Kindle 3, Kindle WiFi and the $9.99 boycott

The potential impact of the Kindle 3 and Kindle WiFi on the Agency Model isn’t really being discussed.

It’s worth wondering –

Will Kindle 3, Kindle WiFi owners cause a strengthening of the $9.99 boycott? Could they cause the downfall of the Agency Model?

Are people paying $139 for Kindle WiFi and $189 for Kindle 3 going to pay $14.99 for books?

Probably Not.

If you’ve waited for the price to get to $139 to buy a Kindle WiFi you’re likely to be willing to wait for an ebook to drop below $10. That or pirate the book or get it from the library.

New Kindle owners will probably stick to buying books that are reasonably priced.

$14.99 and $12.99 will frustrate new Kindle 3 owners and strengthen the $9.99 boycott

We’re now getting a lot of people who simply couldn’t afford to pay $259 for an eReader or didn’t think an eReader was worth that much. In either case they are likely to feel that an ebook isn’t worth $14.99 or even $12.99.

Such ridiculous ebook prices (especially since hardcovers are just a few dollars more and paperbacks are cheaper) will cause a lot of anguish and force new Kindle owners to choose from amongst the few available options –

  1. Pirate eBooks. Most people aren’t particularly inclined to do this – It’s too much of a bother and it isn’t exactly ethical.  
  2. Stick to books priced below $9.99.  
  3. Give in once in a while if you really want a book.
  4. Wait for the book price to drop.
  5. Get it from a library or buy it used for a few dollars.  

The Kindle Store might have 510,000 out of 630,000 books priced at $9.99 or below – However, most new releases are priced at $14.99 and $12.99. It forces new Kindle 3, Kindle WiFi owners to delay gratification and a lot will probably join the $9.99 boycott. 

Where do we currently stand with the $9.99 boycott?

We are in an interesting stalemate where the Agency Model has failed to establish $14.99 but has managed to get $12.99 working –

  1. In the top 25 – 8 books priced at $12.99. Rest below or at $9.99.
  2. In the top 50 – 13 books priced at $12.99, 1 at $11.99, and 1 at $10.99. Rest below or at $9.99.
  3. In the top 100 – 18 books priced at $12.99, 1 at $13.65, 1 at $11.99, and 2 at $10.99. Rest below or at $9.99.                              

22 books out of the Top 100 priced above $9.99 might not seem very bad. However, before the Agency Model the number used to be 4 to 8. 

On the other hand, 22 is an improvement from about a month back when there were 28 books at $12.99, 4 books at $14.99, and several at $11.99 in the Top 100.

$12.99 is the current new book price-point and new Kindle owners will hate it

What the last section does show is that the Agency Model has managed to establish a new $12.99 price point – most new ebooks arrive at this $12.99 price.

The new wave of Kindle owners will attack this as they expected $9.99. They didn’t get the benefit of the ‘Try for $14.99, Settle for $12.99’ trickery Publishers played on all of us and will fight hard against $12.99.

There’s little doubt new Kindle owners will strongly resist the $12.99 and $14.99 prices of the Agency Model.

Will their resistance make a difference?

Can the Agency Model withstand Kindle 3, Kindle WiFi owners?

We do know a few things from the first Publishers vs Kindle Owners battle –

  1. $9.99 books sell better than $12.99 and $14.99 books.
  2. $14.99 failed as an experiment.
  3. Kindle owners (the ones who bought Kindles when they were $399, $299, and $259) fought hard against the Agency Model.
  4. Lots of Kindle owners participated in the $9.99 boycott. Lots of them still do.
  5. There’s a general perception that $9.99 is a fair price for new ebooks.

With new Kindle 3, Kindle WiFi owners we are going to see the same things and a few additional factors –

  1. New Kindle owners are probably more price-sensitive. They are going to come in expecting $9.99 prices.
  2. They are likelier to boycott prices above $9.99. They are likelier to buy books priced below $9.99.
  3. New Kindle 3, Kindle WiFi owners are going to help increase Kindle ebook sales. We may hit 15% to 20% market share by end of the year.
  4. They will strengthen the ranks of current Kindle owners – most of whom have resisted the Agency Model.
  5. Their arrival will revitalize current Kindle owners. Suddenly we all feel we have more say and Publishers seem weaker.

Publishers get a new group of Kindle owners who come in with the exact opposite mind-set of what Publishers would like. New Kindle owners are probably going to fight for $9.99 far more vigorously than current Kindle owners do.

As the number of Kindle owners increases Publishers can’t afford to play games

While ebooks made up 5% of the market Publishers could afford to price ebooks at $14.99 and $12.99 and let rivals like smaller publishers and independent authors get more ebook sales. As the number of Kindle and Nook owners goes up and ebooks’ share of the market increases Publishers can no longer afford to lose ebook sales.

It’s all fun and games to fight against a small group of customers – overprice your books, flex your muscles, dare customers to boycott higher prices. As the number of eReader owners increases and the market share of ebooks goes up to 20% Publishers will have to get serious.

Would they be willing to lose 20% of their sales? Perhaps. 

However, as the market share of ebooks increases it becomes tougher and tougher to mistreat/exploit Kindle and Nook owners.

Perhaps the best way to kill the Agency Model is to simply sit back and watch the new Kindle 3 and Kindle WiFi owners join the $9.99 boycott. New kindle owners who are even less willing to pay prices over $9.99 than we are. New Kindle owners who will probably strengthen the $9.99 boycott enough to kill off the Agency Model.

Will Kindle 3 end the eReader wars?

The one question the Kindle 3 has made me ask myself more than any other (well, besides Graphite or White?) is – Does Kindle 3 end the eReader wars?

The easy way to answer that question is to hide behind ‘Kindle 3 will sell millions’. However, lots of eReader companies are going to sell millions of eReaders before and after the eReader Wars are decided.

The real question is – Which eReader is going to win the eReader wars and end up with an overwhelming (90% market share) or dominant position (70% market share)?   

Kindle 3 is the first eReader (including the $139 Kindle WiFi under the ‘Kindle 3’ umbrella) that threatens to provide a firm answer.

How would we know Kindle 3 has ended the eReader Wars – What’s the criteria?

Let’s say there are two possible criteria for announcing an end to the eReader wars –

  1. A Microsoft Office like dominance with 90% or more of the market. A situation where there isn’t really a viable competitor. 
  2. A Google Search type dominance with 70% or so of the market. A situation where the 2nd and 3rd best companies in the market are not really a threat.

Forget the companies and the market – The 70% to 90% market share and the cemented #1 position are the key criteria.

If Kindle 3 and Kindle WiFi help Amazon get to 70% market share AND cement the Kindle as the #1 eReader then we can safely say the Kindle 3 has ended the eReader wars.

Please note that we are talking about dedicated eReaders. So number of iPhones sold or number of cigarette lighters with LED displays sold doesn’t factor in.

Kindle 3 and the Invisible Competitors – Nook 2, Sony 606, iPad 2

There are bound to be strong reactions to a ‘Kindle 3 as decider’ post.

People who read on the Nook or Sony and people who read on the iPad (no jokes please, we mean the 5% who actually do read) will be aghast. As will a lot of people with an axe to grind (Press) or whose future depends on the death of the Kindle (Publishers, Paper manufacturers).

Well, they have a valid argument – We haven’t seen what Kindle 3 competitors will bring to the table.

We have the iPad 2 which will try another round of ‘LCD (this time with Retina Display) is better than eInk’.  It’ll also keep drumming on ‘the number of people who could possibly read on their device’ as opposed to ‘the number of people who actually read a lot on their device’.

The Nook 2 already has FCC clearance and this time it is Amazon that has made the mistake of announcing its features in advance – though you have to suspect (with the microphone etc.) that Amazon might have kept a few things in reserve. Nook 2 may have the eInk Pearl screen, it might have some new feature that blows us away, and it’s likely to match Kindle 3 in price (even if it bleeds B&N dry).

Sony offers a big threat – An alliance with Google Editions would add the missing range of books and supply some much-needed infrastructure. Sony’s new devices might figure out a way to do touch without sacrificing visibility. Sony has been delivering good devices – It’s the store and eco-system they mess up and perhaps they finally realize it and figure out a solution.

Perhaps the biggest threat is the giant search company and who knows what they might bring to the table.

All these companies face a few big challenges.

Kindle 3 has set a very high bar

There’s little doubt that Amazon had the best store. It also had amazing infrastructure – Free 3G wireless is pretty impressive no matter how you put it.

It was the Kindle that was the weak link. Firstly, the improvements were all incremental. Secondly, the Kindle 2 was 1.5 years old and had old eInk screen technology. Thirdly, Amazon’s avoidance of ePub and lack of openness and lack of library books and lack of WiFi were real disadvantages.

Kindle 3 changes most of that – We’ve gone from a state where the Kindle Store and WhisperNet were letting Kindle edge other eReaders to a Kindle 3 that can stand on its own. In fact, it beats the other eReaders handily (unless ePub or library books are a must-have for you).

As we go through this list of Kindle 3 improvements keep in mind that Nook and Sony Reader will probably match the Kindle 3 on some (perhaps even all) of these improvements –

  1. The eInk Pearl screen is better than any other eReader screen available. The graphite casing adds to the contrast and Amazon has added tweaks to further improve the contrast.  
  2. Kindle 3 is lighter, thinner, and more compact.  
  3. Kindle 3 has double memory and double battery life with wireless off.  
  4. The PDF support has been extended to include search and taking notes and making highlights. You can adjust the contrast and can do incremental panning when zoomed in.
  5. There’s a microphone that’s going to be used for at least 1 killer feature (nothing yet).
  6. There’s a Kindle App Store in the wings and it will almost certainly make a difference.
  7. New Accessible menus combine with the super size fonts to make it very usable by blind and low vision readers.
  8. There’s finally WiFi.
  9. Support for CJK fonts and Cyrillic fonts lets Amazon sell in China, Japan, Russia, and lots of East European countries.

Those are just the big improvements – We also have faster page turns, better button placement, sharper fonts, three font types, auto-disappearing book title bar, a webkit browser, and an article mode in the browser.

Keep in mind that this has arrived 4-6 weeks after a massive Kindle 2.5 upgrade that added PDF pan and zoom, Collections, sharper fonts, super sized fonts, and the ability to share passages on Facebook and Twitter.

Kindle 3 is an eReader which, on its own – without factoring in Kindle Store and Kindle Whispernet, is clearly better than the competition. It’s almost unfair that it gets the backing of the best eBook store and the best eBook/eReader eco-system and infrastructure.

Nook 2, Sony 606, iPad 2 have to beat Kindle 3 by a margin

Here we’re assuming the iPad 2 is going to pretend to be a dedicated reading device which just happens to have a screen optimized for playing games. So we consider it a competitor.

When the Nook 2 and Sony 606 arrive later this month, and when the iPad 2 arrives later this year, it’s not enough for them to match or beat the Kindle 3. They have to beat the Kindle 3 by a wide enough margin that Kindle Store and Kindle WhisperNet and free 3G can’t make up or exceed the difference.

This is perhaps the biggest thing people are going to misunderstand when they get upset about the ‘Will Kindle 3 end the eReader wars?’ question. Kindle 3 just needs to make sure it’s not worse than the competition. The Kindle service/ecosystem (including Kindle Apps on other devices) and Kindle Store will take care of things if there’s a tie between devices or even if another eReader is slightly better.

Which means Nook 2 doesn’t just have to match the 10 to 15 solid improvements the Kindle 3 has made – Nook 2 has to find an additional 5 to 6 improvements and implement them successfully.

It’s the same with the iPad – especially since Kindle 3 has improved on almost every advantage Kindle 2 had over iPad. Kindle 3 is cheaper (well, the WiFi model is), lighter, has battery life of 1 month with wireless off, its more compact, and the eInk screen has amazing contrast. Kindle 3 also cuts down on Kindle disadvantages – there’s double the memory, page turns are faster, there are 3 font types now, PDF support is better, and there’s a WebKit browser. 

Quick Synopsis – Where we stand on our Kindle 3 argument

We’ve established a few things so far (feel free to disagree in the comments) –

  1. Kindle 3 is much better than Kindle 2 and also much better than Nook and Sony Reader.
  2. Kindle 3 has the support of the best ebook store (Kindle Store) and the best eBook/eReader infrastructure (Kindle WhisperNet).
  3. Nook 2 and Sony 606 would have to beat Kindle 3 handily to make up for their comparatively poor ebook stores and for their weaker infrastructure.

We’ve also set 70% or higher market share and a cemented #1 position as the criteria for Kindle 3 to end the eReader wars.

Now, let’s look at why it’ll be exceptionally hard to catch up with the Kindle 3.

Kindle 3 and Amazon’s Kaizen Strategy are hard to beat

Amazon is in the enviable position of having the current best eReader (Kindle 3), best store (Kindle Store), and best infrastructure (Kindle WhisperNet). However, it’s biggest advantages are its kaizen philosophy, its focus on reading, and its deep pockets.

Sony cares only about gadgets. Apple cares only about selling beautiful things to cool people. Apple sells iPads to us strange people despite us wanting to read books – not because they care about books or reading but because they care about iPad sales. Nook is hampered by B&N’s financial struggles.

Amazon is running faster than all of them in the race to develop the best reading solution – Apple could catch it but Apple doesn’t want to run in this race. Sony thinks it’s in the race but it only cares about making a great gadget for reading (it couldn’t care less how, what, or if people read on the gadget). Nook is the only real competitor and unless Google saves it (or buys it) it won’t last (B&N just doesn’t have the resources to compete long-term).  

Amazon has basically done a few key things –

  1. It has focused on reading. The iPad was perhaps the biggest temptation to veer from that path and Kindle 3 shows Amazon has resisted it.  
  2. It has set itself up to invest in the Kindle for a long time.
  3. It has improved relentlessly. Until Kindle 3 we only saw the impact of the Kaizen philosophy in the service and the bookstore and in Kindle Apps. You have to look at the sheer number of improvements in Kindle 3 and realize kaizen is beginning to show up in the device too.

The Kindle 3 is the best current eReader – and still Amazon is improving the device, store, and infrastructure relentlessly.

Not only do Nook and Sony Reader have to catch up to the Kindle 3 they have to do it given that Amazon is improving faster than they are. It’s a race where the runner in front of you suddenly reveals bionic legs and starts accelerating.

With eReaders the inflection point is going to become apparent like it did with ebooks – 6 months after it has occurred. We’ll look back and realize the inflection point has long since passed and will try to piece together exactly what happened.

Well, the Kindle 3 happened.

The only question left is – Is it an inflection point only for the survival of eReaders OR Does it also cement the Kindle 3 as the winner of the eReader wars?

Kindle Hands free reading? Speech to text? Kindle 3 microphone

One of the features of the new Kindle 3 that hasn’t received much attention is the tiny microphone at the bottom. Thanks a ton to John Holloway for pointing this out and speculating about what it might mean. 

The Kindle Help pages clearly show that there is a tiny microphone lodged between the headphone Jack and the micro-USB port. They include this snippet –

Microphone: Kindle (Latest Generation) is built with a microphone jack. This feature is not yet enabled and is for future use. 

Aah … the deliciousness of speculating on what Kindle 3 features the microphone might enable.

Kindle 3 microphone – What cool features might it enable?

There are a lot of potential Kindle 3 features that instantly come to mind –

  1. Voice Activated Page Turns for hands free reading.
  2. Speech to Text.
  3. Voice Activated Menus.
  4. Adding Notes by speaking them out.
  5. Adding Voice Notes.
  6. A voice journal that stores our notes and ideas.
  7. A journal that converts what you say to words.

That’s just the tip of the iceberg.

What Kindle Apps will the microphone enable?

We are going to see a Kindle App Store at some point of time – that means we will have developers playing with the microphone and extending what it’s used for.

At the minimum we’ll get – notes, text to speech (if Amazon doesn’t provide it first), voice recording, spoken word journals, voice commands in apps, and perhaps voice activated games. There’s also the chance that developers use the microphone in ways we don’t anticipate – Karaoke? Another interesting area is using the microphone with sheet music and comparing how accurately you play or overlaying what you’re playing with an underlying track.  

Note: Kindle Apps currently can’t access sound on the Kindle so Amazon would have to enable both the speakers and the microphone for some of these Kindle app ideas to be implemented.

Are there more hidden surprises in Kindle 3?

It’s remarkable that in the middle of – adding WiFi, doubling the battery life and memory, improving PDF support, making page turns faster and fonts sharper – Amazon managed to add-in a microphone and lay down the foundation for hands free Kindle reading and Kindle speech to text.

It makes you wonder what other surprises Amazon has in store for us with the Kindle 3. Perhaps the Kindle 3 microphone and support for CJK fonts (Chinese, Japanese, Korean) and Cyrillic fonts are the only hidden features. Perhaps there are more. It’ll be interesting to see what Amazon does with the Kindle 3 microphone and whether we get hands free Kindle reading and Kindle Speech to Text in the next 6 to 12 months.