This was originally posted at ZDNet's Between the Lines.
Amazon has unveiled its much-hyped Kindle DX, an e-book with a 9.7-inch screen designed to raise a ruckus in the textbook market, but also has delivered a $489 curve ball that seriously alters the return on investment calculation for academia.
On the surface, the argument for the Kindle DX (Techmeme) in academia holds somewhat but that price tag makes the case much harder for your average student. Amazon is asking students to learn a little about total cost of ownership over three years before they pick up a book. What is this? Enterprise software?
Amazon's Jeff Bezos introduces the Kindle DX -- bigger, and more expensive.
(Credit: Sarah Tew/CNET)The Kindle DX runs you $489 as an upfront investment, and the average student spends $488 on new and used course materials a year. In a nutshell, Amazon is asking the average student to fork over more money for the Kindle and then buy the textbooks too.
Add it up and the average student is losing money on the Kindle DX in that first year. Let's say Amazon can halve your textbook costs to $250 a year--you'll still be shelling out nearly $750 in year one.
Over two years, a student will still be behind on the Kindle DX return. Going the paper route on textbooks yields a two-year cost of $976. But the Kindle still runs you $13 more over two years.
In year three, that student will start saving money via the Kindle ($1,464 on paper textbooks vs. $1,239). The big caveat here: I didn't include the used-book market and assumed that the Kindle DX still functions well. Another big assumption: All the textbooks you'll need will be available on the Kindle (not likely). If Amazon can cut a student's textbook costs to $100 a year, the case for the Kindle DX would obviously look better.
In a nutshell, Amazon is trying to make a four-year total cost of ownership case to an audience that just doesn't have the attention span. So-called "super seniors," or those on the five and six year college plans, may find some return.
Books at college can run up to $400 per semester. The Kindle DX is intended to last longer than that, of course, but this is under the assumption that the student won't break or damage the device quickly and all a prospective student's material is available through Amazon's service.
What happens to the return on your Kindle DX if it gets damaged during a close beer pong match?
So what caused Amazon's big disconnect? Simply put, it is Amazon's love affair with Whispernet, its 3G download network.
In its statement about the Kindle DX, Amazon boasts:
Just like Kindle, Kindle DX customers automatically take advantage of Amazon Whispernet to wirelessly shop the Kindle Store, download or receive new content in less than 60 seconds, and read from their library--all without a PC, Wi-Fi hot spot, or syncing. Amazon still pays for the wireless connectivity on Kindle DX so books can be downloaded in less than 60 seconds--with no monthly fees, data plans, or service contracts.
Who cares? The Kindle DX is tailored for students that happen to have Wi-Fi in every campus corner. This miscalculation means Amazon has overpriced its big Kindle--to pay for wireless service--and may leave growth on the table. A cheaper Kindle DX that only uses Wi-Fi is the student ticket. Amazon missed the mark.
Consider this chart detailing where your textbook dollar went. Now you can include costs for Whispernet.
(Credit:
National Association of College Stores, via Larry Dignan/ZDNet)
If Amazon's new bigger-screen e-reader, the Kindle DX, lives up to the hype, it could be good news for Sprint Nextel.
(Credit:
Amazon)
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.
Kindle titles could be available soon on a variety of mobile devices.
(Credit: Amazon)Some people have criticized Amazon for essentially making the Kindle a "closed" e-book reader system. However, word from Yahoo Finance is that it might not be so closed after all and that Amazon will be making its Kindle books available on a wide variety of mobile phones in the near future.
At this point, it's unclear whether it will be offering up all its Kindle titles (the Kindle Store currently has about 230,000 e-books for sale) or just a fraction of them. Amazon spokesman Drew Herdener simply said the company is working on making Kindle books available "on a range of mobile phones."
Additionally, Google announced Friday that titles from its Book Search service will be available for reading on the iPhone and T-Mobile's G1, which uses Google's Android operating system.
Electronic book readers like Stanza from Lexcycle and the eReader from Fictionwise are already popular on the iPhone. However, getting books onto your iPhone to use with those readers is more cumbersome than downloading a book from Apple's iPhone App Store. However, if Amazon were to create an iPhone Kindle application that tied directly into its store, Lexcycle and Fictionwise would certainly have to up their games to compete.
What's this all mean? Well, we'll probably learn a lot more about Amazon's e-book strategy on Monday when it's widely expected to announce the Kindle 2. But it's clear that the company sees big bucks in publishing and distributing e-books, which cost nothing to make (in terms of raw materials) and only need to be stored on a server and not some shelf in a warehouse.
Currently, Amazon takes a nice cut from authors and publishers to sell Kindle versions of their books--up to 65 percent of the list price--though big publishers and authors get better terms.
Anyway you look it, these announcements from Google and Amazon mean you're going to be seeing and hearing about a lot more e-books--and e-book readers. It also shows that Amazon's Kindle strategy is not just about hardware but software.
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