Interest high in new Kindle, but business model questionable

Analysts wonder if the new e-book reader will be too expensive for consumers and students

Amazon's newest Kindle raises more questions than answers about how the e-book market might evolve.

"If it had the right business model, it would be a no-brainer," Michael Gartenberg, an analyst at Interpret, said of the new device.

On Wednesday, Amazon unveiled the Kindle DX, the third in its line of e-book readers, and this one is designed for the display of newspapers and magazines.

The larger-screen device is also being targeted at students, who can use it to read textbooks.

Initially, a handful of newspapers including The New York Times, The Boston Globe and The Washington Post say they'll offer the Kindle DX at a reduced price to readers who live outside of their delivery area and who sign up for a long-term subscription.

The device, now available for preorders online, costs US$489 otherwise. The papers did not say how much they would discount or charge for subscriptions.

"Pricing models in this market are very much a work in progress," said Susan Kevorkian, an analyst at IDC. "It's a place to start. All participants need to be open to change."

Gartenberg also said the pricing likely isn't ideal.

"It's definitely not the panacea that's going to save the newspaper industry at $500, and with no discount unless you're in an area where you can't get a subscription," he said.

But the newest Kindle does raise some potentially interesting possibilities for new business models.

Like the other Kindle devices, this one includes wireless Internet access, and because the DX is designed for newspapers and magazines, or the content providers may be able to subsidize content through advertisements, said Paolo Pescatore, an analyst with CCS Insight.

"If the device can support it, there's no reason why ads cannot come integrated into whatever content is delivered," he said.

As the install base for the Kindle device increases, those ads can be more specifically targeted to users once learns more about "what they're downloading and reading, and what their behavior is," Pescatore said.

Or, users might be willing to provide some basic information about themselves and their preferences so that ads can be tailored to their interests, said Kevorkian.

In addition to the distribution deals with the newspapers, Amazon said that Arizona State University, Case Western Reserve University, Princeton University, Reed College and Darden School of Business at the University of Virginia will distribute hundreds of Kindle DX devices to students so that they can use them to read textbooks.

Amazon did not say who would pay for the devices.

It's uncertain whether students, who are already buying and carrying laptops, and their parents will be willing to purchase an additional $489 device like the Kindle DX. Possibly because they are already paying thousands of dollars a year for the education, the additional investment may not seem like a lot, Gartenberg said.

Plus, the electronic version has some inherent advantages, since students can more easily search the text and make annotations.

"It seems a natural fit for textbooks, it just doesn't fit into the economic model for the way textbooks are sold," he said.

Students often buy expensive new or used textbooks, expecting to sell them later in order to recoup some of the investment. They likely won't be able to do so with their e-books.

"The ownership [digital rights management] issues related to some of these books is still going to be an issue that has to be worked out," Gartenberg said.

With a paper book, the price of a used version may depend on the condition of the book. But the quality of an e-book doesn't decline with age.

If there were an after-market for e-books, "no one in their right mind would buy a new e-book," he said.

For the budget-conscious, the content providers will have to push the advantages of the electronic editions, such as the possibility of updating them, Kevorkian said.

Also, content providers could sell chapters of books rather than entire texts, she said. The electronic text books will also likely be less expensive than the paper versions, judging from the discount on existing ebooks in the Kindle Store.

But without the availability of required text books, the Kindle DX can't be successful in the university market. "One thing I'm paying attention to is the buy-in from publishers and textbooks," Kevorkian said.

Amazon announced deals with publishers, representing about 60 percent of the U.S. higher-education textbook market, that have agreed to offer textbooks through the Kindle Store starting this summer.

Even those deals may not be enough to persuade students to buy the Kindle DX, said Josh Martin, an analyst with Yankee Group.

"While Amazon's partnership with textbook publishers is interesting, the Kindle family doesn't yet have the consumer acceptance or value to reshape that market," he said.

"College students aren't flocking to pay $500 today to save $300 in three years when they are already struggling to pay next semester's tuition. Amazon will need to get more creative in marketing these to students before that value proposition makes sense."

(Elizabeth Montalbano in New York contributed to this report.)

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags amazondrmkindleamazon kindlee-readerskindle dx

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Nancy Gohring

IDG News Service
Show Comments

Cool Tech

Toys for Boys

Family Friendly

Stocking Stuffer

SmartLens - Clip on Phone Camera Lens Set of 3

Learn more >

Christmas Gift Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill


I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Featured Content

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?