The new Kindles, with prices at $79 and $99 finally introduces the concept of the razor and razor blade business model to eBooks. We are all familiar with the idea of razor companies creating very cheap razors and then getting people to come back and buy a never-ending supply of razor blades to use for shaving.
We in the tech world already have a product that fits a similar model with printers and the continual need for ink. Printer makers make next to nothing with the printer hardware and make all of the money on the ink.
Now Amazon is blazing new trails with their two new eBook readers at price points that are almost give away the hardware. This is quite an interesting turn of events in the eBook reader market. When the Kindle first came out it was $399. The only people who bought it at that price were what we call early adopters. However, they became hooked on this eReader and once the first Kindle established that this product category was not a fluke, the competitive market kicked in. Within two years of the Kindle’s release, the competitors undercut the Kindle’s price by as much as $200.
But as more and more people bought the Kindle, Amazon was able to get better deals from suppliers and their costs came down as well. Last year they lowered the Kindle’s price, with ads to as low as $129. But with the new Kindles they break the magical $100 dollar price barrier and in turn have basically introduced to the market the eBook equivalent of the razor and razor blade business model for electronic publishing.
This is especially important since they have over 1 million commercially published books for purchase as well as hundreds of thousands of free books to add to their overall eBook distribution. What this does is virtually assures that Amazon maintains its lead as the world’s top eBook publisher.
This move should not be too much of a surprise though. The basic law of manufacturing is that the more you make, the lower the prices of the product. Once Amazon was building a million units at a time, they started getting preferential pricing on every component. Over the life of the Kindle Amazon has sold millions of these devices thus making it possible to finally break the $99 dollar barrier.
Although some smaller brands had already broken $99 dollars, it is Amazon’s move now that changes the game completely. The end result is that the market will move even faster from physical books to electronic books, magazines, newspapers and more. Many more people will, at this price, be enticed to jump on the eBook bandwagon and you can bet that both of these models will be hot sellers for the holiday.
But the fact that Amazon is driving this razor/razor blade model into ePublishing is very important. It will set the tone and define the role of standalone eBooks and push the concept of ePublishing into the mainstream even faster than many of us had expected.
It is a very good move for their business and it solidifies Jeff Bezos’s overall goal to become the worlds #1 eBook publisher and it will more than jumpstart the next generation of electronic publishing by making book reader affordable to all.