This is a short paper I wrote for my marketing class in New York University’s masters program, Publishing: Digital and Print Media, that I’m proud of. I thought it was relevant and I wanted to share.
“This isn’t a device, it’s a service,” said Jeff Bezos, founder of Amazon, regarding Amazon’s Kindle’s 2007 release. And a service it is— in a marketplace where e-books were difficult or trying to access/download to bulky, non-memory serving eReaders, Amazon’s Kindle is revolutionary. Its points of difference are that it is the size of a paperback book (7.5” x 5.3” x 0.7”), it’s easy to use, it has the storage for up to 200 e-books, turns on immediately when prompted, recharges in two hours and can be used for up to 30 hours, and has a built in wireless connection that can download e-books straight to the device. The prices of their e-books are also significantly lower than e-books sold on other eReaders.
Competitive eReaders/products in the marketplace (upon Kindle’s first release) included a Sony electronic reader (2006), and Rocket eBook (1998), among others. Now that also includes Barnes & Noble’s Nook, released in 2009, featuring enhanced screen lighting systems, up to 8GB of memory, LCD screens, and more. In 2012, Barnes & Noble’s Nook accounted for 13.4% of the global market for eReader sales, second only behind Amazon’s Kindle at 83%. It also includes Apple’s iBooks, an application released on the iPad/iPhone in 2010, where users can download as many books as GB of memory their iPad/iPhone has, have the ability to change font and font sizes, and choose from varying screen layouts, among other features. Apple’s iBook app makes up for 10% of total e-book sales.Other factors that came into play upon the Kindle’s initial release were online book sales from Barnes & Noble’s website, access to information and books online in places/sites/applications other than Google, as well as content formatting in PDFs and EPUB documents.
In terms of Barnes & Noble’s online website, consumers can order books, just like they can from Amazon, and have them shipped directly to their home. In 2007, barnesandnoble.com generated $476 million in revenue— making themselves a direct competitor to Amazon’s online books. However, while Barnes & Noble only sells books and book-related products, Amazon sells almost everything a consumer could possibly want. Barnes & Noble found it difficult to compete in e-book sales until they released the Nook. Despite that, they make ⅛ of the revenue Amazon does in eReader and e-book sales.
In terms of Google’s access to online and published content, Google had, when the Kindle came out, scanned millions of books onto their online database for public access. This directly competed with Amazon’s tactic of selling books online to consumers, rather than have them available for free. Eric Schmidt, CEO of Google at the time, stressed access to uncopyrighted material for the public. However, their download system was flawed, and they ended up being sued by the Association of American Publishers and the Author’s Guild for copyright infringement. Ultimately, people consume content in many shapes and forms and through various mediums— whether that be print or online or on eReaders, and Google is not necessarily a direct competitor but just another way to do that.
In terms of formatting and accessibility, Adobe Systems used PDF formatting to help publishers preserve and maintain frontlist and backlist formatting and content in their own private systems. They modified their systems to accommodate eReaders, but shut that down eventually due to lack of success and revenue. In 2006, after Sony released their new electronic reader, Adobe Systems worked with the International Digital Publishing Forum to develop an e-book format called EPUB— formatting reflowable text as well as video and audio content on any eReader. This helped primarily with accessibility as well as formatting e-books on a variety of online but also on Adobe’s own eReader platforms. This contrasted directly with Amazon’s Kindle format, which was made specifically and only for the Kindle; Amazon has a tendency to be exclusive in its content sharing and formatting, as well as accessibility and sales.
Amazon’s goal with the Kindle was to ultimately create its own successful electronic book platform. When the Kindle first came out, Amazon maintained their strategy of keeping book prices as low as possible, enforcing cheap deals with publishers and supply chain partners. If publishers/supply chain partners did not comply, Amazon refused to sell/made it more difficult for consumers to buy their products on the Kindle.
Amazon’s positioning of the Kindle in the eReader marketplace was aimed at dominating the marketplace. Acquisitioning companies like Mobipocket (2005), Audible.com (2008), Shelfari (2008), and Abebooks (2008), they aimed to have access to as many e-reading/e-book resources as possible, as well as co-branding opportunities. This could also be considered integrative growth, because Amazon purchases and works with like businesses to help grow their own.
Co-branding was also utilized with Amazon the parent company, because the Digital Rights Management only allowed for e-books purchased on the Kindle to not be repurposed for other eReaders, Kindle can only be purchased from Amazon, and also provides access to Amazon’s website so the user can purchase more items/products from Amazon, thus maintaining Amazon’s brand community.
One of Amazon’s most important factors in designing and determining the utilization of the Kindle was the customer acquisition process. Amazon looked at their target market and target consumer behavior— readers in general and people buying eReaders alike. General literacy, book buying, and interest in literary fiction and nonfiction at the time of release was down. Steve Jobs, Apple’s former CEO, said about the Kindle: “It doesn’t matter how good or bad the product is, the fact is that people don’t read anymore. Forty percent of the people in the U.S. read one book or less last year. The whole conception is flawed at the top because people don’t read anymore.” In a 2004 study, the National Education Association’s research proved a 10% decline in literary readers in the U.S. from 1982-2002, which doesn’t seem like much, but accounts for 20 million lost readers. Upon the release and growing popularity of eReaders, reading became, once again, much more mainstream. John Makinson, former CEO of Penguin before the Penguin Random House 2013 merger, said: “eReaders have become mainstream in the sense that they are a genuine consumer product for which there is real appetite, so this is not the province of geeks any longer.”
As mentioned before, Amazon’s goal with the release of the Kindle was to create a successful electronic book platform. Amazon has proved itself to be all-encompassing in online book and retail, as well as with eReaders and e-books. While they do have eReader product competitors, they still dominate in revenue, making eight times in revenue what their competitors make.
James Daunt, managing director of Waterstones, said: “We want people to read. We don’t mind how they read.” In terms of recommendations and how to take action in the future and for the future of Amazon and the Kindle, Amazon should carefully consider forming and how they form relationships with publishing companies. They should be more open and less exclusive with formatting techniques as well as comply or compromise when big publishing companies don’t go along with their terms. They are an industry giant, and because of this they have the freedom to use their power, and should use it wisely.
Amazon generates the most revenue and more people go to amazon.com and use Kindles than any other website and eReader available. However, in the best interest of the consumer and future customers, making the most and best content/books available from the best publishing companies is not only better for their business but also better for helping future customers make informed purchasing decisions. Their goal was to create a successful electronic reading platform— and they did that, but have to remember that they serve the consumer. In the future, they should think about what’s best for the reader/consumer vs. what’s best for them.
All other specific and data references are from the reading: eReading: Amazon’s Kindle by Bharat Anand, Peter Olson, and Mary Tripsas from the Harvard Business School. All bolded phrases are topics/situations discussed in class and related back to the case study.