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Why Amazon Should Give Away Kindle Free

Published: Tuesday, 22 Jun 2010 | 1:34 PM ET

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By: Dennis Kneale
CNBC Media & Technology Editor

amazon.com

From the moment the splashy elegance of the iPad first adorned the de rigueur giant video wall behind the Orwellian figure of Steve Jobs a few months ago, you just knew the Kindle was dead.

You can see it regularly on that most democratic of institutions, the New York City subway. An assiduously bookish young guy sits there with his Kindle, a hipster talisman less than a year ago. Soon as some slinky, black-clad tech temptress sits near him with her iPad, he’s suddenly so dated. He dare not even speak to her.

Amazon [AMZN Loading... () ] cut its Kindle price 27 percent yesterday, to $189 from $259. Barnes & Noble [BKS Loading... () ] cut its same-price Nook reader to $199. And in the immortal words of Wallace Shawn’s irrepressible mensch on TV’s “Gossip Girl”: “It’s not enough!” Amazon should cut Kindle pricing even more: to zero.

That’s right—Jeff Bezos should give away the Kindle free of charge, to spur more sales of higher-profit online books. I made this argument earlier today on CNBC’s “The Call.” (Watch video of the segment here.)

Amazon isn’t a hardware company, it’s a bookseller. Online books promise prodigious profits for Amazon—look Ma! No print-publishing costs! No shipping costs! No warehousing costs! That ain't peanuts: Last year Amazon's net shipping costs rose 35 percent to just shy of $850 million.

The company introduced the Kindle in November 2007 because no one else would; no one had yet done a good enough job designing a bookreader we liked to use. Amazon pulled it off, to the raves of legions of new online-book fans.

Kindle debuted at $400, pricey for what it was: a two-tone LCD screen, some chip memory, a simple keyboard and a few plug-in slots (some reports had it costing $185 to make). Soon as the iPad sashayed into place, the Kindle looked like an old Wang word-processing machine that just got one-upped by the more versatile IBM [IBM Loading... () ] Personal Computer. (And yes, I know I’m dating myself.)

Dennis Kneale
CNBC Media &
Technology Editor

The handheld razor is priced cheap—so they can sell you the high-profit blades. Many cell phones come free of charge, so long as you sign a two-year carrier contract. Amazon could do the same with the Kindle: Start a new book club, and give away the Kindle in exchange for buying a $20 book each month for two years.

Or team up with print-media companies that would subsidize the cost of making Kindles and give ’em away free as the new distribution platform for their newspapers and magazines. Another ally: big brands that could hand out the Kindle as part of their customer service—banks, retailers, bookstore chains, Wal-mart [WMT Loading... () ].

More than 2.5 million Kindles have sold in the 31 months since introduction. That compares with more than 2 million iPads sold—in just the first two months. This, despite the far higher price-point for the iPad, which starts at $499 and runs as high as $829. Is there any clearer indication of what the digitally au courant already know: Apple's [AAPL Loading... () ] iPad rules, the Kindle is dead. But free could set the Kindle free.