Amazon Turns Kindle Into a Platform

Amazon (s AMZN), displaying a sense of urgency that is perhaps driven by the pending launch of Apple’s (s aapl) tablet-style computer, is turning its Kindle device into a platform. The Seattle-based company has announced that it will allow software developers to “build and upload active content” and distribute it through the Kindle Store “later this year.” Amazon will be giving out a Kindle Development Kit that will give “developers access to programming interfaces, tools and documentation to build active content for Kindle.” The company will launch a limited beta effort next month. From the press release:

“We’ve heard from lots of developers over the past two years who are excited to build on top of Kindle,” said Ian Freed, Vice President, Amazon Kindle. “The Kindle Development Kit opens many possibilities–we look forward to being surprised by what developers invent.”

I would also like to see what developers come up with. An Electronics Arts (s erts) executive in Amazon’s press release says that company is looking to develop games for the Kindle platform. I wonder how much can you do with the limited hardware that is a Kindle. Screen refresh rates are low, the inbuilt processor is puny and of course, no color. Unless Amazon is planning to launch a beefier and color version of the device, game developers are unlikely to be able to create great experiences on the Kindle.

The New York Times, which it seems was exclusively briefed before the news announcement, has some more details on Amazon’s plans:

Ian Freed, Amazon’s vice president for the Kindle, said there would be three different categories of active content: free applications, one-time paid applications, and applications that require a monthly subscription. Kindles that have already been sold will be able to run these programs once Amazon has remotely upgraded their software.

Developers will get to suggest their own prices for their programs, but they will have to shoulder the cost of wireless delivery at a rate of 15 cents a megabyte. After those costs are covered, developers keep 70 percent of the revenue from the sale of the app, while Amazon keeps 30 percent. (Remember that unlike smartphones, the Kindle does not require a monthly wireless fee.)

What I suspect will happen is that a lot of content-focused apps are going to be created for the Kindle platform. Amazon has been enjoying amazing success with the Kindle, though it’s still not clear how many of the devices the company has sold. Forrester Research estimates that nearly 3 million e-readers were sold in 2009, but it doesn’t say how many of them were Kindles. According to some estimates, the Amazon Kindle will bring in $310 million in revenue for 2009 and $2 billion in 2012. In order to attract developers, the company needs a lot of Kindles in the market. Perhaps that’s why Amazon is trying to tempt consumers by allowing them to try its Kindle and return it if they don’t like it.

My initial skepticism aside, Amazon is making the right move by opening up the Kindle. I’m sure even the company, like many others, does have to be worried about Apple’s tablet — which could quickly become a competitor for single-purpose e-readers. Like the Kindle, the new tablet is also aiming to become an all-purpose content consumption device. As I wrote back in March 2009:

“First of all, people are looking for a cheap, connected Internet device that is ‘not a laptop.’ I was recently watching an interview with Amazon’s Jeff Bezos on ‘Charlie Rose’ in which he talked about the Kindle being flexible enough to encourage new kinds of media consumption, including multimedia books and newspapers with immersive content and interactivity. I think he is spot on — and just from that perspective, Apple has to be thinking really hard about this looming opportunity.”

Yesterday, Amazon had announced that it would be giving away 70 percent of its digital content sales to the owners of the content, clearly a sign that it wants to attract and retain the content industry. The New York Times adds:

Apple representatives have been in New York this week talking to the largest trade publishers, according to industry executives. They said Apple had proposed an arrangement under which publishers would get to set the price of their books, with Apple taking a 30 percent commission and the publishers keeping the rest.

“There’s a battle going on for what is the value of a digital book,” said a publishing executive who did not want to be quoted by name because of the delicacy of discussions with Apple. “In that battle, Apple has put an offer together that helps publishers and, by extension, authors.”

There you have it — the reason for Amazon’s sense of urgency.

Related Research from GigaOM Pro (subscription required.):

* The Evolution of the e-Book Market

* Irrational Exuberance Over e-Books.