Why the new Sony Daily Edition is a Kindle killer: Free book downloads

Yesterday Sony Corp. (SNE) finally introduced a true competitor to Amazon's popular Kindle e-reader. Dubbed the Daily Edition, this model supports wireless data transmission, a key feature that made it possible for Kindle customers to shop for and download new books and magazines anywhere a wireless signal was available. Lack of wireless was a deal-breaker for previous Sony e-readers, because you had to plug into a computer to download e-books.

Now Sony has a beautiful device that I can't wait to get my hands on. And I believe this one is truly a Kindle killer. Why? Part of the service allows public library cardholders for selected cities to choose from tens of thousands of books for electronic lending on their Daily Edition. For free. That's right, for free. They will also be able to download -- again for free -- e-books from Google's massive online library of scanned titles. Jeff Bezos, can you beat that?

I'll tackle some of the other details that make this new product compelling a little later in the post but the bottom line is: the different view points and business strategies of Sony and Amazon (AMZN) make a huge difference. Amazon has always viewed the Kindle primarily as a way to better monetize its online bookstore and content offerings.

In other words, Jeff Bezos and company saw the Kindle as a way to funnel more buyers to Amazon to cough up more cash for e-books subscriptions, which are actually quite expensive. Most of the titles on Amazon are only selling at discounts of 25 to 35 percent, a very small reduction considering that the content delivery is free and the primary cost of an actual book is the dead trees, the printing and the physical distribution.

Part of the reason for the seemingly high prices was Amazon's unfair revenue split with content owners, a split that gave the producers of the content only 30 percent of each subscription sale. Naturally, the content producers -- newspapers, magazines, authors -- would have to price their products sky high on the Kindle Store to see even a whisper of any real revenue. Newspaper publishers, for example, told the U.S. Congress that the Kindle's terms were extremely unattractive. Particularly galling to them was the fact that Amazon was demanding this split for a product that was clearly aimed at cannibalizing the far more lucrative physical media industry. By way of comparison, Apple (AAPL) offers exactly the opposite revenue cut to iPhone application developers, a key reason behind the wild diversity of iPhone apps.

Now enter Sony, a company that is at its very core a consumer electronics company. Yes, Sony also does motion pictures, music and video games, so it understands how to charge for media. But with the Daily Edition, Sony takes a fundamentally different approach. Rather than herd all the users to one central download location like Amazon, Sony will allow thousands of publishers, online bookstores, and others to sell their wares to Daily Edition users. Sony also is using the EPUB standard, an open standard for e-books that makes it easier for purchasers to transfer titles between devices made by different manufacturers.

In a very obvious way, the Sony-Amazon e-reader battle echoes the building battle between Google and Apple over the mobile internet and open standards.

There are other benefits to the Daily Edition that are important from a usability standpoint. Page-turning will be smoother and can be accomplished with hand gestures. A touchscreen will also trump the Kindle's rather crude navigation scheme that involved toggling different keys set around the display.

The Daily Edition will have a smaller screen than the Kindle DX. Sony will also be handicapped in that it doesn't plan to ship the device until December 2009. That's early enough to catch much of the Christmas shopping rush but late enough that it will miss a big chunk of shopping around Black Friday in November.

The bottom line, however, is simple. The Daily Edition will be considerably cheaper to own if you read books and have a library card. Yes, those library e-books will be borrowed in the truest sense; they will auto-erase from your Daily Edition after two to three weeks. But I also anticipate Sony offering a more generous revenue split with magazine and book publishers, which will allow for lower prices more in line with what an e-book or e-newspaper should cost -- namely, 15 to 20 percent above the cost of content production. All of this would seem to be very bad news for the Kindle, unless Amazon plans to tweak its model considerably in the very near future.

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