Why Amazon Isn't Worried About iPhone's Kindle

by: Manshu Verma

I thought the next gadget I’d get after buying an iPhone was the Kindle. Then I discovered the Kindle app on iPhone and gave it a try. I’ve read three books on the iPhone so far, and am quite satisfied with its performance. If you have to read for hours together, then it’s not a very good option, but I haven’t been doing that kind of reading lately, so it’s not a problem for me.

In fact, I have decided that I won’t be buying the Kindle now. The iPhone serves as a satisfactory book reader and since I have access to all books that are on Kindle – I don’t think I will gain anything from getting the Kindle.

I guess there must be a few others who decided that they don’t need Kindle if they have an iPhone. So, I was wondering whether the app cannibalized Kindle sales or not.

I know my reasons for not buying a Kindle, and was interested to know Amazon’s (NASDAQ:AMZN) reasons for not worrying about the app cannibalizing Kindle sales.

Here is what I found:

iPhone app may induce Kindle sales: For one, there must be several people who decide to buy Kindle after they use the iPhone Kindle app. A lot of people are apprehensive about using Kindle, and if they get to try a free app first — that might just nudge them into buying Kindle.

The app doesn’t have all the features that Kindle has, and most comparisons state that the Kindle is much better than the app. So using the app may nudge some people into buying Kindle.

Great potential for e-book sales: There are about 10 – 15 million iPhones and iPod Touches, but fewer than a million Kindles, so the potential boost that e-book sales can get from this app is pretty significant.

Competition: Other e-book readers like Indigo Books and Music Inc’s (OTC:IDGBF) Shortcovers – are already on the iPhone. So, people who are looking to read on the iPhone do have other options. Amazon could lose out sales to their competitors, if they didn’t come up with this app.

Kindle didn’t cannibalize paper books: This is by far the most interesting thing I read about Kindle. In January this year, Amazon’s CEO Mr. Bezos said that Kindle hadn’t cannibalized its paper book business. He said that Kindle owners continue to buy the same number of paper books they did before owning a Kindle. They incrementally buy about 1.6 – 1.7 e-books for every physical book they buy.

This is a real indirect inference, but if Kindle didn’t cannibalize paper books, then the app may also not cannibalize Kindle, as that’s not a perfect substitute of Kindle.

Amazon was certainly not concerned when it released the app, and an Amazon Vice President Mr. Freed told the WSJ that he doesn’t expect iPhone readers to read more than 20 or 30 minutes on the iPhone and they were “not at all” concerned about cannibalization.

Reading all these reasons made me think that it’s much better for Kindle to be on the iPhone, Blackberry and Droid to boost e-book sales rather than stay away from there in the fear of cannibalizing their Kindle sales. Who knows – I might still change my mind and buy the Kindle after all.