The chart of the day yesterday was one from the Technium blog that showed that if you project forward Amazon (AMZN) price cuts on the Kindle, that it would essentially be free by November, 2011.
Of course there's no guarantee that prices will continue to drop at the prior rate. If we simply extrapolate from past cuts, we could wait until sometime in 2012 when Amazon would, theoretically, pay us $100 to take a Kindle of their hands.
I don’t see Amazon cutting the Kindle price to zero, at least not on a wide-scale basis. There’s no need to do so. What they need to do is get it to the point at which it becomes an impulse purchase. For consumer electronics, it's generally accepted that once an item gets priced below $100 it becomes that impulse purchase. We've seen that with iPods, digital cameras, Flip video cameras, portable DVD players and more.
Yesterday, Amazon announced that AT&T Stores would begin to sell the Kindle 3G, joining Staples and Target as brick and mortar resellers of the eReader. This is very important strategically for Amazon. For, despite the structural disadvantages of its brick & mortar business, Barnes & Noble actually has an advantage over Amazon in selling eReaders. It has readers coming through its doors to buy books, who can pick up and play with a Nook, determining whether it’s a fit for them. While most readers of this blog have probably held an eReader in their hands, I’d guess that 90% of the book-reading public have never done so. I still hear people (who’ve never held one) say “I couldn’t read on something like”.
So, the challenge for Amazon is to get the Kindle into as many hands as possible.
TechCrunch has recently shared an offer that Amazon has made to select customers: buy a Kindle and if you're not happy, get a full refund, while keeping the Kindle. This offer was made to a select group of active book buyers at Amazon.
More recently, they've shared a rumor that Amazon will soon offer a free Kindle to all Amazon Prime subscribers. That would increase the value of my $79 Prime subscription, to which streaming video downloads have recently been added. If they can afford to do it, it's a smart move for Amazon for three reasons:
- It will increase the renewal rate for Amazon Prime by adding more value.
- It will lock users in to the Kindle platform for their eBook purchases.
- It will actually decrease Amazon shipping costs, as books that were eligible for free shipping with Amazon Prime will now be downloads instead of boxes.
I could see Amazon taking one more approach to getting Kindles out there. Why not follow the approach of the "continuity programs" that book and music publishers used in the 70s and 80s, to package a Kindle with a commitment to buy eBooks?
Remember the Columbia House record deal? Was there anyone in the 70s who didn't take advantage of the "12 albums for a penny" offer?
(If you're too young to remember, check out this commercial from 1977)
Amazon could give a free Kindle to those who commit to purchasing 10 eBooks in the coming 12 months. They would cover their costs, while locking a large group of users into the Kindle platform.
