Is the Kindle Market Amazon’s Ace in the Hole?

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Amazon Kindle eReader
Kindle eReader, Wi-Fi, 15 cm (6 inches) E Ink Display, displayed in front of a stack of books. The text inside Kindle is from Karl Marx, Capital, published 1867.
Amazon Kindle eReader
Kindle eReader, Wi-Fi, 15 cm (6 inches) E Ink Display, displayed in front of a stack of books. The text inside Kindle is from Karl Marx, Capital, published 1867.

Amazon (NASDAQ:AMZN) is one company that you either love or hate. It seems that in the world of financial analysts, there are only two camps: Amazon lovers and Amazon haters. It is very rare to find an analyst right in the middle. People have strong opinions about this company. Either people think that it is one quarter away from bankruptcy or something similar to that, or it is the next big thing that continues to redefine itself.

Personally, I am in the latter camp. I look at Amazon primarily as a technology company. It definitely behaves like one. One key piece of evidence that backs this up is its Kindle initiative.

Kindle is, of course, the device Amazon makes that allows consumers to view and enjoy e-books. Electronic books are now easy to consume if you have a Kindle device. The Kindle format is so flexible that you can read Kindle books using your smartphone or tablet. Kindle has really revolutionized the world of publishing. In my opinion, this is Amazon’s ace in the hole. By powering self-publishers and authors the world over, Amazon has solved one of the key bottlenecks of its business model.

It used to be that Amazon would have to play by the rules of publishers. They had to work within the cost framework and pricing guidelines of publishers. It was very hard for them to call the tune. It has only been fairly recently that Amazon has gotten so big that it can push back against publishers. This hasn’t always been the case.

With Kindle, Amazon has more power but it also gave more power to the publishers themselves. By allowing people to publish their own materials on the Kindle framework, Amazon establishes a win-win partnership. Content creators get a very wide market. Amazon, on the other hand, gets a huge market of content creators. This is a very powerful asset that other online content sellers don’t have. I see this portion of Amazon’s business continuing to grow exponentially into the future. In fact, Amazon can easily branch this out to software development and other types of digital content.

 

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