Free eReaders or an eReader War?

October 5, 2011

In 2009 there were rumors abound that at this time (November 2011) the Amazon Kindle eReader might be free. The steady and drop in price (about $50 every few months) led many to believe that this will be the case. Amazon founder, Jeff Bezos, didn’t confirm or deny those rumors.

Picture from The Technium

Now we are here and the Kindle isn’t free – but it’s $79 which is a huge markdown from its original price.

Will this be the beginning of eReader wars?
Will giving out free eReaders will be a way to combat the iPad2?

Now we know that Bezos had under his Amazonians sleeves the Kindle Fire – which to be honest the more I see the more I like. But there is one thing we have to keep in mind: the goal is not to sell devices, but to sell content.

Much like video games, believe it or not. The video game systems are sold at cost (which is why they never go on sale), the companies make their money selling games (content). I don’t know how much it costs to make a Kindle, nook or any other eReader but I’m sure the markup on it isn’t high.

So why aren’t they just giving them away?
There are many reasons I can think of:
First, something free has no value.
Second, they want to at least recoup their production costs because it takes x amount of sales to break even if it’s free.
Third, they’re in the market to make money.

But imagine this: what if when you bought an eReader you got a gift certificate for the value of the reader?

Buy the nook for $99, you’ll get a $99 B&N gift certificate to spend, same with the Kindle.
That would work on several levels: the companies will recoup some of the manufacturing costs in case you decided not to continue with your eReader, but more important, they probably got you by the nose to buy content from them.

Of course you can buy eBooks from various places, but in reality how many people will?
I have a nook and 95% of the books I buy from B&N. My device just makes it so damn comfortable to spend my money with them…hey… you don’t think…?

Amazon Prime ($79 a year) customers already get free streaming movies and 2 day shipping – imagine if they each got a Kindle as well (but the… shipping…), but those are already dedicated Amazon customers.

Barnes & Noble on the other hand does not have the dedicated following Amazon has, but they do have brick and mortar stores, large following, great catalog and their own eReader.

So tell me, what do you think? Am I crazy or will this business model actually work?

Zohar – Man of la Book

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