How the Amazon/Overdrive Partnership Changes the Economics of the Kindle

I have blogged in the past (here and here) about my frustration with digital books and the Kindle.  It is a great device, but I have always struggled with the economics of the platform.  This is especially telling when compared to the option of borrowing books from the library which the Kindle has never supported…until now.

Amazon has announced they have inked a relationship with Overdrive, the company that provides eBook lending services to many libraries including mine.  I believe that this is a major accomplishment since it brings Amazon’s class leading eBook reader into the traditional library realm.

I have always believed that the economics of of eBooks was beneficial to Amazon and that they did not favor the consumer.  Simply put, the cost savings between electronic and physical books was not substantial and in my opinion, was not enough to overcome the limitations of the new platforms.  (The second post above highlights the position.)  However, note that the price of the readers have come down which improves eBook payback.

The addition of traditional lending to the Kindle platform has the potential to substantially change the situation.  The technology can radically alter the economics of Kindle by freeing the consumer from having to purchase pricey eBooks whenever new content is desired.  Overdrive’s technology is relatively mature and has been supported by other eBook vendors.  Amazon’s announcement is a milestone since they are the clear leader in eBooks and their adoption drives credibility in the lending model. Hopefully, Amazon’s action will also increase the number of titles offered by Overdrive.

In summary, I have been skeptical of the eBook model, and Amazon’s recent partnership with Overdrive can change that.  I look forward to the implementation of the new technology in the Kindle platform and will relook at the situation once it is available.  However, I remain cautious until I see the implementation of Overdrive and how easy it is to use as compared with the Kindle’s traditional purchase model.

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