Interest high in new Kindle, but business model questionable

Amazon's newest Kindle raises more questions than answers about how the e-book market might evolve.

"If it had the right business model, it would be a no-brainer," Michael Gartenberg, an analyst at Interpret, said of the new device.

On Wednesday, Amazon unveiled the Kindle DX, the third in its line of e-book readers, and this one is designed for the display of newspapers and magazines. The larger-screen device is also being targeted at students, who can use it to read textbooks.

Initially, a handful of newspapers including The New York Times, The Boston Globe and The Washington Post say they'll offer the Kindle DX at a reduced price to readers who live outside of their delivery area and who sign up for a long-term subscription. The device, now available for preorders online, costs US$489 otherwise. The papers did not say how much they would discount or charge for subscriptions.

"Pricing models in this market are very much a work in progress," said Susan Kevorkian, an analyst at IDC. "It's a place to start. All participants need to be open to change."

Gartenberg also said the pricing likely isn't ideal. "It's definitely not the panacea that's going to save the newspaper industry at $500, and with no discount unless you're in an area where you can't get a subscription," he said.

But the newest Kindle does raise some potentially interesting possibilities for new business models. Like the other Kindle devices, this one includes wireless Internet access, and because the DX is designed for newspapers and magazines, Amazon.com or the content providers may be able to subsidize content through advertisements, said Paolo Pescatore, an analyst with CCS Insight.

"If the device can support it, there's no reason why ads cannot come integrated into whatever content is delivered," he said.

As the install base for the Kindle device increases, those ads can be more specifically targeted to users once Amazon.com learns more about "what they're downloading and reading, and what their behavior is," Pescatore said.

Or, users might be willing to provide some basic information about themselves and their preferences so that ads can be tailored to their interests, said Kevorkian.

In addition to the distribution deals with the newspapers, Amazon said that Arizona State University, Case Western Reserve University, Princeton University, Reed College and Darden School of Business at the University of Virginia will distribute hundreds of Kindle DX devices to students so that they can use them to read textbooks. Amazon did not say who would pay for the devices.

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