Could a free Kindle be the final death knell for print newspapers?

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It’s easy to imagine that some day, in the not too distant future, paper distribution of news will become obsolete. It seems that in most concept videos about consumer electronics in the future, a person is featured sitting at a kitchen table, coffee in hand, swiping through the morning’s news on a transparent, flexible display. Prompted by the iPad revolution, I’m sure many people have already traded paper and ink, for glass and pixels to consume the news.

About a year ago there was a piece by John Lanchester on the future of the newspaper industry. In it, mention was made of a report by the Organisation for Economic Co-operation and Development (OECD) which claimed an estimated 28% of the total cost of a typical print newspaper could be attributed to printing and an additional 24% to sales and distribution. In other words, the physical existence of the paper absorbs 52% of all costs. The estimate was said to be conservative.

On the low end of the estimates — and keep in mind this was a year ago –, Business Insider put the cost of printing and distributing the physical copies of the New York Times at US$644-million per year.

Now, in this paperless future we imagine, which company leads the way in bringing about the extinction of traditional print newspapers? It’s easy to envision it being Apple — Rupert Murdoch does–, but it might very well be Microsoft, credited for embracing the idea of tablet computing under Bill Gates, long before it was even a thought in Steve Jobs’ mind.

But, what about Amazon?

Using the low estimate of printing and distribution, Lanchester estimated that if the New York Times stopped printing a physical newspaper, it could afford to give every one of its 830,000 subscribers a free Kindle (or four) with free global data access, every year. Based on a quick search, it seems he was referring to the US$189 Kindle Keyboard 3G, and now a year later, the price is down to US$139 and you can even get a Kindle Classic (WiFi) for only US$79.

With the introduction of the US$79 kindle in September this year, there has been a lot of debate about the possibility of a free version of the Kindle becoming a reality at some point. It’s not a far-fetched idea. Unlike Apple, Amazon is not in the business of making money from selling its hardware. It sees the Kindle as another window for consumers to access its digital goods.

The original Kindle cost US$399. By the end of 2009 you could get a Kindle 2 for US$259. That’s a 35% decrease in 11 months. 10 months later, the price was down to US$139 — a 46% drop. And now, 13 months later, after another 45% drop in price, there’s the US$79 version. With these prices falling in a consistent and predictable fashion, its not crazy to question whether the Kindle won’t one day be free.

Some have turned to Amazon itself to answer the question. When Wired asked Jeff Bezos about it recently, he responded “It’s an interesting marketing idea, and we should think about it over time. But US$79 is low enough that it’s not a big deal for many people.”

Last year Michael Arrington wrote: “A reliable source tells us [TechCrunch] Amazon wants to give a free Kindle to every Amazon Prime subscriber.” Prime customers pay $79 per year for free 2-day shipping, free unlimited streaming movies, and more benefits are continually being added on. Peter Rojas agrees that a free Kindle is inevitable and also sees it coming via a Prime membership.

In contrast, when Tricia Duryee of All Things D, asked Amazon about the possibility of a free Kindle with a Prime membership, Amazon emphatically responded that it would never happen, and that the Kindle would never be free as they simply could not pencil out that math.

I wonder, if in fact, we should be looking to content creators and large institutions like the New York Times rather than Amazon to answer our question. When the economic logic of going purely digital becomes sound, news institutions like the New York times could be the key to forcing a free Kindle.

When that happens, it could be a pivotal moment in history, the final death knell to the traditional print newspaper, as digital devices become the new standard for consuming news.

Image: NS Newsflash

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  • Rowan Puttergill

    Damn… I’ve been an Amazon Prime member for ages… was thinking of getting me a new Kindle just the other day… maybe its worth holding off for a while. :D

  • http://twitter.com/martincarstens martin’

    Hey Rowan :D I think 2012 will be an interesting year in terms of price reductions for the Kindle — will the reductions keep consistency and reduce once again by about 40% or is $79 as low as it will go?  But, like Bezos said $79 is not a big deal for many people. Are you thinking of getting a Fire?

  • Rowan Puttergill

    It seems that Black Friday kicked off a bit of a price-war on e-readers…
    http://www.beyond-black-friday.com/2011/11/23/price-war-on-black-friday-kindle-nook-and-ipad/
    It will be interesting to see how this plays out in the longer term.

    I’m less interested in the Fire, just because I’m not really after a tablet. The Kindle currently appeals because of its e-ink display. I spend enough time staring at backlit screens to shy away from reading on a tablet. I am pretty old school, so having a normal keyboard (rather than a virtual one) is pretty important to me. I’m also not entirely sure that complete convergence is the road to take. I prefer different devices that are better suited to different tasks. So, while tablets have their uses, I am quite happy sticking with my laptop for the majority of computing tasks.

    After looking at the TechCrunch article again, I realize that the rumour about Prime members getting a free Kindle is pretty old. I guess I should just bit the bullet and buy one for myself. The real debate for me, though, is whether I am willing to just submit and trade off a bunch of my own privacy for the convenience that is afforded by a Kindle, or whether I should pay the extra and buy a more generic e-reader. Decisions… decisions.

  • http://twitter.com/martincarstens martin’

    The rumour about the free Kindle with Prime was around for a while, but I only became aware of it when it resurfaced with the introduction of the $79 price point. If you don’t mind me asking, which privacy concerns do you have? I think the Kindle book eco-system is beyond anything else, especially when you consider the apps available for mobile devices (every major platform) and PCs.

  • Rowan Puttergill

    Hi Martin

    I’m a bit of a privacy nut. I’m excited by cryptography and secured communication protocols. While I love the convenience afforded by Amazon, I hate the fact that every time I buy anything from them they continue to build a profile on me. Also Amazon has been running into a fair amount of criticism this year over privacy concerns:

    http://consumerist.com/2011/03/amazon-sued-over-invasion-of-privacy-allegations.html
    http://bits.blogs.nytimes.com/2011/10/14/questions-for-amazon-on-privacy-and-the-kindle-fire/
    https://www.privacyrights.org/ar/amazon.htm

    Amazon’s DRM on their books (or at least the fact that they use a proprietary format) is also a bit of a pain. Admittedly, since they store books for you and you can run their e-reader software on any device, its not the end of the world. But, it is still annoying.

    In the end, I have to concede that despite my gripes, I still shop at Amazon, search on Google and have a Facebook profile. Some of these things are really becoming unavoidable. As Moxie Marlinspike has said, “As a piece of technology changes, the scope of choice expands and it
    becomes a question of participating in society or not. In this way,
    there is a pattern of small choices becoming big choices. We see this
    pattern everywhere.”

  • http://twitter.com/martincarstens martin’

    That’s a great quote, and I agree, it becomes a question of continuing to participate despite egregious differences between your own and the institution’s ethos, that developed as the institution (and perhaps yourself) changed. Like you I value my privacy, but I’ve started to change a bit. Don’t get me wrong, I think it’s important to ferociously police the issues around privacy as a community, to stop corporations being tempted to pervert our human rights, but the benefits of being continuously profiled has its benefits.

    Targeted advertising, despite often being a punching bag, is better than random nonsensical advertising. No advertising being preferable, but advertising is of course currently the main way in which the Internet continues to remain relatively free.

    I think some people feel offended by being boxed and tagged, but in reality the benefits, to me at least, outweigh the negatives. I love my Audible recommendations. I like the benefits of location based services in for example Square’s Card Case or Motorola’s Smart Actions, but I absolutely require them to be opt in and frank about how my information is used.

    It gets murky, like you say, when things are done without your consent, and you are blatantly misled in order to benefit the commercial institution, instead of honouring the client’s interest as well. I feel like this is what we need to be vigilant against. Corporations will push as far as we allow them to.

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  • Anonymous

    I wonder how many people get significant income from selling paper issues of NY Times these days? Would there be much ancillary damage to NYC? I haven’t been to the city in years and don’t know how the news stand business is doing.
    The Times, of course, could get an OEM reader, even the 3G variety, for much less than $99, and then they could add their own version of “with offers” which they could market to their traditional advertisers as well as to more tech-savvy companies. They could give a reader away with a one-year paid digital subscription, or maybe a non-touch model with a shorter subscription and a touch model with a longer subscription.

    I think this is almost a no-brainer, except for the local “newsstand” aspect. There might be a good chunk of profit still tied up in that aspect of delivery plus political fallout in NYC if printed copies were stopped.

    Doing this for non-NYC area subscribers might be a good first step; likewise for the people who get the paper mailed to them wherever they are.

    Could the Times afford to run a hybrid shop? How much could they reduce the printing and distribution operation without driving up the per-copy cost to the point where printing would no longer be profitable?

    The change is going to come. The only questions are “how fast?” and “who will be in the driver’s seat?”

  • Pingback: Could free Kindles end the age of print newspapers? | Ebooks on Crack

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