It certainly hasn’t started a fire. Before last month’s India launch of the Kindle, the e-book reader from Amazon, local media gave it top billing. It didn’t evoke as much attention as the iPhone when that came to the country in August 2008, but there were still plenty of favorable reviews. “The most ambitious invention after the Gutenberg printing press is finally in India to kindle your literary tastes,” noted The Economic Times. The business daily Business Standard wrote: “Kindle is a delight for a reader for whom the smell or the emotional quotient of owning a physical book does not matter.”
But once the details of the October 19 launch were announced, any hopes for a big splash quickly diminished. One year ago, Apple’s iPhone was greeted with much hoopla and later disappointment. (See “iPhone in India: Has Apple Dialed the Wrong Number?“) Amazon did not orchestrate midnight vigils for consumers waiting to purchase the product, like Apple did — unlike the iPhone, the Kindle is only available online from amazon.com. But the price and the services on offer seemed to indicate that, like Apple, Amazon didn’t have a strategy for the Indian market. “There is no plan to advertise the Kindle,” says Laura Porco, director of Kindle Books, who was in Mumbai last month for the launch. “We will rely on word-of-mouth publicity.”
Indeed, word-of-mouth is likely to take the Kindle a long way. People who have been exposed to the device — some have picked it up during their trips to the U.S. — tend to be euphoric about it. Of course, they haven’t been getting full functionality (the download of, say, War and Peace in 60 seconds flat that Porco promises) because of low broadband penetration in India. But what they have, they are happy with.
The Indian Kindle market “is probably not a big priority” for Amazon at this juncture, says Kartik Hosanagar, a Wharton professor of operations and information management. “[Using the Kindle] calls for a significant behavioral change, and it is not clear whether Indian consumers are ready for that.” Broadband availability in India is “very limited” he adds. “It is not clear whether consumers who have not yet adopted broadband will adopt offerings like the Kindle. I suspect Amazon is testing the waters. And I feel it’s the right strategy.”
There is but “a very small group of potential buyers” for the Kindle in India, according to Wharton marketing professor Jagmohan Raju. “It seems they are targeting only those who already buy from Amazon, and those for whom this will be a way to signal status.” Even if the Kindle’s Indian market is small for now, he adds, “it is better to be there and not have to catch up in case [a competitor] shows up. It’s not a costly launch. They are just making it available.”
Price Sensitivity
As Apple quickly learned when it launched the iPhone, India is a price-sensitive market. The Kindle costs US$259. But consumers will need to add shipping charges of US$20 and a customs duty of 24%. The final tab will be closer to US$350. Raju doesn’t see a problem here, noting that the Kindle’s price in the U.S. is about the same. Such a pricing strategy “prevents grey markets as well as disgruntled customers,” he says.
According to Drew Herdener, an Amazon spokesperson, the key appeal for the Kindle’s U.S. customers is “the convenience of getting books in 60 seconds.” Amazon expects it to be “just as meaningful to customers outside the U.S. where it can be difficult to get English-language books.”
Hosanagar says the Kindle’s pricing supports his assessment that the Indian market is not a big priority for Amazon right now. “Given the uncertainty of adoption in India — even at a reduced price — and the risk of the reduced-price version working its way to the U.S. through the grey market, it does not make sense for Amazon to risk lowering the price for the Kindle in India.”
A Forrester report on the e-reader market, published in September, surveyed 4,706 U.S. consumers in an online survey to find out what value they place on e-reader devices. The conclusion: Most consumers feel that an e-reader would be worth it at a price between US$50 and US$99. “Currently, e-readers in the U.S. are priced between US$199 for the Sony Pocket Reader and US$489 for the Kindle DX,” the report says. “The maximum addressable market for e-readers as they are currently priced is substantial — but to reach the largest market possible, the prices will need to come way down. And even then, e-readers are never going to be as big a market as mp3 players, which 110 million U.S. consumers own. But they will still have phenomenal social and economic impact as they catalyze a new behavior of digital reading across multiple devices. We’re just at the beginning of this revolution….”
As Porco points out, in India there is no competition for the Kindle. In the West, it is a different story, and a fast-changing one, too. Barnes & Noble has already entered with the US$259 Nook; it was available for pre-ordering beginning October 20. By all accounts, it will provide a worthy challenge to the Kindle. The California-based Plastic Logic will unveil its QUE at the Consumer Electronics Show in Las Vegas on January 7. On October 19, the Fremont-based Spring Design announced the Alex, which will have hyperlinks as an additional feature. A Philips affiliate, the Eindhoven, Netherlands-based IREX Technologies, has launched the iIiad (US$399). And, of course, the Sony Reader — which is cheaper at US$199 — has been around for some time now. “But the 800-pound gorilla at the door is the persistent rumor that Apple will bring out a tablet PC that also functions as an e-reader,” notes the Pittsburgh Post-Gazette.
Amazon’s Herdener says his company is “not focused on other companies” but instead on providing “the best possible experience” to its customers. “The rest will take care of itself.”
Competition will inevitably mean lower prices. There have even been some suggestions that the e-readers be made available free; the company can make money on the books and subscriptions. This occurs for, say, glucometers that test blood sugar. The device itself is given free while the recording strips (the consumables) are priced at high margins. A free Kindle or Nook is, however, wishful thinking.
If pricing is a problem on the hardware side, it is likely to be an even more contentious issue when it comes to “software” — the downloadable books and the periodicals. “Indian customers will be able to access 280,000 books and 85 newspapers globally,” says Porco. But none of those publications are from India. Amazon is in the process of negotiating with Indian publishing houses. It is also working with more than a thousand “rights holders” across the world to add content to the Kindle, according to Herdener. “Our vision for the Kindle is to have every book, ever printed, in any language, all available in under 60 seconds from anywhere in the world.”
Content Is King
Amazon is well aware that its market penetration in India will be low in the launch stages but it is still playing its cards right, according to Hosanagar. The Indian market will add to its international sales and “help contribute scale,” he says. “So it’s a sensible strategy despite the low adoption rates we are likely to see in India.”
For adoption to take place, the content end is important. YouGuv, an international research company, has found that users may well be model agnostic. According to its report on a study in the UK: “Owners of e-book readers rate the hardware components of the readers highly, but ratings are the lowest of all for the content attributes (quality and range of books and subscriptions).” (One caveat, however: The survey was conducted when only one product — the Sony Reader — had actually been launched in the UK market.)
Roping in Indian content will require some effort because of the very structure of the Indian publishing industry. Consider books: There are special Indian editions of popular books that cost around half — or even less than that — of international editions. In general, Indians are not willing to pay the US$10 or so that a bestseller would cost abroad. Harry Potter and the Deathly Hallows was initially priced on Amazon at US$34.99; it is available today at US$23. On Rediff.com, an Indian portal, pricing started at US$18. If a book is popular enough (like the Harry Potter series), one can pick up a pirated edition for as little as US$2. Can Amazon expect the Kindle’s U.S. book prices — which are on offer now — to work in India?
Herdener says Amazon believes that electronic books should be less expensive than physical books. “We are working hard with publishers to make this a reality for all books,” he adds.
The huge difference in prices is even more pronounced when it comes to newspapers and magazines. For instance, the Kindle offers The New York Times and The Wall Street Journal at US$13.99 and US$14.99 monthly, respectively. In India, the physical editions of Hindustan Times (Delhi’s leading morning daily) and DNA (a newcomer making waves) are available at US$4 a year. Similar pricing exists for magazines.
Still, book publishers and media houses cannot sit back complacently, says Ravi Bapna, associate professor of information systems at the Carlson School of Management and executive director of CITNE at ISB. “Hopefully they would have learned from the mistakes of the recording labels and not miss out on the new ways to create intimate consumer experiences around the printed word. If they fail to do so, they risk major disruption, much in the same way Apple’s iTunes came from nowhere and changed the game in the music industry.” Adds S. Sadagopan, director at the International Institute of Information Technology, Bangalore: “Book publishers and media houses need to reinvent themselves [and] factor in one more medium. But in India, they will have at least a decade to do the transition.”
A Game Changer?
But will the new Kindle change the world? According to Bapna, “There are three major forces working in favor of a transformative impact of such technologies at this moment. First, consumers want ubiquitous portable access to their digital media. This is common now for music, and books and print media are the logical next steps. Second, platforms such as Amazon have a critical mass of publishers and buyers, and have worked out the complex economics of two-sided networks such as these to rapidly scale. Third, the Green Revolution is here to stay; cutting trees for paper comes at a high societal cost, and Kindle-like technologies are well suited to this new reality.”
Herdener says Amazon has gotten encouraging feedback from its Kindle customers. “We’ve received thousands of emails and photographs from customers telling us that they read more because they don’t have to wait for new content, and they can read anything from their Kindle library no matter where they are.” This is not the end of traditional publishing, he adds. “Technology has still a long way to go to deliver the same experience — Kindle is not yet available in color even though other e-readers are — that purists crave for. It’s the beginning of the end, though.” Sadagopan is more optimistic. “The [Internet] generation will quickly move to e-books from books,” he says. “But even among the ‘net generation, there will be some who will prefer paper…. Some newspapers, at least in the developed world, have closed shop — but not all. They [will] all find their [place].”
Why hasn’t there been as much excitement around the Kindle as the iPod? “Music and photos are enjoyed by everyone, cutting across languages,” Sadagopan suggests. “Books are [usually] read once, photos are viewed many times, music is [listened to] hundreds of times — some, like Hanuman Chalisa, a devotional song based on Lord Hanuman, twice daily by me.”
In an unrelated development a week after the Kindle launch, the British Council Library in Mumbai, an icon for nearly 75 years, announced that it was permanently closing shop. Come January, there will be no reading room, no browsing. The library will continue on in another form: You can reserve books online and they will be couriered to you physically. That is obviously a transition phase. More important is the new MyLibrary that will give access to 40,000 e-books. A part of history will pass away early next year. The Kindle and its kin are writing a new book.
