With the Apple iPad to be released in March, there is no doubt that Amazon is beginning to worry about how its line of Kindle e-readers will fare in the marketplace. However, are they worried enough to start giving them away to select customers?

A rumor was recently reported by TechCrunch that Amazon would be giving away free Kindles to subscribers of its Amazon Prime service.  Prime is a service of the online retailer that lets customers pay $79 a year for unlimited two-day shipping, and offers discounts on next day and same day delivery. This would be a follow-up to a very limited promotion that was offered recently to select customers that allowed them to buy a Kindle, try it out, and if they didn’t love it, get a refund for while being allowed to keep the device.

kindle-2Even if this rumor proves to be false, which it does seem a bit over the top, it brings up some very serious questions about what e-book manufacturers are going to do to win customers in an increasingly crowded marketplace.  This year’s Consumer Electronics Show (CES) was swimming in them, and since the show closed, LG has announced that it will be releasing a reader possibly by April of this year.

Giving away Kindles could be a risky proposition for Amazon.  As I noted in a recent post that asked why e-readers are so expensive, there is a lot of free content out there, and Amazon could give these away and never see one cent in purchases as people satisfy themselves with the free materials.  However, Amazon Prime customers, which I happen to be one, tend to be fairly loyal customers to the online seller because we have something invested with them to get as much out of that subscription fee as possible.  Without any shipping attached to the sale of e-books though, would we still care to keep purchasing e-books from them?

I think a far more likely scenario might be offering heavily discounted Kindles to Amazon Prime subscribers.  Amazon could recoup its manufacturing costs, it would swell its installed user base to help them impress publishers and they wouldn’t have to worry about us actually purchasing any books since they wouldn’t be out any money.  Also, if the company did it in the near future, as opposed to down the road some, it could help clear out some inventory before the inevitable release of the Kindle 3.  Let us not forgot that the Kindle 2 released on Feb. 9th, 2009, so it just passed the one year mark.

So does Amazon need to get more Kindles out into the marketplace?  Yes.  But does it need to give them away to do so?  Doubtful, but offering them at a reduced cost to what is pretty safely said to be your most loyal customers does seem to make a whole lot of sense.