Amazon's second foray into consumer electronics is a slimmed-down revision of its first. The Kindle 2 ($359, shipping Feb. 24) is a portable, networked electronic book reader. Or perhaps it’s a kind of tablet computer that happens to be obsessed with books, magazines, and newspapers. Regardless, it's a powerful portent.

 

We know that newspapers are dropping like flies due to drops in both advertising revenue (bad economy, shift to online spending, failure of print media to deliver, craigslist) and subscriber revenue, which includes readers turning to non-traditional media, like blogs and online-only publications. But many former readers of print publications haven’t abandoned those periodicals; they’ve switched to reading the same publications online that they used to read on dead trees, and advertisers pay far less for their eyeballs there. Even with the cheaper cost of publishing online, a great number of online readers for primarily print publications can’t bridge the difference in revenue from lost subscribers. 

 

Is the Kindle (and its ilk) the bridge from commercial print/digital hybrids to sustainable all-online publications? It's certainly a bright spot in the future for the continued persistence of both readers of perishable content and for subscription revenue.

 

The original Kindle, released about 14 months ago, was the first time Amazon stepped across the divide that separates manufacturer from retailer and wholesaler. I didn't much like the original Kindle, because it felt like a prototype for the real book reader Amazon hadn't yet built. It was awkward to hold, type on, or navigate, but the screen display was something wonderful. The Kindle 2 improves on the design and the display; I have not yet had one in my hands, so I’m relying on reports from colleagues who have handled a Kindle 2, and news outlets.

 

Amazon thought the missing piece in creating an ebook reader people would salivate over was having nearly instant access to a huge library of titles. That's apparently not offered the tipping point necessary, although the company may have sold as many as 300,000 Kindles. (The company releases no sales figures about the Kindle, nor the number of units of books and subscriptions sold for it, nor any revenue information. See a note at the bottom for my logic.)

 

Unlike other ebook readers, such as Sony's modestly successful Reader (over 200,000 sold, the company has said), the Kindle and Kindle 2 include a constantly available cellular data network connection. Sony's device and others have to sync over USB with a computer, tethering them for whenever you want to update the device.

 

The trick behind Amazon's arrangement is that the etailing giant struck a deal with Sprint Nextel that embeds a cell data modem that allows you to access and download books in most places you live, work, and travel in the U.S. (The modem is something like the tiny Wi-Fi radio found in iPhones and nearly all laptops, but which uses frequencies for which cellular carriers own exclusive rights, or licenses.)

 

Sprint operates a third-generation (3G) network in all metropolitan areas, airports, conference centers, and elsewhere, that can hit slow DSL speeds over 1 Mbps. In smaller cities and towns, Sprint uses a second-generation (2G) system that provides downloads at 50 to 100 kilobits per second (Kbps).

 

Amazon uses the Sprint data connection solely to deliver books and other content to the Kindle. If you’re a good explorer, there’s an experimental menu on the Kindle that lets you bring up a Web browser, too, although due to the slow refresh rate and other factors, browsing the Web on a Kindle isn’t optimal. The Kindle is not a cell phone; it’s mobile device that happens to use Sprint instead of, say, Wi-Fi as a conduit to the Internet.

 

It’s been reported, but never confirmed, that Amazon pays Sprint a small fee for each book or other item delivered to a Kindle. That fee isn’t disclosed or broken out; it’s built into the price of each item a Kindle owner buys.

 

Amazon's format for delivering books to the Kindle, a digital rights managed and proprietary method that deters piracy, is extremely compact. A full-length novel might take a few tens of seconds, if that, over a 3G network; over their older 2G system, it's a couple minutes at most. (I’m not a fan of DRM, because it restricts common rights one has for personal use of media purchased in physical form, like books. In this case, buyers know they’re buying a book that cannot be played on any other device. The Kindle can be loaded with books and documents that are in certain open formats, but those have to be added from a computer, and can’t be downloaded over the cell network.)

 

While you might be happy enough to download books at your convenience via a computer and a USB cable, instead of gratifying yourself instantly on the road—I guess we’ll see if Kindle’s gimmick ultimately is the hook it’s meant to be for instant gratification—the subscription portion of the Kindle is most interesting for the future of something else: newspapers. .

 

The Kindle's persistent network connection coupled with "push" delivery of new content means that subscribers to blogs, newspapers, and magazines receive the latest issues or posts as soon as they're available without visiting a site or performing a download information. In that sense, the Kindle becomes the mythical electronic ink newspaper of the future.

 

Thirty-one newspapers, 1,100 blogs, and 22 magazines currently participate in Amazon's subscription service. The Seattle Times charges $6 per month for its Kindle edition.

 

Amazon has released no statistics about subscriptions, either, so we don't know if the Seattle Times saw $500 per month in additional revenue over the 14 months since the first Kindle was released or $500,000.

 

The latter would be very interesting indeed. If a publication (whether having a print edition or not) could attract thousands of new readers to an inexpensive readable portable edition via the Kindle, that's the missing piece that could bridge a publication like the Seattle Post-Intelligencer from flattened fibers to feisty photons.

 

It's far too early to know if the Kindle 2 will have breakout sales; Amazon's been out of stock for months with its first model, so there's both pent-up demand, and a lot of new excitement about the devices smaller size and interface improvements.

 

But as I said, the Kindle is just a portent. The extremely "dense" screens now found on smartphones, which have nearly 200 pixels per linear inch, along with higher contrast than earlier generation devices make onscreen reading rather decent.

 

Imagine a 10-inch diagonal screen on an iPhone (whether or not it makes calls) or a Kindle with an option for an external keyboard, and the future of online news might be right in front of us.

 

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Note on Amazon Kindle sales: Amazon provides little guidance. CEO Jeff Bezos said at the Kindle 2 launch event that of the books Amazon sold that are available on the Kindle and in print, 10 percent of unit sales were in Kindle format recently.

 

Amazon stocks 230,000 titles in Kindle format. The Kindle is for sale in the U.S. only currently due to the data network component. Amazon sold about $3 billion in books in the U.S. in 2008 (a number backed out from its SEC filings and other sources), about 10 percent of the dollar volume for books, according to the Book Industry Study Group, an industry trade organization.

 

That's maybe 200 million books. If the 230,000 Kindle titles represent 20 million sales in all formats, then 2 million books would have been sold to Kindle owners.

 

My take-away is that Kindle owners are likely to buy several books since they bought the device, so 2 million books is probably 200,000 to 300,000 Kindles.

You can use the numbers I provided to come to your own conclusions. If Kindle readers are, on average, voracious, Amazon sold fewer units. If they're on average not that book-consuming, then Amazon sold more. Or Amazon's 230,000 titles could represent 50 million books in all formats instead of 20 million units.