Why Amazon's Kindle DX Could Fail

Please tell us you're joking, Amazon.com (Nasdaq: AMZN  ) . No? Who, then, are these consumers who will pay $489 for the new Kindle DX e-reader, billed by some as a potential savior for the ailing newspaper industry?

Shoppers I've heard from are impressed with the product, but not the price. "I want the Kindle SO bad but it's just too expensive! They've overshot price point in this economy," says Melanie Haiken, a writer who responded to my request for comment via Twitter.

David Vinjamuri, a branding expert who teaches at New York University, agrees:

The Kindle DX looks like a great concept, but it's overpriced. It shouldn't cost more than a netbook. This is a problem for the Kindle 2 as well. I still might have bought it had I not already bought a Kindle 2 just two months ago. I am vexed with the Amazon product launch strategy which looks reactive rather than thought out. It seems designed to aggravate the brand's most loyal users.

Precisely. The problem isn't the device itself but the price point. (Check out what fellow Fool Rick Munarriz had to say today for a different point of view.) A large-format screen should make this latest Kindle attractive to those who've signed up for digital editions of newspapers supplied by Gannett (NYSE: GCI  ) , News Corp. (NYSE: NWS  ) , and New York Times Co. (NYSE: NYT  ) . Magazines, too.

But Amazon isn't Apple (Nasdaq: AAPL  ) , nor should it try to be. By pricing the new Kindle at $489, Amazon has ceded ground to the Mac maker, which is sure to be fine with pricing a more glossy, more functional, and very likely more iPod Touch-like Tablet later this year.

Amazon, in other words, has forfeited any competitive edge that it might have gained by forgoing an iSized price premium.

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Fool contributor Tim Beyers had stock and positions in Apple at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is ... out of things to say.


Read/Post Comments (6) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On May 06, 2009, at 5:42 PM, D2009 wrote:

    The Kindle 2 costs about $185 to make, $350 to own, so Amazon has plenty of room to wiggle if they need to.

    And can we please drop the netbook comparison? Apples and oranges.

    Try reading your favorite novel series on a netbook...tell me how your eyes feel after a few hours. Especially outside in the sun. And don't get me started on battery life. You can read a Kindle for a few hours a day for darn near a week without a recharge -- try that with your netbook, which is also heavier, slow to boot up, and hard to hold in one hand while reading. And now that the DX has a larger screen? Forget netbooks for serious reading needs.

    And are we forgetting that you get FREE EVDO with every Kindle???

    Guys, this thing has a half-decent web browser on it. You can't go streaming Hulu or using Google Docs or anything fancy like that, but you can get to a /ton/ of news articles and such, all for free.

    Finally, the competitor... Apple's media pad will probably be sold through Verizon, so add the 40% Apple markup plus the 30% Verizon markup, and you'll have one really expensive device...that still requires a two-year contract with Verizon "Nickel and Dime You to Death" Wireless.

    It also sounds like Apple's targeting a different niche: all the rumors point to a "multimedia" device, like for videos and games, not newspapers and textbooks...which fits with much of Apple's and Verizon's usual motifs -- wasting time.

    Everyone said the first Kindle was too expensive, and it sold like hot cakes. Everyone said the Kindle 2 was still too expensive, and it's been selling like hot cakes.

    Everyone will say that the Kindle DX is too expensive...but it will still sell like hot cakes.

  • Report this Comment On May 07, 2009, at 11:34 AM, longshadows wrote:

    Right on all counts, except one! Amazon has a virtual monopoly on the best digital media--books, magazines and newspapers. One can look to Sony or Apple, all one wants, for a cheaper reading instrument, but as long as Amazon holds the "booksmarks" to the best reading material, folks are eventually going to give in and pay the higher price, I fear.

  • Report this Comment On May 07, 2009, at 5:33 PM, TMFBent wrote:

    Wow, it gets tiring having to correct misconceptions about the Kindle. Anyone who compares any usual computer device smartphone, tablet, or otherwise, to a Kindle doesn't understand the tech and doesn't get the point. You can't get weeks worth of use from an LCD with current battery tech, and if you could, you wouldn't want it anyway. Your eyes would fall out of your head.

    The persistence of argument like these is amazing to me, and stem, IMO, for ignorance as to what the actual appeal of the Kindle is: Easy reading, a simple device, instant delivery of tons of material.

    You want short-attention-span theater, you've got your iPhone. Unless Apple has a magic screen or battery up its sleeve (and I'm sure some think it does) there's nothing they can do to combat the alleged limitations of this device. And even if they had that, they don't have the relationships with the publishers, nor a good record of protecting IP. (And please don't tell me about fairplay. The iPod was enabled by pirated MP3s, and we all know it...)

    The Kindle remains a leader for a lot of reasons, and it remains misunderstood, mostly by those who don't use it but feel qualified to talk about what it ought to be anyway.

    Do yourself a favor: borrow one from someone you know (if they'll let you have it) and read a few books. Then tell me whether or not you want to go back to your smartphone screen or netbook.

    If you're like any of the dozen or so people who've purchased Kindles after trying mine, you'll see exactly what the deal is.

    Sj

  • Report this Comment On July 10, 2009, at 7:02 AM, andrys1 wrote:

    Motley Fool members know their Kindles, apparently. It was so good to read the fact-filled responses.

    Yes, a notebook, if you want to read e-books on that while waiting in lines, doesn't even have the 24/7 EVDO wireless that the Kindle has (plus its improved web-browser), which is free and included in the cost of the unit.

    Now, Kindle 2 = $300 total cost.

    Kindle DX = $489 total cost

    Netbooks:

    Sprint: 99c + $720 yr for wireless access

    Verizon/ATT: $200 + $720 yr for wireless access

    for a two-year MINIMUM.

    Now say again why netbooks are so competitive with this e-reader with 24/7 wireless for reading books or even for accessing the web when away from your home network.

    Also, how is the cost even similar when you have to pay $1,440 + taxes and fees for a notebook that has 24/7 access to the net.

    Yes, it'll do it in color, but for many more $$ than $0/mo.

    Many of us use our Kindles outside, where wireless info lookups are easy with it (google.com, yelp.com) no matter where you are, as long as a Sprint cell phone would work there and sometimes even when one won't.

    And I now use a DX when I want to read my Photoshop books, PDFs with all kinds of odd layouts and just because it's so incredibly clear and not likely to give me eye strain. Looks darn good even in b&w for the web too and again, for free. The Kindle 2 is for when I'm out and about.

    - Andrys (w/ a shoutout to Rick M)

    kindleworld.blogspot.com

  • Report this Comment On July 10, 2009, at 7:09 AM, andrys1 wrote:

    Apple will never provide an e-reader with free cellular always-on wireless access to the net without charging quite a bit.

    The iPhone basic plan is now $70/mo. plus taxes and fees for unlimited web data included but it now no longer includes an allotment for text messages unless one pays another $5.

    I think the Kindle will do pretty well for awhile until another company comes and does more.

    What they should do is come out with a non-wireless edition for people who don't need that net access. With its annotation, inline-dictionary, and search book/Kindle features (and annotations reviewable on your Amazon space if you give permisison), it'd be a popular stripped-down reader at a lower price.

    - Andrys

  • Report this Comment On July 10, 2009, at 7:14 AM, andrys1 wrote:

    D,

    iSuppli estimated the cost of the components involved was $177 and 'conversion' is $8 which would not be your typical conversion.

    As is known, a lot more goes into a unit's cost than the original materials. They're not counting general labor, cost of programming, transportation, warehousing, administering, marketing or support (the latter is unusually good).

    - Andrys

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