Why Amazon Won't Give You Free Digital Copies of Your Movies and Books

 

Amazon announced Thursday morning that any customer who purchases a CD will receive a free digital copy of that album. The offer is valid not only on present and future purchases, but on any one of 50,000 CDs purchased from the retailer since 1998. Could the same offer soon be extended to movies and books?
The answer, unfortunately, is probably not.
The first issue is cost. Sarah Rotman Epps, a senior analyst at Forrester Research, says Amazon has sold so many books they couldn't feasibly afford to subsidize e-book copies of past (nor, for that matter, future) purchases; the number of CDs Amazon has sold is, by comparison, marginal. Plus, "publishers have learned the mistakes of music companies and aren't giving away their revenues so easily," says Epps. "If Amazon wanted to do something like this for books, publishers would make them pay through the nose." Although DVD and Blu-ray sales are also marginal compared to books, they constitute a substantially bigger market than CDs, and will remain that way.
But the second, and primary, reason is lack of competition. Amazon is fighting desperately to get consumers to think of its website — and not Apple's iTunes — as the go-to destination for music purchases. Over the past two years, Amazon has aggressively discounted popular album releases, going so far as to offer Lady Gaga's Born This Way album for $0.99 download when it was released in May 2011. The offer was so popular that Amazon's servers were stalled for most of the day.
However, it's possible that customers may one day be able to purchase physical and digital copies of books and movies in a single bundle. For a few extra dollars, you could, for example, purchase a hardback that has a validation code for an e-book copy on the back. Indeed, Epps says Forrester has made that recommendation to publishers many times. The firm's research shows that though readers enjoy the portability and convenience of e-books, many would prefer to engage with a print book at home. A studio-backed system called UltraViolet is advocating for a similar system for video, enabling consumers to get automatic access to digital, cloud-stored copies of any TV or movie purchased in hard form.
So what's holding them back? The entertainment industry is moving ahead, but publishers simply move more slowly.
What's perhaps more interesting about the announcement is just how far Amazon has shown it's willing to go to beat Apple. "Giving away products to customers is a dangerous game because there is no where to go from there, your margins are already squeezed so thinly," says Epps. "It's amazing shareholders have been so tolerant of thin margins on Amazon's performance, and moves like this don't help that."