The Wii and the Kindle: Holiday Shortages By Design?

For the last year, the Kindle has been quickly selling out of its limited production runs, thanks in no small part to endorsements from Oprah (NYTimes: "Will Kindle get an Oprah Bump?") and countless excellent reviews in magazines and online. The Kindle is as much a status gift to adults this year as the iPod was 6 years ago to teenagers.

Jeff Bezos and Amazon's Heather Huntoon have claimed that the Kindle manufacturing end is doing their best to keep up with demand, while at the same time no firm numbers are being released to the media for us to see just how many units comprise a production run or how many Kindles there are in the wild (NYPost: "Amazon Hope to Re-Kindle Sales After Supplies Run Out"). We have to believe their nebulous shortages are the result of a happy accident: they underestimated the popularity of a hit product. And right now, 3 weeks before Christmas, the Kindle is back-ordered at Amazon until February (E-Reads: "Panic in Kindle Park"). In a season where most companies want to stock as many of their popular units as possible into their retail channels, Amazon is proudly claiming to have completely sold out of their season's stock a whole month early. We read this and believe it must be a hot item, right? And so the status buzz gets perpetuated even more. However, I have my suspicions that this is orchestrated for a crescendo sales effect, similar to the old Broadway adage "keep 'em wanting more." Aka. Supply and Demand. Not that I blame Amazon for manipulative tactics, because these moves just happen to be part of a de rigueur consumer technology marketing technique perfected by successful companies like Nintendo and Apple. I call it "the shortage."

For example, in 2006 Nintendo released their Wii gaming system in the U.S. in such short supply it sold out instantly at retailers lucky enough to get any units around Christmas time. The very same thing happened to the Wii a year later for Christmas 2007, even though by then, after 12 months of sales, Nintendo was surely aware from its metrics that the limited availability had actually increased consumer awareness and fueled the desire for plenty of consumers who wanted to get their hands on a hit product. Nintendo CEO Reggie Fils-Aime even held a press conference (Gamespot: "Nintendo, GameStop address Wii shortage") to let the media know that they were doing everything they could to produce enough Wii units to meet demand, but that it was not going to be enough: "There was no ability for us to stockpile systems in the summer for the holiday rush." Nintendo has always been adamant they've always manufactured the Wii at peak possible volumes, and that they'd never strategically limit supply to increase demand. The best they can do is make 1.8 million units a month, with a 5 month lead up time (Brandcurve: "Wii Shortage: Manufactured or Real?"), which are the kind of numbers that CEO's don't usually get embarrassed about. Christmas 2008 promises to be the same story (Forevergeek: "Wii shortage this holiday season faced by US shoppers").

The Wii stands out as an underdog gaming console in a very competitive arena. In 2006, the Xbox 360 and Playstation 3 were new systems with more features than the Wii, but the Wii's advantage was that it had a lower price and an innovative, wireless motion sensitive joystick (the Wiimote, pictured above) which attracted families and gamers looking for new experiences. It was never expected to be a sales leader, but Nintendo played their cards conservatively and the Wii became the little console that could, because word of mouth created consumer demand that couldn't be satiated quickly. By the summer of 2007, Apple was ready to try a similar conservative move with the release of the iPhone, and they hoped word of mouth about shortages would create magic, too.

Apple announced the iPhone in January of 2007, six months before it would be available in the sales channel. The pre-sale buzz on blogs created a nickname for the iPhone: the Jesus phone (CNet "Can the iPhone live up to the hype?"). When the iPhone finally hit AT&T and Apple stores in late June '07, there were line ups like no one had ever seen before for a handheld gadget. It was a blockbuster event. People camped out a whole week in advance at some Apple stores to secure a place in line to be among the first with an iPhone. As fast as Apple could manufacture and ship them to the U.S., the iPhone's demand outpaced the delivery and all throughout the summer and into the fall, the status of the iPhone was secured for those lucky few who managed to find one. Again, like Nintendo, Apple quickly waved its hands to get attention and tell everyone that the limited availability was the byproduct of a slow manufacturing process that takes months and months to ramp up. With the iPhone 3G, a year later, Apple experienced the same availability problems (Techcrunch: "Foxconn Building 800,000 iPhones A Week"), which in turn spiked demand again (Engadget: "iPhone Lines Form at Apple Flagships" - pictured above).

How can we not be skeptical about a company's claim that they are making as many units as possible when manufacturing is still lagging behind long after a product demonstrates its demand in the marketplace, sometimes for well over a year or two? Why does it continue to take so long? Clearly, someone is making the choice to conservatively manufacture units so that the life-cycle of the product can be maintained over a longer period, which means more sales overall.

The shortage gambit is that you don't flood the market too soon and that the sales you lose due to lack of availability get picked up down the road because the product maintains its caché longer in the marketplace. A product can have two years or more of great sales (like the Wii) instead of just one hot season followed by backlash. The shortage requires a delicate balance of just enough available units so that once demand rises, sales don't drop precipitously once units are easier to come by. Every parent shopping for the Christmas toy of the year knows that by March stores are practically giving them away. Sellers of limited editions also know this to be true: the value drops when it's too easy to come by.

So, is the Kindle just a lucky tech product that won the sales jackpot because of word of mouth/buzz and its limited availability cult status? That definitely has something to do with it. But I'll bet the Kindle is a long term product that Amazon doesn't want to jump the shark too early and they're plotting this very carefully. The whole publishing world benefits from Amazon taking this long-term status object approach, because e-book sales are the growth area of the book industry, and we should all support any marketing that whets readers' appetites for digital content, even if it's an artificial shortage. The long haul is what counts.

- Michael G.

Kindle 2 Rumors Persist, Now With Pictures

A few weeks ago, Amazon was telling the rumor mills to stop buzzing about the next generation of Kindle and that if a Kindle 2.0 was coming at all it wouldn't be until next year. But now that Sony has announced their new PRS-700 Reader and it's getting all sorts of press, Lo! What should appear the very same weekend? Leaked spy shots of the next Kindle. Coincidence? Nah.

Granted, these are the sneaky tactics you expect in an election year, when it seems everyone is doing their best to play a game of one-up-manship. Presidents, banks, and reality TV contestants are all queuing up to see who can fail the most spectacularly in their efforts to win the hearts of all the Joe Sixpacks and hockey moms. However, we at E-Reads don't want to see either the Kindle or Sony Reader products fail. We love them both. They both deserve the limelight.

But the possibly fake/likely real Kindle 2.0 spy shots by "Boy Genius Report" make me think the device isn't yet up to par with the latest Sony Reader, and I'm sure Amazon isn't entirely pleased with seeing these pictures getting blogged at heavily trafficked Gizmodo.com. The revised Kindle in the spy shots has cleaner lines, but it looks more like a Star Trek medical tablet than ever before, and I assume all those buttons mean that it won't be a touch screen, like the new Sony. But it is reported to be sturdier and recharge via USB cable. Maybe Amazon is still playing catch-up, maybe they're simply refining a low cost alternative to the Sony Reader. Who knows what's really going on. All I know is that when your product has rumors and buzz, it's going to take on a life of its own in the public's mind. And anything that puts ebooks in the public's mind is good by us.

- Michael

IDPF Reports E-Book Sales Climbed 43% This Year, So Far

According to the latest statistics reported by the IDPF (here), the momentum of new ebook titles added by major publishers this year and the popularity of the Kindle and Sony Reader have had a big effect on E-Book revenues in the publishing industry.

"Trade eBook sales were $4,900,000 for June 2008, an 87.4% increase over June 2007. Calendar Year to Date Revenue is up 43%." - IDPF, Sept. 4, 2008

Looking back a bit farther, in the last 2 years the E-Book sector has doubled its revenue; more publishers and more titles have come into the marketplace creating a huge surge. This is what we at E-Reads are proud to see. For many years it seemed E-Books were a sleepy little industry, but the boom in consumer awareness has come from a lot of publishers seeding the growth by adding more and more mid-list and back-list titles, with digital versions finally coming out of the shadow of their print counterparts. Popular proprietary platforms like the Kindle and Reader have assisted publishers in making the decision to invest more in digitization and good DAW (Digital Archive Workflow) practices, because the big names of Sony and Amazon carry a lot of weight in boardroom decision making.

Knowing that the E-Book tide continues to swell, has that given you more confidence to try ebooks or buy a new reading device?

- Michael

While There's No New Kindle Until Next Year, Sony Goes To Europe

The excitement for the next generation Kindle, fueled by lots of speculation at Wired.com, was quickly doused with some cold, wet reality from Amazon spokesman Craig Berman. Even though he didn't deny Frog Design were up to something special for the Kindle 2.0, he's quoted as saying "a new version will come out sometime next year at the earliest," in a recent interview with Dow Jones.

So, that leaves another key player in the ebook device market, Sony, some nice wiggle room in the months leading up to the holiday season. Sony has yet to make any announcements about what might be coming down the pipe, but they have just started expanding into Europe, most notably by partnering with Waterstone's, one of the UK's biggest book retailers.

From September 2008 onwards Waterstone’s will be selling the Reader itself in over 200 of their High Street bookshops. And the product is available to pre-order for September delivery now via their online store. - From Sony's Website, here.

It's very likely that this is just the tip of the iceberg for Sony's competitive march against the Kindle. Of course, E-Reads wishes them both the best of success, so we're currently prepping many more titles to be released in both Kindle format through Amazon and as Sony ebooks (and Reader compatible ePub) this fall, supplementing the over 450+ titles we have currently available at the Sony Connect eBook Store and Amazon.

- Michael

Kindle: Not Ready To Burn My Books Just Yet

The launch of the Kindle is the stuff of technology pundits' nightmares. It's not that Amazon has done anything too aggravating with their initial marketing, because they pretty much went by the defacto protocol for glitzy new devices (summoning up every media outlet, declaring a watershed milestone has been achieved for humanity, celebrities delivering tearful thanks for such a perfect device, etc.) and it was more or less a success. Mind you, Steve Jobs is legendary for creating these kinds of reality distortion fields that permeate every aspect of his Apple launches with an overwhelming perfume of delicious mystery and lust. But at the Kindle event Jeff Bezos was less Mesmero! and more like a self-praising high school valedictorian. There wasn't enough magic, or rejoicing fanboys, to mask the concern a lot of us are feeling.

Before Bezos had an opportunity to work his charm and share his vision, I was already wary. My first gut response was that it won't be too long until someone has hacked the Kindle to use the EVDO service for other purposes, stealing the "free" data service from Sprint. It was also another E-Ink based device without a backlight. And the fact that the Kindle has a keyboard seems less interesting once you factor in that E-Ink conserves its battery life by screen refresh limitations that don't coopertae well with keyboard usage: slow page refreshes for every keystroke (typing a 200 word email on the Kindle would probably take more patience and battery power than you'd like).

Jeff Bezos at the launch of Kindle

Then the air went out of the balloon as soon as all the hidden-cost caveats were revealed.

The Kindle is actually an ebook and RSS pay-for-content service that's only available for the Kindle. And if it were a service offered for other devices, like the iPhone, I still don't think it's what consumers want. But like it or not, this is how the road forward is being paved.

The logic, like most digital media sales, continues to be dumbfounding. Other than recently-published books, most of the content you can get for the Kindle is arguably text you can either read for free or get cheaper through other channels. And any content you buy for Kindle can't be read on anything but the Kindle. So, let me ask you to forget about the device for a moment and to consider just the service: Are you the type of person who likes to pay for every document you want to read, regardless of whether it was offered to you free or even that you wrote it yourself?

Because it's unable to support the common document formats of .doc, .rtf, and pdf, you'll need to email any of those files to Amazon's Kindle service to have them converted to a proprietary format at 10¢ a pop. Let me say that again in more simple terms. You have to pay to read your own stuff on the Kindle. The Sony Reader doesn't have that mentality, neither does the Blackberry or the iPhone. Second, if you want to subscribe to certain websites' RSS feeds, or one of Kindle's many pre-formatted newspapers and magazines, you'll have to pay a monthly fee.

The Kindle is a DRM experiment created as the test-tube baby from the DNA of intellectual property laws and the success of the iTunes Music Store. Most of us have been getting used to paying for content that we can't share anymore, but eventually the ramifications of those restrictions are going to be more severe. The DRM world of the future is a place where parents won't have music collections or home libraries they can easily share with their own kids without paying for them again and again. What happens to lending books to friends and the flow of cultural learning when every document and every format requires a service fee?

The Kindle formula seems predicated on the logic that if you're the type of person who wants to read on the Kindle, you're probably the kind of person who can afford the pay for content service. In contrast, the OLPC (One Laptop Per Child) XO computer is being designed for people who can afford neither. It's been designed for children so that it can foster learning and sharing information in a humanitarian world that most science fiction readers are familiar with. It's that world where we build new devices to help each other, not to siphon off nickels and dimes. What we've talked about in this office is how cool the XO computer would be as the real "iPod of reading," and it could be. It's the sort of device that could actually get kids back into pleasure reading if there was a socially conscious book service for it.

Unlike Richard, who invoked King Gillette earlier, I don't feel Amazon is going about things the wrong way by pricing the device too high and the books too low. Books should always be made as affordable as possible. In my mind, pricing books too high is one of the reasons there's a pandemic of youth and young adults preferring console gaming and the internet to reading. It's actually less expensive to buy a Harry Potter XBox game than it is to buy the hardcover book. Based on the successful model of selling an expensive console that you buy new games for, it's not out to lunch to assume there are millions of people out there who will invest in a platform if attractive content is there for it. On the surface, the Kindle costs $2,000 less than an iPhone after you factor in the iPhone's nearly mandatory contract for 2 year's worth of monthly AT&T data and phone service, so, relatively speaking, it's a moderately affordable platform. And for the Kindle's $399, you're buying a platform for which Amazon seems very committed to consistently delivering a wide selection of new and backlist content.

So, the Kindle does have a good chance of success, as long as Amazon is willing to keep tweaking their formula the way that Apple did for the iPod. Remember, the iPod's success wasn't overnight. When it was first released, it was not a huge seller. There was no Windows compatibility. The touch surface was still a physical wheel. There was no iTunes Music Store. But under the cloak of Steve's reality distortion field, Apple kept refreshing the product with new ideas for 2 full years until they got it right and it took off as a phenomenon for the history books.

The Kindle has a lot going for it because of Amazon's weight in the retail marketplace, but it has to be ready to evolve quickly based on user response. They need to open the platform up for free content. It needs to be ready for user generated .Pub files. They need to make the EVDO service more useful. They need a more polished, premium design that looks less like a snowspeeder. They need to get E-Ink's latest color screens. And I think Amazon is probably already planning for that. Even though they took their sweet time getting all their ducks in a row for the launch, I think that they're not going to shrink back from this vision even if the device sells like a stinker this Christmas (it won't: it's already sold out its initial inventory). The Kindle is going to be with us for a while.

- Michael

News from Sony, Palm, and iRex

Alongside this week's announcement that the IDPF voted in favor of the Open Publication Standard 2.0, there's been good news coming from a number of ebook technology players.

The new Sony Reader?

On Monday, the blog The Reader caught a brief glimpse of Sony's upcoming website changes which briefly revealed they're preparing to release an updated Sony Reader, the PRS-505. The new iteration is expected to have double the internal memory, better control buttons, a more rectangular styling like the original Sony LIBRIé device that was launched in Japan, and should be available as both a dark slate blue or silver finish for the same price as the current model. It's unknown if it will use the new VizPlex e-ink system. The Reader presently sells for $300 and can be found at Best Buy stores across the U.S. (via Wowio)

Palm is also getting ready to inject some new life into their company by integrating two major players from Apple. Apple's ex-CFO Fred Anderson will soon be joining the board of directors and Jonathan Rubenstein, a key player in the iPod's success, will become executive chairman. Earlier this year, a company started by U2's Bono and headed by Fred Anderson, Elevation Partners, bought a 25% stake in Palm, effectively bailing out the company from financial trouble. The new corporate leadership were demonstrably some of the finest people from Apple's resurgence under Steve Jobs and its expected that they will focus more on innovation at Palm. Palm is also expected to update their popular Treo line in the very near future, and it will be interesting to see how the new competition with Apple might help improve their product line. (via Gizmodo)

Finally, iRex scored a major coup for the e-ink based Iliad Reader available in Europe. Les Echos is the first European paper to be made entirely available in a daily ebook edition designed for the Iliad and Star eBook device. A one-year subscription is 365 EUR. Also interesting is that among the first articles in the first Les Echos digital edition is news that Amazon may be set to launch the Kindle on October 15th with an announcement at the Frankfurt bookfair. (via MobileRead)

- Michael

The Open Publication Standard for E-Books 2.0

This summer we've seen a quite a few interesting moves made by ebook technology leaders and there have been hints about the best of what's yet to come this fall, such as new devices from Amazon and Palm. The most important development, I dare say, is one that's been totally overlooked by the media, averse as they are to technical acronyms. This week, the voting members of the International Digital Publishing Forum (aka. the IDPF, which includes E-Reads) made the OPS 2.0 (Open Publication Standard) official. The OPS specifications are the next generation standards for ebook production. The good news for publishers is that this should reduce production costs in the long run, which will in turn be good for consumers because publishers will be able to afford to convert more titles. And, if the developers of ebook software, like MobiPocket, Sony, Adobe, Microsoft, etc., all implement the new specifications fully, then the new standardized files (better known as the ".epub" format) should be the document format of choice for our collective ebook future. I say "should," because it's still not a sure bet.

The biggest hurdles the ".epub" format has faced since the spec was first drafted are getting three specific groups to have interest in using it. The first group is the software companies responsible for digital-rights-managed ebook readers. There's no point producing ".epub" files if hardly anyone can use them yet. Publishers, such as E-Reads, want to be able to produce our books in the standard ".epub" format and then send them off to retailers, who will either sell the unencrypted ".epub" files, or encrypt them by using automated processes to convert them into any DRM format the consumer needs, such as Sony's Reader format, but, as things are right now, it's a rare piece of software that can already read or export ".epub" files, so retailers aren't very interested yet and they're still asking for MS Lit, PDF, Mobi, etc. In fact, only the recently released Adobe's Digital Editions software is really set up to use ".epub" files properly and many other reader applications have yet to completely implement support for the new format. This is because the first group, the software, is still waiting for the second group, the consumer base, to care. Sony has committed to adding ".epub" support for books that the consumers bring to the Sony Reader on their own, but are consumers using the ".epub" format? Well, there can't be grass roots demand for the format when the average consumer is so unfamiliar with it, can't buy it, and has barely any software that supports it. So it falls to the third group, publishers, to start the ball rolling by ordering books to be made as ".epub" files for their archives.

The Benefits of the ".epub" Format

If the average person has never heard of the ".epub" format, let alone tried it out, you can see why more developers aren't yet rushing to make it a "value-added" feature for their software. But the format has some terrific virtues. Unlike a PDF, an ".epub" ebook is designed so that any reader can have better control over how they choose to read a text, with no matter what device they're using. They can easily change fonts, styles, or page sizes and the document will reflow appropriately. And, unlike new reflowable document formats like PDFX or MS Word's DocX, ".epub" is really uncomplicated and it makes for a good legacy format for digital text, because an ".epub" file could easily be converted into any file format you'd like because of its standardized XML structure.

There are two steps to making an ".epub" file. The first is to use OPS (Open Publication Structure), which is just a method of formatting text files with XML tags. This was developed so that there's a uniform way to prepare texts for any device and so that it's easy to reverse-engineer and edit. Next, additional materials, like a cover graphic, are then bundled with the text into a compressed folder with the extension ".epub," which is, really, just a .zip archive. This is the container file, known as OCF (Open Container Format).

For now, the ".epub" format will have to compete for reading audience against established favorites such as HTML formatted books, and RTF files, as well as PDFs, DOCs, and dozens of other conventional formats, so it's up to publishers and developers to make this happen.

The Future Starts Now

To break the old cycle, software and ebook technology companies are trying to spur the use of ".epub" files with some big guns. Adobe is one company that's trying to pave the way forward with its latest version of InDesign CS3, which can export ebooks to Digital Editions in the ".epub" format (more about that can be read here). Since it's official release in June, Digital Editions has been a free download; it's an effort by Adobe to create an iTunes Library equivalent for ebooks. So, with Adobe software you already have an end-to-end package for creating and reading standardized ebooks, and a showcase for the advantages of the next generation of ebooks. Now we have to impress upon everyone else sitting on their hands that this is what we want from them, too.

I corresponded with Nick Bogaty of the IDPF yesterday and he said, "All major and small publishers I have spoken to are very excited about (the 2.0 standard) and are contracting their conversion houses to start work on .epub conversions. Obviously, it helped to have a company like Adobe participate, but this was (equally helped by) the participation and leadership (of) the folks at eBook Technologies, Garth Conboy, John Rivlin and Brady Duga. It really was a joint effort which couldn't have been done without widespread industry support."

It's this collective effort that will, we all hope, provide the momentum publishers, including E-Reads, need to keep adding new titles. The bottom line is that we're all trying to create a useful and ever-growing body of legacy work that the public will want to access for a long time, and the ".epub" format is the best opportunity to get virtually everyone in the ebook world on the same virtual page.

- Michael Gaudet

Real ebooks on the iPhone and iPod

As we mentioned previously, HarperCollins is trying a web enabled ebook preview experience for the iPhone based on their book widgets, but reading a whole book on your iPod had always been relatively awkward experience, that is until the iPods started coming loaded with OS X. Before the release of the iPhone this past June and the iPod Touch this September, the iPod's unique operating system had no support for any of the popular ebook formats. Users had to convert their book files to .txt notes, which had an imposed character limit and no real typography support, or convert their book into JPGs and load them into their iPhoto library (iPod Photo and later models). But thanks to the OS X underpinnings of the new iPod Touch and the iPhone, there is not only native PDF and Doc support (hurrah!) just like with your Mac, but the courageous can try out new (unsupported) applications and read other ebook formats as well. The only downside is that you have to use ebooks with no DRM, but the upside is that all of E-Reads' titles for sale at Fictionwise are sold in "MultiFormat" PDFs without any DRM (just don't go sharing, okay?), and they are good to view on the new iPods right away (with a little ingenuity described below). Hopefully, with the advent of the Wi-Fi iTunes Store, an ebook solution for these Wi-Fi iPods won't be too far off, either.

So, without further ado, here are some tips for getting ebooks onto your iPod, rated by the ease of solution and the relative quality of the reading experience...

For 1st Generation to 4th Generation iPods and the iPod Mini: You can use the app iPod Notes Manager or follow this tutorial at Makezine.com. Ease: 4/5 and Quality: 2/5

For iPod Photo, Video, Nano, and Classic: The previously mentioned will also work, but you can also convert RTFs, Docs, or PDFs to JPGs and then load those pages into your iPhoto library. You have to make sure the page images are named sequentially and that they are sized to look good on the 320 x 240 pixel display. The final ebook can look pretty nice, but you have to work at tweaking the results. Try an application like PDF Convert or Doc to JPG for Windows. For the Mac, print to PDF from your document, and then open it in Preview and try an export to JPG page by page (free on the Mac, but time intensive - ugh). Ease: 1/5 and Quality: 3/5

For iPod Touch and iPhone: You can use the mobile version of Safari to browse to an online PDF, Doc, or ebook text (such as those at Project Gutenburg or Textoniphone.com), or view a PDF or Doc as a mail attachment. Or you can easily hack your iPod's file system with the help of unsupported software like iBrickr or AppTapp to install the "Books" application. Your mileage may vary, but it indeed works. Ease: 3/5 and Quality: 4/5

Finally, did you know you can organize certain PDFs in Apple's iTunes? Even if you can't sync them with your iPod the way we'd like, it's still a good library application if you're willing to compromise. Gina Trapani at Lifehacker has the scoop.

- Michael