Everybody's talking about Amazon retaliating against the iPad with a multitouch, multimedia, app-heavy Kindle 3. But it's not as obvious a move as you think. In fact, it's a bad idea.
As I pointed out yesterday, Amazon is going to do well by the iPad—and plenty of other platforms—as long as they keep their software developers pumped up on smart water and amphetamines. Why does anyone build their own hardware, but out of fear of getting shut out by the competition? Lord knows Apple can be a bunch of dicks, but it's letting Amazon grow, even while it launches its own competing book platform. So should Amazon focus on software and content for everyone, or spend millions to build its own competing proprietary hardware? You know my answer; here's why I'm right:
1. What operating system is it going to run? Kindle OS, whatever that is? Just ask Palm how well even a good fourth-party OS can do nowadays. And they're Palm. Amazon doesn't know squat about building a real computer platform. Android? Most logical, except that Google and Amazon have contradictory book-publishing agendas. Whatever Amazon chooses, will they show preference to that platform over iPhone and the others? And wouldn't it then be competing alongside stronger traditional hardware builders? Beating Sony and a bunch of startups in the e-ink business is easy; taking on HTC, Samsung, LG and Motorola all at once is a little harder.
2. If it does everything, what will make it a Kindle? Yesterday, I argued that e-ink is a choice people make because it is easy on the eyes. Amen. And the best option is Amazon's. Great. Let's keep that in the mix. But if Amazon's flagship resembles the iPad in every way, consumers won't see its benefits. What will make it a Kindle?
3. Who's going to pay for the wireless service? One key benefit of Kindles is that you don't pay for the 3G used to deliver books and news clippings. But if the thing gets a color screen, a grown-up browser and a video player, you can be someone besides Amazon is gonna foot the bill. (Hint: It will be you, for $30 a month or more.)
4. What media will it offer? Amazon has a lot of relationships, but they don't exactly have their act together on the media side. The music store is fine, but it's DRM-free like all the others, so you can't use it to incentivize a hardware product. Amazon Video on Demand is something we like to see in a Blu-ray player, but I don't know anyone who swears by it. It's certainly not part of the holy trinity of Netflix, Hulu and Vudu.
5. How will Amazon lure app developers from Apple, Google and Microsoft? Hate to beat a dead horse, but Palm can't get its app act together, so how can Amazon? Apple, Google and Microsoft are only going to beat the developer drum louder and louder, and VCs are helping by raising serious money to back anyone with a good enough idea. Like game consoles, you will probably see more and more exclusive app deals. None of this should spell optimism to a late entry with no experience.
One final thought: Apple is being nice to Amazon now, but if it perceives Amazon as a threat, how quickly will Steve Jobs turn off Amazon's App Store tap? If you answered "pretty darn," you're correct. Do I condone this kind of thuggery? No. But tell me that's not how it would go down, and I'll laugh in your face.
Amazon: Please pump money into building and refining Kindle apps for every platform you can. And by all means keep churning out e-ink readers. There's a niche for them, and you are good at it. A cheaper e-ink Kindle and a better iPad app are your keys for continued success, and you know it.