Kindle 2: Where are you?

Ever since rumors--and some alleged photos--of Amazon's next-generation Kindle digital reader hit the Web late last year, I keep getting e-mails from readers asking me for buying advice. Here's a typical note:

Hi, David:

Around Christmas, I ordered the Amazon Kindle, but as I'm sure you know, it's back-ordered for a couple of months. Then I saw your article on the Kindle 2 coming out soon and I'm not sure what to do. Should I cancel my order? If the new Kindle 2 comes out right after I get mine, will I be able to return it?

Thanks for your help,

Susan

I understand where Susan's coming from. The Kindle's $359 right now--a decent chunk of change in a tight economy. And nothing sucks more than getting your timing wrong on the release of the next version of a product, particularly when you're dealing with a first-gen device like the Kindle that has room for improvement.

It's hard to say exactly who's to blame for this little mess, but any way you look at it Amazon has an interesting problem on its hands. If the company confirms that a new product is on the way, it potentially kills sales of the existing product. And if it puts out a product without warning its customers that a new product is coming, it risks alienating its customers. (Not that scenario B hurts Apple too much, but Apple has set clear rules and trained its customers to accept its terms of engagement).

Give Amazon credit. Until now, it's played its hand with a true poker face. However, despite having been very tight-lipped about its product plans and the number of Kindles sold, last summer a number of bloggers came out with articles confidently predicting that Amazon was about to release a new Kindle. They had it on good authority.

For example, on August 25, 2008, Peter Burrows posted a piece on the Businessweek Tech Beat blog entitled "Here Comes Kindle 2.0." He wrote:

I can confirm what McAdams Wright Ragen analyst Tim Bueneman is saying--that Amazon.com plans to unveil a larger-screen model of its Kindle e-book player, aimed at students, in the coming months. And I'm also hearing some details, similar to TechCrunch in July....about an upgrade of the base model, that I'm told is coming in September...my sources say the new version is significantly thinner, has a better screen, is more stylish, and includes fixes to some of the user-interface annoyances with the first version. One person that has seen the device says it is as big a leap from its predecessor as the iPod mini was from the first iPod. "They've jumped from Generation One to Generation Four or Five. It just looks better, and feels better," says the source.

Well, we're almost in February and there's still no sign of any new Kindle. That doesn't mean Burrows and other bloggers were totally wrong about the Kindle 2. You can get parts of a story wrong--like the release date--and other parts right. And the beauty of it all is that no one really remembers sketchy reporting these days unless some jerk goes ahead and quotes your stuff in a column five months later.

Of course, regardless of how accurate--or inaccurate--anything really is, the problem is that the information is out there. Someone like Susan who's looking to buy a Kindle goes ahead and keys "Amazon Kindle" into Google and, lo and behold, on the first page of the search results is a story called "Amazon's Kindle 2 leaked," written by the jerk at CNET who also writes this column. And so Susan starts poking around and realizes there's a lot of information out there about a new Kindle, and from the looks of it, it's going to be significantly better than the original. (Making a jump from "Generation One to Generation Four or Five" seems a wee bit optimistic, however). And then I end up with an e-mail in my inbox.

This all happens pretty frequently. There's speculation about new products and price drops all the time. Most companies keep a tight lid on news to protect sales of their existing products. But some companies purposely leak information to create buzz for their new wares.

In this case, it's hard to say just what transpired (next time I talk to Jeff Bezos, I'll ask him). Some stories claim that Amazon was ready to release a new Kindle for the holidays, then pulled back at the last minute. Fine. But it seems odd that the company would then plaster the device on its homepage and encourage people to buy it even when it was out of stock and there were rumors of a new device coming out. To avoid discounting, Apple and other smart businesses usually try to clear the channel of as much old stock as they can before sweeping in with the new stuff. But Amazon didn't seem to have any stock--or certainly not enough of it.

Some pundits are arguing that Amazon is pulling the old people-want-what-they-can't have routine to hype the Kindle (Nintendo has been accused of the same thing with the Wii). But I've had enough people--and plenty of nontechie people--ask me about the product that I would bet demand is truly out-pacing supply and that Amazon, after saying it misjudged demand for the product initially, misjudged it again--or probably just didn't anticipate Oprah's endorsement or the impact it would have on the product.

So, what's Amazon going to do?

Well, Amazon is a very customer-centric company and won't risk alienating its customers. So it's going to make sure that if you ordered a Kindle during the holidays, you're going to get it. Then it's going to wait until demand starts to wane a bit. And then it's going to announce that a new Kindle is coming. (Or maybe it's two new models, like some of the articles have speculated).

The Kindle 2--or whatever it's called--may look identical to the alleged Kindle 2 in the leaked pictures. And it's probably going to be better than the original Kindle in a few key ways; it will be zippier, the interface will be improved, and the buttons will be redesigned to avoid accidental page turns, though reviewers will still find things to complain about. As Sony discovered with its new PRS-700 Reader, you can sometimes take some nice steps forward while taking one big step back. (And if the photos are real, I'm sure Amazon has noted some of the critical comments that certain readers have made about the design of the "leaked" product).

Anything new and improved often costs a little more. So, to make sure no one's too disappointed, Amazon could price the new Kindle at $400 (the launch price of the gen-one Kindle) and drop the price of the original to $300. If you happen to have bought the old Kindle within a month of the announcement, you'd be offered the option of returning that Kindle or taking some sort of rebate on it--or possibly a credit for buying books in the Kindle Store. (I could see Amazon throwing a whole bunch of recent Kindle purchasers some sort of store credit for books).

The other serious possibility is that Amazon has already discontinued the original Kindle and will send out the new Kindle 2 to anybody who's ordered it--whether it be last month or now. That would be the simplest thing to do, so long as the new one turns out to be a nice upgrade.

When's this all going to happen? Well, with the Kindle only being "sold out" and not back-ordered for 2-3 months anymore, I think we're starting to hit the wane phase (relatively speaking), especially with consumer spending falling off a cliff. So, I'm guessing March. Valentine's Day would be a potential target date, but that seems a little too close.

Of course, everyone could accelerate the process by simply not buying any Kindles until Amazon announces the Kindle 2--or offers customers some clear guidance as to what it will do should you buy a Kindle today and a new model comes out two or three months from now.

What do you guys think? Will Amazon choose to gradually phase out the original Kindle? Or will it end up suddenly shipping everybody who ordered a Kindle for the holidays (and now) a new Kindle 2?