Amazon Kindle Features Hint at Future Direction

Even before Amazon.com announced its third-generation Kindle on July 28, speculation abounded about what new features the online retailer would add to the device to better compete against the likes of Barnes & Noble's Nook and the Apple iPad.

On the furthest edge of that speculation, some suggested that Amazon would introduce multi-touch capabilities or even a color screen. But the unveiled Kindle demonstrates Amazon's continued focus on the basic e-reading experience: The screen has 50 percent better contrast; the body is smaller and lighter; the storage capacity has doubled; and new bells-and-whistles have been kept to a minimum.

Both the third-generation Kindle, which retails for $189, and the new Kindle Wi-Fi, which retails for $139, will ship Aug. 27.

Now the question becomes: What's Amazon planning next? Fortunately, the new Kindle comes with a handful of "experimental" features, which in turn could provide a few clues.

"The experimental category represents features we are still working on to enhance the Kindle experience even further," reads a note on Amazon's Kindle page. "Try them out, and let us know what you think."

Those features include Read-To-Me, a text-to-speech feature that can "read English newspapers, magazines, blogs, and books out loud to you, unless the book's rights holder made this feature unavailable." A Voice Guide can read aloud the Kindle's menu options, home-screen content listings and item descriptions.

Other features include the WebKit-based browser, which is apparently free to use over Wi-Fi, and the ability to listen to music and podcasts. "Transfer MP3 files to Kindle to play as background music while you read," suggests Amazon's note. "You can quickly and easily transfer MP3 files via USB by connecting Kindle to your computer." Amazon also offers free access to Wikipedia.

Is Amazon experimenting with making the Kindle more of a tablet PC? Or are these new features merely a way of augmenting the basic e-reading experience?

Both Amazon and Barnes & Noble, which produces the rival Nook e-reader, have been augmenting their devices' operating systems over the past few months. The Nook now offers Android-based games, for example, while the newest Kindle software allows users to share select passages from e-books via Twitter and Facebook.

But analysts acknowledge that Amazon's greatest threat in the category could be the Apple iPad. With that device's ownership base recently estimated by one analyst to exceed that of the Kindle's, and other tablet PCs in manufacturers' pipelines, Amazon could very well intend to build out the Kindle's functionality—via a browser and other Web-centric features—in a way that appeals to bibliophiles on the fence.

However, should Amazon decide to buttress the Kindle's future editions with additional features, it runs into another issue: cost. After Barnes & Noble decided to radically reduce the price of its Nook e-readers in June, Amazon found itself caught in a spiraling price war; its new Kindle's price matches that of the Nook, but the Kindle Wi-Fi undercuts the similarly stripped-down Nook Wi-Fi by $10.

"With these cuts, eBook readers from Barnes & Noble as well as Amazon now are priced at about the break-even level with their bill of materials and manufacturing costs," William Kidd, director and principal analyst of financial services for iSuppli, wrote in a June 24 statement following price-dips for both the Nook and Kindle. "With zero profits on their hardware, both these companies now hope to make their money in this market through the sale of books."

Adding more tablet-like features has the potential to drive the Kindle's per-unit costs to unacceptable levels. In that case, Amazon may feel inclined to pursue its current strategy: battle the iPad and competitors such as the Nook by offering a more refined e-reading experience.