Kindle 2: Still Expensive

Megan McArdle loves her Kindle, but says that Amazon doesn’t want to have "a glut" of Kindles if the new Kindle 2 fails to sell as well as the original.

My feeling is that having too many Kindles in stock is not going to be much of a problem for Amazon, which desperately wants to own the next iPod. The main reason why everybody has an iPod is that, well, everybody has an iPod: the network effects on this kind of thing are extremely important, and you’re much more likely to buy a Kindle if someone you know has one.

The worst-case scenario is that the Kindle 2 doesn’t sell at $359, and Bezos has to lower the price to sell more. Once they’re sold, those Kindles will generate just as much extra revenue for Amazon, in the form of eBook revenue, as the full-price devices.

I do think the price is still too expensive — but the problem is that it comes with a lot of "free" wireless data, which is hard for Amazon to discount too much. Eventually, however, I can see the Kindle being a serious revenue-driver not only for Amazon but also for newspapers, magazines, and other web publishers. I’d pay good money to be able to read all my RSS feeds, constantly updated, on the Kindle — but it would have to be a flat rate, not the per-blog pricing model the Kindle currently uses.

What seems certain is that Sony has lost the eBook reader wars just as it lost the pocket music-player wars. Once Amazon figures out a way to take the Kindle international, Sony’s Reader is toast.