James Moore: Amazon chief needs to kick his addiction to tablets and concentrate on what he already has
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
Thursday 27 October 2011
Outlook It will be a bitter pill for Jeff Bezos to swallow, but he needs to kick his addiction to tablets. Drug habits are always costly, and Mr Bezos's has already cost him more than $4.5bn (£2.8bn) in terms of the fall in the value of his Amazon shareholding. This came as a result of his company reporting a 73 per cent fall in third quarter income, well below what analysts had expected, as a result of it pouring money into an attempt to take a bite out of Apple.
Amazon's Fire, a rival to the iPad, retails stateside at $199, less than half the price of the cheapest of Apple's devices. It's true that tablet consumers aren't immune to price – Hewlett Packard's, for example, flew off the shelves. But only when it was sold for a giveaway price after it was discontinued.
The Fire was born out of the Kindle, the black and white electronic reading device that has been an Amazonian success. However, a full-on tablet is a very different proposition to a simple e-reader. The basic Kindle works because it offers something that the iPad can't. Its "liquid paper" screen makes it comfortable for reading books for hours and hours, even in bright sunlight. It's hard to do that with a tablet. In addition to web browsing, they are better suited for magazine articles or comics, which can be consumed in shorter sessions.
The question facing Mr Bezos is whether he and his outside investors are comfortable enough with the time – and the money – that it will take for his tablet to catch Fire and establish a genuine foothold in the market.
Rather than trying to enter a race he's going to find tough to win, Mr Bezos would have been better off innovating with what Amazon has. Hardback books, for example, fetch a premium price. Why not offer them as a "combi-pack" by selling them packaged with a Kindle edition along the lines of premium priced Blu-rays (often sold with a DVD and a digital copy of a film).
Amazon also needs to pay attention to how it sells digital media, which is going to be crucial to its future. It's music MP3s, for example, are usually cheaper to buy than they are on iTunes, but Amazon's site is far less user friendly. It still makes sense to browse on iTunes and buy on Amazon. Which is dangerous for Amazon should Apple decide to peel back its prices.
Working at this might well help Bezos to take a decent sized bite out of the Apple. Because what Amazon has always been good at (really good at) is not so much technology but retail. Technology has facilitated the creation of Amazon but the company is not and never has really been a technology company. It looks like Mr Bezos might need a spell in business rehab to get it, though.
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