Jeff Bezos' Kindle Strategy Focused on "Serious Readers" is Seriously Flawed

Last Updated May 27, 2010 9:09 AM EDT

Jeff Bezos lookign derangedAmazon's (AMZN) CEO Jeff Bezos threw down the gauntlet the other day when he told shareholders that Kindle could compete with Apple's (APPL) iPad by playing to "serious reading households." Too bad his five finger challenge is more like a ladies' lace glove -- delicate and full of holes.

Bezos said, "There are always ways to do the job better if you are willing to focus in on one arena." In other words, his strategy is to hone in on both the Kindle and on its e-book retail business -- right after he admitted that 90 percent of households are not book-centric.

So the remaining lucky 10 percent of bookworms get the grey-scale Kindle as is, despite Bezos' claims that it would be easy to add a color LCD screen. Who needs the rainbow when that would provide an inferior reading experience to the reflective E Ink Corp. technology that Kindle currently uses, argued Bezos. Leave the fancy colors and functions to those app-happy multitaskers itching to get their fingers all over the iPad's screen.

While Bezos patiently waits for color reflective screen technology to catch up to his already superior digital reader, his competition can get busy taking over a significant portion of the market. Barnes & Noble (BKS) will be more than happy to sell those not-so-serious readers a Nook, complete with a color screen and access to over 1 million e-books.

Not to mention after all that reading (whether serious or skimming), if people are so inclined to author their own book, B&N offers PubIt! The new service allows independent publishers and self-published authors to upload their content and sell it through the retailer's e-bookstore as well as on multiple platforms including the iPad.

Though Amazon's got its own DIY e-book service dubbed Digital Text Platform (DTP), which is also a distribution channel to Kindle and other devices that run the Kindle Reader software, Bezos won't budge on e-book pricing, either. You may remember the stand-off earlier this year between Amazon and Macmillan over which would control the retail price of a download. Amazon capitulated to Macmillan and later changed its pricing system for the other legacy publishers (on the heels of their 70/30 agreement with Apple), but Bezos and company still have a "strong conviction" that $9.99 is a good price point for many bestsellers.

Though he declined to give details, Bezos pointed out a share shift among customers away from books priced over $10 to those with lower sticker prices. To prove his point -- and take a stab at Pearson PLC's Penguin Group (PSO) for insisting on setting its own prices -- Bezos recently pulled Penguin's e-book titles from its offerings and priced a number of the publisher's new hardcovers at only $9.99. The two have since reached an agreement.

Under the guise of staying focused on his core business, Bezos is hiding his short-sighted management scheme. The e-book business is booming. Sales of digital books from the 13 publishers that report results to the Association of American Publishers rose nearly 252 percent in the first quarter of 2010 to $91 million. The only result coming out of a strategy to clings to an ideal of a $10 e-book and a colorless Kindle is a loss of sales.

Image via Flickr user Etech05 CC 2.0