Analyst: Kindle’s a “Niche” Product–Because Amazon Wants It That Way
Can’t wait for the debut of Kindle 2.0, which should arrive around 10 a.m. this morning in New York?
Here’s a splash of cold water, courtesy of Jeffrey Lindsay: The Bernstein Research analyst says Amazon’s much-hyped e-book reader is merely a “niche product”–and that the e-commerce giant wants to keep it that way.
Lindsay’s argument in a nutshell: Electronic delivery of content may be the future of Amazon’s (AMZN) business, but it’s going to make most of its money selling physical goods for a long time to come. So Jeff Bezos and company won’t make the moves that, say, Steve Jobs and Apple (AAPL) might make if those guys were pushing e-books.
Lindsay: “Unlike Apple with the iPod, which cannibalized somebody else’s sales–namely the music industry–Amazon with Kindle is in part cannibalizing sales of its bestselling product, and this must be factored into the economics.”
Translation: Don’t expect to see super-cheap (say, $99) Kindles anytime soon.
Lindsay’s numbers aren’t radically different than those of Mark Mahaney, the Citi (C) analyst who has been notably bullish about the Kindle and its impact on Amazon’s business.
Both men estimate that Amazon sold about 500,000 devices last year. And while Mahaney thinks Amazon’s hardware and software sales will be a $1.2 billion business by the end of next year, Lindsay has a more conservative $900 million estimate.
Even by 2012, when Lindsay thinks Amazon will be selling two million Kindles a year, this won’t mean that much: Amazon’s revenues could actually decline by 0.6 percent because of slower physical book sales, while the company’s earnings would increase by perhaps 2.9 percent, the analyst predicts.
All worthy thoughts to contemplate–a little later on today. But in the very near term, most Kindle-watchers will be focused on more prosaic concerns. Like are those “leaked” Kindle 2.0 product shots real? We should have answers in a few hours, when Amazon holds its press conference at the Morgan Library.
Check back at All Things Digital at 10 a.m., where I’ll be liveblogging the event.