Or, why the Kindle cost $399 at launch.
What is Amazon’s most valuable IP?
How about a list of registered users who are guaranteed as willing to pay a premium price for a nifty gadget (I mean “service”) along with the exclusive privilege of buying more things from Amazon? Somewhere in Amazon’s database land, alongside all the details and purchasing history they already have for each customer, there’s a single bit called something like owns_kindle. Those bearing this mark are the ur-early-adopters, the loyalists, the customers with a vary large net future value. The marketers dream. Opt-in isn’t even an issue–what Kindle owner won’t be interested in special offers and exclusive deals for their special device? Where else are they going to go?
That one bit alone is probably worth another $400, making it the most valuable IP in terms of dollars-per-byte that Amazon holds. Even if they do a drastic price cut soon (and such price cuts will at some point be inevitable to sustain the market), even if they refund half of the difference to the early adopters, they will come away with super-sized smiles. -m
P.S. s/Kindle/iPhone/ and s/Amazon/Apple/ and this entire post still holds.
P.P.S. There is a pretty good play Apple could make here around an ebook reader. Tie it to the same wireless service plan that the iPhone uses, make books available through the iTunes store (including tons of Gutenberg/public domain content/creative commons for free), and put it on a very slick designed piece of hardware. But even in this case, it will initially sell for a premium price for the reasons above. Game on!