Kindle Fire: Ominous for Content Providers?
Unless you’re marooned on a deserted island, you’ve probably heard that Amazon has announced a series of new devices, including one called the Kindle Fire, which has an iPad-style touchscreen and is powered by the Android operating system. On the content side, meanwhile, Amazon has signed deals with some leading publishers to provide one-click access to their magazines and newspapers. It’s nice for media companies to have a strong competitor in the tablet market, but dealing with Amazon puts them in the same boat they’re in with Apple: They provide the content, but the platform owner controls the relationship. And in some ways, Amazon might be worse.
The impetus for Amazon’s interest in new tablets is fairly obvious: Apple’s iPad has shown that a relatively huge and growing market of users is interested in the convenience of a mobile device for reading and playing games. So far no one has come along who shows signs of playing a strong second fiddle to Apple in that market, so why not Amazon? The company has deep pockets—although not quite as deep as Apple’s—and it also has something that Apple doesn’t when it comes to the content side: an existing relationship with many users that’s based around subscribing to magazines, buying books, and so on.
The need for the Kindle Fire was obvious: As soon as the first version of the iPad arrived, the Kindle looked more than a little antiquated, with its black-and-white screen, no touch interface, and other weaknesses. That’s not to say there isn’t still a market for dedicated reading devices, for people who don’t like the distractions or the reflective screen of the iPad—and Amazon will no doubt continue to sell plenty of Kindles with touchscreens and other features added. But the sweet spot of the market is a device that can do many different things, from streaming video and audio to displaying magazines, newspapers, and books in full color.
A WAY TO SELL CONTENT
In some ways, Amazon and Apple are polar opposites, at least when it comes to the way they are approaching the tablet market. As my colleague Erica Ogg has pointed out, Apple’s main interest is in selling hardware, and the company uses content as a way of doing that. It arguably had no real interest in becoming a music powerhouse, except that controlling access to those songs would give it a powerful lever with which to sell more iPods. Amazon, however, sees devices like the Kindle Fire as a way to sell more content, and that makes it simultaneously more appealing as a partner for media companies and a potentially more dangerous one, as well.
The benefit for content publishers and media companies such as Conde Nast and News Corp. is more or less the same as it is with Apple: They get access to the users who choose that device as a way to consume media, and Amazon handles the logistics of the relationship—the billing, the processing, and to a certain extent the marketing and promotions as well. They also get to put their content on a device that (in some cases, at least) seems to make users more likely to pay for things, which is something media companies have been wrestling with virtually since the Internet was invented—although they have to give the platform owner 30 percent of the proceeds, of course.
But the downsides of this relationship are also a mirror image of the relationship many media outlets have with Apple: The platform owner is in the driver’s seat, both in terms of what apps are allowed or not allowed, and also what information about the end user or subscriber is provided to the content creator—an issue that was a sticking point for many when Apple started trying to sign up publishers for the iPad. In the end, the platform owner is the gatekeeper of a media company’s relationship with its customers, which is the same kind of tradeoff media companies make by creating Facebook apps.
COMPETING WITH CONTENT PARTNERS
At least in Apple’s case, however, the hardware maker appears to have no real interest in becoming a media or content producer, since all it wants is content that makes people want more devices. In theory at least, it doesn’t particularly care where that content comes from, as long as it gets its 30 percent. Amazon is in a different boat; it has already indicated it’s happy to compete with its former publishing partners when it comes to books (its core business) by pressuring them to accept lower prices and also by signing up such authors as Tim Ferriss—in effect, becoming a publisher.
Is Amazon suddenly going to get into the magazine business or the newspaper business? No. But its Kindle Singles program is appealing to more and more authors who are using that avenue as an alternative to both publishing traditional books and to magazine articles or newspaper features. Some newspapers and other publications have been using e-books and the Kindle as a tool to extend the life of their content, and that is smart—but Amazon has a clear interest in that business as well.
There’s no question that working with Amazon and a new platform like the Kindle Fire makes a lot of sense for publishers and media companies—it’s a win-win for both sides. And so long as Amazon’s interests align with those of its media partners, everything should go swimmingly. But what about when they diverge?
Also from GigaOM:
The State of the E-book Lending Market: Business Models and Challenges (subscription required)