Ronnie05's Blog

Amazon – Future of digital distribution? (Part I)

Posted in e-commerce, Revenues and Monetization by Manas Ganguly on September 7, 2012

This is the first of two post series on Amazon

Amazon killed it … or very nearly did. Amazon’s device and service announcements in the 6th September event have just gone to show Amazon a few notches above Google, Nokia and Microsoft put together.

Post the launch of Kindle Fire tablets last year and a record sales in the holiday season, Amazon spent a lot of time understanding their customers and how the customers use digital media. In the course they have managed subverting the long held notions of device pricing – and managing the margins without any device contributions. After all, when you make your money through services, device margins are obliterated. That is going to put a awful lot of pressure on the earlier generation of device makers – Samsung, Nokia, HTC and the works. What that means is that Amazon is willing to make the Kindle and the Kindle Fire a loss leader to lure shoppers inside its virtual store. This principle is where disruption @ Amazon begins.

People don’t want gadgets anymore; they want services, and the new ranges of Amazon devices have a clear perspective- to provide a dedicated sales channel for Amazon’s digital storefront with an end-to-end set of services. By taking off the device bit, Amazon signals that it is ecosystems not devices that will drive consumer purchases. As Bezos puts it- “We want to make money when people use our devices, not when they buy our devices.” When business isn’t built on HW margins, the larger ecosystem and services you can do a lot of things competitors can’t – that’s an innovation principle that Apple and Amazon would hold as the key.

Amazon is stepping up ecosystem efforts but is focussing on its own features, services. Third-party apps still seem like an afterthought. Similar is principle to the Apple “Walled Garden”. Given Apple’s iOS app selection & large ecosystem of it’s own, I don’t think iPad is under major threat. But Apple cannot afford to be complacent.

The 6th September event was an act of declaration of war and the whole eco-system and market just got a whole lot more interesting in the course rebuilding the DNA of Amazon. The only other company who is thinking of business in the manner that Jeff Bezos is thinking about it, is Apple! As per Bezos – “We have our own patents, our own hardware, can afford to subsidize, and we’re going after Apple”. That’s setting the perspective.

In short, this is all about Amazon positioning itself as the future in digital distribution

Continued…

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