Friday, July 30, 2010

Why Not Give Away E-Book Readers?

So Amazon has announced a new, slimmed down version of the Kindle selling for only $139 and the company is taking pre-orders now for delivery at the end of August.  This is the cheapest Kindle to-date and it will further accelerate the e-book reader price war that's been brewing for the last few weeks.  This is all good news for those in the market for these devices, of course, and it will be interesting to see where prices bottom out.

But this has me wondering if e-book makers such as Amazon, Sony, Barnes & Noble and Borders aren't using the wrong business model.  After all, the real revenue stream, and the most profit, for these companies will come from selling e-books to those who own one of their devices.  Each of these companies has an online bookstore from which new e-books can be downloaded to the readers, and the expectation is that those who have readers will need an endless supply of reading material.  Makes sense.

So why don't the Big Four makers mark the readers down to something like $50 a pop?  Get those readers into the hands of readers and then sell the heck out of e-books to them.  Lock them in to your device and then aggressively market your continuing service to them.  Heck, why not use the safety razor business model and send coupons out to targeted readers offering them free devices?  How better to gain instant market share and ensure long term profits?

Of course, this will not work for the makers of the more generic readers not supported by their own online bookstores.  But, I suspect, even these manufacturers would find a way to make more money if the overall e-book market expanded by a factor of ten or more.

In the meantime, I'm watching with interest to see how all this shakes out.  I suspect there will be more losers than winners if things keep going the way they are.  Is anyone brave enough to try my suggestion?  I sincerely doubt it, but wouldn't it be fun if one or two of them decided to give it a shot?