You’ll very rarely see me talking about new technology purchases as money-savers. Being a geek myself, I certainly succumb to the Geek Tax, buying new toys when they are expensive and watching them drop in price for years after. Personal Finance Wisdom, this is not.
I was struck, then, by Brett Arends’ recent Wall St. Journal article, which asks if Amazon’s new electronic book reader, Kindle, currently retailing for $359, might be a money-saver. Arends looks at two areas where you could save money: on the cost of the books you read, and on mobile wireless Internet access:
First, you usually pay less for books purchased on the Kindle than you do for those printed on paper and delivered to your door. In a completely unscientific survey, I picked an array of 10 popular books and compared their Kindle price with that of the paper version bought from Amazon. These included Fareed Zakaria’s The Post-American World, Ken Follett’s Pillars Of The Earth, Elizabeth Gilbert’s Eat, Pray, Love, to Dan Brown’s The Da Vinci Code. Kindle versions worked out on average about $6 cheaper. (And, of course, you get them instantly.)
On this point, though, he notes, “at a saving of $6, you’d need to buy 61 new books to earn back the $365 cost of the Kindle” (note, the price of the Kindle was slightly higher when he wrote earlier this week). But, he claims, there’s also mobile Internet service included:
if your mobile Internet needs are pretty basic – such as checking email and news, that sort of thing – you can do that too. Most data plans from a mobile network start at about $20 a month.
How does he figure this all adds up?
So if you need rudimentary mobile Internet and you typically buy two new books a month, getting a Kindle could save you $32 a month. Even when you factor in lost interest, that’s a payback period of 12 months on the $365 cost.
Buy two books a month on Kindle instead of on paper, and you’ll save money. Sounds good — but is he right?
I have a number of quibbles with this analysis — I think Arends gets both parts of his assessment wrong, in different ways.
As a book platform, I think Arends understates the potential savings of the Kindle dramatically. For example, he compares the $24.75 price of the new hardcover book Nixonland with the same book delivered through Kindle for $9.99 — a savings of $14.76 for one book. That assumes, though, that shipping the hardcover book is free. Amazon certainly offers discounted or free shipping programs, but they require an Amazon Prime subscription for $79.00 a year, or Super Saver shipping, with a $25.00 minimum purchase (Nixonland would fall just under that).
Assume for a second that you were not a Prime member and did not want to buy anything else with Nixonland. You would pay at least $3.99 for standard shipping (about 3-5 days for delivery), or $11.98 for second-day air, or $17.98 for next-day air. On the Kindle, you’d pay none of those costs, you wouldn’t need a Prime subscription, and you wouldn’t need to add anything else to your order to get Super Saver shipping. Rather than saving $14.76 a book, you’d instead save between $18.75 and $32.74 for one book. Looking at Arends’ average savings estimate of $6.00 a book, including shipping increases that savings to between $9.99 and $23.98 a book (assuming the Nixonland shipping costs are representative, and that you shipped each book you buy individually, which hopefully you wouldn’t!). Best of all, Kindle delivery — nearly instant — beats the delivery time of any of the shipping options, potentially by as much as a week.
There are downsides of buying books on Kindle, though: you can’t share them with others unless you’re willing to loan out your Kindle itself; storage on the device is limited; and more sentimentally, the feel of a well-read, dog-eared, coffee-stained book certainly isn’t the same on a slab of electronics. But let’s continue as gimlet-eyed rationalists.
For mobile Internet access, unless I misunderstand the description on Amazon’s site, the Kindle does not give you a free web browser. Instead, you have to pay monthly subscription fees for the blogs you want to read. For instance, O’Reilly Radar, where I am a contributor, is available for free online, but costs $0.99 a month to read on Kindle. The excellent blog Boing Boing, co-written by Wesabe advisor Cory Doctorow, is $1.99 a month through Kindle. If you read around 20 blogs, you’ll quickly swamp the $20.00 monthly savings that Arends claims, compared to mobile data plans on other devices. If I subscribed to all 190 feeds I read in Google Reader for free online, it would cost me at least $188.10 a month on Kindle — assuming they were all available on Kindle, which they aren’t. So I’m not buying the “mobile Internet is a cost savings” argument for Kindle. [UPDATE: see the comments for more on this.] For the purposes of argument, I’ll count this as a wash, although really I think you’d do better not paying for blogs that you can read free online.
Adding these up, it looks to me like if you normally order books using standard shipping, you’ll need to order 36 books — three a month — before you start saving money with Kindle. If you usually use second-day air shipping, you only need to buy 20 books to save money with Kindle. If you use overnight shipping, you only need to buy 11 books before you start saving — less than one a month. (Again, these numbers assume you are not an Amazon Prime member, and that you’re shipping books individually.)
Is Kindle worth it, then? You can certainly use your ordering history on Amazon to decide for yourself, but the numbers look very good to me. I also believe that wireless delivery of products like books has a real environmental benefit: compared to the carbon cost of shipping a book to you overnight, Kindle is potentially a huge savings of plane exhaust.
All told, Kindle looks like that rare tech device that avoids the Geek Tax and offers a number of economic and other benefits. For myself, I find the first version of the device inelegant, and I’ve had a hard time getting excited about buying one. I do buy and read a lot of books, though, and would love the cost savings it appears Kindle offers. I’ll probably wind up buying one for that reason, and for the environmental benefit I’m guessing wireless delivery would offer.