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February 24, 2010

Why this iPad Won't Kill the Kindle Platform (and how it could)

Apple-iPad-001

Many have already voiced glowing praise or strong disapproval of Apple's recently announced iPad.  Some proponents, such as Leo Laporte, call it a "Kindle Killer." Skeptics and haters call it "The next Apple Cube."

These judgments are premature, however. Whatever "magic" Apple has in store for the future, there's nothing in the first generation iPad that changes the market dynamics so completely that it will disrupt Amazon's economics with the Kindle solely as an eReader.

People who buy eReaders are typically going to take reading seriously. The advantages that they bring are best realized by certain types of people:

  • Heavy readers who want to enjoy the improved economics that eBooks bring
  • Heavy readers who want to conserve physical space
  • Anyone who travels frequently and likes to read on trips

With these audiences, the iPad falls short for a number of reasons:

1. Nearly twice the cost of entry
The starting price for the iPad is $499. For the Kindle, it's $259. By way of example, assume the average eBook price is $10, with its hard-copy counterparts costing twice that. A Kindle owner must purchase 26 books before breaking even. An iPad owner would need to purchase 50. 

So for the heavy reader, the economics are hard to justify. For the casual or occasional reader, they are nearly impossible -- if they're going to use the iPad over the Kindle simply as an eReader.

2. Back-lit display
The e-Ink technology that drives most eReaders today has some limitations, but it minimizes eye strain compared to back-lit displays, such as what the iPad has. For heavy readers, this is a significant drawback. It means they can't read as much without their eyes getting tired. It may still be viable for those who are not heavy readers, but in that case, the economics make even less sense solely as an eReader, and except by virtue of wide market distribution, Apple's bookstore cannot promise much revenue to publishers, making the marketplace less attractive (especially as a closed system, as it likely will be).

At least the format is open-source anyway, so they don't have to reformat their books specifically for the iPad.

3. Shorter battery Life
10 hours is a lot of time to be reading. And the standby time the iPad promises is remarkable, but a back-lit display capable of showing full-color images, videos and applications comes at a price. With wireless off, the Kindle can go at least two weeks without a charge, so there's no reason to be tethered to a power source for travelers.

Marketing Differences

Because the iPad does a lot of things, it's hard to describe it using terms that are clear and understandable by a lot of people. The tagline for the iPad is "A magical and revolutionary product at an unbelievable price."

What's the frame of reference? It's a "product?" So is a refrigerator. And oatmeal. And manure. 

It's almost as if Apple believes an entire category can be created by adding abstract and glowing adjectives.

Plus, because the iPad does a lot of things, making promises about how many books it holds would undermine its uses as something other than just an eReader. And it is much more than just an eReader. It's a "product" that CAN be used as an eReader. Among other things.

The Kindle, by contrast, says it's a "reading device" and promises simply that it will hold 1,500 books. In other words, more than you'll read over the next five years.

That's much more concrete than "16GB," which is how much storage the entry-level iPad promises.

So, as an eReader, Amazon's Kindle enjoys the advantage of being able to be explicitly sold as an eReader.

Apple Raises the Bar for User Experience

Apple has done some things well. Even as an eReader iPad works in some important respects. The prevailing question is whether it works sufficiently for the consumer at their prices.

1. Intimacy
Though not flawless, the experience of reading a book on the iPad looks to be more intimate than with the Kindle. The page-turning metaphor is direct and closely resembles the experience of actually turning a page of a book. Along with the ability to deliver deeper content through color and multimedia (which is impossible with either the Kindle or a physical book), motivated publishers have the capability to engage consumers like never before possible.

2. Usability
The touch-screen interface allows Apple to dispense with the metaphors that drag down the Kindle. That makes interactions more direct and gives publishers and app developers more flexibility on how they choose to deliver their content. As such, students can hope that Apple's platform makes it easier to consume nonlinear books than the Kindle does. And since anyone with an iPod or iPhone is already familiar with the iTunes interface, assuming the experience of purchasing a book rises at least to that level of usability, there's very little reason to believe the experience would be any more difficult on the iPad than the Kindle.

3. Flexibility
The iPad does a lot of little things well, and it looks like it can be used to specialize or converge however its owner intends. It can be a personal assistant. It can be a gaming device. It can be used to stream music or movies (with the right app and know-how) from a media server. It can be used as a netbook computer (especially with the optional keyboard). It can be used as a home automation control pad. Or it can be used as all of these things.

The beauty and the curse is that the consumer controls what it will be used for.

The problem is that convincing the masses that something that CAN be used in such ways SHOULD be used in such ways relies on heavy, repetitive marketing, positive word-of-mouth, or consumers themselves having the imagination for its divergent possible uses. Oh, plus they must be willing to risk at least $500 on the prospects -- with no guarantee of success.

Here's where it gets exciting

I don't know how the mass marketplace will respond, or how much Apple is willing to reduce its margin to gain a wide penetration for the iPad if at first it does not take off.

But even if it doesn't, if Amazon is smart, they won't take this lying down. Nor will Sony or any other manufacturers of either popular eReaders or tablets. If it's successful, the iPad may either drive down the costs of pure eReaders and/or inspire the development of better interactions.

If that happens, people will be more willing to adopt the platform, the cost of reading will decrease, and publishers will be forced to participate in this space and -- hopefully -- embrace the efficiencies it represents for their entire industry.

Whether the iPad brings Apple financial success or not, Amazon will need to improve its interface (which is already very good for linear reading) and technology. The iPad (and -- perhaps more importantly -- the responses it will engender from rival tablet makers) will likely change users' expectation about how they should interact with books.

Even if Apple doesn't sell as many as they hope, I would still count the iPad a success if it resulted in widespread adoption and use of electronic readers in general. - Cam Beck

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Thanks for the webcast.

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