Nov 25

Peter Brantley

Peter Brantley

Kindle Fundamentals

Many of the conversations over the release of the Kindle have focused on its features, or perceived lack thereof; there has been some discussion of what reading might become, or how authorship might change. I was impressed with the rather complimentary review of Michael Hyatt, CEO of Thomas Nelson Publishers. And, meanwhile, the Kindle is popular enough (despite a rating of 2.5 out of 5 stars from Amazon reviewers as I write) that Amazon promptly sold out of its first-day supply.

There has been less discussion of the business fundamentals associated with the Kindle, and little contemplation of how reading fits into long term trends in media consumption.

After a Thanksgiving with aunts and relatives who have seen the Newsweek article on the Kindle but continue to espouse the sanctity of print, it's useful to look at the Kindle and the greater transition it is part of -- a potentially fundamental and historically unique transformation in how we share knowledge and entertain, with a concomitant shift in the underlying economy of those transactions.

Here are some thoughts of Joe Esposito, Portable CEO and formerly an executive at Simon & Schuster and at Random House, a former President of Merriam-Webster, and CEO of Encyclopaedia Britannica; and Bill Janssen, a senior researcher at Xerox PARC for many years in the fields of digital texts, ebooks, and the user experience.

Joe Esposito,

While all this talk about Kindle rages (yes, a pun; sorry), sober observers of this industry should note at the least the following.

First, it doesn't cost anywhere near $200 to digitize a book. It may cost Penguin that much, but that's because they aren't paying attention. No way Amazon is spending that much. Amazon is one of the world's great industrial-process companies; it's Wal-Mart to the nth. It may be costly to digitize a single book, but it's peanuts to digitize millions.

Second, most reviews (blogosphere and MSM) spend time on all the features Kindle does not have. In my view, it has too many; it's the Microsoft Word of PDAs. One friend says it doesn't support color. I spend a couple thousand dollars on books a year, and not one of those books has color. Someone complains that it doesn't support PDF. Of course not. The Kindle is an Amazon product. Is Adobe a shareholder of Amazon?

But the biggest mistake is this nonstop chorus of "the users, the users, the users". Business is not about making people happy. Business is about making capital happy. This is why Apple has a proprietary format for the iPod and why Amazon is attempting to lock users into its broad ecosystem. The Kindle is not a device. It is a component of a system.

The Kindle may or may not succeed (I am a skeptic), but it won't fail because it doesn't support open standards or lacks this feature or that or even because the price is high; it will fail if it doesn't self-evidently provide ten times the value of hardcopy, and a return on the capital for everyone in the value chain. Two times better, maybe, but ten times? We are still waiting.

Joe Esposito

Bill Janssen,

In the hype around the Kindle, I haven't noticed a mention of Monday's NEA report, To Read or Not To Read. Seems much more interesting.

I've been saying for a few years that we are entering an age where textual fiction is becoming less and less significant, particularly for the canonical long text, the novel. The novel is a relatively recent innovation in entertainment, and the popular novel is a product of cheap production and distribution, thanks to the industrial revolution.

The delivery channels have multiplied, and the economics have changed. Television killed off the pulp magazine (and crippled the market for short stories). What would replace the novel? Something which would produce a ludic experience for hours at a time -- a movie. But movies have not succeeded in killing off the novel. They're too expensive and too complicated, and major players control the distribution channels. The best they could do was to absorb years of talents like Chandler and Faulkner.

But now we have kids who don't read, the Web, game engines, and the writers' strike. Game engines and machinima make it possible for writers to produce and direct their own work without actors or sets, for a relatively modest capitalization (a game machine). The Web provides free distribution. Kids provide a hungry audience. But the wild card here is the WGA strike. Suddenly all the folks who normally spend their days creating teleplays are looking for other outlets for their creative energies. Maybe write that novel they've been talking about? Maybe not. People like Rob Long (Cheers) are suddenly blogging. Maybe someone will tell them about machinima. We may be entering a twilight for the popular novel, perhaps relegating it to a niche more like opera.


- finis

tags: publishing  | comments: 15   | Sphere It

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Comments: 15

  Alex Tolley [11.25.07 08:27 AM]

"Business is not about making people happy. Business is about making capital happy. This is why Apple has a proprietary format for the iPod and why Amazon is attempting to lock users into its broad ecosystem. The Kindle is not a device. It is a component of a system."

Consumers are getting sick and tired of the "you have no choice but to like what we give you" attitude. Apple has come in for a fair bit of criticism in this regard. [By chance I have only just acquired an iPOD (my daughter's hand me down) and I was astounded at how restrictive it was compared to my interface-challenged Creative Zen.]

The Kindle's success or failure will not be dependent on the value chain - it will depend on only the value to the end-user. Amazon may want it to be part of a system, but if users want to use it as a standalone device that reads PDFs, then the latter criterion is what will make of break the device.

One final thought. Every piece of advice for start up companies includes the advice that you should follow your customers. Abandon products that customers reject and build ones they want. Somehow this advice seems lost on big companies who insist in giving customers only products that fit their value-chain, ecosystem models. The lesson of blogs, flickr, YouTube is that people want to create alternatives to corporate packaged products. It's about time executives took out the earplugs and listened.

  David Megginson [11.25.07 09:43 AM]

"Business is not about making people happy. Business is about making capital happy."

I wonder if Joe Esposito was paying attention during the last tech bubble (or this one, for that matter). Making capital happy only gets you investors; making users happy gets you a business. The companies that survived (like Amazon) paid a lot of attention to their users and won them over.

He also missed the point about PDF. He's right that the iPod uses a proprietary format, but it also supports MP3, so that people can listen to music from any source without having to have any further business dealings with Apple (and I suspect that the vast majority of songs on iPods are in MP3 format). PDF might not be the right choice for the Kindle, but not offering some alternative could be a bad choice.

  Ralf Graf [11.25.07 10:09 AM]

1. Frequent repition won't make "false" turning into "true". The iPod doesn't use a proprietary format.

2. And it isn't a natural rule that culture has to obey to "making capital happy".

Regarding this two simple points, the two citations (especially Joe Esposito) miss the point in their judgements.

  Tim O'Reilly [11.25.07 10:18 AM]

I agree with Alex and David. Amazon missed the boat by not supporting PDF. They learned one of the lessons of the iPod (own the format) but missed another (but take advantage of the network effects of freely redistributable formats and widely available content.)

The iPod would never have taken off if the only music available on it were from the iTunes music store.

  Aaric Eisenstein [11.25.07 10:19 AM]

The Kindle itself isn't likely to be terribly successful for any number of reasons. The question, though, of what Amazon pushing electronic books means, is a fascinating one. Further thoughts on my blog.

  Syven [11.25.07 10:52 AM]

These conversations are important to me not because of whether one makes people happy or capital happy, but because they open us to think about what is the instant change power of new technologies at the most personal level, me as a consumer not as an aggregate of what others consumers may or may not do.

If this discussion makes me think about my technology use and how this fits or effects into my particular lifestyle then it serves me to focus us on why a certain technology is going to be important and it will reference against my existing experiences with the technologies we have accepted as a total aggregrate.

I have a Sony Clie on my desk which I did buy, that purchase decision was not because I buy gadgets as toys but they become tools which change the way I process information and turn information into either lifestyle or business decisions. No one has to tell me what happened to Clie owners but for every technology decision I make today, I also make with it a lifestyle or way of life decision.

So either the conversation about the Kindle leaves me to meditate on what this means to my own life or it is a conversation that challenges us to respond at the same intellectual level we blame universal education for making so academic or shared solely for entertainment, where tomorrow a new conversation will fill our minds. Nothing wrong with that kind of stimulation either, one is long term and reflective, the other is short-term and transient.

Once upon a time these conversations were sterile and sanitized via consumer surveys and analyst reports, but as the Cluetrain Manifesto so intelligently pointed out, today markets are conversations. If I have one flaw online today, it is that I accepted that very premise, otherwise why reflect so much about what is white plastic configured with hardware and software.

When I signed the Cluetrain Manifesto I didn't sign it as a product but an instrumental part of how I will conduct my own life after 1999. That's me, and whether the Kindle sells or not is a marketing and social phenomena - maybe like a Vietnam veteran who didn't know the war was over, I still believe in the intelligence in the statement that markets are conversations and not simply opportunities to create new walls and finely tuned and coordinated branded lives.


  brandy [11.25.07 10:55 AM]

Does Tim realize you can put loads of txt files on it and convert O'rielly pdf's to put on it? I am now thinking about buying some O'reilly pdf books when previously I never would have, because i purchased a kindle.. so amazon's kindle just made me a possible customer of O'Reilly.. but I found the IA book to be way overpriced for a digital version :) computers crash and back up discs get scratches... plus I'm not paying for all the paper etc. If it was 10 or 12 bucks I would buy it, after all I already own the hard copy as well, two copies actually because of the newer addition.

I've never finished reading either, too heavy.. was hoping to put it on the kindle. Ya'll charge too much heh :)

  Ming Yeow Ng [11.25.07 01:59 PM]

do update your post a little, and note that the vast majority of 1/2 star reviews were by people who did not even buy it before!

  Leo Klein [11.25.07 07:02 PM]

"Second, most reviews (blogosphere and MSM) spend time on all the features Kindle does not have. In my view, it has too many; it's the Microsoft Word of PDAs. One friend says it doesn't support color. I spend a couple thousand dollars on books a year, and not one of those books has color. Someone complains that it doesn't support PDF. Of course not. The Kindle is an Amazon product. Is Adobe a shareholder of Amazon?"

Ugh! I wouldn't invest too much in whatever company this fellow is leading. No doubt he's an authority on electronic devices.

To hear people in favor of the Kindle, you really have to be skizoid. The above paragraph downplays the fact that the Kindle doesn't support color while the promo goes on and on about subscribing to the NYT and WaPo -- journals that typically publish all their photos online in color.

There's a disconnect going on here.

Also to the argument that you can't judge the thing until you've got actually one in your hands, my response is, Oh Yeah?

We make decisions all the time based on spec. I don't need to see a color image on a b&w screen to know it won't be satisfactory.

I don't need to have the thing in my possession to know that a unit unable to to handle pdf's natively is inferior to one that can.

As adults we make decisions based on prior experience all the time. It's what keeps us from getting screwed time after time.

Last but not least, I warned all my aunts that traditional books have nothing to fear from the Kindle. The whole purpose of such an association is to lend the device more credibility than it deserves. Some of the same people who make this claim also warn us not to rush to our own judgments. It's marketing, pure and simple.

  WindowsOBserver [11.25.07 07:27 PM]

Like Ming said - the majority of those reviews at came from people who just read about the Kindle - their opinions were based on what they thought the device should or should not be able to do. KInd of skewed if you ask me.

I think the fact that it sold out on day one is a more telling thing.

  Tim O'Reilly [11.26.07 07:23 AM]

Brandy --

It's great that you'll consider going to the effort of converting our PDFs to run on the kindle. But not everyone will do that. Amazon is doing everything they can to funnel all commercial activity through them. I think they go too far. The kindle would be a far more powerful (and, I think, successful) device if Amazon supported direct load of PDFs purchased from publishers and other retailers.

As far as pricing goes, we do have a program that lets you buy a PDF for far less if you buy it in combination with a book. But we really ought to develop a program whereby you can prove to us that you bought the book in the past (either from us, or from some other source, including Amazon :-) and can get the PDF for a reduced price.

But as to "paying for all the paper," I hope you realize that the paper, print and binding is less than 10% of the cost of any book. The bulk of that list price is received by the retailer and distributor. That's why Amazon can afford to give you 20% off -- they buy the book from us at something like 57% off.

So if you're wondering why Amazon can take the hit and make ebooks so cheap, consider the fact that they have quite a bit more margin than the publisher to begin with, and while they have substantial fixed costs, they have very little marginal cost for each additional product added to their catalog, while the publisher has significant product development costs (which comes out of a slice of the pie that is smaller to begin with.)

  Michael H [11.26.07 08:39 AM]


Earlier this year I bought a French-English dictionary that had an option to download an e-book version (not PDF, BTW). The book came with a plastic card that had a one-time use authentication key and a web address. Going to the web address and entering the key, the user is then taken to a form that asks the user for the first entry on some page. If the number of pages is known, a script can come up with a random page number to display to the user. When the user submits the entry they are sent to the download page for the dictionary. I would think you guys could probably come up with something similar. The potential downside to the customer is that they would need a physical copy of the book.

When I code, I like to have the book in my lap or nearby, so I haven't bothered with any electronic versions of your books. However, an electronic version of a multi-lingual dictionary is quite handy. However, that's just my personal preference.

  Joseph J. Esposito [11.26.07 05:41 PM]

I am getting beat up for something I DID NOT SAY, and since I say many kooky things, this seems odd, unjust, perverse, and inefficient. What the posters do not know was that my comment was itself a response to a mailgroup remark that criticized the Kindle for not doing more for users. And the point of my post was simply that that is not relevant. It's not users that matter; it's customers. It is also not relevant if a service uses open or proprietary technology; what matters is the business strategy that underlies the open or proprietary technology. It really doesn't matter how many people buy the Kindle if Amazon can't money from it. The Kindle is not simply a device, any more than the iPod is somply a device: it is a node in the Amazon network. Amazon's requirement is that the network as a whole makes money. If someone can come up with a way to make money selling devices that are not part of a network and sell them profitably, more power to them. So far no one has succeeded.

Joe Esposito

  Syven [11.27.07 04:32 AM]

Joseph, the last thing anyone online can do is avoid conversations about the "Kindle", IMHO the hype machine for this product has gone into hyperdrive and whatever comments people make about it dwarf and disappear in relationship to the size of the buzz Amazon have managed to inspire.

Let's take a short pause to give Bezos a round of applause and then we might notice all the good stuff we might have said. (Wait a minute, let me just check what's on my e-book, I was right the news cycle has gone on a writers strike, so we are all free to talk about the Kindle all the way to Happy Kindling Christmas.

The keynote story here is that the man with the strangest laugh in technology is going to have the loudest sounding laughter when we rekindle this conversation.


  Toby Segaran [12.02.07 05:25 PM]

My girlfriend and I are both frequent travelers and read a lot. We've used a Sony Reader for quite a while and were very excited about the Kindle. We've had it for a few days and really love it.

The arguments we've been seeing online seem to miss the point. It's really about the consumer experience for people who like to read. People who say that they can read books on their iPhones have obviously never experienced electronic ink. People who want PDF support should check out what happens on the Sony Reader when you try to put a letter-sized PDF onto a paperback sized screen. In any case, the PDF-conversion on the Kindle is actually perfectly acceptable for simple documents and I'm sure it will get better in the future.

You can read our full retort here:

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