Analyst: Kindle’s a “Niche” Product–Because Amazon Wants It That Way
by Peter Kafka
Posted on February 9, 2009 at 4:20 AM PT
Can’t wait for the debut of Kindle 2.0, which should arrive around 10 a.m. this morning in New York?
Here’s a splash of cold water, courtesy of Jeffrey Lindsay: The Bernstein Research analyst says Amazon’s much-hyped e-book reader is merely a “niche product”–and that the e-commerce giant wants to keep it that way.
Lindsay’s argument in a nutshell: Electronic delivery of content may be the future of Amazon’s (AMZN) business, but it’s going to make most of its money selling physical goods for a long time to come. So Jeff Bezos and company won’t make the moves that, say, Steve Jobs and Apple (AAPL) might make if those guys were pushing e-books.
Lindsay: “Unlike Apple with the iPod, which cannibalized somebody else’s sales–namely the music industry–Amazon with Kindle is in part cannibalizing sales of its bestselling product, and this must be factored into the economics.”
Translation: Don’t expect to see super-cheap (say, $99) Kindles anytime soon.
Lindsay’s numbers aren’t radically different than those of Mark Mahaney, the Citi (C) analyst who has been notably bullish about the Kindle and its impact on Amazon’s business.
Both men estimate that Amazon sold about 500,000 devices last year. And while Mahaney thinks Amazon’s hardware and software sales will be a $1.2 billion business by the end of next year, Lindsay has a more conservative $900 million estimate.
Even by 2012, when Lindsay thinks Amazon will be selling two million Kindles a year, this won’t mean that much: Amazon’s revenues could actually decline by 0.6 percent because of slower physical book sales, while the company’s earnings would increase by perhaps 2.9 percent, the analyst predicts.
All worthy thoughts to contemplate–a little later on today. But in the very near term, most Kindle-watchers will be focused on more prosaic concerns. Like are those “leaked” Kindle 2.0 product shots real? We should have answers in a few hours, when Amazon holds its press conference at the Morgan Library.
Check back at All Things Digital at 10 a.m., where I’ll be liveblogging the event.
Comments
Kindle will never succeed because its design is already a dinosaur. No one wants a single use device. You can read ebooks on a Treo 680 or any number of other smartphones as well, and you can get one for $125 new on eBay. It will organize your calendar, contacts, play games, let you do word processing, download the New York Times, be a telephone, an internet browser and an email client. With just one convergence device, you always have it in your pocket. How much will you read if you leave it home because you already have too much to carry? No one needs a Kindle at its ridiculous price. Get a convergence device that handles multiple functions.
Posted by Mark Squires at February 9th, 2009 at 5:09 amKindle will succeed only to the extent that Amazon will let it. It’s meant to do one thing extremely well. I’ve read five or six books on it so far and have five or six loaded in ready to go. The most I’ve read on a handle held is maybe a ten page memo. People used to see me reading my Kindle and ask me what it was. Now, more people tell me they love theirs and ask what do I think of mine.
Posted by Ernest Robles at May 8th, 2009 at 11:31 am