Amazon Kindle: Pulling A PlayStation

Like the Sony PlayStation 3, Amazon’s Kindle eBook reader is $399. They’re both bound to be popular sellers this holiday season. But Amazon is making the same mistake with the Kindle as Sony initially did with the PS3 launch: it’s just too damn expensive.

At the outset, the PS3 was $599 (or $499 for one with a smaller hard drive). The competition was cheaper (XBOX 360, Wii). Sony learned quickly that this pricing structure wasn’t going to work. Anyways, consoles are always sold cheaply at a loss and offset by shares revenue from game titles. Who cares what your initial loss is at the outset, when the amount of consoles out there will drive game sales into the future?

Sony recently added a model for a more modest $399 and has seen sales skyrocket.

Amazon should do the same. If Amazon wants to drive adoption of its gadget and solidify themselves as the leader in the eBook/eMagazine market as Apple has done with music, they should make the device more accessible to consumers.

To be fair, Amazon doesn’t have much competition in the space (Sony’s Reader is the only challenger) whereas the PS3 had, arguably, two strong competitors. Also, Apple came to prominence selling iPods at a profit (like Amazon is trying to do with the Kindle) and doesn’t make most of their money selling iTunes content. Still, just because Apple’s doing it successfully with iPods doesn’t mean Amazon should use it for eBook readers. Amazon should adopt the model already in use by wireless carriers and gaming consoles – subsidizing the device and raking in money brokering content. That model skyrockets you into the lead because it makes the device more accessible. Amazon needs the network effect to work in its favor here, and this is the only way to do it.

More info on the Kindle at Engadget.

Edit: Perhaps Amazon is really pulling a Wii!  According to the Seattle Post-Intelligencer, the Kindle is sold out after 5.5 hours on sale!