
When the elephants dance, the chickens must be careful - raganwald
http://raganwald.posterous.com/when-the-elephants-dance-the-chickens-must-be
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nicolaus
I own a Kindle. I like it. I have, however, never bought anything from Amazon
on my kindle because of the power this gives to Amazon. I use it to store and
read _3rd party ebooks_ only. This is also the reason I do not own an iPad or
an iPhone: I will not give up that much control and information to any one
company. People like me do not exist in large numbers today. We will exist in
large numbers tomorrow. Enjoy this revenge of the CD-ROM / Walled Garden model
while it lasts. The lack of privacy / control experiment will not last
forever.

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wanorris
So far, I've been very happy with the content I've purchased from Amazon.

Apple sells content as an enhancement for its device-selling business, and
thus does not do much to make that content available off of its own devices
(iTunes for Windows notwithstanding).

By contrast, Amazon sells devices as one of many ways to make it easy for you
to buy their content, and thus they make their content available anywhere
there's a volume of users that might want to consume it. I've read Kindle
books on my Kindle, a PC reader, my phone app, Chrome, and an iPad. So far,
I've never had a device where I wished I could read a Kindle book but
couldn't.

You may indeed ending up having the last laugh, because who can predict the
future? But so far, Amazon has been a really convenient company to do business
with.

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zeteo
Both Amazon and Samsung Electronics have unique advantages in the tablet
market (e.g. Samsung makes the iPad's CPU), and their market capitalizations
are similar. Calling one an elephant and the other a chicken implies a
difference of impact of about three orders of magnitude.

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raganwald
The metaphor applies to their market strengths, not their market
capitalization. Samsung does have manufacturing prowess, which lowers its cost
per unit, which allows it to compete with Apple on price. I get that, I really
do.

What I don’t get is how it sustainably competes with _Amazon_ on price. I’m
not sure that manufacturing prowess is going to make up for such a disruptive
business model asymmetry at the low end.

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zeteo
That's fine, but we must also keep in mind that the difference in competencies
can also lead to different definitions of success, of which Samsung's might be
less visible. Samsung can still make a pretty good impact with a strategy for
a symbiotic profit-sharing agreement on the iPad (Apple doing the OS and
marketing, and Samsung supplying crucial hardware); with the Galaxy as a
sideshow, its only purpose to achieve a good bargaining position vs. Apple
regarding the profit shares.

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raganwald
I like this, thanks. Reminds me of the plotline from the novel “Shogun,” where
Toranaga has Anjin construct a ship jsut so he can burn it as a bargaining
concession with the Portuguese.

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martythemaniak
I find it extremely unlikely that Samsung is interested in being a mere
manufacturer. In fact, the entire economic development of East Asia has been a
decades long story about starting as small, cheap manufacturers and moving up
the value chain into global brands.

Samsung is not quite-there yet, but I find it silly to suggest they'll
suddenly stop and start regressing.

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sadlyNess
There's a KiSwahili proverb that goes _Fahali zipiganapo, nyasi ndio huumia._
When the bulls fight, its the grass that gets hurt(translated literally).

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ZeroGravitas
Samsung had some kind of book and video store the last time I checked. I
remember they were giving away a bundle of books and films with their tablets.

I'm not sure it's self-evident that outsourcing the manufacturing is better
(or worse) than outsourcing the content sales channel. Particularly if, like
Samsung, you're building the components too.

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raganwald
Of course they do. They also have access to all of the Android apps, and they
build their own retail stores like Apple. But honestly now, what are their
chances of reinventing themselves as content distributors, of beating Amazon
at its own game?

What I suggest is this: There are people who will but a Kindle just to get the
content Amazon has. Amazon’s content is a “killer app” for kindles. Whereas,
content is not a killer app for Samsung. If a customer buys a Samsung for
other reasons, Samsung can make some extra money selling them some content.

So yeah, Samsung may make a little more than the margin on the tablet, but
Samsung is not going to sell more tablets because of its content, and I doubt
they will make as much per unit as Amazon, not by a long shot. So I don’t see
them having the content to drive market share, and I don’t see them selling
enough content to subsidize a price war with Kindle.

JM2C.

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kenjackson
Aren't Kindle apps available on most major platforms?

I get that Amazon can subsidize the tablet, but I do there is a story for
someone who wants a Kindle app, and the Google/Microsoft app store, and the BN
app, and the Netflix app. The cost might be higher, but I think a non-trivial
portion of the world would be willing to pay it.

And note, there is nothing to stop Samsung from getting subsidies from Amazon,
Barnes and Noble, Hulu, Netflix, etc... for pre-installing their apps. It's
the great crapware returned, except this time antivirus won't be the dominant
crapware, but rather contest distributors.

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raganwald
This is a very intelligent reply, thanks. Yes, kindle is available everywhere,
and that won’t stop any time soon. And I’m sure Amazon would be happy to
subsidize other tablet manufacturers who make their content available.

However, If Amazon don’t become a major tablet player, they are at the mercy
of the tablet manufacturers. Terms could change at the drop of a hat. Amazon
could wind up bidding for access.

If Amazon become a major player, they can sleep at night. They don’t have to
worry about Apple demanding 30% or Samsung going into the content business and
cutting Kindle out. They can farm their customers for profiling data that they
themselves will use to sell more products.

Kindle everywhere is a no-brainer strategy, but it can’t be the only strategy,
otherwise Amazon will find itself squeezed. Far better to have Kindle
everywhere while simultaneously taking market share away from the tablet
manufacturers that are erstwhile platforms for Kindle.

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bradleyland
I was with you right up to the point where you backed Apotheker. I'm not
convinced that the iPad or Kindle Fire markets (I also view them as somewhat
separate) have to be one-horse races.

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raganwald
My “backing” was rather faint praise, given that it was served with the weasel
phrases “Beginning to think” and “May have been.” I definitley agree that
every market has room for a strong number one and a scrappy number two. There
are good arguments to be made that _someone_ is going to carve out a living as
the scrappy number two tablet manufacturer.

Could it have been HP thanks to WebOS? RIM thanks to their co-called
Enterprise strength? Samsung thanks to their manufacturing prowess? (see
excellent comments elsewhere in this discussion...) Maybe. Tough business,
tough call.

I’d like to think that the scrappy number two able to sell around Apple’s
price point will have something innovative to offer. It might be none of these
companies, it might be a hardware startup with some special sauce, or an
entirely new approach to software.

But then again, if wishes were horses, beggars would ride. Maybe HP should
have doubled down on WebOS.

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ScottBurson
It's funny to me how people are reading this. I was going to challenge your
quote from the opposite direction (i.e., as being too weakly stated): I think
Amazon's entry into the tablet market proves that HP's exit from it was very
much the right call. I thought so before, and it's inescapable now. HP would
only have been throwing good money after bad to continue.

I like WebOS (I used a Pre for a while) and sure, it would be great if HP
could somehow be a significant player in the tablet market. I just don't see
how it can happen. HP was late to the party and there's massive competition.

The only justification I could see for continuing to sell the TouchPad is if
customers (primarily business customers) came to feel that HP's offerings were
incomplete without it, and that drove them to other suppliers for desktops and
laptops. I suppose it's possible things could get to that state, but I don't
see it happening soon. Trendiness aside, I don't see many problems that
businesses have that a tablet solves better than a netbook ... as witnessed by
the iPads I see people carrying with cases and external keyboards.

Edit: clarification.

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teyc
Bezos has the same canny business sense as Jobs. He made a lot of long
incremental bets. This guy now runs a book store, a compute cloud and a tablet
company.

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wanorris
Actually, he runs a general merchandise store, not just a bookstore. And it
would probably be more correct to say that he runs a digital content delivery
company that makes it's own devices than to call it a tablet company.

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fluidcruft
I guess Googorola is the elephant in the room?

