Lesson No. 2: The service matters more than the device itself. Every time I dismiss the Zune, Creative Zen, or some other MP3 player as an also-ran, I get letters from loyalists who insist that their gizmo far outshines the iPod. Sometimes they're right—but what they miss is that the iPod isn't a standalone device. It's part of a music-delivery ecosystem, the most important feature of which is iTunes.
It's here that Kindle's rivals will find it hard to compete. Amazon is the Internet's master retailer, and the Kindle's killer feature is its convenience. When you buy a Kindle, it comes pre-loaded with your Amazon account info; you don't even need to enter your credit card number to buy any books. And then there are all those customer reviews and the amazing recommendations—not to mention the huge selection of popular, cheap titles.
How could anyone compete with that? Here's one idea: Pull down the restrictions. The Kindle's biggest problem is its "Hotel California"-content model: You can check out any time you like, but you can never leave. Because Amazon uses its own proprietary eBook format, every book you buy is tied to the Kindle (and other devices Amazon deigns to approve, like iPhones and iPod touches). Sony recently embraced the ePub document format, which—though it's still copy-protected—works on multiple devices. This lets you buy a book for your Reader but be assured that your library won't get deleted if you get some other gadget in the future. The ePub format also lets you hook into other sources for books—for instance, the Reader lets you borrow eBooks from your local library. Google just put 1 million public-domain books online—these will work on all devices that read ePub, which means everything but the Kindle.
I'd counsel Amazon's competitors to embrace openness even more. In particular, they'd be wise to let people trade eBooks. They could do this even while maintaining copy protection—you could authorize your friend to read your copy of The Da Vinci Codefor three weeks, and while he's got it, your copy would be rendered unusable. (I'd prefer if eBooks came with no copy protection—as is the case with most online music—but many in the publishing industry would never go for that.) Kindle's rivals could also get together to create a huge, single ePub bookstore. Publishers would have a big incentive to feed this store with all their books—if they provide books only to Amazon, they'd be helping to create a monopolist in their industry, and that's never good for business.
Will any of this happen? Perhaps I'm dreaming; it's been a long time since Sony's seen a hit gadget, and the new Reader could certainly end up as another failure. But the Kindle hasn't won yet. It's not too late to keep it from swallowing up the book industry.