Amazon cuts Kindle price – 3 reasons why it does not matter

Amazon recently reduced the price of the its Kindle eBook reader to $189 from $259.  This is a substantial discount, but does it matter?  Personally, I am not convinced about the benefits of the Kindle or equivalent eBook readers.  Here is why:

DRM

I am frustrated with the strict Digital Rights Management (DRM) inherent in the Kindle and other similar platforms.  I believe that protecting intellectual property is critical, but today’s DRM solutions are very limiting and are designed around the needs of the publisher not the consumer.  The problem is that there is no universally adopted DRM standard.  The Kindle’s DRM is different from Barnes and Nobles’ Nook which is different from Apple’s iBookstore.  The result is a confusing range of formats and options with limited or no interoperability.  Books purchased from Amazon will not run natively on Barnes and Nobles’ Nook or Apple’s iPad.  Amazon has tried to address this by making Kindle applications available for a number of platforms, but it still can be a challenge if you prefer an alternative platform.  As we all know, technology changes rapidly and as eReaders proliferate, there is no guarantee that your Amazon (or Barnes and Noble or iBookstore) content will work on future platforms.  This is very different from the traditional book model where you get perpetual license to a physical book and are guaranteed access to the content.

Fragility

I primarily read when traveling and typically throw my books in my carry-on or checked bag.  Inevitably my bag gets jostled as I tote it around the airport and put it in the overhead bin.  In the case of paperback books, they will tolerate physical abuse including wetness and sand with minimal damage, and worse case scenario, you buy another book for $10.  Additionally, the book is always accessible and so I never have to worry about complexities of battery charging and management.

The Kindle scenario is entirely different.  It is a well built device, but like all electronics is particular sensitive to physical abuse and foreign substances like water or sand.  Even worse, if it breaks, you do not lose one book but all of your reading material for the entire trip.  (To be fair, you do not lose your ownership of the books; these are maintained in your Amazon account.)  Thus if your Kindle dies mid-trip, you are out of luck for future reading.  Similarly, the Kindle requires battery power to operate and if it loses power mid-flight then no more reading for you.

Economics

The following table illustrates the price difference between traditional paperback books and Kindle versions.  The titles are chosen to represent a range of content.

Book Paperback Kindle Difference
Lightning $7.99 $6.99 $1.00
Wild Things $10.19 $7.42 $2.77
Practical Guide to Linux Commands, Editors, and Shell Programming $31.49 $28.34 $3.15
The Adobe Photoshop CS4 Book for Digital Photographers

$34.64

$31.18 $3.46
One Day at a Time: A Novel $7.99 $6.39 $1.60
Using SAN & NAS $19.77 13.49 $6.28
The Glorious Cause: The American Revolution, 1763-1789 $16.47 $9.99 $6.48

As you can see the difference between print and Kindle prices vary from $1.00 to $6.48.  The reader must decide whether the cost savings is justified for them especially given the limitations described above.  The average savings of the seven titles is $3.50 which suggests that you must read 53 books to cost justify the Kindle.  However, if you ignore the bottom two outliers, then the average savings is $2.40 and the breakeven increases to 78 books. 

(On a side note, am I the only one who wonders about the price differentials above?  There must be a cost for printing, storing and shipping physical books and these disappear in the world of eBooks.  Amazon must be recognizing substantial cost reductions by bypassing traditional distribution.  Shouldn’t the price difference be greater due to cost savings?  I think so and it irks me that they appear to be using eBooks as a profit center.  I believe that Amazon is soaking eBook buyers and that this is a reflection of inefficiencies inherent in this nascent market.  I will write about this in a future post.)

The economics get even worse if you compare eBooks to other alternatives like the library.  I am a voracious reader and prefer to borrow books because I read so rapidly and rarely read books twice.  This works great and the price is unbeatable.  Unfortunately, there is no equivalent for the Kindle where your only option is to purchase every book.

Summary

In summary, I am a technologist and love all gadgets.  I really want to love the Kindle and similar devices, but struggle.  The trade-offs in functionality and economics do not make for a compelling value proposition.  I believe that the majority of consumers are better off sticking with the traditional paperback book model.

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2 thoughts on “Amazon cuts Kindle price – 3 reasons why it does not matter”

  1. You analysis is spot on. If you compare eBooks to eMusic you see some interesting parallels. Not surprising since they are media. Electronic music took off when the cost of the electronic product became low enough. If iTunes changed anything it was the cost structure. The same will have to happen for eBooks. The cost of music players also had to drop while capacity went up. I bet the same is true for eBook readers. To really take hold the price will need to drop to under US$100.
    One thing to note: Libraries are now lending in eBook format. This is an example where DRM actually works. I can download books in a variety of formats (including PDF) from my local library website. When the lending period is up, the book is disabled. That’s okay because I expect that I have only borrowed the book. If I purchase a book, I expect a perpetual license that is not inhibited by technology.

    1. Tom, thank you for your comment; I completely agree with your perspectives.

      Regarding the library option, I checked my local library and confirmed that they do offer the service, but unfortunately, it gets back to the DRM issue. They only support the Sony reader and the Nook and so Kindle and iPad users are out of luck. How is this consumer friendly?. Here is a link to their compatibility list: http://bit.ly/dt58vb.

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