Wednesday, July 28, 2010

Kindle Sells Out: 5 Reasons Amazon Shouldn't Celebrate - PCWorld

Kindle Sells Out: 5 Reasons Amazon Shouldn't Celebrate - PCWorld

This article was somewhat confusing to me. His points don't make sense to me.

1. Watch out for falling profits.
It's true that the Kindle price has dropped from it's initial price of $359, but that does not mean that the company is making $170 less on each one. It means the revenue has dropped by that amount, but profit is based on the cost to produce the product. The $170 drop in price may not be any less profitable. It may will be less than it was the day before the price was dropped, but I would expect that there was a sliding scale. At first the product cost x to produce and they sold for $359. Over time the price to produce dropped and their profit margin rose, until they dropped their price. I think it's true that they dropped their price due to the competitive price from the Nook, but I don't think that they are eating cost on each one. That information is not known to me, but it doesn't mean that Amazon shouldn't celebrate. Jeff Bezos knows what's going on there, and he knows whether or not he can celebrate.

2. Is $189 Still Too Expensive?
If Amazon was fine selling their device for $359 why would they care if $189 is too expensive? Studies may show that the best seller price for e readers is in the range of $50 to $99, but that doesn't mean that's what Amazon is after. BMW isn't. They don't build cheap cars, it doesn't stop them from making money. Also if $189 is eating into their profits, wouldn't $99 eat into that even more? Amazon has reported that they've tripled sales since dropping to $189. It may not be low enough for everyone, but it has clearly crossed some kind of threshold that's let them extend their cusomer base by quite a bit.

3. Sales Stats Unknown.
While it's true that I don't know the sales stats or the profit of a single Kindle, that doesn't make it a reason for Amazon not to celebrate. Amazon knows that information. I don't know if I should celebrate, Amazon knows if it should celebrate.

4. About the iPad
I have never considered an e-Reader as a competitor to a tablet. The iPad has blown me away with what it's capable of doing and having seen it in action I want one. But I don't want it as a replacement for my eReader. They are separate for me. I love the e-ink solution of the Kindle, the battery will last for weeks with wireless turned off. I can take my notes and buy books directly from the Kindle when I want to, but I don't have to synchronize. There is no power saving package that I could turn on with the iPad that would let the batter last more than one day. The iPad is awesome, but just like reading on a computer screen my eyes hurt after a while. I'd rather read on the Kindle than the iPad. With both devices I would definitely choose to only take the iPad in some instances and use it to read my books. However, that doesn't hurt Amazon, because it's still a eBook that they sold to me. I'm not even sure that the Kindle DX is a competitor to the iPad, at least not yet. It may be made somewhat obsolete by the iPad, if newspapers can provide a new medium that take advantage of the interactivity of the iPad. If that were to happen the Kindle DX would be useless, but for now it's not. I'm really not sure what the future of the Kindle DX is.

5. Beware the Multifunction Devices.
I own a Kindle and a Droid. I have the Kindle app for the Droid. I don't consider it a replacement for the Kindle. If I'm somewhere without my Kindle (which is rare), I can pop open a book real quick and take advantage of a few minutes to read. I would never consider my phone a replacement though. The screen being on drains the battery way too fast, and I'd rather keep that life of my batter for things like phone calls and text messages. Besides, it's rare that I have time to read when I don't also have emails that I need to follow up on. I can use my phone to do those other things and wait until I am back near my Kindle to read on it. But in a pinch it does work. And I like that I can keep a copy of my favorite book with me on my phone for referencing.

My disappointment lies in every argument. None of them show that there is a problem with the Kindle. And they don't provide a single reason that Amazon shouldn't celebrate.