Like most technology products, each new version of Amazon’s Kindle eInk reader is lower-priced than the last one. There’s been speculation that the price will eventually go to zero, perhaps taking a page out of the cell phone model where the consumer commits to a long-term plan. There’s no monthly service plan for a Kindle so I always figured Amazon would require consumers to purchase a minimum number of ebooks over a 1- or 2-year period instead.
That makes sense, but there’s a bigger play Amazon probably has in mind and I’ll bet it will eventually feature their tablet, the Kindle Fire.
Think for a moment about the new and likely upcoming competition the Fire is encountering. First there’s Google’s Nexus 7. I’ve heard the Nexus 7 described as “the tablet the Kindle Fire should have been.” If that’s not bad enough, there’s also the iPad mini Apple is supposedly working on.
What if the smaller iPad matches the $199 price of the Nexus and Fire? Will Amazon go to $149? 99? How about free?
I figure Bezos & Co. has a sense of urgency in the tablet space, especially if Apple delivers something for $199. But if Amazon drops the Fire’s price to zero can they really subsidize it with ebook purchases? Perhaps, but the more likely model is one that incorporates Amazon’s Prime membership program.
Prime is one the key factors that distinguishes Amazon from everyone else. Amazon Prime is the online equivalent of a Costco or Sam’s Club membership. Amazon wants everyone to become a Prime member because it greatly increases the odds you’ll buy more products from them; after all, you want to justify that $79/year investment, right?
I can’t think of a better way for Amazon to enlist more Prime members than by pulling them in with a free Kindle Fire. Amazon would probably lose more money in the short term but Mr. Bezos is focused on the long term and Prime membership is at the heart of Amazon’s long term plans.
As this Forbes article’s headline says, “Amazon is no Walmart…yet.” Prime membership is Amazon’s path to surpassing Walmart. There’s probably no better way to build that path than by giving consumers free tablets in exchange for a multi-year commitment to the Prime service.
What do you think? Are we likely to see a free Kindle Fire that requires a multi-year Prime subscription?