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By Paul Biba

Barry Eisler’s excellent article in Buzz, Balls & Hype was reported on by TeleRead here. Now he has come in with a second installment which is just as thoughtful and interesting as the first. Take a look:

Why would Amazon want paper books to be replaced? Simple: eBooks eliminate Amazon’s massive procurement, storage, and shipping costs. Think of Apple’s iTunes store: would Apple prefer to be selling music by shipping CDs? Also, by making books available anywhere, anytime, and at a substantially lower price enabled by digital’s lower costs, eBooks can dramatically increase the number of books bought on impulse. Lower cost, higher profit, greater volume: a very attractive combination for any retailer.

As for Amazon’s attempt to foster the transition, that’s what the Kindle is for. After all, until the right hardware exists, there’s no market for the software. Yes, in one sense the Kindle is intended to capitalize on the desire for eBooks that’s growing anyway, but its more important purpose is to speed the transition.
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If I’m right about Amazon’s digital hopes and plans, a few things follow:

First, if eBook readers aren’t becoming a mass market fast enough, Amazon will find ways to make them more attractive. I talked about obvious ways in the previous post: improved quality, added features. But there are at least two even more powerful ways Amazon could create a mass market for Kindles. It could drop the price dramatically, moving, as I suspect it intends, to a razor/blade model with the Kindle as the loss-lead razor and book downloads as the high profit margin blades. Look what Apple did with the iPhone: the company introduced the device at $600, then dropped the price of the next generation, much improved, 3G, 15,000-outside-apps-available model to $200 (Time’s Top 10 iPhone apps here). It seems to me that Apple is now using the iPhone itself as the razor, with music, video, and application downloads as the blades.

 
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