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Amazon Enhances Its Position in Academic Markets with Launch of Its Whispercast System

By Ed Yourdon

Quietly, Amazon has enabled a potentially transformative functionality for the Amazon Kindle device ecosystem called Whispercast. The service was launched with little fanfare, but it has the potential to enhance Kindle’s already-dominant control of the e-book device market. Whispercast launched on October 17, and it provides services for administrators who have a network of devices within their institution. The service allows administrators to register significant numbers of devices at once, or customize the device for each individual. Alternatively, existing owners of their own Kindles can register with the network and receive centrally managed services. Within an organization’s network, apps or content can be centrally managed as well as network access control.

The functionality is not radically different from the Whispersync service that Amazon released with Kindle when it was first launched. However, with Whispercast, it is now extending this control over the Kindle’s content to other parties. With the launch of this new service, Amazon is effectively moving to provide the necessary network administrative control over business and, in particular schools, that will require centralized management. Consider the power of being able to control the network of kindles within a school, managing the network of devices, the content on those devices, ensuring that it is all centrally managed and regularly updated as needed. If one is providing Kindles to a school or classroom, this type of control is vital to effectively managing those devices.

This also combines with the growing trend of centralized academic content sales.The model that seems to be winning out among publishers and distributors of higher education content is to include the content purchase directly from the institution, which is included directly as part of the tuition price. During a talk at the Tools of Change meeting in Frankfurt last month, William Chesser, VitalSource Technologies, discussed the variety of models for distributing content to students, which included single title sales, embedded sales and institutional purchase structures. From the perspective of students, having content that is embedded (at no apparent fee) is better for the student, in that they don’t directly pay for the content and they are assured of having all of the appropriate content at their fingertips without having to go through the additional step of purchasing content.

While this simplicity might work for the school, the faculty and the publishers, whether this is actually a good deal for the students is an open question. Generally, economic systems where there are payment intermediaries between suppliers and end-user-customers are not the most efficient. Consider the some data about the implications of disconnect between buyers in the market for surgical services, pharmaceutical sales in the US, or the academic library market for journals. All are examples of markets where the ultimate customer is detached from the payment process and each is an example of market dysfunction. While adding the course content as a component of course registration or university fees may be appealing at first glance, it isn’t obvious that this will lead to lower (or even competitive) prices for the students.  It is also not obvious that the savings for the primary or secondary school districts that the price point of the devices is such that it is a better deal than traditional print distribution models (although it has been some time since I posited that argument). It could be possible with the significant price decreases of reading devices is making the calculation more competitive for reading devices.

There is little doubt that Amazon is becoming a key player in the higher education market, rapidly displacing the sales from traditional bookstores. Over the past two years, Amazon has increases its share of the college textbook market by about 6% to nearly a third of overall textbooks sales. It has also moved into the rental market for collegiate textbooks, when it announced in August it will offer a textbook rental system through which students can mail back well-kept books free of charge after 130 days. E-books are certainly another aspect of Amazon’s strategy, this new functionality will only add to that trend.

About Todd A Carpenter

Todd is the Executive Director of the National Information Standards (NISO). He is focused on facilitating information exchange via standards, technology and business best practices within the US and internationally.

Discussion

13 thoughts on “Amazon Enhances Its Position in Academic Markets with Launch of Its Whispercast System

  1. This is indeed remarkable, even more remarkable when you consider this: Amazon’s Whispersync is also tied onto the Kindle *app*, which installs (and syncs) on both iPad and Android tablets. So basically, you can replace every mention of “Kindle” by “any tablet with the Kindle App installed”, not change a single to the post, and it will pretty much still be accurate.

    Posted by Hakim | Nov 19, 2012, 6:04 am
  2. In a behavior system like a school time (labor) and network efficiencies are also economic values, along with cost. So not reducing cost does not mean there is no value added. One has to look at the system efficiencies. In that context I am also curious to hear more about how academic libraries buying journals is a market dysfunction. Is it not a sort of economy of scale? Students could not individually subscribe to the journals they use.

    Posted by David Wojick | Nov 19, 2012, 7:06 am
    • Yes, David, this new functionality is all about efficiency for those administrators who have to manage a network full of devices that people are bringing to the network. In fact, the management tools are quite limited to manage a “bring your own device” network that still has centralized control. Whispercast will create that functionality and therefore the network admin efficiencies that address many problems that admins have of controlling devices on their network. It is prescient of Amazon to see this administrative need and come up with a solution. Whether that will in fact lead to market dominance for Amazon is an open question, but they are positioning themselves well to be that dominant systems player in the academic market place.

      As to the question of buying journals by libraries is a dysfunctional market, by this I mean that the purchasers are not the end-users and therefore can not react effectively to changes in the value (in a dollar term) of the product they are purchasing. The past decade and a half has proven that libraries are incapable of holding down price through their purchase behavior, i.e., in an economic sense, because they are frequently forced by the faculty at their institutions to retain journals that they might otherwise cancel because the price is too high. There has been a lot written about this market dysfunction. I refer you to the McCabe article on this, which linked to in the post. I think history has proven McCabe correct in several of the conclusions that he drew about potential market dysfunction, since journal prices have more than trebled (estimate), since the article was written. One could write several articles about this, and many have. I don’t think we need to rehash the “serials crisis” here….. We of course could…

      Posted by Todd A Carpenter | Nov 19, 2012, 10:05 am
      • One of the arguments against funders paying for open access article processing charges through institutional block grants runs along the same lines, that it perpetuates the disconnect between the user and the price paid for the services.

        Posted by David Crotty | Nov 19, 2012, 10:32 am
      • Prices rise in well functioning markets, sometimes by enormous amounts. If libraries were a mistake what was the alternative? Surely not students and faculty buying individual subscriptions as in that case there would be no industry or market. It is not a market failure for a company to buy stuff for its employees (faculty) and customers (students). That there are many libraries creates the market.

        Posted by David Wojick | Nov 19, 2012, 1:37 pm
  3. We looked at the math on the suggested savings for schools using eTextbooks back when Apple announced their big iBooks textbook initiative here:
    http://scholarlykitchen.sspnet.org/2012/01/31/apple-and-textbooks-a-second-look/
    Essentially, it boiled down to a break even on costs for the books themselves (replacing a $75 print book that lasts 5 years with a $15 eBook that you have to buy anew every year), but with all the extra added costs of buying tablets/laptops, maintaining and replacing them, and infrastructure improvements (most classrooms have very few plugs for example), it’s unclear that this makes much economic sense.

    Still, this is a smart initiative by Amazon, much like a smartphone manufacturer offering enterprise tools for managing a company’s phones issued to employees, it seems a necessary part of trying to do business in this manner.

    It’s also another example of Amazon’s seemingly endless capacity for investment (another one is here, claiming that Amazon loses $1 billion per year on streaming video http://allthingsd.com/20121116/netflix-ceo-amazon-losing-up-to-1-billion-a-year-on-streaming-video/ ). It is becoming increasingly difficult for anyone to compete against Amazon, as they are able to continue to spend, spend, spend, without any pressure from Wall Street to earn any sort of profit:
    http://www.slate.com/blogs/moneybox/2012/10/26/amazon_profits_they_don_t_exist_but_the_company_keeps_on_keeping_on.html

    In any line of business where you’re earning healthy profits you always need to worry that a competitor will undercut you on price. But normally you can also have some confidence that they’ll be restrained in their price cutting by the need to maintain profits of their own. Amazon is totally off the leash in this regard. Wall Street treats it like a brand new startup that just needs to think about growth and can find a viable business model later. Which means that if they come after you, you have no recourse. Your profits are going to shrink, and your investors are going to punish you for it but Amazon’s profits don’t necessarily need to grow proportionally. They just need to show they can poach your market share.

    Posted by David Crotty | Nov 19, 2012, 10:44 am
    • I agree with the economics of print versus eBook pricing, but my feeling is that as the price for devices continues to drop, we can expect that the devices will move more rapidly into the academic market. While I agree about the $15 eBook-price point being economically unsustainable for the districts or universities, I posit that eBook prices at $15 might not make sense (from the purchaser perspective) as a price point for the digital content.

      If you take the music industry as a guide, the price point for a single track on a CD used to be upwards of $1.50 per song, with iTunes, that price dropped to $0.99. Now with services like Spotify, that price could be less than $0.01 (presuming one is a frequent user and if one pays at all). If one presumes the same economic pressures will drive the price per element of content from its current price of $75 per book, say for a dozen chapters, the price per chapter unit would be ~$6.25, that if the publishing world faces the same price pressure that the music industry has, we could be looking at an effective rate per student chapter of $0.05-0.06.

      The real question isn’t whether those economics would work for schools or students, it’s whether that would work for publishers. This would argue for scale and market power. Publishers will need to navigate some difficult times in this market. Publishers will need to bring significantly more added value that yields more successful outcomes for the end-users in order to command premium prices

      Posted by Todd A Carpenter | Nov 19, 2012, 11:45 am
      • The price of the device is one matter. But there’s still an enormous infrastructure that needs to be built around them (and will likely need to be built for the future, regardless of any particular device). You have to create a system that gets the devices into the hands of students. You have to have a system that allows for lost devices or broken devices. You have to have a full-time administrator or IT staff (insourced or outsourced) to keep the devices working. You have to physically change the nature of the classroom to allow every student to have access to electricity as you can’t assume a bunch of 3rd graders are going to remember to charge their devices each morning. The costs go well beyond the actual tablet or eReader itself.

        And your other point is spot-on and it also goes beyond just the publishers to the authors themselves. Streaming services like Spofity remain unproven, and artists are increasingly wary of them as they seem to offer little if any revenue (latest example here http://www.npr.org/blogs/therecord/2012/09/26/161758720/how-musicians-make-money-by-the-fraction-of-a-cent-on-spotify ). They seem like a great bargain for the user of content, but may be economically untenable for the producer of content.

        And that gets back to a bigger argument, one that was quite controversial here a bit back (http://scholarlykitchen.sspnet.org/2012/07/26/review-and-discussion-free-ride-how-digital-parasites-are-destroying-the-culture-business-and-how-the-culture-business-can-fight-back/ ), the idea that content, whether music, books or whatever, is becoming a valueless commodity that exists only to sell devices and services for tech companies. I personally don’t want to see our educational system become just another conduit to keep money flowing into the pockets of Silicon Valley venture capitalists.

        Posted by David Crotty | Nov 19, 2012, 12:58 pm

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