Kindle shortage: What is Amazon hiding?

On Christmas Eve, the NY Times published a takeout on Amazon’s efforts this Christmas season to sell the Kindle. As with the 2007 season, the Kindle sold out, and won’t be available until February. The NYT notes that Sony is exploiting the shortage to gain its own sales, while other readers are either on the way or already here. In the latter camp are several iPhone book reading apps, such as Stanza and Classics.

Reading the NYT story on Christmas Day — in dead tree form syndicated to my in-laws’ newspaper — one paragraph jumped out at me:

It is difficult to quantify the success of the Kindle, since Amazon will not disclose how many it has sold and analysts’ estimates vary widely. Peter Hildick-Smith, president of the Codex Group, a book market research company, said he believed Amazon had sold as many as 260,000 units through the beginning of October, before Ms. Winfrey’s endorsement. Others say the number could be as high as a million.

Sorry, but there’s no excuse for such secrecy. In other consumer industries — such as MP3 players or PCs or cellphones (let alone records or automobiles) — reasonably accurate estimates of unit sales are taken for granted, and are the basis for strategic planning by the whole ecosystem. Amazon has been able to prevent any third party estimates of reader sales because it controls its own distribution, and has not chosen to share accurate information with shareholders or analysts.

The Kindle looks to be a big success. Why is Amazon hiding the truth? I can think of three reasons:

1. It doesn’t want its competitors to know. Somehow I suspect that at least Sony has the resources to find out what’s going on.
2. It’s saving it for some big splashy announcement. In other words, Jeff Bezos wants to be the next Steve Jobs.
3. The numbers are embarrassingly small. In other words, the Kindle has sold out because it’s doing a bad job of managing its production supply chain, not because it’s a smash hit.

I will certainly admit that not every schlocky Chinese factory can assemble a device as small and precise as a Kindle, but it seems like after 18 months it should have been able to find a way to make enough units to meet anticipated demand. Perhaps Amazon didn’t want to produce a large number of units because it’s flushing inventories for the next model, but the Christmas season seems too important to miss — particularly if you’re trying to see consumers with a platform to buy your content.

Consistent with their aversion to full disclosure, Amazon issued a vaguely-worded press release Friday with lots of cutesy factoids but not a single dollar figure. In fact, there was no discussion of overall season results, just a claim of “record-breaking” unit sales on the “peak day.” Despite such a lack of information, this PR was oft-remarked (e.g. by Forbes and Henry Blodget) and was credited with raising the stock price (although less than 1%).

From what we can measure, Amazon has clearly been greatly successful at getting content for its book at good terms, leveraging its market power as the country’s second largest seller of books.

As my buddy Doug Klein made clear in several presentations to my SJSU students, cajole (bludgeoning?) the publishers and the existing distribution channel (and its inertia) are key to the success of any company that seeks to shift the book industry from dead trees to electronic distribution. Doug should know, since he was president/COO of the company that made the Rocket eBook, which fought the publishers a decade ago.

Content deals, as with publishing (or music downloads) will tend to be nation-specific, so being the US leader is not assured (or even likely) to lead to Total World Domination of book publishing. This is where open standards will be nice, so that a reader purchased in the US can read content downloaded in the UK or Australia or even Japan.

Will Amazon get the same pressure to open up its proprietary-formatted content as Apple has? Perhaps if it stays out of France, it can avoid such difficulties.