Jeff Nolan wrote a great post here at SiliconANGLE talking about the overwhelming feeling of “meh” on the topic of the brand new ad supported Kindle.
Throughout my long history of eReader punditry, going back to my days at Mashable, so much of what I see in the eReader world has been “meh,” only because of my personal history working with the eInk display matrix. Years and years ago, I worked on a handheld device that, amongst its other specifications, had to be useful in sunlit situations.
Any backlit solutions were immediately out, so I was one of the first developers who had a chance to work with this amazing, ultra-cheap and versatile stuff called eInk, which is now the display mechanism for almost all eReaders in existence now.
This, of course, was many years ago, and prices may have shifted when purchasing eInk in bulk, but when I worked with it, it was priced cheaply enough to be competitive with standard wallpaper.
That’s why I was so bullish, initially, on eReaders – and then later on so continually disappointed. I envisioned a world where the eReader was completely free, and the cost of the device was subsidized by consumer purchases of newspapers and other publications. It would be a wonderful world where money went back to the content producers instead of the digital equivalent of the paper manufacturers.
And Then I Purchased a Kindle.
Several months ago, I bought my own Kindle, right when the price dropped to $139. My wife counseled against it, saying it would be yet another unused device upon my very large pile of unused devices, but I quickly fell in love.
$139 was just the right price for it to be an “impulse” and “non-life changing” price point for me, and while I haven’t used my Kindle daily, I’ve always got it close at hand as a way to catch up with my most important feeds, a way to tweet quickly on a lightweight interface when on the road, or a way to while a way a weekend with a good book.
I share some of Jeff’s indignation: “I don’t have a problem with ads but my reaction is still negative. Amazon is saying I am only worth $25.”
From a consumer purchase decision perspective, there’s no appreciable difference I can discern between $114 and $139. I’m not substantially more likely to make that purchase, and I can’t imagine anyone else who is.
Subsidizing Your eReader With Subscriptions
An eReader is a device built to grease the wheels of commerce – and it works. I can personally attest to that; I’ve purchased more books and publications subscriptions in the short time I’ve owned an eReader than probably the five years prior combined.
Back in 2009 Nicholas Carlson at Silicon Alley Insider did some math similar to what Sean P. Aune and I did back on Mashable Conversations in our eReader discussions, and determined that printing the New York Times costs twice as much as sending every subscriber a free kindle – back when the cost of a kindle retailed for $359.
Here’s how we did the math:
According to the Times‘s Q308 10-Q, the company spends $63 million per quarter on raw materials and $148 million on wages and benefits. We’ve heard the wages and benefits for just the newsroom are about $200 million per year.
After multiplying the quarterly costs by four and subtracting that $200 million out, a rough estimate for the Times‘s delivery costs would be $644 million per year.
The Kindle retails for $359. In a recent open letter, Times spokesperson Catherine Mathis wrote: “We have 830,000 loyal readers who have subscribed to The New York Times for more than two years.” Multiply those numbers together and you get $297 million — a little less than half as much as $644 million.
And here’s the thing: a source with knowledge of the real numbers tells us we’re so low in our estimate of the Times‘s printing costs that we’re not even in the ballpark.
If the numbers are even anywhere close, there’s no reason at all Amazon shouldn’t be able to strike a deal with some publication to explode the number of eReaders in the market (or any other eReader manufacturer, for that matter).
Now, as then, though, Kindle appears to be looking in exactly the wrong place to subsidize the cost of the device.