Business Models – Amazon Mimics Netflix

Amazon appears to have seen a new gap in the market, creating something like a monster book club, in the style of a Netflix, a sort of cloud ebook subscription model.

Focal Points:

• The story seems traceable to the Wall Street Journal, which says that an ebook subscription offering will be almost free, bundled into the Amazon‘s Prime service, which has already been used to combat Netflix, by making a number of videos free to Prime members.
• Amazon Prime costs $79-a-year and brings users benefits such as free next-day delivery and access to movies and TV shows (in the US), while subscribers are estimated to spend a typical 7-8 times as much with the company than more casual shoppers.
• Free membership is likely to be an incentive to buy the upcoming Kindle Tablet, and Amazon clearly wants to achieve Prime-level buying patterns across all its content, as well as continuing to differentiate Kindle from other ebookstores. Barnes & Noble has proved a powerful competitor in the US and other country-specific challengers are on the horizon, including major UK bookstore chain Waterstones, whose new CEO James Daunt recently promised an own-branded e-reader integrated with the firm's digital shopfront, which would be "significantly better than our online rival's".
• The WSJ says that Amazon is in talks with book publishers, though these are likely to be wary of the concept and may exclude certain new or premium titles, as happens with Netflix. There will be fears of individual books' value or launch impact being diluted, and the service would almost certainly include tiering plans, with different release dates, as with movies.

Editor’s Note: This snapshot is particularly interesting in that it introduces a business model to take advantage of the new delivery/consumer paradigm that is brought on by the impact of the Internet and end-user devices.

IT Executives should simultaneously be informed about the technology, its impact and how to take advantage of the new paradigms from a business perspective. It is likely that the movement in consumer markets will flow into corporate/institutional markets as well.