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Originally Posted by RSaunders
6charlong, I think you propose exactly the opposite business model from the Sony business model. In your model, Sony makes money for every person who reads books on their reader. The "reading books" marketplace is saturated, anyone can get any book they want, consider all the bookstores that have closed since Amazon.Com opened. In order to maximize sales, they can't charge much of a premium per reader since they are attacking a saturated market. If the publishers make and distribute books using open source tools, then Sony makes nothing per book. The earnings from your model are:
Earnings = small * number_readers + 0 * number_books_read
Sony is informed by their Playstation product, since playing games is a hobby like reading books. In this model you make little to nothing on the game player, producing a demand for accessories and game content. Then you tightly control these products to maximize profits. The earnings in the Sony model are:
Earnings = 0 * number_readers + medium * number_books_read
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I think this is a very wise post. You've certainly nailed the reason for the current state of things. However, there's a third possibility for earnings:
Earnings = small * number_readers + medium * number_books_read
I wouldn't be surprised if this is the model with the Reader, seeing as the hardware *does* cost $350. In fact, I think this would be the wise way to go.
I really hope they're not banking on sales of content to keep the Reader business alive. In one sense it's valuable to them, because a high initial price scares off many potential buyers, and sales of books can offset the loss.
But I really think that any business trying to make a living on content alone (especially when they stand to take a loss if they *don't* sell content) isn't designing their business model around the realities of the 21st century. Content is rapidly being driven downwards in price by ease of sharing owned content and the ease of publishing one's own content. Imagine what the YouTube of eBooks would look like, and which business model would do best in that circumstance.
The only thing that allows the second business model to work with games is a highly controlled game publishing business. It's impossible to make legitimate PlayStation games without Sony's approval, and very hard to make illegitimate ones. The direct opposite is true for books.
So, if they can't make money (or at least, not much money) selling books, and they need to sell the Reader cheap.... What's the solution? Personally, I think they should go the cellphone route and sell cheap Reader hardware bundled with a subscription plan to a bunch of content. Sign up for two years of access to the Connect library, get a cheap Reader. If you don't want the Connect membership, a Reader will cost you full price.