Amazon the New Betamax
Roland is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you are of a “certain age” you remember all too well the VHS vs. Betamax wars. Thousands, if not millions, of consumers world wide got stuck with equipment an industry chose not to support. At that time Sony owned the patents on just about everything and they tried to milk the economy dry with licensing fees for blank tapes, movies, and player equipment. JVC, despite its dire financial straights at the time, put forth the VHS (Video Home System) as an Open Standard (quite possibly one of the first formal instances of Open Source technology.)
While many of Sony’s arguments were true with respect to picture and sound quality, what eventually won out was the fact 120 minute VHS blank tapes had a retail price of around $2 in many places and due to the licensing fees Betamax couldn’t come close. The consumer “might” have opted for the higher priced tapes if they weren’t using countless blanks to tape their favorite shows.
Today, Sony (NYSE: SNE) is actually on the winning side along with Barnes & Noble (NYSE: BKS), Apple (NASDAQ: AAPL), and most other ebook vendors. Today Amazon is pushing the Betamax business model. A proprietary format which pretty much only works on Amazon branded or licensed equipment. While it is true consumers aren’t (currently) programming their eBook reader to record NCIS when they won’t be home to watch, the greater truth is that Amazon device holders are in an ever shrinking market of suppliers.
Many authors and publishers are opting out of doing business with Amazon. While Amazon is actively recruiting hundreds of people wanting to be authors, there is no editing requirement. A growing number of Kindle owners are starting to openly complain about the quality of ebooks available from Amazon and the fact Amazon is the only vendor option they have.
When it comes to authors and publishers, some only make their work available via one or two electronic avenues. There are titles on Apple’s site which are only available there thanks to sites like FastPencil. http://www.fastpencil.com/
Likewise with Barnes & Noble via their Pubit! Web site. http://pubit.barnesandnoble.com/pubit_app/bn?t=pi_reg_home
Sony has several sites they deal with, but, their content acquisition team is absolutely amazing. If you have a few titles under your belt, you deal directly with them and the level of service is beyond description. I have literally released a new title and found it available for sale in well under an hour. Their customer service must be equally astounding because they outsell the other vendors of my titles by roughly 100:1.
While there are people out there who vehemently spout the virtues of Betamax, the rest of the world has moved on to various DVD formats. Most of the VHS tapes have either broken or are gathering dust because the low cost players their owners purchased can no longer rewind the tape after it has been played.
Educated consumers are doing the math in a down economy. They can buy a low cost reader which will lock them into a single vendor, or, they can buy something which does many things and lets them purchase industry standard EPUB formatted books from dozens, if not hundreds of vendors. At least, consumers old enough to remember the video cassette market are making such a decision, and Apple customers simply purchase whatever Apple releases next. That leaves Amazon with an ever shrinking customer base.
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