If The Kindle is Sold at Break-Even, Why Doesn't Amazon Sell ePub?

Amazon claims that it makes no money from the sale of Kindle eReader hardware.

Looking at the prices of eink devices at wholesalers, this looks broadly accurate. They do seem to be selling at around wholesale cost - customers also get Amazon's fabulous support, free software updates, and high quality manufacturing.

Yet there is a curious anomaly. Why aren't Amazon selling ePub books?

Terminology

A quick diversion into the terminology used in this article.

• eReader - the physical hardware. Kindle, Kobo, nook, etc.
• eBook - the electronic file containing the words & pictures. ePub, Mobi, PDF, etc.

Background

There are, broadly speaking, two main formats for ebook - ePub and MobiPocket. Think of them like the difference between 8-Tracks and cassette tapes - they both hold music, but play on different system.

ePub works on just about every eReader on the planet - with the notable exception of the Kindle.

MobiPocket (or Mobi, for short) only works on the Kindle⁰.

Wikipedia has a fairly comprehensive comparison of which device can handle which format.

So, we have a problem. The books you buy from Amazon can't be read on your Sony, Kobo, Nook, or Generic eReader. Well, they can, but you have to remove the DRM, covert the book to the ePub, and hope that everything works ok.

What a pain in the arse.

What Would Happen If...

Now, I'm not suggesting that the Kindle should be able to read ePub books. Obviously, it's technically capable of doing so - but it would mean that Amazon customers could compare prices with other retailers and start to leave the Amazon ecosystem.

What I'm suggesting is that Amazon should say "Buy this ebook for your Kobo" and deliver an ePub to those poor, unfortunate souls who haven't been blessed with a Kindle.

There are lots of statistics regarding eReader share. Some suggest that Amazon have a ~47% share of the eReader market in the US whereas the Kobo eReader has a 46% share in Canada, and 50% share in France.

Let's say that the Kindle has a worldwide share of 50%. Amazon has two options:

1. It can aggressively pursue that market share by producing more innovative, cheaper hardware, and hope to convert users to the Amazon flock
2. It can accept that some people don't want its hardware and start selling books directly to those users

Amazon claims that it makes more money from eBook sales than hardware. So why doesn't it expand its market to the 50% of eReaders which are currently not served by its store?

At the moment, customers with Kobo, nook, and other eReaders can compare prices across a number of eBook stores. What would happen if they could add Amazon to the list of shops they could compare with?