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Jeff Bezos: Why the Kindle Is So Expensive (wired.com)
50 points by silkodyssey on June 18, 2009 | hide | past | favorite | 54 comments



“We want to have the best electronic book store, and we want to have the best-built e-reader — not try to use one to thing to advantage the other,” said Bezos.

Someone might want to tell Steve Jobs; Apple, um, clearly didn’t get anywhere by tying iTunes to the iPod.

Can someone clarify for me, does it sound like Bezos' stance might be that allowing each product to compete in its own market without the advantage of the other will help force it to become a better product? And that ultimately this will be better because each product will have more merit independent of the other?

I can't tell if that's what he thinks or if that's what I think he thinks. Either way, I think I like this way of thinking.


Honestly, I feel like Amazon wants to own the e-book market badly enough that they were forced to introduce their own reader. Once competing hardware shows up, I'd put my money on Amazon dropping or scaling back the Kindle to focus on content sales.

Especially when you consider their margins. Books on the Kindle store have a publisher-set "suggested price," but Amazon retains the right to sell the item at any price point. For each sale, regardless of actual price, the publisher gets 35% of their suggested price.

Imagine publishing an item for $100 on the Kindle store. Amazon can mark it down 25% and still $40 per sale while you only get $35. Not a bad situation for Amazon.


Bezos' claim is bullshit; of course they want to use their reader to advantage their store. Long-term, the book-selling business is probably larger for them than the hardware business. But as long as they have the dominant reader device, of course they are going to leverage that into a position of dominance in ebook sales.

He'd love us to believe that the store and reader are not in some sort of mutually-reinforcing dominant position. But if they really were separate, wouldn't I be able to buy e-books from amazon with a different device? And start my own bookshop for kindle users (maybe paying amazon for traffic to the device)?


But if they really were separate, wouldn't I be able to buy e-books from amazon with a different device? And start my own bookshop for kindle users (maybe paying amazon for traffic to the device)?

You can definitely do the former. You can use your PC to buy Kindle books on Amazon and then read them on your iPhone or iPod touch. (You can't buy them directly on the phone, but who knows whether this decision was made by Amazon or by the Apple App Store guardians.)

As for the latter, you can probably do that too, albeit in a pretty cumbersome way. Native PDF support on Kindle DX will make it much more viable, although the biggest barrier would be limited access to the Kindle's wireless connection.

I suppose one possibility if you were making your own Kindle store would be to have your customers add your site's email address to your Kindle's whitelist of addresses allowed to send documents to your Kindle. This would mean customers would pay an extra $0.15 per MB with each transaction...but now that I think about it this is still way less than Amazon would charge you to sell a book in the Kindle store at Amazon.com....hmmm...I wonder if this may actually be viable?


actually, with the newest version of the kindle iphone app, you can buy books and have them sent to your iphone OTA.

and dave thomas at pragmatic programmers has been targeting kindles for a couple of months now. you pay him for the file and then it's up to you to get it on your kindle (by cable or by email), but I prefer his formatting over what you get with other technical books at the kindle store. he's put a lot of thought into making code examples readable on the device.


Uh, mobipocket.com, the company that sells most of the e-books is owned by.....Amazon. So if you have an iRex or a Cybook, you are shopping at Amazon for books, it just isn't on the amazon.com site.


The honest answer: "Because this is what people are willing to pay!"


Actually working at a company that designs similiar devices the real answer is: e-ink is crazy expensive. You can buy a 24" lcd screen for the price of a 9" e-ink display. It was impossible for us to match the Kindle's price because they are getting a relatively good deal on the technology compared to the average company.


Agreed, the biggest factor holding up the price is the display, no question about it. When we can get alternative e-ink manufacturers, the price will drop.

I looked into developing an e-ink reader, but the developing kit is/was around $3500, enough to keep out hobbyists at this moment.


Yes, I think the main reason they are charging 3.5k is to keep the hobby crowd away from the technology. They (eink) does not want to deal with you unless you have serious plans to develop a mass market product.

I decided to call up PVI directly (a fun experience since they answered the phone in a foreign language) and they were willing to sell me 6" displays for around $85 in low quantities.

For hobby related projects, the best bet is to use kent display's CHLCD modules which are similar to a LCD but with bistable pixels. The display driver is also integrated so much easier to interface with.


Hopefully, Pixel Qi's displays (and dev kits) will be available on digikey soon after they ramp up, as well.


In my humble opinion, I can't see the Kindle succeeding in this pricing model.

I really respect Bezos but to me he is seeing things from his side not the customers.

The consumer has limited space in his pocket. Why would anyone want to have a Phone and a Kindle with them at the same time.

I can't really see the Kindle appealing to the mass market with that pricing model. I think Amazon's best bet might be offering subscription through smartphones like iPhone and others.

When the iPhone originally came out with the $500 price tag it only appealed to the fan boys. But by cutting the initial price they started appealing to the average Joe.

The thing with the average joe is that they don't do the two year math. They only look at the upfront price. We justified our monthly data plan costs by getting rid of our land line. I think that's why the smartphone makes sense to lots of consumers.


When a Kindle version of a book is available it makes up 35% of that book's sales. (http://www.businessinsider.com/henry-blodget-kindle-sales-no...)

It has succeeded already by most reasonable business measures.


The consumer has limited space in his pocket. Why would anyone want to have a Phone and a Kindle with them at the same time.

I think this misses the point. A Kindle doesn't even fit in your pocket. The value of a Kindle is not that you take it with you anywhere, but that for many people it's a better way of reading books.


Indeed. I do most of my Kindle reading on my couch.

Of course, it's also nice to have the same ability on an airplane, too. And it's nice that the battery doesn't die in an hour like my phone would.

I wouldn't want a Kindle if my phone could magically shape-shift to be the size of a book and if it had unlimited battery life. But in the real world, you have to compromise.


Actually, the price doesn't really matter right now. Jeff is clever enough to be aware that he's only selling to early adopters, and that will be the case for the next couple years.

As long as he can build the infrastructure + database of online books, he might realize that his distribution company won't make the best electronic book reader in the world, and open his distribution channel to other manufacturers.

What he's doing is sliding the bubble closer so he can make the market mature faster. The money made/lost at this point is insignificant compared to when the prices of the displays plummet and the market for electronic books really takes off.

As apple proved, it's all about the content.


As long as the total cost of Kindle + 'x' number of k-books is less than what it costs for printed ones, it is cheaper for the customer (ok take some points for style, ease-of-use etc).

The risk with current pricing model is that once somebody buys a Kindle they have to keep buying the k-books at whatever price they come. Otherwise the device becomes useless. One can only hope Amazon keeps a tab on the k-book prices.


Every new technology goes through this cycle. Even if it is new only in form and not in it's underlying technology. Some people will be willing to pay a premium to be early adopters. Later on, when competition hits and the market is more saturated (and when the economies of scale are in full swing) the prices will reduce drastically.


This is Price Skimming - http://en.wikipedia.org/wiki/Price_skimming

Done so well by Apple and others in consumer electronics space.


Not necessarily. We don't necessarily know what type of profit margins Amazon gets on the Kindle. --What looks like price skimming can also be due to maturation of a technology.


If it was price skimming, wouldn't the newer versions of the product cost less?


There'll be a significant drop in price when a strong competitor emerges...


"The Kindle DX is $489, and that is an unbelievably low price for something that has inside it a sophisticated computer, a completely new kind of display of that size, and a 3G wireless radio, Bezos said."

Somebody please send a $250 netbook to Bezos, or two for a Kindle's price.


I'm so tired of this netbook argument. They're apples and oranges. One is a dedicated ebook reader and the other is a multifunction ultra-portable computer. Just because one is capable of doing something the other is capable of does not necessarily make them comparable. I've used netbooks and e-ink ebook readers. The ebook experience on a netbook does not compare. This is like saying cell phones are a rip off because you could use a $40 pair of walkie talkies without a monthly fee instead.

Not to mention, we have no idea what the cost is on a Kindle. Netbooks use commodity components that are widely available from numerous manufacturers. The same is not true of e-ink displays. This is at least partly a factor in the perceived high cost of an ebook reader.

We also don't know what kind of arrangement Amazon has with Sprint. Amazon gives a few cents to Sprint when you purchase something using Whispernet. Maybe Sprint also gets a flat fee every time a Kindle is sold. We simply don't know.

There's also the issue of limited competition in the ebook market right now. There are only a few manufacturers of quality e-ink readers and on top of it all the Kindle is the only game in town if you want to buy ebooks from Amazon. This is relatively new technology and the price will go down. We've seen it before with the components that go into a $250 netbook. This is economics 101.


I do not agree because:

- Netbooks are usually based on Atom processors that are cheap when compared to Core2 and other more traditional PC processors but are much more expensive than the cellphone-class ARM processor used in the Kindle

- Netbooks use higher-capacity batteries because Atom processors use more juice than the ARM in the Kindle.

- The Kindle uses far more commoditized components than a netbook does - it uses cellphone-class components while netbooks use PC-class ones.

- Netbooks also have more RAM - the Kindle certainly has less than a gigabyte of RAM - I would risk the Kindle has no more than 128 megs, soldered on the motherboard - which is also cheaper than mounting RAM into a socket.

- The e-ink displays are not new technology - a couple years ago my carrier (in Brazil) offered me a Motorola phone with e-ink display. It was an entry-level "dumbphone" and I did not need one. The only "new" thing in the Kindle DX display is its size and design considerations that follow from it.


The e-ink on that motorola phone is very different. It could only display fixed images, much like an old-style seven-segment display (like on a microwave). The e-ink on the Kindle is like a computer monitor; it can display smooth text and arbitrary images.

The Kindle DX has nearly 1-million 16 color pixels. That motorola phone has literally a handful of one-color pixels. Hence the price difference.


Dude, you do not want to compare the e-ink technology from your "Motorola phone with e-ink display". That was cheaper, of course, but the resolution was awful (2x6). Not to mention refresh speed and screen size.

Pocket calculators have LCD displays for decades, too. That does not mean that your 22" inch LCD screen has no "new technology" and should be cheap.


Actually, the ink itself was high-resolution. It was the driving mechanism behind it that was so-so. There is a lot being done in the driver side of the e-ink displays to improve refresh times. OTOH, I don't see that much being done to improve resolution.


The e-ink part is exactly the same. It's the logic behind the screen that is different.

And Kindles are not that different from any other e-paper display device bundled with e-readers from many other sources.

The Kindle should be cheap to build


You know this isn't Reddit, right? Just saying something 100 times doesn't make it true.


The same way as saying any number of times something is false doesn't make it so.

This discussion lacks a price list for all parts. Until then, it's my common sense against yours.

Or better: my biases against your biases.



Thanks.

US$ 60 for the display doesn't look that expensive. At US$ 190 total cost of manufacture for the 2, I would risk the wireless free forever subsidy seems to be a substantial part of the unit cost. Would it be a safe bet to estimate the display of the DX to be around US$ 120?

So, again, I would be happy with a DX that used wi-fi or my own GSM/3G instead of the US-only cellular network. And the bright side is that it could probably be sold for less than the current versions.


Kindle has a thickness of a cellphone. This is an important factor that many of the "NETBOOK" people seem to want to ignore.


It's largely irrelevant. Netbooks are not designed to use flat batteries - most of them use cylindric cells - and have higher profile motherboards because memory and SSDs/hard disks live on sockets on top of the motherboard - because PC users are used to expand them. Netbooks also heat up a lot more than the cellphone-sized brain Kindles use and netbooks must accommodate heat management hardware (fans, heat exchangers) Kindles don't


Uh, so?

A user that wants a thin device doesn't care why the device is thin. Netbooks aren't as thin as a Kindle, period.


They can't be as thin as a Kindle - they are different devices designed to be used in different ways - a netbook is usually used the same way as a notebook (I use mine mostly on a desk, hooked up to a big monitor, a decent keyboard and mouse) while the Kindle is designed to be used as a book.

I would happily trade a couple millimeters thickness for longer battery life, wi-fi, a hard-drive and network-printer emulation software so I could print my stuff to "paper stacks" on the device. Unfortunately, the absence of such device indicates strongly that those needs are mine only.

I look forward to hacking the Tech Crunch thingie to suit those needs.


Unlike the cheap phone you were offered, the Kindle e-ink display uses a newer form of e-ink that allows for more than 2 colors, with a resolution several hundred times the resolution of the phone's e-ink display, significantly faster refreshing, AND which can update portions of the screen instead of the entire screen every time (which was not available on any e-ink product until the iRex illiad which came out in 2007). It's sort of like the difference between the mouse and the elephant.

The processor is not the expensive part, nor is the ram. The fucking display is the expensive part.


Would you please stop using all caps in comments?

http://ycombinator.com/newsguidelines.html


"The processor is not the expensive part, nor is the ram. The fucking display is the expensive part."

Still, the display has to be very expensive, since every other piece should be really cheap and there are not that many of them anyway. The Kindle has the brains of a cheap smartphone.


Yes, the display is very expensive. You've got it exactly right.

Look at all the other vendors of eInk devices. Those devices are also expensive. If they could massively undercut Amazon, they probably would.


They would only undercut Amazon if they could secure supplies for a proportionately larger number of units. If parts supplies are short, the best strategy is not to undercut your competitor and gain market share, but enjoy higher profit margins while the part shortage lasts.

And, of course, as long as market share is not a huge concern.

It is also unwise to enter a price war with a competitor with deeper pockets than you.


Indeed, I have used and continue to use my netbook to read e-books, and the experience is not satisfactory. My eyes hurt. If Kindle DX can reduce my eyestrain, I am going to buy it.


> I've used netbooks and e-ink ebook readers. The ebook experience on a netbook does not compare.

Pixel Qi's screen will narrow that gap eventually, at the price of being less available and more expensive in the short and medium-term.

http://www.pixelqi.com/blog1/


Because netbooks have a completely new kind of display? Included in that cost is (presumably) the cost of developing a display that looks nice and holds an image without battery, and the cost of setting up new manufacturing lines for it.

Its still a little cheaper than the iPod Touch was originally, isn't it?


I want mine with a GSM-ish modem and no lifetime data plan. That should make it cheaper.


It's offensive that they considered _forcing_ Kindle owners to purchase a minimum amount of books per month.


Really? It's offensive that they considered a plan that would subsidize hardware with required book purchases? I'm glad they didn't go that route, but it would have been stupid of them to not think about it.


If they're forcing you to purchase a certain amount of books, and you don't, your hardware would most likely get turned off; meaning that you are really leasing it. Which is complete bullshit.


Err...I would expect that this wouldn't have been implemented this way. It most likely would have worked like Audible: a set monthly subscription fee, and you would get a set amount of "Kindle credits" to spend in the Kindle store every month.


Does your cell phone turn off if you don't use the full allotment of minutes?


It does if I don't pay for the ones I don't use.


Maybe that's one of the reasons they didn't go that route? The subsidized cell phone business model can suck for consumers (sorta the point Bezos was making), but requiring a minimum book purchase is still something some people might go for.

I have no idea how they'd implement it, but I suspect you'd pay a monthly fee that "earned" you X number of books. You'd hope they wouldn't let you "forget to buy enough" and thus lose your Kindle service.


It would make more sense for them to charge you $(X-Y) if you only bought $Y worth of goods in the month.




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