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Business Impact

Amazon Unwraps Kindle 2.0

The device betrays a plan to dominate the transition from printed books to electronic ones.

At a press conference held at the Morgan Library in New York City this morning, Amazon announced a new version of its Kindle electronic reading device. While the new device offers important improvements over the original Kindle, it is most significant as a sign of Amazon’s ambitions to dominate the transition from printed books to electronic ones.

Out of print: The new Kindle is less than a centimeter thick, weighs 300 grams, and turns pages 20 percent faster than its predecessor. The e-ink technology powering its screen is also a newer generation, displaying sixteen shades of gray rather than four.

The Kindle 2’s biggest new feature is text to speech, powered by software from Nuance. The device can read a book aloud to a user, and is designed to make it easy to switch between reading and listening. At Monday’s launch event, Jeff Bezos, the founder and CEO of Amazon, demonstrated this technology by having the Kindle read from the Gettysburg Address. The device betrayed the stilted speech that is characteristic of most text-to-speech software, but nonetheless pronounced the words clearly and accurately.

Most of the other changes to the Kindle are improvements designed to further its ability to “disappear” while the user is reading, as Bezos put it. At just under a centimeter thick, the device is smaller; is, at 300 grams, slightly lighter than the previous version; and turns pages 20 percent faster, Bezos said. The e-ink technology powering its screen is also a newer generation, displaying sixteen shades of gray rather than four. And the Kindle 2 has enough storage space for 1,500 books instead of just a few hundred. The Kindle 2 will sell for $359 and, as with the first Kindle, will come with free wireless access to Amazon’s store.

While these updates may be welcomed by prospective users, the Kindle 2 is most significant as part of a strategy that Amazon is developing to deal with the anticipated shift away from the printed word.

Amid signs that the market for electronic books is finally gaining momentum, Amazon could face stiff competition not only from other electronic reading devices, such as Sony’s e-Reader, but also from increasingly capable smart phones and other portable Internet devices.

For example, last week, Google announced that it had reformatted more than 1.5 million books for reading on iPhones and Android phones. Although Google’s offering currently consists of only public-domain books, Frances Haugen, product manager for Google Book Search, says that the company intends to work with partners to offer new books as well.

In laying out Amazon’s vision for e-books, Bezos maintains that a dedicated electronic reader such as the Kindle will be crucial. To illustrate this point, Bezos cued up a chart showing trends in Amazon’s e-book sales (without exact numbers). Sales climbed lazily to a peak at 2005, when they began to drop again. But sales have rocketed since the first Kindle was sold 14 months ago, Bezos said, and Kindle books now account for 10 percent of the units that the online retailer sells.

Richard Shim, an IDC analyst, says that the e-book market has been crawling for 10 to 15 years, and adds that “there are [still] a lot of obstacles that need to be overcome before we start running.” Major blocks, he says, include the cost of reading devices, the cost of digitizing books, and often-complex licensing issues.

Shim notes that recent activity in the e-book market suggests that it is starting to grow. But he also believes that there could be separate audiences for e-books on mobile phones and e-books on dedicated devices such as the Kindle. Although Google’s achievement is impressive, he sees Amazon as more likely to drive customers to try e-books, since the retailer has a much stronger economic interest in this area.

Indeed, Amazon is making a major push to provide content for the Kindle. “Our vision is, every book ever printed in any language, all available in less than 60 seconds,” said Bezos. “And we’re making progress.”

Amazon has gone from offering 90,000 books for the Kindle in November 2007, when the device was first released, to offering 230,000 books today. The company is prioritizing the digitization of books based on their popularity–Bezos noted that 103 of the 110 books currently on the New York Times best-seller list are already available for the device. Amazon is even supporting the launch of the Kindle 2 with an exclusive short story written by Stephen King, “Ur,” which the author says focuses on reading books on an electronic screen.

“The key now is for the industry to continue to sculpt the market into what they want it to be,” says IDC’s Shim.

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