The new textbook size Kindle is out (officially it is Kindle DX).
The price is $489 – almost 25% higher than I predicted yesterday.
About 6 months back I did a net present value analysis of a Kindle purchase here at voluntaryXchange.
I’ve redone that analysis (and you can download the spreadsheet and play with the assumptions if you like).
There are a lot of variables in play here – a primary one being that we don’t know how much Amazon is going to be able to knock off the list price of textbooks. One of the articles I linked to yesterday suggested that Amazon would be able to easily knock off 1/3 of the price, but my simulations suggest that this won’t be enough.
The reason is that this interacts with the students willingness to resell their textbooks. Since students aren’t going to be able to resell their Kindle texts, the important comparison is the net retail price a student pays for a hardcover (after reselling), versus the list price of the text for the Kindle. One thing is clear: the Kindle books will have to be under that net price.
The thing is – a student controls that net price. Some resell everything and their net price is probably half of the list. If you keep your books, the net price is then the retail price of your text.
But … if you’re going to keep your books, a new element enters the picture – you have to keep your Kindle too.
The cool thing for this analysis is that those factors balance out.
So, say you’re a text-keeper. If you buy 4 conventional books a semester at $100, and Amazon prices the Kindle equivalents at around $50, a Kindle DX becomes a good buy if you use it for only a single academic year – even if you keep it and never use it again!
Alternatively, suppose you buy your $100 books, but you resell them for $50. Amazon will have to beat that net price of $50. But … because you’re text-reseller, you’ll probably have no compunction about reselling your Kindle DX too. The result is about the same: a Kindle DX is a good purchase if you’ll use it for two semesters even if Amazon prices their books just below the net price you’d pay for conventional texts.
The spreadsheet includes all the other details that financial professionals like to see: opportunity costs, discounting, salvage and so on.
But … the bottom line holds. There are two types of students – those that keep their books and will keep a Kindle too, and those that resell books and will resell a Kindle too. For either one, the purchase is close to a no-brainer if Amazon can knock off half the price of a conventional textbook.
The BIG IF for now is what textbooks Amazon is going to be able to make available. My guess is that they are going to start with the standard general education classes. These are probably filled with resellers that might put downward pressure on the list price of a new Kindle DX. The alternative is graduate students – particularly Ph.D. students. These are the book keepers, and their books are often high price and low margin in traditional formats. Publishers like Wiley may leap at the chance to get out of the paper text market.