[Posted by Sarah Rotman Epps]
As part of the Kindle DX announcement this morning, Amazon revealed that they're working with three newspapers–the New York Times, The Boston Globe, and the Washington Post–on a pilot program this summer where the publishers will offer the Kindle DX at a reduced price to subscribers in exchange for a long-term contract. The Detroit Free Press and Detroit News are launching a similar program with Plastic Logic devices.
I advocated that newspapers do something like this at a speech I gave last month for the Newspaper Association of America. Why? Because if they do nothing and wait for the eReader market to evolve organically, newspapers will at best see modest incremental revenue from eReaders. We estimate that just over 1 million consumers have bought Kindles and Sony Readers so far–impressive, but not enough to drive mass adoption of eReader newspaper subscriptions. Publishers need to catalyze adoption of the devices to get as many subscribers as possible buying content if they want to see real revenue and real cost savings from cutting print.
Will the Kindle program work? I don't know–it depends on how deep the discounts are for subscribers. For a device that retails for $489, the discounts will need to be mighty steep to convince those that weren't otherwise considering buying Kindles to take them up on the offer.
The other unknown element is advertising: The Kindle DX has better image display than earlier Kindles, but Bezos didn't mention anything about an ad model. Newspapers rely on advertising for a significant portion of their revenue, and they need partners that support this model. Luckily for newspapers, they're about to have a lot more choice as more competitors come on the market in the coming year.