Tech titans Apple (AAPL -1.22%) and Amazon.com (AMZN -2.56%) have been two of the disruptive, and some would argue destructive, forces to the publishing business over the past decade.
Source: Amazon.com
Amazon.com fired the first shot, revolutionizing digital reading when it launched its Kindle line of e-readers, and now tablets, in 2007 . And in keeping with its famous penchant for driving prices as low as possible, Amazon used its then-new Kindle platform to initiate a painful spate of price competition throughout much of the publishing industry. This drove five of the world's largest publishers into the arms of Apple when it launched its iPad tablet in 2010 and set in motion the antitrust actions that would dominate headlines still today.
However, revolutionary companies like Apple and Amazon simply don't rest on their laurels, and you need look no further than Amazon's recently unveiled Kindle Unlimited plan as the most recent example of either company's constant willingness to push the limits in digital media.
Amazon dives deeper into digital publishing
Last Friday , Amazon officially announced its Kindle Unlimited reading subscription service. The deal is a bookworm's delight that costs users a flat monthly subscription fee of $9.99 to give users unlimited access to over 600,000 titles, as well as thousands of additional titles on audiobook from a partnership with Audible.com.
Analysts are cheering the move, which is predicted to generate a much as $1 billion in fresh annual revenue. To get there, Amazon will have to add roughly 8.3 million new subscribers in its first year, a goal that seems possible, but certainly not a given. As we've seen with the resounding success of other media subscription services like Netflix, consumers love the simplicity and cost-efficiency of the model for good reason. However, Amazon's Prime Unlimited is also by no means a surefire success and Amazon will have to counter a number of arguably sad social norms in order to Kindle Unlimited value proposition to play out at scale.
It's somewhat of a fact that the average American tends to watch substantially more television relative to the time they spend reading. With Americans reading less and less, it's an unfortunate risk that the average consumer might find justifying the $9.99 monthly expense, the equivalent of a single book per month. However, with Amazon needing to only entice 2.7% of the U.S. population to join Kindle Unlimited to hit $1 billion, I still like the services chances at success.
Why Kindle Unlimited is bad news for Apple
And while even $1 billion dollars might not seem like a huge financial windfall for a company like Amazon, which has generated sales of $78 billion over the last 12 months, Kindle Unlimited should still serve as a win for Amazon in a few ways.
The first of which is the effect that Kindle Unlimited will have on Amazon's competitive position against its primary digital media rival Apple. Although Apple recently acquired a fledgling digital music subscription service as part of its broader Beats acquisition, Apple has always shown a strong preference toward direct sales of all of its digital media offerings, of which it takes a generous 30% cut from its various partners. In fact, owning content and apps has been a major contributing factor to the overall stickiness of Apple's overall platform.
If Amazon is able to effectively shift a significant amount of e-reading consumption away from Apple users in the U.S., Amazon could, at least to a significant degree, decrease the degree to which some users are beholden to Apple's platform. To be sure, Kindle Unlimited only applies to a small number of Apple users today, those in the U.S. However, if it proves a success in shifting readers user habits decidedly toward Amazon's Kindle ecosystem, expect to see it rolling out globally in short order.
At the moment, Amazon's Kindle Unlimited plan remains a completely unproven idea, albeit a solid one at that. However, as a move that has the potential to generate additional revenue for itself while also possibly weakening a key competitor, Kindle Unlimited still present an intriguing double-edged sword for Amazon's on-going digital content onslaught. So while we're still in the early innings as far as this storyline goes, it will be fascinating to see whether Amazon's grand experiment here can live up to its exciting potential.
