The Rocket eBook was one of the first commercially developed electronic readers. It was launched in 1998 by a fledgling company called NuvoMedia. When its founders realised that they needed help navigating the book publishing industry, the first door they knocked on was Amazon’s. They even took a prototype of the device to Jeff Bezos. The Rocket eBook differed from modern e-readers in two fundamental ways. Firstly, it had an LCD display which was strenuous on the eyes. Most of the e-readers we use today have electronic ink displays, an ingenious low-power and low-glare alternative to LCDs. At the time of the Rocketbook’s launch, this technology was still being developed — it was expensive and very much a nascent technology. Secondly, to transfer files to the Rocketbook, the user had to actually plug the device into their computer. NuovMedia did toy with the idea of adding a convenient wireless option, but since that would have tacked an extra $400 to the cost of each unit, they decided against it.
Bezos was intrigued. But the negotiations between NuvoMedia and Amazon lasted only three weeks before grinding to a stop. Bezos was insistent on Amazon having exclusive rights in any contract they would end up signing, as well as the power to veto future investors. He wanted to protect against the risk of a competitor like Barnes & Noble acquiring NuvoMedia at a later stage. These demands proved to be too dear for the young startup. After getting investments from Barnes and Nobles and Bertelsmann, NuvoMedia finally got the Rocketbook to market. They sold 20,000 devices the year it launched.
1998 was really early in the annals of consumer technology. Note that the digital revolution spurred by Napster was still a couple of years away. A review published by Wired described the RocketBook as “It's like an object that has tumbled out of the future.”
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Things were looking good for NuvoMedia. Its founders had lofty plans to build an even better device at a lower price point. One of the Rocketbook’s biggest competitors was the Softbook, an e-reader produced by Softbook Press. In 2000, NuvoMedia and Softbook Press were acquired by Gemstar International Group. At the time, Gemstar’s CEO released an optimistic written statement:
“Next to watching television, reading is America's most favorite pastime. We believe that Gemstar, NuvoMedia, and SoftBook collectively will be in a good position to provide the best technology, broadest distribution, and the most consumer-friendly devices.”
But sales of the e-readers shipped by Gemstar were slow. A Chicago Tribune piece on the e-reader market hit the nail on the head — it pointed out that consumers were not willing to shell out hundreds of dollars for devices that were harsh on the eyes (remember: electronic ink’s moment had not arrived yet!) and was difficult to use to boot. Gemstar finally pulled the plug on its e-readers in 2003. In 2004 Barnes and Noble discontinued sales of ebooks entirely. An analyst remarked that “E-books for a long time have been something that people have said will lead to a spike in adoption, but the technology hasn't really been there yet.”
Jeff Bezos must have been watching these developments with interest. In a speech he gave at Lake Forest College way back in March 1998, Bezos said:
“I firmly believe that at some point the vast majority of books will be in electronic form. I also believe that that’s a long way in the future, many more than 10 years in the future. And the reason that that gets held back today is that paper is just the world’s best display device. It turns out that today with the state of the art in display devices, dead trees just make the best display devices. They’re higher resolution, they’re portable, [they’re] high contrast and so some day when computer displays will catch up with that and then I think electronic books will be extremely successful.”
In 2000, Napster blew the lid off the digital revolution. It was a clear signal to media players that consumer demand had shifted from physical to digital. At this point, almost three quarters of Amazon’s sales came from books, movies, and music. Apple had already taken a huge chunk of the digital music market with the iPod and the iTunes store (something that Amazon paid close attention to, since the shift was an existential threat). It was in this context that Amazon decided to double down on its core competency and single largest category: books.
To be clear, this was not the obvious move to make at the time. In 2004, paperbacks were winning the war against digital reading. Plus Amazon’s experience with digital media was extremely limited — the only real digital book work they had done was the ‘Search Inside the Book’ feature on Amazon.com. This feature allowed users to preview books before purchasing them which in turn required parts of the book to be available in electronic form. The only dedicated resources working on such digitisation was a small five or six person team.
Bezos made decisive changes in the org structure of the company to underscore its focus on digital media. Amazon established a R&D centre called Lab 126 in 2004. Its objective was to find ways to disrupt Amazon’s current business before anyone else could. Bezos also uprooted senior employees who had been working on the retail side of the company for decades to lead Amazon’s new digital business. He believed that for Amazon to truly innovate, the people working on digital had to be “unshackled” from their role in Amazon’s pre-existing traditional media business. This included Senior Vice President Steve Kessel who was to lead Amazon’s foray into digital. Kessel was to report directly to Bezos, another indication of the importance Bezos had placed on this project. In Brad Stone’s The Everything Store, Bezos reportedly told Kessel: “Your job is to kill your own business. I want you to proceed as if your goal is to put everyone selling physical books out of a job.”
Then came the shocker. Bezos announced internally that Amazon was going to develop its own e-reader. It was one thing to reorient part of the company as a digital media organisation, it was quite another to suggest that Amazon build its own hardware. Hardware was so far removed from Amazon’s core competencies that executives within Amazon questioned this decision — pretty much everybody was of the view that Amazon should outsource building the device to a company that specialised in hardware.
But Bezos was insistent. Even though outsourcing would have been cheaper and easier in the short run, he was focused on Amazon’s long term goals. One of the reasons for Apple’s success in digital music was their control over the whole consumer experience — software (iTunes) and hardware (iPod). Bezos was of the view that Amazon needed to do the same to succeed in digital books. This meant building a device and developing a digital bookstore, controlling both ends of the customer experience. Creating the hardware for its own device would also give Amazon more flexibility to innovate by incorporating consumer feedback into subsequent iterations of the product. Ultimately, Bezos believed that if a company found itself at a crossroads because it lacked a specific capability, it needed to either build the capability or find a way to buy it. This stood in contrast to many other companies, many of which pursued opportunities based on what capabilities they already had.
In this case, Amazon chose to build the capability in-house.
Amazon’s fundamental mantra while developing the Kindle was to make the device “get out of the way” or “disappear”. The objective was to allow the reader to be immersed in the author’s reality. The industrial design of the Kindle was initially contracted out to the legendary design firm Pentagram. Pentagram’s designers dug deep into the physics of reading while mocking up prototypes for the device — they studied how readers turned pages; how they held books in their hands, and so on. The design goal was a device that somehow subconsciously felt like a book. Inspired by the popularity of the Blackberry, Bezos also wanted the Kindle to have a keyboard for users to search for book titles. After repeated creative differences, the Pentagram designers parted ways with Amazon in 2006. Lab 126 hired its own designers to get the design across the finish line. The brutalist angles and width of the device were intended to mimic a paperback. Bezos described the Kindle’s design objectives in a 2009 interview with Charlie Rose:
“And the key — the key feature of a physical book is that it gets out of the way. It disappears. When you are in the middle of a book, you don't think about the ink and the glue and the stitching and the paper. You are in the author's world. And this device, we knew four years ago when we set about to design it, that that was the number one design objective. Kindle also had to get out of the way and disappear so that you could enter the author's world. And the design team accomplished that.”
Back when he was negotiating with the founders of the Rocketbook, Bezos had reservations about readers being forced to plug their devices into computers to download books. He thought the process created too much friction. And he was right — studies revealed that average consumers connected their iPods to their PCs to download new music only once a year! Bezos was also inspired by the Blackberry and the continuous connectivity that it represented. He was adamant to build in the ability for readers to wirelessly transfer files to the Kindle. The easy option would have been to just make the device Wi-Fi enabled. While Amazon would later release Wi-Fi only models of the Kindle for a lower price, Bezos thought that making consumers connect to Wi-Fi was too complicated for the non-tech-savvy user. This was the birth of Whispernet — the technology that allowed users to wirelessly download books using the device’s inbuilt network capabilities. Here’s how Bezos described it:
“But the coolest feature as regards books is that you can think of a book and have it a minute later. So this is — because without futzing with the PC or doing anything, wherever you happen to be -- you can be lying in bed or you could be on a train. And in either case, you can go to the store, you can browse, you can search, so you can type in the name of a favorite author or you can browse.”
Whispernet was the equivalent of building a wireless phone into each Kindle. No one had ever done this before. And if that wasn’t enough, Bezos decided that Amazon would cover the cost for the data plan. While establishing relationships with wireless carriers was difficult, the total cost wasn’t as onerous as the team expected. This was because ebook files were relatively small, resulting in very modest fees. In an interview two years after the first Kindle was launched, Bezos reflected on Whispernet’s role in the Kindle’s success: “I believe that's a big, a big part of the success of Kindle. Because it makes it a seamless device, where you don't even need a computer. And you don't ever have to hook it up to your computer with a cable. You don't have to fuss with any of that.”
The original Kindle’s display was powered by e-ink technology. While designing the Rocketbook, the founders of NuvoMedia had actually considered using e-ink while it was at the early stages of its development at the MIT Media Lab. Almost a decade later, the technology was finally viable. Amazon got lucky. When they were developing the Kindle, they managed to snap up a technology that was good for long form reading (and terrible for pretty much everything else!) just as it matured enough for commercial use. The e-ink display was one of the things that Bezos was referring to when he was asked if the Kindle could have been made five years ago:
“No way. No way. Impossible. In fact, when we started — we've been working on this for three years. But when we started, we were basically taking a bet that the technology that we needed to be able to get this to work would be commercially available in the next two to three years. You know, we were looking ahead a couple of years into the future.”
Unlike pesky LCD screens, e-ink worked well in direct sunlight, used little battery power, and was remarkably easy on the eyes.
The basis for the Kindle’s software was developed by a French company called Mobipocket. Mobipocket had built an app that allowed people to read books on PCs and mobile devices. Amazon acquired the company in 2005.
With work on the actual device underway, Amazon also focused on developing their digital bookstore. After all, what was the point of an elaborately designed device if consumers couldn’t read the books they wanted to on it? Bezos expected 100,000 titles to be available on the device when it launched. Quantity wasn’t good enough, he demanded quality — these titles had to include 90% of the NYT bestsellers. In the early 2000s, only a small part of the traditional publishing houses’s portfolios had been digitised. Luckily, Amazon had some experience here — while creating their Search Inside the Book preview feature, Amazon had developed effective processes around digitising books. What’s more, by 2004 Amazon sold a considerable percentage of all books in the United States. They leveraged this position to get the publishers to implement quick turnaround times and favourable financial terms. Sometimes when a publisher refused to bend to their will, Amazon would tweak their algorithm to stop recommending their titles. After seeing their sales plummet, the publishers would usually fall in line. Brad Stone’s The Everything Store quotes Jeff Steele, an Amazon employee who was instrumental in this process, as saying: “I described my job as dragging publishers kicking and screaming into the twenty-first century.”
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The first Kindle was launched in November 2007 with a price tag of $399. The ebookstore launched with 90,000 titles, more than four times the number on Sony’s e-reader at the time! Most of the books — including bestsellers and new releases — were priced at $9.99 (This was reportedly an arbitrary figure that Bezos chose, inspired by Apple’s 99 cent iTunes store. It wasn’t based on complex calculations about margins, number of books that have to be sold to breakeven, or anything like that). The Kindle’s 250 MB storage capacity meant that it could hold around 200 of these non-illustrated books. In just the first five or six hours after the device’s launch, ALL units were sold out. In the 2008 holiday season, the Kindle was sold out once again. Describing this as a “high-quality problem,” Bezos said:
“This is nobody's plan. This is not what companies want to do. And we did it two years in a row. So we ran out in Christmas of '07, and then we ran out again in Christmas of '08.”
In recent years, Amazon has consistently held more than 80% of the U.S. e-reader market. But the Kindle wasn’t always such a dominant player — it had plenty of competition over the years.
Sony released not one but two e-readers before the first model of the Kindle had even launched. The Librie shipped in 2004 and was the first reader to use e-ink technology. It had 10 MB of memory which was enough to hold just about 10 books. Sony developed a proprietary ebook format called LRF, which was the only file format compatible with the Librie. The device did not support PDF files. Worse, the Librie only read books sold from Sony’s Japanese store. In fact, Sony only sold the device in Japan. Devices were sold in the United States through online retailers with a third party English OS upgrade.
Just a year before the Kindle was launched, Sony released the Sony PRS-500 — the first of a long string of iterations. The hardware of these devices was lauded as being pretty incredible. But Sony discontinued manufacturing in 2014. The primary reason for Sony’s inability to compete with the Kindle was the lack of actual content available for their devices. Even when Sony finally included an on-device ebook store in 2009, the software was difficult to use.
The Kindle 2 was launched in early 2009. The original brutalist features were done away with, in an attempt to broaden the appeal of the device. It also came with the experimental text to voice feature.
Later that year, in November 2009, Barnes and Noble released the Nook, their first e-reader. The Nook’s e-ink display was coupled with a small colour LCD touchscreen. It retailed at $259. Over the years, Barnes and Noble released nearly 10 iterations of the device. But sales of the Nook never really took off, and Barnes and Noble shifted its focus away from hardware devices to licensing its content to other device makers as early as 2013.
2010 marked Apple’s entry into the digital reading space with the iPad. The iPad was marketed as a multi-use tablet that could also be used to read, as opposed to being a dedicated e-reader. To stay in the game, Amazon released its own multi-use tablet — the Kindle Fire — in 2011. In addition to reading books on the Fire, users could also stream TV shows and movies. The Kindle Fire was not a compelling product when put against the iPad. But even so, Apple lost in the digital book war when a major antitrust case went against them.
The facts leading up to this case date back to before the iPad’s launch. At the time, Amazon contracted with the six major traditional book publishers through something called the “wholesale model”. This meant that the publishing houses would set a “cover price” for a book and sell the book to Amazon at a discounted “wholesale price.” Amazon would then be free to sell the book at any price it liked to the end user. Amazon leveraged its deep pockets to use a “loss leader” pricing strategy — by selling best selling books at $9.99, they were losing around three or four dollars on each book they sold. This did not bode well for the publishers who worried that Amazon was eating into their paperback and hardcover sales. They also harboured the existential dread that Amazon’s pricing would devalue books into a commodity.
Apple saw the increasingly paranoid publishers as a gateway into the ebook space. To beat Amazon, they knew they would have to launch the iPad with a comparably extensive digital bookstore. In their negotiations with the publishing houses, Apple got them to switch from the “wholesale model” to something called the “agency model”. In the “agency model”, the publishers would set the price of a book, and Apple would get a fixed percentage of this price on each sale. The publishers were happy because they had control over pricing once again. To make sure the publishers didn’t set prices that were too high, Apple included two important caveats in the contracts: pricing tiers with caps; and a Most Favoured Nation (MFN) clause which dictated that if any other ebook retailer sold a particular book for a price lower than the one on the iPad book store, Apple would be empowered to sell it at this lower price. The MFN clauses “encouraged” publishers to convince all their other retailers (Amazon included) to switch to the agency model. And in this they succeeded — the publishing houses used their collective negotiating power to force Amazon’s hand. Predictably, the agency model resulted in an industry-wide increase in ebook prices.
The courts found Apple in violation of American antitrust laws not because of the substantive content of the clauses it included, but because it had negotiated these contracts with publishing houses that controlled more than 50% of the market (and dealt with more than 90% of NYT bestsellers). Apple ended up processing refunds amounting to $400 million to consumers impacted by the price increase.
This put Apple off digital books for good.
The Kindle’s most persistent competitor eventually turned out to be the Kobo. The Kobo was first launched in May 2010. It was priced at $149 in an attempt to eat into the more expensive Kindle’s market share. (Of course, Amazon dropped the Kindle’s prices shortly after). This model’s big drawback was that it did not have Wi-Fi or a built-in store, forcing users to load their books onto the Kobo manually. Chapters Indigo, an early investor in the company, helped them build an online book store shortly after launch. In 2018, the Kobo held around 13% of the e-reader market in the United States. However, it has managed to hold its own as a niche player. The Kobo’s success is largely attributed to its approach of partnering with local retail bookstores to develop a hybrid brick-and-mortar plus online strategy. It was also a great option for readers who don’t want to be locked into the Amazon ecosystem, since the device is compatible with books from a variety of sources and formats.
The Kindle itself has gone through a number of iterations over the last 16 years.
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The Kindle 4, released in September 2011, finally did away with the full-size keyboard. Instead, the device had five buttons and a cursor pad. Just a month later, Amazon launched the Kindle Touch — the first touch responsive Kindle. It also had an advanced reference tool called X-Ray, which allowed readers to deeply explore the book they were reading — for instance, to view different paragraphs of the book that referred to a particular character.
At the end of 2012, Amazon launched the first Kindle Paperwhite. Its patented front light technology (using four small LEDs on the display screen) enabled readers to comfortably use the device in complete darkness. Amazon’s Paperwhite models ended up being quite popular. In June 2015, they also launched Bookerly — a new font specially designed for easy reading — on the Kindle Paperwhite 3.
In November 2022, Amazon released the Kindle Scribe, the first Kindle to enable note-taking with a stylus. Critics immediately saw this as a response to the reMarkable 2 tablet — an e-ink tablet that boasted a paper-like writing experience. A review by the Verge described the Scribe as doing ‘just about enough’ to keep up with the competition:
“Instead, the Scribe just provides a perfectly adequate, if underbaked, service. The whole time I’ve used the Scribe, I’ve struggled to escape the sense that this is a sort of lazy entry into a burgeoning market.”
For several years now, tech enthusiasts have lamented the stagnating innovation in the e-reader space. Take Amazon’s Scribe for example. The technology to enable note-taking on a Kindle has been around for a while, but it took Amazon a long time to actually implement the functionality. The Verge frames it rather aptly:
“This thing is packed full of old ideas turned into a mediocre reality, but if you’re not deep into the world of E Ink note-taking tablets, they’ll just seem neat.”
But Amazon certainly doesn’t really mind. As long as people are buying ebooks on the Kindle, they’ll keep making them. In an interview with BBC, Bezos said:
“Basically, we sell the hardware at our cost, so it's break-even on hardware. We want to make money when people use our devices, not when they buy our devices. The continuing relationship with the customer is where we hope to make money over time.”
Sources:
The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone. Published in 2013.
Working Backwards: Insights, Stories, and Secrets from Inside Amazon by Colin Bryar and Bill Carr. Published in 2021.
https://money.cnn.com/galleries/2010/technology/1010/gallery.ereader_history/2.html
https://www.nytimes.com/2000/01/20/business/deal-to-buy-2-electronic-bookmakers.html
https://www.cnet.com/tech/tech-industry/gemstar-buys-two-e-book-makers/
https://www.chicagotribune.com/news/ct-xpm-2000-12-24-0012240268-story.html
https://www.cnet.com/tech/tech-industry/barnes-38-noble-shelves-e-books/
https://goodereader.com/blog/electronic-readers/the-evolution-of-the-sony-e-reader-in-pictures
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