Razors, ink cartridges, iPads and Kindles — oh my!
February 3, 2010 by Valerie HelmbreckPosted in: Communication, Gadgets, Hardware, In this week's e-newsletter, Latest News & Views, adoption, cash flow, e-commerce, mobile technology
The shoes are beginning to drop on that Apple iPad announcement last week, and while Amazon’s getting a pair of loafers dropped on its head, the folks in the publishing world seem to be practicing their end zone dance.
Seems that Apple’s negotiations with publishers gave at least one of the bunch enough confidence in the newest Steve Jobs gadget to hold Amazon’s feet to the fire on book pricing.
Amazon had cut the price of the books it sold to customers so low that publishers were feeling the pinch. The company had done a sort of reverse of the old marketing game that offers a device for very little and then charges big for the consumables — think printers and ink cartridges. Give away the printer and mark up the cartridges 500% of cost.
In marketing parlance, it’s called the “razor/razor blades” approach. Give away the razor and sell the blades at a high price.
Think about that the next time you plunk down $15 for some Mach III blades that cost the company $1.50 to produce.
Most companies practice the technique. They want and need the revenue stream that the consumables provide. They figure most folks will buy only one printer every couple of years, but they’ll need ink cartridges every couple of weeks. Same with those Mach III razors.
But Amazon was more interested in making their Kindle Reader the dominant player in a pretty empty field. And they succeeded — until last week when Apple unveiled its modestly priced, spiffy and multifunctional tablet.
Now, Amazon’s feeling the heat on two fronts: from a device that can run circles around its reader (which pretty much just lets you read content) and from content providers who are getting a much sweeter deal from Apple.
Publishing powerhouse MacMillan was the first to hold that deal over Amazon’s head and force a concession. But nobody’s counting the online book-selling powerhouse out of the game.
Word is the Kindle will get an fast upgrade and apps to try and compete with the iPad.
But Apple’s got a 140,000 app head-start on Amazon in that footrace.
Let the games begin.
No matter what you think of the iPad, it’s what consumers think of it that will matter. And for the price, they’re gonna get a whole lot more out of the iPad than they’ll get from their Kindle.
Meanwhile, score two for Mr. Jobs.
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Tags: Amazon, Apple, iPad, Kindle Reader, Steve Jobs
February 9th, 2010 at 9:46 am
“until last week when Apple unveiled its modestly priced, spiffy and multifunctional tablet”
Excuse me! In what state of mind is a $499 iPad modestly priced?
Is that compared to the $259 Kindle?
I am all for competition. But, iPad’s addition to the ladscape has nothing for the consumer. It is priced high and the e-books will be more expensive than on Amazon.
Does the author realize that his analogy of printers/ink and razors/blades does not apply here? In fact Amazon’s methodology is charging a high price (compared to iPad it doesn’t seem so high anymore) upfront and then charging less ongoing.
Compare that model to Apple’s: charge an extremely high price upfront, and then make way to charge higher prices on an ongoing basis.
Note to author: please read your article before publishing – it is filled with irrelevant comparisons and the title itself is irrelevant. A complete waste of time.
Note to FinanceTechNews: please proofread the articles before publishing if you want your audience to be remotely interested in your articles.
February 9th, 2010 at 1:23 pm
$499 for an iPad is “modestly priced” when you consider the fact that the device is “MULTIFUNCTIONAL” as opposed to the single-function Kindle.
February 9th, 2010 at 4:55 pm
There is still a place for eBook readers like the Kindle for people who are just looking for just a simple eBook experience.
The iPad does not compete in that market; instead, it competes in for people interested in slate devices that provide a multimedia experience (inclusive of eBooks) with a multi-touch user interface at a higher price that reflects the added value.
I think that the iPad will also provide extensions beyond capabilities of the standard eBook reader and standard eBook content that some people will be interested in, although I doubt the public can appreciate what the real difference is until the iPad is available. (see the SI videos on YouTube)
February 9th, 2010 at 6:32 pm
This post doesn’t specifically address the article, so if you are not remotely interested you’ll stop reading here.
I do plan on buying an iPad, and I have no interest in using it as an e-reader as far as books are concerned. However, I expect that to change when the market comes to me, as I know it will. And the iPad will be way cheaper than my other solutions. I know this because I’ve been working on those solutions and they have already cost me more than $499. This is why it works for me. The iPad has shown me it can deliver rich content in a very thin client. I have Vista/XP/Media Server/OS X/RH 3.0 running across seven computers in my house now. I have two routers serving wireless and wired. I garden, I barbecue, I DIY, I have three bicycles and two motorcycles, and friends and relatives over for gatherings. I have assembly manuals, pruning instructions, recorded F1 races – all kinds of content. I have a TV and CAT 6 in my garage, for crying out loud. If all that content can be piped to my iPad that I can prop up next to my car to show me how to replace a headlight bulb, or next to my barrow while I try to identify some weedy plant, or in my lap as I cook, I am happy. The iPad provides a gateway for content of all kinds, and when publishers of everything from This Old House to Home Depot start providing it, I’ll be ready. Yes, I have a netbook too, but it’s heavier with a poorer screen and less battery life. It came close to my ideal, but the iPad is closer. I’m betting that by the time the 2nd generation iPad comes out, all the content that I have to run and fetch will be right at my side in an easy-to-read-and-view format. For me, that will be priceless.
February 10th, 2010 at 9:33 am
Hey Mickey, read the article. The author clearly states that “The company had done a sort of reverse of the old marketing game that offers a device for very little and then charges big for the consumables”.
February 10th, 2010 at 12:00 pm
Dear Ashley,
$499 is not modestly priced when you can purchase fully functional lap top for at least a hundred dollars less.
I agree with Mr. Mouse – Apple may come out with spiffy devices but they are over priced and the downloads are over priced as well. In fact Apple goes out of their way to make sure you cannot use other company downloads on their devices to eliminate competition.
February 10th, 2010 at 12:07 pm
For what one can do with an iPad, as compared to what one can do with Kindles, $499 is dirt cheap.
February 10th, 2010 at 12:37 pm
$499 is not modestly priced when you can get a Lenovo netbook with a pivoting tablet screen for the same price that also runs normal windows programs, not Ipad/iphone specific software only.
And let’s not forget, eInk is easier on the eyes when reading.
About the only device on the market that will probably lose is the Kindle DX.
February 10th, 2010 at 12:52 pm
The buyers and sellers of digital books should both consider the fact that the author/publisher gets to collect money more times per reader with digital publishing.
When I buy a physical book that is worthwhile, I will still have it 3 years from now. If it does not have lasting value, I can give it to a friend who can pass it on when he is done.
The book can be purchased by a library and loaned to many people over its lifetime.
The eBook/eReader industry has found a way to charge us for a book but prevent us from actually “owning” it. A reasonable charge for renting an eBook should be something like 15-20% the cost of buying a physical book. not 80%.
February 10th, 2010 at 1:43 pm
I am more in line with Richard’s thinking. Call me what you will, but I prefer the real deal, the actual book. Why? During the workday I am tied to a screen of some type for at least nine or ten hours. When I want to read for relaxation I don’t want to feel like I am doing the same thing I did all day, read a screen. It’s psychological, but I want the feeling that I am doing something totally different from my hectic work schedule. It’s also physical, my eyes need a rest from the screen!
Have you ever been stuck on an airplane for hours when you can’t use any electronic devices? I have and thankfully I had my trusted book!
Do I share my books, yes. But, the people I share with are readers and we keep buying books to recycle within our group. Once done we donate the books to a worthy cause. Those causes don’t have Kindles or iPads to hand out to those in need. Parents can not be expected to keep up with all the electronic gadgets kids want today. Here is yet another one to add to the junk pile heap of non-recyclable electronics.
February 10th, 2010 at 2:22 pm
Don’t forget the Kindle can get content over cellular without you having to pay for a contract on the device. So you can be sitting in the park or riding in the car and decide to read that new release on a spur of the moment. With the istink, I mean the iPad you have to go find a public wifi connection.
As for $499 being “modestly priced”, in my tax bracket we call that serious money.
July 10th, 2010 at 10:04 pm
I don’t think I would like the DX a bigger screen is nice but part of the reason I love my Kindle is its portability. Check out the other reasons to get a Kindle here http://amzn.to/9qQGee
July 16th, 2010 at 7:43 am
I’m really excited about getting my Apple Ipad!