Oprah Winfrey has appeared in this blog two times in the past, once in relation to my mother in-law and a second time when announcing Craig Woll joining us as an occasional blogger. Although intentionally rare, I think it's finally time for a third appearance.
Earlier this week Amazon announced it's latest version of the Kindle. I've been intrigued with the device for several months, and this new version may just tip me toward buying one. The ability to hold 1,500 books, free wireless download of new books in seconds, being able to have an electronic version of my favorite newspapers waiting on my device each morning. Sounds appealing and environmentally friendly.
Amazon Inc. is announcing a new version of its Kindle e-book reader on Monday. And, in a sign that the electronic book is gaining clout in the publishing world, Amazon is also expected to say it has acquired a new work by best-selling novelist Stephen King that will be available exclusively, at least for a time, on Kindle.
Before I get to the impact of Oprah, let's take a look at some of the production issues that have impacted the first version of the device.
The $359 Kindle, which allows people to read books in an electronic format, has been out of stock on Amazon's Web site since November, which meant it was unavailable over the crucial holiday shopping season. Now clues from the contract-manufacturing industry in China and Taiwan suggest the Seattle company may have been blindsided by demand for the book-size device and that it has since been ramping up production for the launch of its new Kindle.
The maker of the Kindle's special screens, Taiwanese manufacturer Prime View International, says the Kindle shortages came from Amazon's conservative sales forecast for the device. Prime View adds that Amazon is now trying to avoid repeating the current shortage by asking it to pump out more screens, which it is now doing in case orders increase suddenly.
This is not a small business, although Amazon refuses to disclose specifics.
Citigroup Inc. analyst Mark Mahaney estimates 500,000 of the devices have sold to date, based on data reported by Sprint Nextel Corp., the carrier used by Kindle users to download new books. He forecasts the product will bring Amazon $1.2 billion in sales by 2010.
Ok, I know. Get to the point already. So here's the impact of Oprah…
One factor that may have contributed to Amazon's supply problem was an Oct. 24 endorsement by Oprah Winfrey, who called her Kindle "my new favorite thing in the world." Ms. Winfrey's production company, Harpo Inc., says she wasn't paid for that endorsement, and chose to promote the Kindle on her own after being shown one by a friend.
The day of the endorsement, visits to Amazon's Web site were up 6% over the previous Friday, according to Experian PLC's Hitwise. Web traffic going from Oprah.com to Amazon.com increased more than 15,000%.
While Amazon had some warning about her endorsement — the company offered a $50 coupon to Oprah viewers — it would have required several months' lead time to ramp up production of the device and ship it from China, say analysts.
Now… how fast could Amazon's offshore contract manufacturers respond? How long did it take to communicate the change in demand, across time zones, ramp up production, procure additional containers to go on container ships, and then have those ships traverse the largest ocean in the world? And what would have happened if a glitch was found after those devices were on the high seas?
Aren't long supply chains fun? And more costly than you'd initially expect…