I was in a debate earlier today on Twitter on the state of the tablet market, and of course the conversation eventually rolled around to the Amazon Tablet. And like most debates on the AmTab, someone brought up the loss leader idea.
A lot of people are thinking that Amazon will sell the AmTab under cost as a way to create a platform for selling digital goods. They'll make up their initial loss through sales of content. I disagreed with my friend, but the reason I disagree would take too much space to be explained fully on Twitter.
I do not see how Amazon could sell the AmTab as a loss leader, and that's because I have a different view of Amazon current business model (with respect to digital content). Amazon.com is where I go to get free content, and I think Amazon did that on purpose.
Update: Let me be more specific. Digital content is itself the loss leader. It can't be used to make up for a second loss leader.
Are you familiar with eReaderIQ, the free Kindle ebook site? They have a RSS feed, daily email, and a website dedicated to showing you all the latest free ebooks for the Kindle. They find around 130 new free ebooks each week.
Yes, I did write 130 free ebooks a week. That's more than any one person could ever read in a week, too.
I tried to set up a site similar to eReaderIQ that would work with Kobo or B&N. My first step was to look on InkMesh, the ebook search engine, to see how many new ebooks each ebookstore posted each week. I discovered that Kobo never got more than a handful of free titles in a week and B&N only a few dozen, which pretty much shot that idea out of the water.
Update: The current search results for Inkmesh disprove my argument. Right now B&N actually have more free ebooks this week than Amazon. The number was lower when I looked into it before, and the change is interesting.
Think about that for a second.
Only 1 of the 3 largest ebookstores in the US have vast quantities of free ebooks. Surely that's not an accident. The only way that I can see such a difference occurring is if someone worked to create the situation deliberately. I truly believe that Amazon have more free ebooks because that is part of their business plan.
If that's not enough, then take a look at the mp3 store. I've bought just the 1 album from Amazon, but I have also downloaded hundreds of hours of free MP3s. There are nearly as many free mp3s on Amazon as there are ebooks. Do you really think that's a coincidence?
I confess that I don't know enough about other mp3 retailers to make a definitive statement, but when I stack the free mp3s next to the free ebooks it looks suspiciously like Amazon did it on purpose.
And then there's the free daily Android app. Amazon are giving away a free app everyday, with total downloads often hitting 100k. Doesn't this look like Amazon is giving digital content to
it's creating a mindset among Android users to encourage them to come to Amazon and get free stuff? And folks, that daily free app is most definitely not an accident.
I don't know if Amazon have a tablet at all, but I am quite certain that they will not sell it as a loss leader. The idea just does not fit with the external appearance of their current business plan. The digital content itself is the loss leader, IMO.