Can Amazon Kindle Digital Book Fever?

If CEO Jeff Bezos has any say, bookstores could eventually be a thing of the past. Just turn on your Kindle and get the new Stephen King

Amazon (AMZN) Chief Executive Officer Jeff Bezos considers the book a stubborn relic of the predigital universe. While other media, including music, are readily available over digital delivery devices such as Apple's (AAPL) iPod, the book has stuck with its hardbound and softbound covers and dog-eared pages for hundreds of years. "Why are books the last bastion of analog?" Bezos asked during a Nov. 19 press conference. "Can you improve upon something as highly evolved and well-suited to its task as the book and, if so, how?"

Bezos thinks he has the answer: Kindle, a handheld book reader he's hoping will help usher books into the digital age. On Nov. 19, Bezos unveiled the long-awaited device at the W Union Square hotel in New York. Kindle, available on Amazon for $399, holds about 200 books in a paperback-sized package and displays pages on a screen that appears more akin to paper than a backlit LCD screen.

Part portable library, part bookstore, Kindle is wirelessly hooked up to the Internet via Sprint Nextel's (S) high-speed cellular network, letting users download books at a moment's notice. Users can purchase books—some 90,000 titles are currently available—for about $10 apiece, and there are no connection-subscription fees.

Opening the Market

Amazon spent some three years on Kindle's design in hopes of creating a product so user-friendly that it will not only compete with printed books but also encourage users to choose it over reading the newspaper on handheld Web-connected devices such as smartphones. Kindle easily connects to the online dictionary Wikipedia and has a browser that lets users visit other Web sites. However, it only delivers those sites in black-and-white, and Web surfing is not intended to be its main function. "It's a single-purpose reading device," says Steve Kessel, Amazon's senior vice-president of worldwide digital media.

More broadly, Amazon hopes to widen the still nascent market for digital books (BusinessWeek, 9/3/07). Only the Sony (SNE) Reader has really gained much traction; it currently sells for between $300 and $400, according to prices listed for online retailers.

Kindle's creators took pains to make a smooth transition from analog to digital. The device lets users upload digital books and documents by e-mailing document attachments to a personal account associated with the device. It also stores books on Amazon's servers for easy reload in the event they're lost, corrupted, or the device gets stolen. Amazon didn't reveal any sales targets for the Kindle.

Subscription Base

Subscriptions to major publications, such as The New York Times (NYT) and Time Warner's (TWX) Time magazine, are available for between $5.99 and $15 a month. Amazon says it pays booksellers and periodical publishers a list price and then makes a profit from the difference between that and the download price. It does not share revenue from the sale of Kindle with the publishers.

Kindle also delivers blogs for between 99¢ and $1.99 per blog, per month, depending on how frequently the blog is updated. Blog publishers can sign up their services on Amazon's site and share in the subscription revenue. The charge, which may seem curious for usually free, ad-supported blogs, covers the expense of delivering the blog as well as providing publishers with an alternative revenue stream, says Amazon's Kessel.

Protection and Praise

Amazon does not protect the books with any digital rights management (DRM) technology. However, Kindle books are formatted specifically for the device and publishers are welcome to append their own DRM technology to their titles, says Kessel. To prove that publishers are embracing the technology rather than worrying about the potential for users to somehow hack into it and steal digital book titles, Amazon included a video featuring praise from well-known authors such as Nobel prizewinner Toni Morrison. "I like the fact that it travels," said Morrison. "It is faster, it's lighter, and I have more [books] at my disposal."

Whether the Kindle can finally ignite the digital book market remains to be seen. But the device is already receiving positive reviews (, 11/19/07), even if some commentators consider it ugly and a little pricey. Looks shouldn't be a problem if, as Bezos hopes, the Kindle becomes a gateway into authors' imaginations. "The most important thing about Kindle is it does indeed disappear so you can enter the author's world," he says.

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