The “cheap Kindle” rumor has returned

It's started again.

Every so often someone comes up with a brilliant rumor that Amazon will be giving away  the Kindle. This rumor is actually older that the Kindle itself; I recall reading about the $50 Kindle back in summer 2007. It's also popped up at least twice since then, and the most interesting version of the rumor was the one where Amazon would give Kindles to Amazon Prime members. Obviously it never happened, but it was interesting.

The current iteration of the rumor comes from the blog The Technum. Someone did a simple straight line extrapolation based on when Amazon reduced the price of the Kindle, and came to the conclusion that the Kindle would be free by November. I embedded the chart above so you can see it for yourself.

A straight line extrapolation works for math but it does not work when you factor in human behavior.

I don't believe this rumor; if Amazon did this they'd lose money. One justification given for this rumor is that whatever Amazon loses on hardware sales they'll make up on ebook sales. That might be true now, yes. But you don't know tat it will be true when the price is zero. I think the average is about 10 per ereader owner per year, and that's not enough to cover the cost of a $190 ereader. Besides, most heavy readers already have an ereader. A free Kindle would pick up the fringe cases, not the heavy users.

Nate Hoffelder

View posts by Nate Hoffelder
Nate Hoffelder is the founder and editor of The Digital Reader: He's here to chew bubble gum and fix broken websites, and he is all out of bubble gum. He has been blogging about indie authors since 2010 while learning new tech skills at the drop of a hat. He fixes author sites, and shares what he learns on The Digital Reader's blog. In his spare time, he fosters dogs for A Forever Home, a local rescue group.

4 Comments

  1. mh28 February, 2011

    “I think the average is about 10 per e-reader owner per year, and that’s not enough to cover the cost of a $190 e-reader.”

    But they might buy e-books in the next year too. And in the year after that. They might keep the Kindle for three years and buy an improved version after that. So you must take into account 30 or so books and an option to buy a new Kindle… It makes more sense now.

    Reply
    1. Nate the great28 February, 2011

      yes, but a lot of those will be agency ebooks so the profit is minimal.

      Reply
  2. mh28 February, 2011

    That’s true. Not to mention the free titles that are also available.

    Reply
  3. fjtorres28 February, 2011

    Considering how much FUD this industry dishes out on Amazon because of their competitive business practices, I find it amusing how much effort goes into pondering ways Amazon can grind competitors into fine dust. 🙂

    Free Kindles?
    Not going to happen.
    Not even as a Prime Fringe.
    Amazon has nothing to gain, as pointed out above.

    But a “Free” Kindle as part of a Book Club membership?
    That’s a different animal altogether.
    (And not something competitors should be looking forward to.)
    First of all, a contract-based “Free” Kindle is really an installment sale.
    So Amazon will have to factor in default rates. A minus.
    Amazon will need a way to collect the installments. Another minus.
    Amazon will have to cook up a contract/deal that doesn’t dish out Kindles that are truly free to people who otherwise would’ve paid full price and that doesn’t annoy those that did. So there would be significant strings attached. Which means people who actually read the fine print on their contracts may pass. We’re not talking customer stampede here. (I don’t think so, anyway.)

    Let’s say Amazon cooks up a dozen genre-based book clubs (SF, Fantasy, Urban Fantasy, Romance, Mystery, Suspense/Horror, Action/Adventure, Christian, History, Biography, Science, Current Affairs) with a common deal:
    Free Kindle with 6 Free Genre Books when signing up for a two year subscription to a monthly club selection at $10. Each month you either get the Club’s selection or alternately choose the selection from another club. That works out to 30 books for $240.
    (The free books would come from Amazon’s regular stock of promos so there’s no added cost to Amazon there.)

    The fun comes with the monthly club selections.
    As Oprah has shown, there is true market power in properly run Book Clubs. Especially one that comes with “Mandatory” purchases.
    How many people would see a Kindle at $10 a month as a no brainer?
    Ten thousand? A Hundred Thousand? A million (doubtful, but…)
    I suspect the number would be significant.

    Applying the so-called agency pricing to the monthly selections, Amazon would be grossing $72 off each Book Club Member over the two years. With K3 WiFi currently estimated at $80-100 build cost and likely lower when they launch this hypothetical effort, they would essentially be breaking even over two years. No loss. No gain.

    Except that, even sliced and diced across twelve clubs, the sales associated with being an Amazon Book Club selection would mean a lot to Mid-list authors. And be nothing to sneer at for the name authors. Maybe monthly selections sales *don’t* run under agency pricing rules at all; maybe it’s a 50-50 split that month. Under those terms, Amazon doesn’t just break even; they make a small profit. And if some of the selections happen to be Amazon Exclusive Editions…
    (For that matter, a Book Club Deal for existing Kindle owners; say a dozen free books in return for a one-year subscription wouldn’t hurt the prospects of the Book Club Selections. It is the size off the pool of subscribers that provides the leverage.)
    “Free” Kindles under a book club model could easily make Amazon an industry Kingmaker, just like Oprah’s book club, which used to mint Bestsellers regularly.

    So think long and hard, folks, before fantasizing over “Free” Kindles.

    It’s not just about the money; long term, it’s about the loyalty and the purchasing power of the Kindle owners.
    There is true market power at stake in these kinds of plays.
    There be dragons…

    Reply

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