new Kindle 3 to arrive – Digitimes

The Kindle is still out of stock and now there’s some interesting news/speculation from DigiTimes that a new Kindle 3 might be the reason –

1.35 million e-book readers were shipped to the global market in the second quarter of 2010, 33.2% fewer than the originally projected 2.02 million units, chiefly because shipments of new models were delayed to the third quarter, according to DigiTimes Research.

It seems a bit of a stretch to say that eReaders sold less because new models were delayed to Q3, 2010.

New Kindle 3 arriving in Q3, 2010 – DigiTimes

DigiTimes is saying that Amazon will be releasing a new product in the third quarter of this year (Q3, 2010 would include July, August, and September of 2010). Kindle 3 is the only thing that comes to mind.

DigiTimes starts off by claiming that 1.35 million ebook readers were shipped to the global market in Q2, 2010. This was lower than its expected 2 million projection. Apple people – Yes, you can now write about how it’s due to the iPad and how iPad ate up 33% of the market. It probably did and it also didn’t kill off eReaders. A 33% loss is easy to withstand – especially since the Kindle price-cut to $189 didn’t happen until June 21st and there may be a new Kindle 3 soon.

DigiTimes also says China Mobile didn’t do well and SiPix shipments were delayed and these factors contributed to the lower eReader shipments.

New Kindle 3 prediction from DigiTimes

Here’s what DigiTimes writes about Kindle vs Nook and a forthcoming Kindle 3 (courtesy Teleread) –

Barnes & Noble took the leading position in the second quarter with 33% market share, followed by Amazon’s 27%.

However, Amazon is expected to regain the leading position in the third quarter when the company launches a new product, DigiTimes Research noted.

For the second half of 2010, demand is expected to pick up as vendors lower their prices.

DigiTimes is projecting 7 million eReader sales in the second half of 2010. That’s quite an assumption given that 1.35 million were sold last quarter. Even factoring in a new Kindle 3 and the holiday season you’d think 4 to 5 million would be the upper bound.

New Kindle 3 – Is Price going to be a big factor?

DigiTimes talks a lot about price. It’s saying that vendors are going to lower their prices, SiPix’s ePaper will lead to more competition (and perhaps lower prices), and system on chip solutions will help reduce prices (and also facilitate new and faster developments and features).

Sounds like we might get Kindle 3, Nook 2, and the new Sony Readers all at around $200 price-points.

Basically, we now have a combination of factors coming together –

  1. eInk might have hit volumes of scale or implemented some efficiencies they learnt from LG Display. That would explain the Kindle DX 2 being $379 and suggests that the Kindle 3 might be closer to $200 than to $259 (price of the Kindle 2 before the price cut to $189).
  2. There is a lot of pressure due to Nook WiFi being at $149 and Amazon is unlikely to price the Kindle 3 for $110 more.
  3. Amazon has new Kindle models and used Kindle models (excluding the DX) retailing between $109 and $189. This suggests that it might have decided that sub $200 prices are ideal. A sub $200 price does seem plausible. Perhaps something between $199 and $225?
  4. All the Digitimes points above. Competition from SiPix and system on chip solutions will definitely help lower prices.
  5. Agency Model and the fact that eReader makers are no longer taking losses on ebooks. They can now price their new eReaders cheaper. Add-on the contribution from ebook sales via various Kindle Apps and Amazon might decide to take a hit on the Kindle 3 or sell it at close to what it costs to make each Kindle 3.

If Kindle 3 is merely Kindle 2 graphite then we really ought to see a lower price than the earlier $259 Kindle. A $199 or $220 price would also help with sales and would entice more people into reading.

DigiTimes has a pretty up and down record when it comes to making Kindle predictions. It does however have its sources in China and Taiwan and there’s a chance it might be right. Certainly hope its right about 7 million eReaders being sold in the second half of 2010 and it’d be good if Kindle 3 makes up 5 million out of those. A lot more money for Amazon that it can devote to getting us a color Kindle 4 and adding new features to Kindle 3 and Kindle 2.

Kindle 2.0 improvements essential for Amazon

I’m going to start with Amazon’s big advantages and why Kindle 2.0 is bound to sell out. Then I’ll talk about the reasons I feel Kindle 2.0 needs to be significantly better than Kindle 1.0 (even though the leaked pictures hint that it possibly isn’t). I’ve clearly mentioned when points are my own gut instinct (and thus may or may not be valid).

Kindle Advantages, and reasons Kindle 2.0 will Sell Out.

Kindle 2.0 could have no new features and it would still sell out (provided it’s not worse than Kindle 1.0 – and even that might not be enough to stop sales). Here are the big things in Amazon and Kindle’s favor –

  1. There is huge market demand. The prices on EBay, the Kindle being out of stock, the 11-13 week delays, and refurbished Kindles selling out in 1-2 days all point to this.
  2. The Amazon Kindle Reader meets the market demand – that’s the truth. People can point to hundreds of improvements. However, at its core the Kindle is great for reading, nearly every Kindle owner loves it, and it does what’s required.
  3. The trust that Amazon has among customers is great.  In the UK, both Amazon and Amazon.co.uk are amongst the top 5 most trusted brands. In the US, Amazon consistently gets the best or close to the best customer feedback. I feel that this is a huge reason for Kindle’s success.
  4. Amazon’s range of book titles is unmatched.
  5. Amazon’s wireless delivery, coupled with its ‘Always On’ Kindle Store, is a big competitive advantage.
  6. The free wireless Internet is another big competitive advantage.

Reasons Kindle 2.0 needs Improvements

Amazon’s decision to not disclose sales figures is a master move. A lot of the potentially huge competitors (like Apple, Microsoft, Google) have no concrete figures on exactly how many Kindles are sold, how big this market is, and how big it could be. A range – Yes. An exact figure – No. Here are the main reasons a much-improved Kindle 2.0 (and for that matter a Kindle 3.0 that is a technological leap) is essential for Amazon –

  1. Most of all, Amazon needs as many Kindle owners as it can get. Every single customer is a lock-in – and with enough users you’ll literally see the replication of the iPod + iTunes monopoly in books.
  2. Also, just like iTunes is expanding into Movies and other digital content, the Kindle and the Kindle Store can expand into other areas – And the best part is they already have Amazon.com. An iTunes for buying anything :).
  3. There are a lot of smaller competitors, some with dangerously good products – I feel that PlasticLogic is the real long term competitor – the fact that they have no available product is a heaven send. Take a look – [youtube=http://www.youtube.com/watch?v=v226DYqlbHQ]
  4. Even other gadgets are extending their ereading capabilities or adding software – we all know about iPhone apps – now Nintendo DS is getting into the ereader game, and it has 87.88 million units out there.
  5. The big boys are waiting to see what happens before jumping in. Google already has Google Book Search and the digitization project going on. Microsoft is always a threat (think XBox, not Zune). Sony’s already in the market, with a viable product. Amazon has a tangible advantage in having the best available product and having great buzz – it must keep improving the Kindle and keep its advantage.
  6. Trust of its users – There are a lot of people who’ve bought the Kindle based on their trust in Amazon. It’s hard to call hundreds of thousands of people early adopters – However, these are the people using the Kindle, spreading the word, and providing feedback. Amazon owes it to them to keep improving on the Kindle – hardware, software, and the Kindle store.
  7. I feel that any Kindle owners are unlikely to switch sides, given the presence of an equally good competing device. In fact, I’d say even if there was a slightly better competing device, existing Kindle owners would not switch over. The longer Amazon has a clearly better product in the marketplace, the more customers it gets, and the more loyalty it engenders.

I feel that Amazon’s Kindle has stolen a huge lead. The only true competitors are going to be ones that can fight it on technology, usability, and convenience. This narrows down the field significantly. PaperLogic might (and should) morph into a supplier of technology as opposed to an end product. Kindle 2.0 becomes an exercise in maintaining market dominance, getting more and more converts to the ‘Kindle Family’, and getting valuable feedback for Kindle 3.0 all the way to Kindle 10. Kindle 1.0 might have a year’s worth of a lead over the rest of the market – However Kindle 2.0 and Kindle 3.0 might very well be fighting Apple’s iBookReader and a Google Books + PaperLogic hybrid monster by the end of 2009.

Kindle 2.0 Articles – Forbes Vs ZDNet

Andy Greenberg at Forbes wrote an obligatory slow news day article on the Kindle 2.0 yesterday, titled ‘Why Amazon Doesn’t need Kindle 2.0‘. There’s a rather amusing retort from Andrew Nusca at ZDNet’s ToyBox entitled ‘Why Amazon Needs Kindle 2.0‘. I’m writing down my thoughts on each.

The Forbes article has this interesting snippet –

Forrester Research (nasdaq: FORR) roughly estimates that around 400,000 Kindles have been sold in all – a small number in the world of consumer electronics, but around 30% more than Sony’s (nyse: SNE) sales of its competing Reader device.

Wow – I had no idea that Forrester not only had Kindle sales estimates, but also Sony sales estimates. So Forrester is saying Kindle has sold 400K units, and Sony Reader has sold approximately 309K units. These are some rather sketchy claims and I wouldn’t pay much heed. Here are Mr. McQuivey’s Kindle predictions, covered in the Boston Globe, from last year –

McQuivey projects that 50,000 of the $400 Amazon Kindles could be sold in the first year on the market and estimates that the other high-profile e-book, the $300 Sony Reader, can’t have sold more than “a few tens of thousands” since its launch last year.

Anyways, Mr. Greenberg makes a few rather interesting claims (with my thoughts alongside) –

  1. There’s been no significant jump in eInk technology other than the touch screen (I’d argue that’s a pretty big jump in itself – from book to book + journal. I do feel that there’s no guarantee that Kindle 2.0 will have this feature).
  2. There’s nothing Amazon can do to upgrade EVDO technology (I don’t see any need to update EVDO technology – how much can you improve on getting books wirelessly in 1-2 minutes).
  3. Kindle 2.0 would have only incremental software improvements. (I think this is a ridiculous claim – we’ll see some definite BIG improvements in software – it’s impossible for Amazon to spend over a year creating Kindle 2.0 and not put in some cool new features). Much of the Forbes article seems to be inspired by the Forrester Research article. Another snippet –

    Forrester analyst James McQuivey surmises. “The next Kindle can’t be dramatically better,” he says. “There’s very little other than the pleasantness of the experience that you can tweak.”

  4. Mr. McQuivey is also quoted as saying that the only killer feature Kindle 2.0 could have is a price drop and that Amazon would be loathe to do it because it would cannibalize sales. (Nonsense. Amazon will go for the lowest price it can manage – I’ve run across claims (which I’ll follow up on and write about) that each eInk screen costs $200, and I think that might be the big stumbling block for prices).
  5. Kindle’s wireless delivery makes it untouchable. (This I have to agree with – at the moment, even with its touch screen, Sony Reader can’t touch the Kindle).

Which brings us to the ‘Why Amazon Needs Kindle 2.0‘ article, and an article I like much more, although their conclusion that Amazon needs Kindle 2.0 because eventually Sony will get it right is rather narrow. To be fair they do talk about how Apple kept improving the iPod, thereby locked out big competitors, and that is a much better reason to improve on Kindle.

I’m going to write more about Kindle 2.0 soon – what I think are the real reasons Amazon needs a much improved Kindle 2.0.