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Old 05-21-2008, 08:32 AM   #1
Alexander Turcic
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Amazon Kindle projections overrated?

We've spent the last couple days thinking this over, and as much as we'd like to agree with analysts on the rosy future of the Kindle (and e-books in general), we cannot ignore the nay-sayers, put-down, it's been done before, commenters. So also Scott Berry of SeekingAlpha, who attributes the bank analysts' euphoria to them being crack smokers (and stock manipulators).

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Citi’s Mahaney has even gone so far as to suggest 3% of Amazon’s revenue (about $750M) will come from Kindles within 2 years. Worse yet, he assumes a sales ramp roughly half of the original iPod. Frankly, he’s smoking crack.

If Eliot Spitzer hadn’t brought an end to the practice some years ago (cough, cough), I’d almost think these two were trying to drum up business for their investment banks. Instead it’s probably something much more innocent, like say pumping the stock for the traders.
Note, he also believes that end users don't need e-book readers. So whom do you want to believe -- analysts or Mr. Berry?
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Old 05-21-2008, 09:29 AM   #2
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Quote:
Originally Posted by Alexander Turcic View Post
So whom do you want to believe -- analysts or Mr. Berry?
Berry's right in that analysts tend to blow smoke up everybody's skirts to make something new look good, and that they probably are. I think their forecasts are overly optimistic for the Kindle, since
A) it's expensive,
B) it's invisible to customers who want to see or try before they buy,
C) it's ugly, and
D) there are other e-book readers to be had that beat out A, B, and C handily.

This doesn't mean things can't improve for the Kindle, and I do expect them to. But enough for 3% revenue in 2 years? Naw, not quite. Maybe with Kindle version 2. Or 3.

As far as Berry's opinion that end users don't need e-book readers... so what? Music lovers don't need iPods, either. That's neither here nor there, and the right product will sell whether people need it or not.
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Old 05-21-2008, 10:46 AM   #3
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I think that projection was overrated. Suppose that Kindle can attain the star position as iPod, then in order to compare them, I think it is fair to ask:

1) Is the book market half in size as the music industry?
2) Is eBook sales as a percentage of all book sales larger or smaller than digital music sales as a percentage of music sales eventually?

Although I don't have numbers, I am pessimistic on both counts. Therefore I don't quite believe that Kindle can have half as many units moved in the first three years.
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Old 05-21-2008, 11:53 AM   #4
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in between

The truth probably lies somewhere in between. I tend to be optimistic about the future of e-books and the Kindle. People who actually own Kindles love them (me being one of them). And it has the force of Amazon.com behind it.

I don't think many of the analysts have actually tried the device. The new e-ink devices are far better than trying to read on a Palm device or LCD or CRT. They need to try it out. I don't think they will get their heads around the concept otherwise.

And please quit saying that the Kindle is ugly. It does not photograph well, but in person it is not really a bad looking device. I have a 2nd generation iPod and it looks better than that.
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Old 05-21-2008, 01:53 PM   #5
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Quote:
Originally Posted by WeirdBeard View Post
I don't think many of the analysts have actually tried the device. The new e-ink devices are far better than trying to read on a Palm device or LCD or CRT. They need to try it out. I don't think they will get their heads around the concept otherwise.

And please quit saying that the Kindle is ugly. It does not photograph well, but in person it is not really a bad looking device. I have a 2nd generation iPod and it looks better than that.
(Well, if they ever turn up at my local bookstore for me to see and touch, I may stop. But as long as all I have to go on are those photos... it's ugly 'til I say it isn't! )

Seriously, it actually makes little difference if the analysts have tried the device, or compared it to PDAs or PCs... they aren't its target market. Analysts are supposed to report on what the market will do, and as such, they are automatically removed from that market. What matters is what readers will and won't do... they're the ones who need to try the device.

Best thing that could happen to the Kindle right now, would be to show up by the thousands in Wal-Mart and Best Buy.
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Old 05-21-2008, 02:34 PM   #6
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Steve, while I don't agree with these optimistic projections, I think you have to revise your views on the Kindle. I find the Kindle ergonomic and easy to use (my test of the Sony convinced me that the Kindle had much easier page turns, so that while the Sony looked better in a display case, it did not use better); you can try it out for 30 days and, if you don't like it, return it; and those other readers to which you refer but do not name lack certain features of the Kindle (search, online bookstore, web access). Expensive? If I use a device every day, as I do the Kindle, $400 is money well spent.
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Old 05-21-2008, 02:54 PM   #7
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I have to agree with radleyp. Yes, the projections are probably higher than is likely, but I think the future of the Kindle is bright. As long as Amazon follows through on the Kindle's potential (they're lagging a bit behind in my view), then prospects for a healthy Kindle marketplace are good. Will it hit 2-3%? I really don't know, but I don't think it's impossible.
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Old 05-21-2008, 03:03 PM   #8
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I wonder if most Sony users buy books from Connect or from other sources. I know most of the folks here don't but I don't know how typical they are. I bring this up because I think one could make a compelling argument that the Kindle + Amazon is likely cheaper in the long run for many people than Sony + Connect. This isn't just because the book prices are a bit lower. Because you get free samples, you rarely end up buying a book you don't like or end up finishing. Sony has excerpts but they seem rather short. Also, because you can get your books almost anywhere in the US regardless of whether you have a computer with you, there is rarely a need to buy more than what you want to read right now. When I bought paper books, I would try to get books for a month at a time. Because of this I have quite a few books I haven't read. I may never read them. My fancy for them passed. With the Kindle, I only buy in advance if I'm leaving the country. Even then, I can read a generous sample at my leisure. When I look at how much money I've wasted in those two ways, I can see that $100-$150 gap closing really quickly. When I add to that the features that Sony lacks, the decision is really easy.
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Old 05-21-2008, 03:44 PM   #9
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I guess what I'm thinking is that why wouldent Amazon want tro release their Kindle sales figures? The only reason I can see is that the numbers are not very good. If that's the case they might be using the "hype" of great sales as a tool to get more publishers to sign up. If they numbers are really good, why not make them public?
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Old 05-21-2008, 04:47 PM   #10
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Originally Posted by radleyp View Post
Steve, while I don't agree with these optimistic projections, I think you have to revise your views on the Kindle...
While I don't argue your points, Radley, I still believe the fact that potential customers can't see and touch the device first is a major stumbling block. Sure, you can buy one and send it back... but at $400 (paid up front), a lot of people will balk at even doing that sight-unseen. Maybe if Amazon offered it at a "Get it now for free for X months, then pay or send it back if not satisfied" promotion, more people would be willing to give it a try. And so far, since Amazon has not produced enough of the devices to keep up with the early adopters, much less the regular public, it's too early to claim that average consumers don't need to see it to buy it.

So the analogy against the Sony is interesting: The Kindle may work better than the Sony in the display case; but if the Sony is the only thing in the display case... guess which one will ultimately sell better?

I'm not saying the Kindle is a bad product... just that it's being badly marketed.
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Old 05-21-2008, 05:22 PM   #11
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I have to agree that Amazon is making a huge marketing mistake by not having some retail display for the Kindle like Best buy, Circuit City, Fry's etc. As someone who eventually bought a Kindle, I also had MAJOR reservations about how the Kindle looked like in photos and in the videos on Youtube. More importantly I was worried about the ergonomics and those BIG page advance buttons. After I bit the bullet and bought the Kindle anyway I could not believe how different the device is in actual use than in the photos and on videos. The Kindle works very well in person. It is just not photogenic and unfortunately Amazon has made it difficult for people see their product in person. Big mistake.
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Old 05-21-2008, 05:23 PM   #12
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And please quit saying that the Kindle is ugly. It does not photograph well, but in person it is not really a bad looking device. I have a 2nd generation iPod and it looks better than that.
If we honestly think it is ugly, why should we not say that? I own both a Kindle and a PRS-505, and the design of the 505 is much cleaner. The cheap plastic case on the Kindle already has a crack in it (and no, I haven't dropped it), while the 505 is still pristine (and I actually have dropped that). And what's up with that case they ship the Kindle in?

The Kindle is a superior device from a software perspective for a variety of reasons, but for industrial design it has a long way to go. The only prop I can give the physical device is the user accessible battery, which Sony should be shot over.

I'm also going to back up Steve that $400 for a product sight unseen, especially in a market where people are cutting back their spending, is not helping any. The only other person I know in real life that owns a Kindle hemmed and hawed since it was introduced and only broke down and ordered two weeks ago. Everyone else I know is listening to audio books ($9.95 a month on a device they already own), haunting used bookstores for cheap paperbacks, and using PaperBackSwap.com.

I think the Kindle has a future. That does not mean it is not without faults. (Not simply allowing encrypted MobiPocket titles to work on the Kindle as is, without resorting to hacks, is definitely a big one.)
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Old 05-21-2008, 05:34 PM   #13
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My Costco (in Danbury CT) some months ago had a Sony in a display case, along with jewelry rather than books or any other electronic devices. Clearly Costco had no idea what the product was. It had been on sale at the nearby Borders but they had stopped carrying it the Christmas before because it wasn't selling. I don't think Sony gave much of a damn about the marketing. At least Amazon is a bookseller. BTW, you would pay for the Kindle on a credit card, so what's the problem in having the charge put on and then removed when you return it?
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Old 05-21-2008, 05:54 PM   #14
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Pricepoint of the Kindle is also problematic. Amazon should price the Kindle at $200 or below, eat the loss and hope to make up the profits on subscriptions, book sales etc. Sort of the same model used by cellular carriers to subsidize cellphones.
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Old 05-21-2008, 08:40 PM   #15
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I post on another board that is not in any way about books but there are lots of people there that are very interested in the Kindle. They see it on the front page of Amazon. Quite a few have actually bought them. I'm sure many more would if it were cheaper, of course. I've never seen a single post about the Sony (or any other) reader.
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