If Amazon's new bigger-screen e-reader, the Kindle DX, lives up to the hype, it could be good news for Sprint Nextel.
Amazon's CEO Jeff Bezos on Monday unveiled the much-anticipated large-screen Kindle e-reader in New York City. The new Kindle DX is geared toward readers of personal and professional documents, newspapers, magazines--and textbooks, a potentially huge target market.
Analysts are expecting this new Kindle to be a big hit. The larger screen and PDF reader will help open up the device to a whole new market.
While huge sales of the new device will obviously benefit Amazon, it's also likely to help boost subscriber figures and revenue for Sprint Nextel, which provides the wireless service used to download the textbooks, documents, and newspaper articles.
The way the arrangement between Amazon and Sprint works is that Amazon sells the Kindle to consumers and bundles the wireless service with the device. This means consumers never get a bill from Sprint. Meanwhile, Sprint charges Amazon a wholesale price for network usage on a per device basis.
More Kindle users could help Sprint, which has been has been struggling to retain customers since its acquisition of Nextel. In fact, if it hadn't been for the Kindle, Sprint likely would have had an even uglier first quarter. During the first quarter of 2009, Sprint lost about 1.25 million of its most valuable post-paid cell phone subscribers, the company said Monday.But the company was able to offset some of those losses with subscriber gains from its wholesale and affiliate subscribers. In fact, Sprint managed to add about 394,000 wholesale customers during the quarter, which made the total customer loss look a lot better. Sprint's CEO Dan Hesse attributed subscriber growth in wholesale to market opportunity for open network devices, such as the Amazon Kindle 2.
Right now, it's unclear exactly how many Kindle devices are using Sprint's network, or exactly how much revenue the carrier generates for every Kindle user through its arrangement with Amazon. But for a company that is trying to compete in a wireless phone market that is over 80 percent penetrated, new opportunities like the Kindle can only help.
As a result, Sprint isn't the only mobile operator going after this market. AT&T and Verizon Wireless have each said they plan to offer service for more non-cell phone devices on their networks. At the CTIA trade show in Las Vegas in March, Verizon Wireless said it was talking to five e-book makers about making their devices available on Verizon's network. AT&T wouldn't provide details, but executives hinted that an e-book deal could be in the works for its network as well.
Just last week, rumors surfaced that Verizon could be working with Apple to launch a new "media pad." This device would allow people to read books and newspapers, but it would also allow them to a lot more, such as listen to music, view photos, or watch high-definition video. Details about the rumored Apple "media pad" are still scarce, but it could provide a challenge to the e-reader market and could help Verizon generate a new revenue stream from a new wireless device.