The cover story in this month’s issue of Fast Company profiles Amazon.com and discussing the long-term strategy behind the Kindle and their push into the e-book market. The article is a great read, especially as it provides insight into Amazon’s larger strategic goal. Not only is Amazon looking to pull an Apple by disrupting and dominating the e-book industry, but CEO Jeff Bezos has his sights on a larger prize: to rewrite and dominate the entire publishing model.
Jeff Bezos is trying to do to book publishers what Steve Jobs of Apple did to the music industry. With its iPod and iTunes Store, Apple carved out a largely virgin market so fast that it was able to wrest control of the digital-music distribution system and thus dictate what the record labels could do. With Amazon jamming (its latest earnings are sky-high even as other online retailers are in a state of malaise), Bezos may sense similar opportunity, a moment when he, in true Jobs-like fashion, could colonize this growing niche for the Amazon ecosystem. Should that happen, book publishers would have more to fear than just being squeezed. Amazon could phase them out completely, treating them as the ultimate middlemen orphaned by a new technology.
Essentially, Amazon is looking to bypass traditional publishers through its massive electronic distribution channels (Amazon.com and the Kindle device) as well as its on-demand publishing technology. Rather than dealing with the publishers, Amazon could strike deals with the largest authors (those that provide the bulk of the revenues from ‘hits’ that traditional publishers require to keep operating) by offering wider distribution and increased royalties. This could fundamentally alter the publishing industry, if not destroy its current incarnation.
While this is interesting, there is another part of the article that deserves attention: the risk Amazon could face down the road from Apple.
Amazon is faced with a dilemma. While they expend countless resources to create a high-demand e-book market (creating larger consumer demand, testing various designs and functionality in terms of the reading device with those consumers, etc.), Amazon will bear the brunt of creating this massive new market. Ideally, the investment pays off as Amazon then dominates that newly created market. However, the article points out that there could be a disruptive competitor waiting in the wings to take advantage of that market: Apple.
The article speculates that Apple could very well launch an e-reader of its own, one that vastly improves on Amazon’s market-leading Kindle. Specifically, Apple could develop a reader that utilizes their leading touchscreen technology so that readers can intuitively flip through pages of magazines or books (a feature the Kindle currently lacks), develop their reader so that media is presented in color (the Kindle is gray scale), and provide a larger viewing screen. And while Steve Jobs has previously denied a desire to get into the e-reader market, Apple is apparently full-go towards developing and launching their own tablet computer. Such a device could be a “Kindle-killer”.
Apple has made a name for itself as a disruptive innovator, most recently shaking up the digital music player and music industry with the iPod and iTunes as well the cellular market with the iPhone. In both cases, Apple didn’t attack and steal market share at the low end of the market (as Christensen suggests). Rather, they attacked the market with high-performing products set at market-leading price points. In the case of iTunes, Apple did manage to keep prices quite low ($0.99 per song), but the iPhone was a high-priced and high-performing digital music player. With the release of their tablet and a built-in e-reader, Apple would again be attacking a market from the high-end.
Is this unique to Apple? Are they a “luxury disruptor”? They’ve seemingly developed an infrastructure and design team that allows them to pivot into new markets with high-end products and to extract high-prices despite the existence of lower-priced, established competitors. I am wondering if this is replicable, or if Apple is simply an outlier when it comes to innovation and execution.
Curious as to readers’ thoughts.