There are more rumors fluttering around Seattle that at some point, likely the holiday season of 2011, Amazon will start giving away its Kindle e-book reader for free, likely to select (as in Prime) members. And as the e-book market expands, the possibility is looking more and more likely.
Amazon doesn't make much money on the Kindle e-book reading device. And it's not supposed to; the hardware is a loss-leader that allows mobile access to--and binds customers to--Amazon's e-books store. It's a way for Amazon to say that, yes, its e-books really can replace dead tree editions.
If Amazon was betting on its hardware, it wouldn't have Kindle apps for the iPad, iPhone, and other devices. The money, as far as Amazon is concerned, is in selling books. The Kindle hardware is simply a conduit for this. It's the metaphorical chip to the e-book dip.
GeekWire, a new Seattle-based tech gossip and business site, talked to venture capitalist Scott Jacobson, who gave a list of reasons why Kindle would likely make this move. They include the aforementioned lock-them-in-with-free argument, as well as the relatively low cost nature of the e-ink devices, the need to develop the rather new market, Amazon's history of embracing "free," and the simple fact that Amazon can afford it.
Another key element is that Kindle owners, according to Amazon's own metrics, buy more books than non-Kindle owners. Those are the customers that Amazon not only wants to keep happy--they're the customers that Amazon wants to create and encourage. In addition, those who tend to be early adopters and the tech-savvy have already done a fair job of adopting to the new digital book format. But to really make the e-book expand past these readers, Amazon needs to reach out to those who won't pay $140 for a new (to them) technology. Giving away the Kindle hardware, which we first heard about a year ago, is a way to do this that makes sense.