Wednesday, January 27, 2010

Apple v. Amazon

Fights between big name tech giants is always entertaining, much like fights between late-night talk show hosts. In some sense, Apple's new iPad is a direct shot at Amazon's Kindle. It's cheapest version isn't much more expensive than Amazon's most expensive model and does much more beyond books.

But really, the two are playing different games. Apple is really setting up its book store, magazine tie-ins, and exclusive app environment to make purchasing its device more attractive. Amazon has a Kindle app for the iPhone that works on the iPad. The Kindle was a great way to create the eBook market, but ultimately Amazon doesn't care what device you use to read their books. Apple's about the hardware; Amazon does retail.

But if there's anything Apple has shown us these past several years; it's that hardware is where the money is. Apple's iTunes didn't make much money, but was a great boost for iPod sales. The world of digital retail is fiercely competitive, and prices trend towards cost--which is to say zero. The world of consumer electronics has brands and margins.

But whatever tough times Amazon faces in the future, the newspapers are far worse off. They've pinned whatever last hopes they have to this device. But what percent of people will actually buy one, and what percent of them will pony up for a brand new subscription to the NYT? This is mass delusion. If they really want to save their business, they need to destroy privacy, collect data, and put up targeted ads. Whatever they think, advertising--not subscription--has always driven the newspaper industry (newspaper subscriptions in the past just covered the cost of paper and printing); all the internet has done is shown how horribly inefficient advertising is.

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