One More Reason You'll Buy a Kindle

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If lower prices haven't swayed you into buying an e-reader, how does a steady diet of free e-books sound?

Amazon.com (AMZN) is introducing the Kindle Owners' Lending Library, a bonus for Amazon Prime members who are already paying $79 a year for free two-day shipping on Amazon-warehoused goods and access to roughly 13,000 streaming video titles.

The new lending library lets Kindle owners "borrow" an e-book from a list of hundreds once a month at no additional cost.

The initial selection isn't too shabby. Michael Lewis' Moneyball, Anthony Bourdain's Kitchen Confidential, and Sara Gruen's Water for Elephants are some of the current and former best-sellers that are being made available.

The digital librarian is more forgiving than a real one. There are no due dates. The book simply disappears from your Kindle the moment you check out another free title a month or more later.

Kindle, Barnes & Noble's (BKS) Nook, and other electronic readers already allow for e-book borrowing at the local library, but the Kindle Owners' Lending Library raises the bar of convenience by letting Kindle owners zap the borrowed e-book to their portable gagdet no matter where they happen to be.

The Long Road Down

I
t certainly only helps that Kindles are no longer setting readers back $399 apiece the way they were when Amazon introduced the devices four holiday seasons ago. The Kindle can be had for as little as $79. The new Kindle Fire tablet hits the market in a few days at $199.

The challenge here for Amazon will be making sure that this all pays off.

Profitability fell by 73% in Amazon's latest quarterly report, and the low end of the leading e-tailer's guidance for the current quarter suggests that an actual loss may be in the cards this holiday season.

Investors have largely given Amazon a pass on the margin contraction. They understand why Amazon is trying to make sure that there are tens of millions of Kindles -- and millions of Kindle Fires -- in the market. Digital delivery affords Amazon the ability to deliver books, videos, movies, and games without having to fret over warehousing logistics and shipping costs. It doesn't matter if it fails to make money on the Kindle. It can even subsidize the hardware the way that some video game console makers do, knowing that they can make it back later in media sales.

However, what happens if public library borrowing or the new Kindle Owners' Lending Library is too good?

Freeloaders Who Love to Read

Can Amazon make money on someone who buys a $79 Kindle and relies only on borrowed books? There are also plenty of public domain e-books that are freely available.

It's a chance that Amazon is willing to take. The mall food court employee handing out free chicken samples on toothpicks realizes that giving away morsels of food is a money-losing proposition. The reason it works is because it attracts the hungry, resulting in incremental sales from mall shoppers who were probably going to eat somewhere else. Let's apply that logic to Amazon's new lending library.

After a few months of going through Michael Lewis books and Suzanne Collins' The Hunger Games trilogy, bibliophile freeloaders will gain an appreciation for the Kindle itself. Why wouldn't they want their morning paper or weekly magazine in Kindle form? Amazon does offer them, you know. How about the book that they were going to buy? Waiting a month for a free book is a chicken square on a stick, but it's not a full meal.

Amazon knows what it's doing.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article. Motley Fool newsletter services have recommended buying shares of Amazon.com.




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93 Comments

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LonMax

Considering you can get a full Android 10" G-Tablet for $250 that can buy books from any book store like Google's or Amazons, why would you ever want one?

November 09 2011 at 1:35 PM Report abuse rate up rate down Reply
Coriolana Sinta

Nook has had the lend me program for at least eighteen months. I wouldn't buy a kindle now for the same reason i chose the Nook two years ago: Amazon is the Walmart of cyberspace and i refuse to feed ther inatiable maw.

November 09 2011 at 11:52 AM Report abuse rate up rate down Reply
M

I travel a lot for work, and I also teach at the college level. I'm NEVER without my Kindle. It's the most amazing device I've ever owned aside from my laptop for work. I've pre-ordered a Kindle fire because I love my Kindle and for 199 I'm willing to see what it is about. I am NOT willing to drop 500 on a iPad, because I know exactly what I'd use it for...the same as my Kindle because I can't do any meaningful work on an iPad.

I love books, don't get me wrong, but when I travel I can have all sorts of books and publications at my fingertips without the weight and cumbersomeness. And whatever I'm paying it's less than for a physical book, most of which I will read once anyhow. So for readers who read multiple books at the same time, or different publications it's a slam-dunk. It's also light and easy to hold and the e-ink is amazing in almost any light, unlike an iPad. It will be interesting to see if the Fire has the same experience. I hope so. Because this device is a killer app in my opinion.

November 09 2011 at 10:01 AM Report abuse rate up rate down Reply
Two Roofs

THe reason I prefer the NOOK is because if I have a question or any halp I can just walk int Barnes & Noble and speak with a very helpful salesperson. With the Kindle I cannot walk into Amazon.

November 07 2011 at 3:11 PM Report abuse rate up rate down Reply
restoretwo

I use my Kindle almost everyday. The voice reading feature is amazing . looking forward to the Kindle Fire.
The best feature is being able to buy a book at 3 am & getting it in a few seconds. Priceless !

November 07 2011 at 12:41 PM Report abuse rate up rate down Reply
philipsxt

The Kindle is convenient for those who travel. However, Amazon's increasing prices for ebooks have lowered the attraction for me. Originally, Amazon charged $7-10 for most e-titles. They are now charging and average of $13 for new popular titles, and often the same, and occasionally more than they charge for an actual hard copy of the book. Obviously, an ebook represents less cost to Amazon than a hard-cover or paperback, to say nothing of the elimination of shipping costs (usually there is none if you buy $25 worth at a time). This has become like razor blades. Give the reader at a low cost, suck in the customer to a product for which there is only one source for ebooks, and Amazon is home free. I resent paying the same as Amazon charges for physical books. I have stopped using my Kindle except for when I travel.

November 07 2011 at 12:26 PM Report abuse rate up rate down Reply
bohr137

$79 a year is a lot of money. How are these folks freeloaders?

November 07 2011 at 10:39 AM Report abuse rate up rate down Reply
docmetcalf1955

you mean one more reason i won't buy this piece of junk

November 07 2011 at 8:15 AM Report abuse rate up rate down Reply
allyndp

I'm not interested in buying a Kindle now or in the future. I'm still trying to figure out how to uninstall the books from my droid. What do I want with frigging Alice in Wonderland downloaded to my cellphone?

November 07 2011 at 7:51 AM Report abuse +1 rate up rate down Reply
1 reply to allyndp's comment
bohr137

Don't be dissin Alice.

November 07 2011 at 10:39 AM Report abuse +1 rate up rate down Reply
bcheerful3

I have one sitting here for months now. I seriously can't be bothered at the moment. Tired of technology.

November 07 2011 at 12:40 AM Report abuse rate up rate down Reply