In the brief pause between last week’s Kindle announcement and this week’s iPhone reveal, there has been a lot of chatter about Amazon’s perceived attack on the iPad. Too many comments assume that the digital media market is a zero-sum game with Amazon gunning for some of Apple’s market share.

Amazon’s new Kindle Fire opens the door, as several smart people have already pointed out, for it to compete ultimately with Google more than Apple.

Even if those projections don’t come to pass, the Kindle Fire represents the opening of a whole new sector of the digital media frontier. (And it is worth noting that the digital frontier is playing the same role in 21st Century America that the Western frontier played in 18th and 19th Century America.) Apple created a viable tablet computer by leveraging its app ecosystem and premium customer base. Amazon is following up with a device that gives access to its digital media reservoir at a low cost. These two strategies complement each other more than they compete. This was a point first made last week by Mark Mulligan:

Mulligan’s insight doesn’t actually go far enough. The strategies are more than mirror opposites. Each digital delivery system appeals to a different set of consumers. Apple has followed the logical outgrowth of the iPhone market by creating a luxury product with real pricing power. iPhones are status symbols equal to any tony car or fashion brand. Amazon has focused on creating a comprehensive store that will satisfy the demand of the largest number of customers at the lowest possible price. Up until now, digital media consumers who shop on price haven’t had a platform. Kindle Fire represents the best possible candidate to be that platform.

In more familiar terms, Amazon is becoming the Wal-Mart of digital media to Apple’s high-end suburban mall. Where Amazon relies on vertical control to drive down prices (let’s not forget that it continues to use its size and balance sheet to drive down ebook prices much in the way Wal-Mart pioneered,) Apple offers a luxurious, controlled environment. An app builder brings the iPad user into his universe with the same control over the atmospherics that Abercrombie has over the music, lighting, fixtures and staff.

Amazon obliterates the brands that stand between the consumer and the content; Apple steps back and relies on the app makers to build an audience and drive sales of its devices. So far, the only misstep Apple has made as a “landlord” has been to try and charge too high a rent and drive some of its anchor tenants away (e.g., the Financial Times and Amazon.)

Having viable platforms on both ends of the economic barbell is a huge plus for almost everyone in the digital media game. First of all, the faster we make this transition the better it will be for everyone—even those who will lose revenue and market-share as ad-based media declines. Squeezing the last juice from the ad-supported media has given us  all manner of bizarre hook ups between content producers and distributors. At best, these are stop-gap measures like today’s ABC News-Yahoo! announcement. At worst, they’re serious sinkholes like content farms.

Second, and more important, media outlets have already begun to find good ways of making use of both the Apple and Amazon ecosystems without impinging on either. If you’re a newspaper or magazine, selling an ebook on Amazon gives non-subscribers (or just non-users) at meaningful taste of your content. We’ve already seen Vanity Fair, Slate and The New York Times do this. You’re also opening up a new revenue stream when you start down this road and those guys need new revenue like no one’s business.

This straddle between subscription-based and single-purchase content can strengthen both sides of the digital information economy and the brands that operate in between. In print, television and the movies, the power of the episodic series, whether it’s a recurring character or a multi-part story, is the one proven economic model. Creating episodic work generates marketing and revenue opportunities with each new release. It also strengthens the producer/distributor who can establish a new hit by delivering an audience then benefit from the secondary rights.

The dam that’s been holding back a flood of digital content from tablet devices is the producer’s fear that they will have terms dictated to them by Apple or Netflix. They’ve also got to protect their existing relationships with their primary carriers and clients, the cable companies. Amazon’s entry into this world strengthens the digital distribution side. If Kindle Fire fails, the process of migrating content from cable to digital will take much longer as everyone digs in their heels. But Amazon’s deep pockets will present an immediate advantage to some seller who will eventually prove the case. At that point, even Netflix will regain some of its lost luster.

Netflix has lost its momentum as a stock, plummeting 60%, and Hulu no longer looks like it will find a buyer. Amazon’s new Kindle puts a lot of pressure on both companies. The good news is that having Amazon as an alternative will give producers more than one bidder for their content. In the short term, that massively reduces expectations for Netflix. In the long-term, if Netflix can get beyond the strategy of being a comprehensive source for video content (or, at least, develop a business model that works for the producers) it should still do quite well.

Kindle Fire has to gain traction. When it does there will be renewed interest in getting content onto the iPad. It will be an imperative, in fact, to counter-weight Amazon’s wealth with Apple’s very large customer base.

The result will put more content behind an effective and enforceable paywall. And that’s good for everyone (including consumers.)

Source:

Amazon’s and Apple’s Mirror Opposite Content Strategies
by Mark Mulligan
Music Industry Blog; September 28, 2011
http://musicindustryblog.wordpress.com/2011/09/28/amazons-and-apples-mirror-opposite-content-strategies/

Category: Consumer Spending, Technology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

18 Responses to “Apple Is the Luxury Mall of Media, Amazon Its Wal-Mart”

  1. [...] Marion Maneker, “Amazon is becoming the Wal-Mart of digital media to Apple’s high-end suburban mall. “  (Big Picture) [...]

  2. Ben says:

    This is opinionated drivel. The author reaches for so many conclusions that are far from true that it makes the whole piece ridiculous. Here are a few things wrong with the piece.

    1) Amazon is not driving down e-book prices – the publishers are all choosing what the price of their books should be.
    2) Amazon is using Android for the Fire – this is going to hurt Google?
    3) TV companies are just going to hand over the keys and somehow this is good for them?
    4) Where does the data come from that Hulu hasn’t found a buyer?
    5) Amazon introducing a tablet does nothing to balance the power of the traditional pay-TV ecosystem – there is absolutely nothing to back this up.

  3. jib10 says:

    Ben your wrong on 2. The Android used in the Fire is a fork of the open source version of the Android code base. As such it totally controlled by Amazon. They can develop it as they see fit. And they have the tech talent to maintain and develop it. They have been managing, maintaining and developing their own versions of open source code since they started.

    As for 1) you are missing the large number of authors who are using Amazon as their publisher. I know several and I am not in the writing biz. They still have traditional publishers for some of their books but more and more of their work is self-published with Amazon. And for the most part, it pays better, not great but better. It is an evolving market but most writers are positive about it. And the $0.99 e-book is a driving part of the market, makes book buying an impulse purchase. I know authors who are redoing how they write to work with this. Writing more like a TV series than a movie. What would have been 1 book in the old model becomes 3 or 4 in the new.

    TV and movies are trailing the book and music e-publishing but you can see it coming.

  4. franklin411 says:

    “iPhones are status symbols equal to any tony car or fashion brand. ”

    That’s true amongst the aging boomer crowd, but it’s not true in the under 30 set. Go to any college campus and you’ll find 10 Android devices for every iOS device. Find the Computer Science department and walk into any classroom, and you’ll find budding programmers playing with Android devices, not iOS.

    Apple won the battle for yesterday, but Google is winning today and tomorrow.

  5. overanout says:

    “That’s true amongst the aging boomer crowd, but it’s not true in the under 30 set”

    Tech needs a fast changing job market very quickly or much of the latest tech fads will be sitting on store shelves hoping for buyers. As a aging boomer myself the last computer I purchased was in 2001 and it works fine in spite of the smirks from my adult children! In fact the wife and I recently cut our communication overhead by 3K a year by eliminating our land lines, reducing internet speeds and premium cable channels most if not all that we reduced or eliminated was used infrequently.

  6. econimonium says:

    No No No a thousand times no! A true “Luxury Brand” is one because of one simple fact alone: it is unobtainable by the masses. Loro Piano is a luxury brand. Hermes is a luxury brand. Coach, and even Tiffany’s now can be found in any class B mall so they are NOT. Burberry teeters on the edge these days since everyone started sporting that awful plaid everywhere. So let’s get this solid: luxury brands tend to be expensive because they are supposed to be rare and crafted well. People don’t purchase them because of the price. They purchase because YOU CAN’T HAVE ONE and I wish to send that signal by wearing a completely useless $500 silk scarf, or a suit that is hand made where the tailoring and cloth is visibly better than yours (and you can tell because my buttons at the cuff work and to remind you, I leave the first one or two unbuttoned). Apple is no “luxury brand”. Period.

    They choose to offer a high price because they can, not because it is seen as “status”. Trust me amoung my co-workers and students it’s not thought of that way at all. In fact, if someone offered a cheaper alternative that had the functionality, the majority of them would jump. So please don’t confuse “brand” with “what else is there, really that works so well?” And here you have the Fire. And we’re going to find out what people think. If the Fire does what everyone wants for 200 bucks, Apple will get hurt badly. If it doesn’t they won’t. But to think that people will keep buying iPads becuase of the “brand”…well, you’re forgetting what happened when IBM thought the same thing about the PC and clones…and you do this to your peril.

    I keep saying that I don’t understand where all the iPads are, and who has them since none of my students do (“oh I bought one for my wife/girlfriend…she doesn’t really use it but says it’s cute”) but in my class last week when I talked about the Fire, 5 students said they love their Kindle and already pre-ordered one. One small data point but one worth noting.

  7. deanscamaro says:

    Okay, so I’m a Boomer+ and I have a Kindle……basic, first release. I read and get books through Amazon. The book readers have driven a lot of what writers (publishers?) have done. It was common knowledge that most e-book readers had the opinion that nothing should cost more than $10 because paper publishing costs disappeared…..don’t know how that figure came about, but it did. That belief drove a lot of books to come out at the $.99 to $9.99 cost to those on e-books and that range continues to expand in quantity. Then Amazon came out with Kindle Singles, which are new, but shortened books by the authors. Amazon has implemented pre-orders for books not yet published, targeted to get buyers in early. They are now offering Daily Deals at extremely low prices. Amazon is driving what authors/publishers are doing.

    As I am out of the technology-driven, mindset; a tablet with capability for 1 million apps is not my thing. I appreciate that Amazon recognizes there are some out here who do not need every technology advancement on my reader; just provide a good book reading facility.

  8. econimonium says:

    Hahaha I see in my above post “Loro Piano” when it should be “Loro Piana”. So much for the iPhone’s spell check huh? Speaking of which have you see the site for “Damn You Auto Correct”?? Hilarious!!!

  9. scottinnj says:

    “I keep saying that I don’t understand where all the iPads are”

    I commute to NYC everyday, and see numerous iPads on the train to Hoboken NJ. At any given time from what I see when I get on/get off is that usage is about 20% web browsing content (mostly WSJ/NY Times/email), 20% book reading (can’t tell if is iBooks or Kindle App), 20% watching movies/TV shows (can’t tell if this is downloaded or streamed) and 40% Angry Birds/other game apps. I’m happy with my iPhone and Kindle though am going to ask the wife for the Kindle Fire for Christmas – at $199 I’m willing to test a tablet, not at $629 for the iPad (plus $30/month to Verizon).

  10. Bob A says:

    Q: How many Ipod owners bought an Ipod primarily because they could copy just about any music they would ever want from a friend(s) for free?
    A: Most of them

  11. econimonium says:

    @scottinnj for the sales figures, I really expect them to be as ubiquitous as iPhones among the commuter class. From what I can see, they are not. They certainly are not on international flights, nor in airports, nor in schools, nor on the subway. So that’s where I’m expecting to see more and I don’t. Even at work everyone has an iPhone, an iPad? Any we have seem to be confined to marketing…we’re a tech company. None of my staff has one.

    Don’t get me wrong, I’m happy with my iPhone and upgraded to the 4 this year after a very happy 3GS run (I have it to my niece who’s 13 ). But did I buy it because it was “premium”? No. I bought it because it’s easier to use than an Andriod and I was used to the first phone. So there was no learning curve for me. In other words I was being lazy because I didn’t even evaluate an Android phone :) But, you know, I did pre-order a Fire….not sure what that means :)

  12. http://www.finviz.com/quote.ashx?t=AAPL

    that Chart is telling..

    AAPL ‘Bulls’ better hope that ~360 holds..

  13. “And the $0.99 e-book is a driving part of the market, makes book buying an impulse purchase. I know authors who are redoing how they write to work with this. Writing more like a TV series than a movie.”

    That’s the model I am using for a new book series being published on Amazon. At the moment I haven’t looked into the Apple publishing system because the work is taking precedence but I will get to it once I have a batch of several units to process.

    At the .99 price point, I am writing titles for a 100-episode series, The Decamerican, with a structure of 10 episodes per traditional mass market paperback length, around 100,000 words. My thinking is that the 10 titles, at $9.99, equal one traditional novel. A bit of a premium for e-book prices but I am hoping the story grabs people enough to follow it. It is a horror series, so perhaps not this demographics’ cup of tea.

    The idea of selling units like this is not new – people have compared the pricing structure to single songs on iTunes, and NPR types have been wondering if there is room for a “digital Dickens” for some time. There have been some notable success stories, defined ironically as people who make a big enough splash to get a traditional publishing house to give them a bucket of money, but there are also I would say a couple hundred people selling enough units monthly to make, let’s say a car payment of $300 and better.

    At .35 royalty per unit [based on .the 99 price], you really have to get a big following to make it work, not unlike Google Adsense publishers. In the same vein the people who are making decent money in either type of system are the ones going for popular and well-populated niches, as well as those who simply aim right for the lowest common denominator [romance in books, gossip on blogs]. There are of course the few quality people who break out, and again in both cases these are often the ones especially savvy at self-promotion.

    As for my series, for those interested [if this comment appears it means BR cleared it] the first episode is 7:00 a.m., link is below. The second episode [7:06 a.m.] was finished today, it should appear in a day or two. My goal is to produce 10 episodes per month, at a minimum, and I am of course, irrationally exuberant about the project.

    7:00 a.m. (The Decamerican)

  14. scottinnj says:

    @econimonium

    For clarification when I say ‘a lot’ I’m thinking it is around 30% of the people on the train – again the wall street commuting class is where I think you would expect high penetration.

    I think there is another sizable universe of ipad users which are the less tech savvy. For example I bought my 72 yr old mom an iPad. Explaining a PC was too hard. But mom just wants to be able to check email, see her grandchildren and nieces pix on Facebook, surf web a bit and download an occasional book or movie. And for her limited needs it does all that very well and very intuitively. My guess is that your students – I presume they are college students – probably have a smartphone and a PC, and if you have both of those already, what purpose does an ipad serve? I tend to think the ipad will plateau in sales alot sooner than the iphone (my opinion, but then again I’m worth far far less than Steve Jobs, so there you go).

  15. jib10 says:

    Frank Giovinazzi, If have not done so, read Kevin Kelly’s 1000 True Fans. It is an interesting take on how to make the self publish world work.

  16. Moopheus says:

    Hey Frank–I just looked at the sample on Amazon. Do yourself, and your readers, a favor–hire a copyeditor. Please.

    I don’t think I could bring myself to buy a self-published book from Amazon’s vanity program. I used to read slush for publishers in New York. I personally rejected several thousand manuscripts from hopeful writers, so I have a pretty good idea of what’s in those books. Ninety-nine cents is overcharging for that stuff.

  17. ToNYC says:

    Touch screens invite the pablum of consolidated URLs and later arbitrage-led editing per special log in. Same button for you all; different content for some and other tiers of knowledge. You get the appropriate story at the common conference. Fisher-Price revisited. Want fries with your processed data?
    This is the antithesis of RIM security. Know your server. No surprise RIMM no longer exists in the mind of buzz. Don’t fade away.

  18. ToNYC Says:
    October 4th, 2011 at 12:07 am

    Touch screens invite the pablum of consolidated URLs and later arbitrage-led editing per special log in. Same button for you all; different content for some and other tiers of knowledge. You get the appropriate story at the common conference. Fisher-Price revisited. Want fries with your processed data?
    ~~

    x2