Amazon and Synergy = Kindle

Editor’s Note:  Yesterday I took a comment by Felix Torres and posted it on the front page because I thought it was really important.  After I did that I emailed Felix and asked if he would be willing to write an extended version of his comment for us.  Well he did, and this is the result.  It is, IMHO, the best post we’ve had this year, and I bet it will take that number one slot for the full year as well. The title, above, is from his email to me.  Thanks, Felix.  PB

One of the things that most folks in the publishing world neglect is that Amazon is not just a retailer, but also a software developer. More, they are one of a handful of companies working on a platform for (potentially) the next age of computing: the so-called “cloud computing” era of blended local and remote computing. Here’s a few starting points for those that haven’t caught up with the IT techies’ meme dujour:

http://www.businessweek.com/technology/content/aug2008/tc2008082_445669.htm

http://blogs.zdnet.com/BTL/?p=8471

http://aws.amazon.com/

http://aws.amazon.com/ec2/

Notice how Amazon has multiple business competencies quietly stashed in the back? Logistics, marketing, software development… It takes a lot of skills to move that many dry goods. And once you have the tools and skills, one would be foolish not to use those tools.

Which brings us to Kindle.

Once you factor in Amazon’s hidden face it is hardly surprising that they are leveraging their cloud platform capabilities into boosting Kindle with features like Whispersync and hosting notes and bookmarks; they already host Kindle bookshelf backups and email accounts and file conversion services for their users, after all. And when you consider that none of their existing ebook-business competitors has any experience in that arena (except Microsoft, who may not even be in the game anymore) this just might turn out to be the deciding factor.

Now, to be totally clear, Adobe also has a Cloud initiative of their own;

http://technoracle.blogspot.com/2009/01/adobe-cloud-computing-livecycle-es.html

But Adobe is primarily a software developer, they can match Amazon in the software development aspects of their Adept ebook initiative but their focus is strongly tied to their DRM and the back-end software. They have (so far) no control on the front end of the user experience. For that, they need to rely on their hardware partners and their retail partners. And, truth be told, Adobe’s claim to industry leadership is totally dependent on the big publishing houses good will; they have made Adobe a player–essentially a stalking horse designed to make sure the Amazon tail doesn’t end up wagging the publishing dog–and they can just as easily break them with zero attendant legal issues. (All the talk about hitting Amazon with antitrust is amusingly premature; the publisher’s sponsoring of Adobe DRM is actually more likely to attract attention than Amazon is, for now.) Which means that any evolution of the emerging Adept-DRM ecosystem perforce involves multiparty negotiations. And those take time. Time Amazon doesn’t need. Adobe seeks to control the ebook business by establishing a chokehold on the middle ground, the ebook format and the transaction-processing, with their proprietary DRM. But to do that, they need to cede control of the back end and the front end. Amazon controls the entire stack.

Other players, Microsoft, IBM, Google, etc also have cloud computing initiatives but of those, only Google looms as a potential challenge to Amazon in the ebook sphere. They already have some of the pieces in place; the back-end software, their Android Linux-based gadget OS, their book-scanning initiative. A Google ebook store would not be out of order, followed by dedicated reader gadgets, probably using a non-Adobe DRM on ePub.

IBM and most of the other cloud contenders, and to a large extent Microsoft, are primarily focused on Enterprise-level cloud computing, for now. Indeed, most are in effect recreating the mainframe computer for a new era. At most, they may end up providing the back-end services for the various enterprise level document viewers/editors that will reside at the high end of the ebook business.

Apple is of course, a player of sorts, since a lot of people seem to do ebook reading on the iPod/iPhone platform and with a large-format iPod coming (the long-awaited, miss-labeled Apple Tablet) Apple might choose to get directly involved with ebooks by expanding iTunes in that direction. However, Apple’s mindset is still firmly entrenched in the old paradigm of device-application-content with firm distinctions between applications, content, and connectivity services. Their few efforts at online and hosted apps are basic and haven’t exactly covered them with glory. And if they get in, it will likely be by wrapping their FairPlay DRM on ePub. (Sense a pattern? Adobe’s ePub land grab is way too obvious.)

Amazon, on the other hand, is both developer and retailer of cloud computing services. Where other players in the software-as-a-service cloud arena are focusing on either the tools or the apps or hosting clients Amazon is doing all of the above; they are the platform and tools developer, the hosting and service provider, and also the biggest client. And when it comes to Kindle, they control the entire system; back-end services to user interface. When they see the opportunity for a new feature they can just implement it. No need to talk to partners whose toes they might be stepping on. For an industry in its infancy, this kind of agility can be extremely powerful. Decisive.

For the near term, say three-to-five years, Amazon really has no significant challengers to the Kindle cloud they are developing. Expect new features to roll out regularly, many of them shocking, some might even seem head-scratchingly odd, but all will fit into a basic paradigm that says: “reading is more than just about books”.

(Or publishers.  It might take time but, ultimately, the readers rule.)

We live in an increasingly interconnected world, people; no country, no industry is an island. What happens in other arenas reflects all over. And what Amazon is doing with Kindle has been done before.

Is being done right *now* and being done exquisitely well.

To see where Amazon is going with Kindle we have but to look at Microsoft and what they are doing in the gaming console arena.

Want to see where Kindle is going? Look to Xbox 360. Look to Zune. Look to XBOX Live. And then look again, at what doesn’t show on the surface.

XBOX 360 is, like Kindle, a “walled garden” content delivery system. DRM rules XBOX live. Unlike Sony, Microsoft doesn’t own any movie studios, yet they beat them to market by over a year with online movie rentals and TV show sales. Microsoft charges for online gaming, yet have far more discrete, active users than Sony, who don’t. Walking through Xbox live’s online marketplaces can take days; even the free sections of the service are loaded with game videos, game demos; downloadable games with free demos, and lately even applications for TV calibration or drink-mixing. It has TV shows from all the networks and movies from pretty much every studio not named Sony. A lot of money is being made there; hundreds of millions a year and current projections indicate a cool billion a year by 2012 or so. Going from zero to a billion-a-year in one console generation is hardly a trivial endeavor for what is essentially a secondary feature.

How did this happen?

Network effects.

Microsoft calls it community.

When their competitors were focusing on technical hardware features, worrying about how many Teraflops a benchmark demo could cough up on their hardware, Microsoft went straight to first principles and deconstructed gaming. What made it fun, how gamers behaved; what drove them to buy games and play them. They went after the hearts and minds of gamers. They came up with Achievements and gamer scores, they came up with friends lists and skill-based match-making, they came up in-game chat from day one, user-controlled soundtracks across the board, automatic game patching; with parental controls for games and videos and parentally-controlled gaming time quotas. They came up with Xbox Live Arcade for downloadable games both retro and new. They came up with XNA community games as a venue for end-user developed games. They have even started adding scheduled games that are essentially Xbox version of TV game shows (1-vs-100, for starters) where the player can be a viewer or a participant and win actual cash prizes, blending console gaming with TV game show viewing. Now they are blending in Zune and its portable media players.

Its all a mix of tightly-linked hardware and back end services. (What Apple did with iPod taken to the next level.) Xbox live is in many ways a nation unto itself with its own currency and police. A true community.

How is this relevant to Kindle?

Kindle is just for reading ebooks, after all, right?

Sure, just like an Xbox is “only” for games. Except people buy Xboxes these days so they can play with/against their friends; they buy Xboxes because the people they know buy Xboxes. And there is added value in having the same console, playing the same game, and talking, interacting. Suddenly, gaming is about more than the games. Its about the (forgive the marketing-speak) “experience”.

And that is where Kindle is going. Fast.

Look at the Amazon website; people post reviews of their books, draw up lists of recommendations. Why do they bother? Because it brings them just a bit closer to other people like them, readers. Conventional wisdom says that reading, like electronic gaming, is primarily a solitary activity. Microsoft proved that “truism” wrong and forever changed the gaming industry.

Amazon is on its way to doing the same to reading. All they have to do is give Kindle an optional front page. Make it something like, oh, Facebook.

Let Kindle users set up reading circles. Let them build communities. Talk to each other about what they’re reading, what they’ve read, Like the online features on the Amazon bookstore but closed, private. Personal. Friendly.

(Scared yet, Adobe fans? You’d better be.)

Suddenly that keyboard becomes a lot more useful, doesn’t it?

Suddenly, that wireless connection is more than a vehicle to the storefront.

The Kindle is all about selling books. So far, all we’ve seen is the hard sell, the blatant book-selling features like the lock-in, the mandatory wireless, the keyboard. But sooner or later, and I’m guessing sooner (based on some comments and hints dropped by Bezos) we’re going to see the other shoe drop. The soft sell. And then the community features will take center stage. Kindle Live, as it were. Network effects taking over.

Want to see what Kindle3 is going to be like as a user experience? Go to Xbox Live. Go to your Amazon personal recommendations page. Go to facebook. Now, roll’em up.

I own a BeBook myself. Very pleased with it. I’m looking forward to the Bebook Mini.

But I have 3 friends with Kindles and two more shopping who will likely end up with Kindles because of the connectivity. The critical mass is building and if Amazon does in fact do as I’m expecting them to do, I will very likely end up getting a Kindle myself. Too much synergy, too much added value to ignore.

(Theoretically–if the publishers allowed it–they could let you lend each other ebooks, maybe give ’em away. The technology is implicit in the system. The publishers will never go for it, of course. But you can already email sample chapters to friends, no?)

And ultimately, that is the key word; synergy.

Amazon is a software developer because as an online vendor their corporate fortunes are tied to the quality of their backend software and they did not want to be at the mercy of an outside supplier in running their operations; they are big enough that rolling their own environment and their own apps on their own datacenters makes more sense than relying on outside sources. And it makes sense to size those operations for peak use, for growth, and it makes sense to leverage those in house capabilities as another product. Get enough outside cloud computing customers and their IT department becomes a profit center instead of a cost center. Stupid, those folks aren’t.

And synergy is the key to Kindle. Stupid those people aren’t. So if they do something that appears to be stupid… Well, maybe we’re the ones missing something.

Synergy and community.

Repeat after me: “reading is not just about books.”

Now, strap in folks, the ride is about to get interesting…