The coming of Kindle 2.0

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As longtime readers know, I'm an unabashed Kindle booster.  I don't think it's for everyone, but for a subset of people like me--people who buy a lot of new books every year, so that the half-price books make it cost effective, people who spend a lot of time in transit, and people who travel a lot for work--it's a godsend.  But of course an ebook reader is only as good as the books available on it.  I opted for the Kindle in large part because Amazon was behind it, and I figured with their distribution capability, the Kindle was very likely to win the market shakeout.

As it prepares to launch Kindle 2.0, it looks like they're making great strategic decisions to increase their dominance of the ebook marketplace:

Amazon.com 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.

Many publishers have long feared that Amazon would persuade a major author to write for its Kindle on an exclusive basis. Although retailers such as Barnes & Noble Inc. have long published their own books, they have struggled to find distribution outside their own stores. But Amazon has already proven that it can sell as many Kindles as it can manufacture. Indeed, Amazon is working to overcome the supply problems that have plagued the device.

A lot of people in top management must have been biting their fingernails trying to decide how many of the new units to produce.  The major problem with Kindle 1.0 turned out to be too much demand; Amazon kept running out of the units, even over the crucial Christmas season.  This is the kind of problem you want to have--but if Amazon wants to decisively win the ebook wars, it needs to have (duh!) a lot of readers.

On the other hand, the market for luxury gadgets, no matter how useful and money-saving in the long run (for its target market, anyway), is not exactly robust right now.  They don't want to have a glut of the things either.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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