Tricia Duryee interviews Amazon CEO Jeff Bezos over at All Things D and Jeff shares  Amazon’s unique perspective on pricing:

We do not like the razor and razor blade model, where you lose money up front and then somehow make it up on the backend. We also do not like the other model, where you make a lot of money on the device, because it doesn’t follow our approach.

If you make a lot of money on the device, I believe you haven’t earned your money on it yet, and then you’ve incentivized them (the customers) to stay on the upgrade treadmill that I mentioned today.

This point about earning money on the device is quite interesting. It suggests to me that he’s trying to focus the Amazon team on providing ongoing value to consumers by intentionally leaving money on the table at the time of the initial purchase — we’re not making our margins up front, so we need to be sure we understand how to provide a long lasting product and the value we can deliver to customers over time to keep them using this device.

Apple, of course, doesn’t do this. They make sure to capture their ~30% margin up front. And yet Apple continues to deliver ongoing value (new apps, new content, and software product updates for older devices).

Given the complexity of Apple’s devices over Amazon’s, the trouble here is your iPhone or iPad often starts to feel sluggish as the years, apps, and software updates roll on. As a result you’re incentivized to upgrade for speed and perhaps one or two other major features (retina screen, better camera, etc).

But I bet Kindle 1 users are still pretty happy with their Kindle. The screen is still great for reading books. All the content available on the latest Kindle is still available to you. The built-in light on your case isn’t that much of an inconvenience over the just announced built-in Kindle light. Why upgrade?

It’s fair to say Apple is unique in the industry in the long term value they provide their customers. Most electronics manufacturers sell and move on, Apple doesn’t.

It’s also fair to say Amazon has been in a unique position having created a focused device that, by its nature, obviates consumer desire to upgrade.

So it will be interesting to see if this philosophy of disincentivising hardware upgrades in order to focus on providing long term value to customers will work with the additional complexity of the Kindle Fire (Android OS, more apps than just books, more media formats, more of a reliance on screen resolution, more interactions that need to feel responsive to your touch). Will software updates be enough to keep Amazon customers using their Fire? Or will they get on a 1 to 2 year upgrade cycle, despite Amazon’s efforts to keep them focused on content, not hardware.

Photo by Victor Blue for Wired.

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In that case, an act where I was rooting for Apple simply because I despise protectionist agendas and see video content owners as far more egregious in this area than music, which does not bode well for consumer access (and with the rhetoric on that one being that it followed “NBC’s decision to not renew its agreement with iTunes”, rather than a unilateral decision on Apple’s part to make this content unavailable).

But books. Man, I (yes, naively) expect Amazon to do whatever it takes to make every book available to me. To be a leader in access to knowledge. In that sense, the Google of the retail world.

So when Amazon intentionally makes unavailable an entire publisher—including most of their subsidiaries—that was a wake up call. And I immediately thought: boycott Amazon, let them know why. Buoyed further by the excellent outsider’s guide to the fight article from Charlie Stross. But, yesterday, Amazon capitulated.

What continues to be worrying about this whole tact is that they didn’t simply cease selling the eBook version of MacMillan titles, but the “Kindle Team” had the print versions pulled as well, which were not suffering from any pricing dispute. Scary stuff.

Short of having an open burning of Macmillan books, this feels oh so wrong to me. Am I overreacting? I feel Amazon has a responsibility to make the written word available to me. To leverage their reach to ensure that nothing is out of reach.

By selectively choosing what they carry, the expectation Amazon is now setting is that diving into their catalogue on a particular topic is not at all thorough. Meaning I should work on sourcing and considering writing from other sources now. Back to niche retailers who curate intentionally and with due consideration for the content rather than eliminate choice based on the almighty dollar.

Back to my take on the actions of Apple as compared to Amazon. NBC is just entertainment, which was distracting from the real issue: preventing access to knowledge and information hurts us. If Amazon had pulled Harlequin, I would have ignored this larger issue in much the same way I did with NBC. But the fact remains, whether it’s a cultural landmark, or a valued treatise, it should be available to us. (Not withstanding my disinterest in any of this eBook/online video content which is DRMed up the wazoo). And that’s what makes the comments following Amazon’s capitulation even more disconcerting.

There’s a lot of pro-Amazon drivel here about giving in to bad old Macmillan, that Amazon should fight for the consumer, and that a Macmillan boycott is underway. This is not a reasonable perspective. If Macmillan wants to price an eBook at $14.99, that’s their prerogative and the consumer has a choice of whether or not they want to purchase at that price. The same can be said about a song or sitcom but, on the other hand, they’re just not the same thing. The process of researching, writing, and publishing a book, be it fiction or non-fiction, does not correlate to a standard television program which also has far more ubiquitous and available distribution. I see books as being more delicate and, most importantly, Amazon has far more control over distribution than Apple does with NBC. The equivalent would be if your cable provider said they’re going to stop airing a channel because the channel wouldn’t provide them with Online or On-Demand content. The cable provider would of course be skewered by the press and by the people.

So let’s be mindful of what’s at play here and, as consumers, stay focused on the big picture. There are battles shaking down with new distribution models, where behemoths of industry are going to continue to fight to squeeze every last dollar out of their supply chain relationships. In the end, for consumers, the only thing that should matter to us is that we don’t lose access, whether due to pricing or licensing limitations.

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