This very good article expresses the Amazon strategy:
Quote:
To Guarantee Profits, Amazon has to Build a Very Closed Ecosystem
If people start buying Kindle Fires and Kindles and buying/getting content elsewhere, Amazon will never make a profit.
This forces Amazon to do some interesting things -
Amazon has to lock users into its ecosystem. That’s why we have no ePub support. That’s why there is unlimited Cloud Storage for Amazon content but just 8 GB storage on the Kindle Fire. That’s why Kindle Fire doesn’t have an SD Card slot. That’s why Amazon has to build a custom version of Android and its own Android App Store.
Amazon has to figure out how to make money from content. Amazon has to ensure it makes money from content because it’s selling Kindles and Kindle Fires at a loss. It’s a painfully amusing situation - content owners themselves can’t make profits from their content and yet Amazon is expected to make a profit from its 30% cut.
Amazon has to figure out how to sell more and more things to users. Since there is no guarantee that selling content will make up for subsidized Kindles, Amazon has to sell people everything it can (including kitchen sinks and designer shoes).
Amazon wants to become ‘The One Shopping Destination’. However, it is taking such big risks to achieve this that it is putting itself into a position where it MUST become The One Shopping Destination.
A closed ecosystem is one way to try to guarantee things don’t go to Hell. Amazon is, perhaps to a larger degree than it realizes, trapping itself into this ‘Closed Ecosystem’ requirement. It’s already at a stage where it needs the Closed Ecosystem just to make a profit.
|
Quote:
Every customer getting a subsidized Kindle or Kindle Fire has a ‘Delayed Gratification Tax’ attached to her. What happens if the Content Strategy fails? What if all these customers turn around and say – We never signed up for the ‘Delayed Gratification Tax’.
The funny thing about us (as humans and as customers) is that you can almost guarantee that all of us will forget we got a subsidized $199 Kindle Fire as soon as we get it. As soon as Kindle Fire is in our hands we will simply want content for free or for ridiculously cheap prices (perhaps not all of us, but enough of us to make profiting from content sales rather difficult).
|
LINK
This guy nails it, and that's exactly what happened with the NC. Techies got the NC because it was good hardware at a cheap price, rooted it and went off to buy non-B&N content elsewhere. B&N may end up going down because it can't make back in content sales what it lost on R&D costs for the NC. Amazon ain't interested in that, because it can't afford that. And it will take steps to make sure it doesn't HAVE to afford that.