Back in July 2008 I wrote about Amazon’s Kindle Strategy. I said they are not in it to capture the devices market but rather win the distribution platform market.
It is driving the new format, reduce the value captured by publishers and position itself to be the distribution medium of choice. The goal is to capture the format market and control the value chain and not the devices market. Since no one else s making such devices amazon.com took this on itself.
There is news today from Amazon that signals the move in that direction. Amazon announced today that they will release a Kindle iPhone Application that lets iPhone and iPod Touch users read Kindle books on their devices instead of Kindle. This program is available for free, a right move that fits with the platform strategy to increase footprint. The Kindle App will be a bit with iPhone users and it will reach top 10 among most downloaded.
Is this program targeted at its existing Kindle customers or new customers? While Amazon says it is adding convenience to Kindle owners allowing them to read books while they are away from their Kindle device, it is directly targeted at converting new users and increasing Kindle format footprint. For the very near term (within days) even if 1% of 10 million (approximate) iPhone/Touch users bought just 1 book at $9.99, that is $1 million in new revenue. For the long term this translates into not only more revenue from repeat purchases and new customers but also delivers on Amazon’s goal to win he platform war.
Questions do arise on why Amazon introduced Kindle at all and why it did not go for iPhone application in the first place. I think Amazon’s strategy evolved since the introduction of Kindle. The biggest factor of Kindle device is the readability with its e-ink technology, there will always be a segment willing to buy this device for this factor alone. Techcrunch downloaded Kindle App for iPhone and reported they had same reading experience on iPhone as on Kindle. Amazon probably also wanted to be negotiating with Apple from a position of strength having a powerful BATNA (Best Alternative To Negotiated Agreement).
Other Winners and losers? By giving the program away for free Amazon denied any revenue to Apple. Authors and Publishers stand to gain more from increased book sales. Magazines and Newpapers that received subscription revenue from Kindle subcribers stand to lose any additional revenue from new subscribers. This is because iPhone readers can access the content using the browser and with existing online subscription instead of paying a separate subscription fee for reading on Kindle. To some extent Sprint Nextel that has the contract with Amazon to deliver books on-demand to Kindle devices stands to lose.
Overall, Amazon will win because of its clear strategy and flaw less execution.