Oprah Saves Amazon

It's Oprah Winfrey to the rescue for Amazon.com's (Nasdaq: AMZN  ) nascent Kindle. Amazon CEO Jeff Bezos and his company's revolutionary e-book reader were the stars of Winfrey's show on Friday. "It's absolutely my new favorite favorite thing in the world," she said, but the gushing didn't end there. "I know it's expensive in these times, but it's not frivolous because it will pay for itself," she pointed out. "The books are much cheaper, and you're saving paper."

Winfrey didn't give away cars this time, but she is giving folks a price break on the $359 device. Between now and Nov. 1, Amazon shoppers who enter OPRAHWINFREY as a promotional code get a Kindle for just $309.

I'm not sure to whom Bezos had to sell his soul to land this ringing endorsement, but it's huge for Amazon.

You can't spell Winfrey without "Win"
No one outside Amazon knows how many Kindles have been sold since its debut 11 months ago. That's peculiar, since Amazon is usually quick to tout its holiday sales or Harry Potter book orders.

Even if there are competitive reasons to keep these numbers close to the vest -- reasons such as keeping rival gadget-maker Sony (NYSE: SNE  ) in the dark -- it also doesn't help win over potential buyers who are shying away from squandering money on an item that may be discontinued if it doesn't catch on.

Winfrey's support will help change that outlook. Thanks to her series of monthly book recommendations, Winfrey's audience consists of many devout readers. If she can convince them that making a large upfront investment in the Kindle will pay off through discounted electronic-book purchases, the Kindle is going to be a hot seller over these tricky holidays.

Inspirational metrics
"We will not introduce the new version of the Kindle until next year at the earliest," the company noted during last week's conference call.

That's  a good thing, since buyers may have been apprehensive in recent months; rumors that enhanced Kindles would hit the market before the holidays have been circulating. That comment -- along with Winfrey's $50 price break -- should sway many of those straddling the fence.

A robust run on Kindles would be huge for Amazon, especially when combined with some of the metrics that Amazon did reveal during last week's call:

  • 10% of the unit sales from titles available both in digital and physical formats are coming from the Kindle camp.
  • The selection of available Kindle titles has doubled since last November's launch.
  • The typical Kindle buyer winds up buying 60% more books in Kindle format than he or she used to buy in physical form through Amazon, yet those same folks continue to buy physical books as well, at pre-Kindle rates.

That last point is huge. There are workarounds to get e-books for the Kindle outside Amazon, but it remains a tight ecosystem, in the mold of Apple (Nasdaq: AAPL  ) and the way it hooks up iPod buyers with the iTunes Music Store. Since the initial wave of early adopters is made up of diehard bookworms, Amazon's grasp is significant. If you're Barnes & Noble (NYSE: BKS  ) , how do you compete? Borders Group (NYSE: BGP  ) was an early backer of the Sony Reader, but it's no match for a rival with a proprietary gadget that now has Winfrey's kiss of breadth.

You can't spell Oprah without "ah"
I guess we'll soon find out whether Winfrey is the Kindle's golden goose. If Amazon begins spilling the beans on Kindle sales -- and it has the perfect opportunity to rattle off how many units it moved over the weekend or wait a few more days to give us the first week of the Winfrey bump -- you'll know it's a winner.

Winfrey's touch isn't always Midas-worthy. Her arrival at Sirius XM Radio's (Nasdaq: SIRI  ) XM didn't lead to an acceleration of subscriber growth or even the overtaking of Sirius in new quarterly additions. General Motors' (NYSE: GM  ) spunky move to give away 276 Pontiac G6 sedans to her studio audience in 2004 backfired when the winners began bellyaching about the tax bill on the prize.

However, anyone who has seen how her monthly book pitch can influence national best-seller lists can't deny her influence on folks who love to read. If Kindles don't sell like hotcakes now, maybe they never will.

Other page-turners in the Kindle saga:

Borders Group is a Motley Fool Inside Value selection. Amazon.com and Apple are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz has been shopping online for about as long as Amazon.com has been in business. He owns a Kindle. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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  • Report this Comment On October 28, 2008, at 12:31 PM, SteveTheInvestor wrote:

    Not to sound too negative, but...... so what? Unless you read a book a week, this thing is a waste. Of course, there are those who do whatever Oprah says, so sales will likely improve.

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