Amazon's Kindle and the future of publishing

To those who view the Amazon's digital reader device the Kindle as a plague sweeping through the book world, the publishing industry would like you to know it isn't dead yet.

In fact, Amazon CEO Jeff Bezos claims that the reader who buys a Kindle continues to buy as many paper books as ever, in addition to purchasing one-and-a-half times that many in electronic format. And for newspapers such as the New York Times, the Kindle may be the only viable format at present for delivering revenue-producing electronic subscriptions.

This week, Amazon unveiled the latest version of its trend-setting device, which now can read the text aloud in what one Engadget blogger describes as a clear, good voice.

The new kindle also has improved processing speed and increased integration with other devices so that you can begin reading on one device and transition to another seamlessly. Other improvements; seven times more memory, thinner, better hand controls. Bezos also announced that writer Stephen King has written a story exclusively for the Kindle, about a Kindle user. Let's hope it isn't of the "Christine" killer-car variety.

While many expected the Kindle to suffer the same fate as earlier dedicated reader failures such as the Peanut, Amazon has been very successful, so much so that it has been unable to keep up with demand. The company has not shared sales figures to date, but TechCrunch recently learned that almost a quarter of a million Kindles had been sold by August of 2008. Amazon currently offers almost that many books in the Kindle format, including bestsellers. The device also accepts other common unprotected ebook formats such as .MOBI, TXT, HTML and Word, It also stores and plays MP3 music files.

The Kindle sells for $359, and some insiders claim that even at that steep price Amazon is losing money. However, the books in the Kindle format, while less expensive than the printed versions, are priced high enough to avoid gutting the printed book market -- for the time being -- while still returning a healthy margin to Amazon.

For an example, the newest novel by BloggingStock's Tobias Buckell, Sly Mongoose, retails in hardcover from Amazon for $17.79, while the Kindle version sells for $14.37, or 81% of the print price (not including shipping). Many Kindle owners are not aware that they don't own the Kindle version they pay for, but merely have the right to store and read it on their device. Since printed books have at least incidental resale value, this serves to narrow the gap in price. The book industry to date has not experienced the piracy that has bedeviled the music and video worlds.

The apparent success of the Kindle comes at a time when the traditional publishing industry is reeling from declining sales and increasing costs, resulting in widespread layoffs and red ink. The conjunction of these two trends led me to wonder just where the publishing industry was headed, so I spoke to a couple of industry insiders.

Edward McCoyd, director of digital policy for the Association of American Publishers, is sanguine about the impact of the digital revolution on publishing. He feels that, regardless of the platform that carries the text, the public will still look to publishers as the gatekeepers to assure that "quality will still rule the day." The Kindle, he feels, has been a positive development for the industry, bringing in much-needed revenue and opening avenues for growth.

Other experts point out that the Kindle and like devices also allow publishers to sell books in their catalog that no longer justify a new print run, a classic example of the 'long tail' principle.

I asked industry expert Edward Nawotka, a correspondent for Publishers Weekly, where he saw book stores fitting into this changing market. He believes that book stores can survive by becoming something more than big box retailers. Those stores that learn to connect to their customers on a one-to-one basis, that offer experiences such as digital kiosks, author readings, social events, and even, as in one store of his acquaintance, fashion shows, will thrive. "People self-identify with stores," he says. And those stores such as DOMY in Houston use that attribute to carve out a significant and consistent market share. As far as the industry goes, Nawotka points out that it has always faced competition, and he doubts that the margins are so alluring that it will draw cut-throat interlopers.

Nawotka is also agnostic when it comes to the Kindle, pointing out that other screens will compete for the readers' eyes. The Japanese, he points out, already read, on their cell phones, novels written expressly for that platform. "If the book is good enough and the story important enough," he says, "people will read it on any format they can get it."

He speculates that the book market might split, with one fork, the popular, ephemeral fiction such as romance and thrillers, transitioning more readily to the electronic form. The other fork, serious literature, may well retain the hardbound format that reflects the permanence of the works. In fact, he speculates, we may see a boom in the crafted book, such as those done by Folio which marry artful presentation with worthy text.

Nawotka doesn't expect generations raised with the printed page to convert wholesale to the electronic book, but he thinks that those raised on video games, PCs and cell phones will naturally adopt this technology.

According to the Christian Science Monitor, the digital generation may even fall in love with the Kindle in college. Schools such as Princeton, Yale, Oxford and UC Berkeley are already offering the option of replacing the backbreaking stack of textbooks with the same material in Kindle format.

I question Amazon's long term plans for the Kindle, however. Some industry experts believe that Amazon is attempting to follow Apple's lead with the iPod, selling books in a format only readable on the Kindle platform. However, the Kindle is capable of reading files from other e-book retailers and non-profit organizations offering classical material for free. Other e-book readers already on the shelves (the Sony e-Reader and the iRex iLliad) or on the drawing board (such as the bendable, ultra-cheap-to-produce devices under development at the Flexible Display Center at ASU), could compete with the Kindle and drive down the sales price.

I speculate that the Kindle is part of an attempt by Amazon to move into publishing, perhaps bypassing the writer's agents and publishers. The company has used several tools to engage writers directly -- its First Novel contest, Amazon shorts, which allows the writer to list and sell short stories much as bands sell tunes on iTunes, and its print-on-demand service, which gives writers the ability to create and market their own work. Such an integrated model would explain the willingness of the company to absorb part of the cost of the Kindle.

So, is the kindle the shape of publishing in the future? In my opinion, probably not, for two reasons. First, I don't believe that the consumer will want to keep five unique screens -- television, computer, cell phone, iPod, and Kindle. While a true convergence device that does everything equally well is far in our future, I expect at least the last three to converge.

The Kindle is a device designed for those of us so inured to the printed page that we demand a facsimile of the same before we will accept it. New generations won't share this prejudice. In fact, one writer recently noted the booming market in Japan for erotica for women, formatted for the cell phone.

Second, we've seen example after example of the poor long-term viability of selling hardware vs. content, and the Kindle, although valuable in establishing the market, will soon draw competition that will drag down the margins. Amazon's real treasure is the content under its umbrella and the ease of delivery.

And to those of you who vow you will only give up your printed books when your dead, cold fingers are ripped from the cover? Where is your turntable? Your television antenna? Your leaf rake? Your CB radio? Change in the marketplace doesn't come by coercion. It comes from offering the customer a better experience or a better deal. The electronic book can provide both. You will be assimilated.

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