If you came of age in the 70s, chances are pretty good that at some point you were a member of the Columbia House Record Club. You know the one. Get 10 records for a penny if you agree to buy six more over the course of the next three years.
And if you're like me, you loved the part about getting ten records for a penny, but hated the fact that if you forgot to send back that month's card, they would automatically send you the record of the month, which inevitably was something like Olivia Newton John or REO Speedwagon. And it was too difficult to send back, so you'd begrudgingly pay for it.
The annoyance aside, the basic model worked. You could buy records anywhere, but you bought them from Columbia House to fulfill your obligations.
It wasn't just Columbia House, of course. Continuity programs were successful for Book of the Month Club, Time Life Books, Newhouse, Rodale and numerous other publishers. But they've largely died out, with ecommerce and digital media have taken hold.
Yet I think that now is the time for Amazon ($AMZN) to take a close look at continuity programs.
Piper Jaffray's Gene Munster today projected that the Kindle Fire tablet is going to be "destroyed" by Apple this holiday season.
"The only reason people really buy the Kindle Fire is because it's cheaper," he said. "There's a high probability that Apple comes out with that 7-inch tablet that's going to compete against the Kindle Fire this holiday, and I think it's just going to get really difficult for really all the players."
If that truly is the case, what should Amazon do?
In my view, they should immediately move more aggressively to get Kindles and Kindle Fires into the hands of readers. And the best way to do that is to bundle the hardware and the books into a super attractive package. There are two obvious (and related) ways to do that:
- Get a Kindle for $1 with the agreement to buy 12 books in the next 12 months; or
- Buy a Kindle and we'll give you a coupon good for 6 free eBooks
Of the two, I prefer the former. It's the razor and razor blade model and Amazon has to make sure that readers are using its format of razor (the Kindle), not iBooks.
Beyond that, I think that Amazon should simply send free Kindles (or a coupon for a free Kindle) to Amazon customers who buy a significant number of hardcover books. If you're buying 10 or 12 hardcover books each year from Amazon and aren't buying any in eBook form, you're an active reader who is likely to buy an ereader in the next 12-36 months. Why not lock that user in right now?
Amazon's customer files are the one huge advantage it has over Apple right now. No one knows more about reading habits than Amazon. And no one has stronger commerce analytics. So Amazon should put those analytics to use locking readers into the Kindle format. Because once you choose a format and channel, you're unlikely to change that. I buy all my books in Kindle format, even though I have an iPad, because I started with a Kindle. And because Amazon's model is built upon selling books, not selling hardware, they can afford to use the device as a loss leader. The Apple model is reversed and I don't see them shedding margins on the device to improve media sales.
It's time for Amazon to embrace the Columbia House model to lock readers into the Kindle format.