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Read the rest of this articleAmazon Q2 forecast hints that Apple’s iPad poses threat to Kindle 2
The road ahead for Amazon will be filled with competitors vying for the dominating market share it currently controls with the Kindle 2. Apple knows a thing or two about hardware, and already has wooed the masses with its shiny but small app portal, the iPhone. It stands to follow then that as orders continue to pour in for the iPad, Apple will use some of that same closed ecosystem mindset to make it equally as successful.
Amazon is certainly aware of that threat and though it just posted earnings that exceeded Wall Street’s expectations, its predictions for the next quarter are more conservative. The Kindle is Amazon’s top-selling product and any slowdown in growth is likely to be influenced by the success or failure of the Kindle.
That’s only the first level, the Kindle 2 is even more important as a portal to Amazon’s core business: selling books. Though the company is trying to catalyze an app ecosystem, Apple has a ton of mileage in that space already with its iPhone app store. The Kindle 2 will certainly continue to command the attention of consumers predominantly interested in reading only because of the E Paper screen, but those who want to use a device for reading plus other things? It’s out of the iPad’s league by a long shot.
So seeing Amazon shares fall 6% in after-hours trading shouldn’t be too much of a surprise because stellar results in the present don’t promise a bright future. The iPad has also allowed publishers to drive in a pricing wedge with Amazon because it entered the market allowing different prices.
Publishers are anxious to avoid the situation record labels are in with iTunes where price elasticity is a difficult thing to negotiate. Interesting that Apple is so open to pricing shifts in a market where it wants to gain a foothold.
The good news in all of this is that it’s reducing the amount of paper we’re using while making books more accessible for a generation that perhaps isn’t as accustomed to spending time in the library or bookstore. Unless, of course, they can access Facebook from a wireless hotspot there.
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Comments
Where in the article does Amazon actually acknowlede anything?
Truly, I am an apple fan. : ) I don't see the point for a kindl,! When you have iBooks on the ipad.. Apple has a way better design for reading books and it is fun to turn the page with your finger!
While I am certain that with iPad sales of 500,000 in the first week even iPad haters would recognize that the iPad will have a huge negative impact on the Kindle. However the dishonesty of the editor or writer of this article is breath taking. The article contains no acknowledgement by Amazon of any iPad threat. Perhaps Amazon did acknowledge it but it is not reported here except as unsubstantiated claim. We are all used to headlines that exaggerate contents but no one accepts actual untruths and that appears to be what we have here.
iPad haters? I take it these people are jealous (or 8 years old?)
Anonymous and Anonymous: I certainly appreciate your feedback, and unusual as it may seem we aren't in the business of green purely to create sensationalized titles. My use of the word acknowledge was pointing out the correlation between Amazon's reduced forecasts for Q2 and Apple's burgeoning success with the iPad, which is articlulated in the article.
Most likely the iPad is impacting some of Amazon's sales forecasts and that reduction is an acknowledgement of the competition in the e-book reader space heating up.
However, given your candid feedback I've adjusted the title to make that abundantly clear.
This is a baffling article. Kindle devices are priced at break-even, and Kindle ebooks run on the iPad. So long as Amazon continues to sell Kindle ebooks at the same rate (or higher, since some people waited for a color device) there will be no negative impact on profits or margins; it displaces low margin ereaders with high margin ebooks.
Separately, Amazon's margins would actually go up if they accepted the Apple pricing model, but their interest is still in volume and uptake. Bezos is simply repeating his early Amazon strategy.