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It’s became obvious to me at the start of the year that the Kindle was going to fail as a consumer device. The sales had not been bad - encouraging actually, with Amazon (NASDAQ:AMZN) running out of stock over the holiday period. That should have been auspicious, but on New Year's Eve I ran into one of the entrepreneurs who founded Lexcycle, the company that introduced Stanza. I reported on our conversation in One Million Users: Is Stanza Killing The Kindle? and later reported on Amazon’s acquisition of Lexcycle. I’ve not changed my mind about the Kindle. Here are 10 reasons why.

  1. Amazon is Amazon, not Apple (NASDAQ:AAPL) or Nintendo (OTCPK:NTDOY). I am impressed by Amazon. You might believe that Jeff Bezos was lucky to be first with the idea of the electronic book store, but I suspect that Amazon would now be dominant even if he’d been second or third with the idea. It’s hard to find fault with his implementation of it and the innovations he introduced. I am impressed that he scooped up the web music CD and video DVD business quickly. I salute the fact that he was ambitious and set up a clicks-and-mortar operation rather than just a web site. He was the first electronic retailer to establish an affiliate program - which pretty much drowned out the competition and his implementation of zShops was a great success. On a completely different business tack, I am deeply impressed with Amazon’s EC2 - its IT Infrastructure as a Service operation, and I expect it to continue to prosper. But none of that makes Amazon a credible device manufacturer. It isn’t one yet and it isn’t going to become one.
  2. Jeff Bezos Suffers from iPod Envy. Don’t misunderstand me, the Kindle is excellently designed and I have no problem with reading books, even magazines and newspapers, on either of the current Kindles (the DX and the Kindle 2). I am particularly impressed with the attention paid to readability. I’m not alone either. It seems like most people who’ve touched the Kindle are impressed. Nevertheless I can’t help getting the feeling that Jeff Bezos suffers from iPod envy. That would be natural too in any entrepreneur, but it shouldn’t dilute the focus of the organization you run. Apple started with the iPod and built an end-to-end commercial ecosystem that linked the iPod to iTunes. Apple then doubled down and established something even more powerful with the iPhone and the App Store. Jeff Bezos would love to do something similar with the Kindle and, in my opinion, it’s blinding him to the fact that it won’t work. It would be really neat if the Kindle was the iPod of books, but it isn’t. It never will be.
  3. The Kindle is Functionally Limited. The iPod allowed you to load and listen to the music you had already bought. You could also buy music from Apple, but actually few people bought much. For several years the average iTunes user was buying no more than the equivalent of a single CD a year through iTunes. The digital version of the music were, admittedly, a little cheaper than the CDs, but no-one bought an iPod to save money on buying music. If you wanted to save money on buying music, you stole it. Nobody is going to buy a Kindle to save money on buying books either. Yes, they are a little cheaper via the Kindle, but it’s not a meaningful incentive. The iPod developed into the iPhone and its functionality exploded. The Kindle has no such development path ahead of it. Its functionality is limited and if you increase its functionality it becomes what? A Netbook.
  4. It’s the Channels, Stupid. To sell the Kindle, you need to get it into people’s hands. When was the last time you walked through Best Buy (NYSE:BBY) and took a look at the Kindle. How about when you were strolling around Fry’s. Or maybe you saw a stack of them in Borders (BGP) or Barnes & Noble (NYSE:BKS). No? How could that be? (It was a different story with the iPod.)
  5. The Kindle is Pricey. Amazon just introduced the Kindle DX, at $489. You can get a Netbook cheaper than that. Unfortunately, Amazon hasn’t got the volumes to bring the prices down quickly, so the DX is going to stay at that kind of price for a while. The Kindle 2 is smaller and cheaper at $359, but I still think the price is too steep. Remember, you’re not getting a netbook here, you’re getting a book reader. It differentiates itself from other computing devices in two ways; it is better designed for reading (no question about that) and there is a whole series of things it cannot do, because it is not a laptop. Once you’ve bought the Kindle you have to start buying books to put on it.
  6. The Kindle: A Device Too Far. The Kindle is yet another electronic device to carry around, which might get stolen, and which will inevitably run out of juice at an inconvenient moment. Amazon is betting that because some people are happy to carry a book with them they’ll be just as happy to carry a Kindle. Some may, but not many methinks. A book is cheap, but a Kindle is not, a book is self managing, but a Kindle is not. It’s a burden. It’s a device too far.
  7. The Kindle has a Weak Commercial Ecosystem. Just go round an Apple store and take a look at all the add-on devices that you can buy for the iPod or iPhone - then think of the Apple Apps Store and the thousands of apps you can buy for the device. The commercial ecosystem is huge. Now go round a store that’s selling the Kindle - oops. Sorry, surf the web and you’ll find much less in terms of physical add-ons and nothing in terms of software - because the Kindle is a closed environment. Even if you think in terms of magazines, newspapers, etc. Amazon has not yet delivered a compelling set of magazine subscriptions to buy into - and, by the way, the Kindle is black and white only. Most magazines wont want to have the color sucked out of them.
  8. The Kindle should be an Application not a Device. Kindle functionality is entirely doable in software, it was done in software, and when it was done in software (by Lexcycle) it acquired more users in the space of about 4 months than the Kindle had - and that was on the iPhone which doesn’t have an ideal reading screen. Portable video devices were sold for a while but were eclipsed by Microsoft (NASDAQ:MSFT) and Apple providing the same functionality in software. And by the way, a soft Kindle would be able to do color - after all, it’s little more than a PDF reader and there are lots of such readers. Ultimately that’s what the Kindle is a hardware PDF reader that doesn’t do color.
  9. Amazon Cannot Afford The Kindle. The Kindle is not friendly to the rest of the Amazon electronic book business model. The more that Amazon tries to differentiate its Kindle from software equivalents, the more it will have to embed functionality in the hardware - because software differentiation can easily be mimicked. However, the hardware is a constraint. Software competitors will naturally innovate to provide what the Kindle device cannot provide (color is just the obvious example.) This in turn will naturally generate competitive formats, which will in turn loosen Amazon’s grip on the electronic book business. The Kindle dislocates Amazon’s electronic book business.
  10. The Kindle: A Bug Waiting To Be Squashed. Apple is rumored to be about to launch a tablet PC with 10 inch screen which will be priced somewhere between the iPhone and the Apple MacBook. It feels like a Kindle killer to me. But even if Apple doesn’t step in with such a device, the Netbook market will generate one. Ultimately, the Kindle is a goofy Netbook with limited functionality. It will be made obsolescent by millions of not so goofy Netbook or tablet devices.

Disclosure: No positions

Source: Ten Reasons Why the Kindle Is Toast