job of.

Amazon must either make the Content Strategy work or a Metamorphosis will happen

We don’t know what the metamorphosis will be.

We do know that if all this ‘Delaying Gratification’ and ‘Taking a Hit on Kindle and Kindle Fire’ doesn’t get rewarded down the line, Amazon will be in some amount of trouble. Companies in Trouble do very interesting things.

If its Content Strategy works, Amazon will rule the retail world – to an extent that makes Wal-Mart seem trivial. If its Content Strategy doesn’t work, Amazon will be in a rather interesting conundrum.

We don’t know what the metamorphosis of Amazon will be (in case its Content Strategy doesn’t work) but we do know what might be the facilitator.

The Metamorphosis of Kindle and the Metamorphosis it will facilitate

Kindle and Kindle Fire play a very critical part in Amazon’s Content Strategy, and they will play an even more critical part if the Content Strategy fails.

Consider another section from Mr. Jeff Bezos’ letter:

 We are building premium products and offering them at non-premium prices.

Again, we’ll take some liberties (we aren’t good at denying gratification), and restate it as -

We are building premium mini-Amazon stores and making them very compelling by offering them at non-premium prices.

The Kindle and the Kindle Fire are not exactly devices -

1. They are mini Amazon.com tributaries. It’s the perfect analogy – tens of millions of little tributaries joining into the great Amazon.com river and turning it into something vast beyond comprehension. What happens when there are 27 million Kindle device owners and they all are gifted Amazon Prime and do 80% of their purchasing from Amazon.com? What happens when the number grows to $100 million?
2. They are a direct channel from customers to Amazon. A channel where Amazon doesn’t have to pay Google for traffic or CBS for advertising slots.
3. They are an emotional and physical connection between Amazon and Customers. We only have to look at devotees of the various tech religions (Android, Apple, etc.) to see how powerful this could be.
4. They are behaviour capturing devices. We don’t mean ‘in an evil way’ – just in a ‘what does she buy, what does he wish for, what do they covet’ sort of way.
5. They are a defence against competitors.

We are way beyond the stage where Kindles were eReaders. The Kindle has metamorphosed into an Amazon.com tributary.

Ask any shopkeeper what he would give to have mini-stores in customers’ hands. Ask grocery stores why they hand out those points cards and membership cards. Ask any marketer what she would give to get a full history of customers’ purchases and customers’ explicit and implicit wish lists.

All of that is dwarfed by what the Kindle and the Kindle Fire promise to deliver to Amazon.

In the end it will come down to Kindles and Kindle Fires

Pick whichever path you like - Each ends with there being a hundred million Amazon.com tributaries in people’s hands.

If Amazon’s Content Strategy works then each is a steady source of profit for Amazon. And that’s just from the content.

If Amazon’s Content Strategy fails it might still be able to profit by ramping up the mini Amazon store aspect.

If everything else fails, Amazon still has a hundred million direct channels to customers. Companies are willing to pay for Search Ads and even for Ads on sites where people have zero intent to buy anything. What would companies be willing to pay for a channel where customers’ main intent is to buy?

We haven’t considered all the aspects and all the possibilities. Once you have Kindles in enough users’ hands there are a lot of different things that can be tried.

Amazon, if it is forced to metamorphose, will almost certainly base the transformation on the hundred million Kindles and Kindle Fires it will have in circulation. At its core, Kindle is a hedge of a spectacular kind – it plays an absolutely vital role no matter what happens. It’s gold and stocks at the same time. It’s emerging markets and developed markets in parallel. It’s the Schroedinger’s Cat of retail.

If Amazon’s gambles pay off, Kindle and Kindle Fire will be the channels delivering consistent and comforting gratification to Amazon. If Amazon’s gambles fail, they will morph into devices of resurrection.

That letter from Mr. CEO is genius. Perhaps explaining exactly why Amazon is in the second camp would be overkill. However, it would certainly be interesting to hear more on exactly why Amazon is working hard to charge customers less and why/how it is able to sell premium products at non-premium prices.