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.
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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