3 Comments

Summary:

It’s nice for media companies to have a strong alternative like Amazon’s Kindle Fire when it comes to the tablet market, but the bottom line is the same as with Apple: They provide the content, but the platform owner is in control of the relationship.

Unless you chose today to get marooned on a deserted island, you’ve probably heard that Amazon has announced a series of new devices, including one called the Kindle Fire which has an iPad-style touchscreen and is powered by the Android operating system. On the content side, meanwhile, Amazon has also signed deals with some leading publishers to provide one-click access to their magazines and newspapers. But while it’s nice for media companies to have a strong competitor in the tablet market, dealing with Amazon puts them in the same boat they’re in with Apple: They provide the content, but the platform owner controls the relationship. And in some ways, Amazon might be worse.

The impetus for Amazon’s interest in new tablets is fairly obvious: Apple’s iPad has shown that there is a relatively huge and growing market of users interested in the convenience of a small form-factor mobile device for reading and playing games. So far, no one has come along that shows signs of playing a strong second fiddle to Apple in that market, so why not Amazon? The company has deep pockets — although not quite as deep as Apple’s — and it also has something that Apple doesn’t when it comes to the content side: an existing relationship with many users that’s based around subscribing to magazines, buying books, etc.

The need for the Kindle Fire was obvious: As soon as the first version of the iPad arrived, the Kindle looked more than a little antiquated, with its black-and-white screen, no touch interface, etc. That’s not to say there isn’t still a market for dedicated reading devices, for people who don’t like the distractions or the reflective screen of the iPad — and Amazon will no doubt continue to sell plenty of Kindles with touchscreens and other features added. But the sweet spot of the market is a device that can do many different things: stream video, stream audio, display magazines and newspapers and books in full color, and so on.

Amazon sees devices as a way to sell content

In some ways, Amazon and Apple are polar opposites, at least when it comes to the way they are approaching the tablet market. As my colleague Erica Ogg has pointed out, Apple’s main interest is in selling hardware, and it uses content as a way of doing that. It arguably had no real interest in becoming a music powerhouse, except that controlling access to those songs would give it a powerful lever with which to sell more iPods. Amazon, however, sees devices like the Kindle Fire as a way to sell more content, and that makes it simultaneously more appealing as a partner for media companies and at the same time a potentially more dangerous one as well.

The benefit for content publishers and media companies like Conde Nast and News Corp. is more or less the same as it is with Apple: They get access to the users who choose that device as a way to consume media, and Amazon handles the logistics of the relationship — the billing, the processing, and to a certain extent the marketing and promotions as well. They also get to put their content on a device that (in some cases, at least) seems to make users more likely to pay for things, which is something media companies have been wrestling with virtually since the Internet was invented — although they have to give the platform owner 30 percent of the proceeds, of course.

But the downsides of this relationship are also a mirror image of the relationship many media outlets have with Apple: The platform owner is in the driver’s seat, both in terms of what apps are allowed or not allowed, and also what information about the end user or subscriber is provided to the content creator — an issue that was a sticking point for many when Apple started trying to sign up publishers for the iPad. In the end, the platform owner is the gatekeeper of a media company’s relationship with its customers, which is the same kind of tradeoff media companies make by creating Facebook apps.

Amazon likes to compete with content partners

At least in Apple’s case, however, the hardware maker appears to have no real interest in becoming a media or content producer, since all it wants is content that makes people want more devices. In theory at least, it doesn’t particularly care where that content comes from, as long as it gets its 30 percent. Amazon is in a different boat; it has already indicated it’s happy to compete with its former publishing partners when it comes to books (its core business) by pressuring them to accept lower prices and also by signing up authors like Tim Ferriss — in effect, becoming a publisher.

Is Amazon suddenly going to get into the magazine business or the newspaper business? No. But its Kindle Singles program is appealing to more and more authors who are using that avenue as an alternative to both publishing traditional books and to magazine articles or newspaper features. Some newspapers and other publications have been using e-books and the Kindle as a tool to extend the life of their content, and that is smart — but Amazon has a clear interest in that business as well.

There’s no question that working with Amazon and a new platform like the Kindle Fire makes a lot of sense for publishers and media companies — it’s a win-win for both sides. And so long as Amazon’s interests align with those of its media partners, then everything should go swimmingly. But what about when they diverge?

Post and thumbnail photos courtesy of Flickr user Umberto Salvagnin

  1. Amazon is not new to this. They’ve been in the media game for a while (music, books, and movies) so not sure what’s germane here. Are you suggesting that content owners (rather than aggregators) should make their own tablets? Should they own the customer? One could argue that HBO is moving in that direction (with HBO GO) but, ultimately, they would need to have a direct relationship with the customer rather than one through the MSO. That’s probably not going to happen. They, and all content owners, made their bed a long time ago when they decided that content creation was more lucrative than distribution. Amazon (especially with their recent book publishing venture) seems to be trying to straddle both lines. Regardless, the point of this article assumes there will be some conflict that Amazon has not already seen before (in fact, I’d presume it to be Ultraviolet ready; Amazon laid a lot of track to get to this point). They didn’t just jump into a market blindly.

    http://blog.jasonthibeault.com/index.php/2011/09/28/what-the-kindle-fire-means-for-the-tablet-market/

    @jnthibeault

    Share
  2. The number of parents buying this for their kids is going to be phenomenal. A lot cheaper than the iPad and yet offers similar use.

    Share
  3. Amazon was selling Kindle books at a lower price, and Apple and a bunch of publishers banded together to force Amazon to increase the prices.

    Share

Comments have been disabled for this post