It seemd as if Amazon had found the perfect product for their business model in the shape of the Amazon Kindle reader. Its domination of the nascent e-book reader market was almost total. It achieved approximately a 60% market share (the Sony reader was second with a 35% market share), and it was difficult to see, despite the fact that almost every new reader that was released was instantly named the “Kindle Killer”, where the competition was going to come from.
However, Apple seemed intent upon spoiling the party when they released their long awaited iPad which, although an entirely different type of device, has the ability to read e-books. Most Apple devices seem to engender a love/hate reaction amongst consumers and there was no shortage of pundits and analysts ready to point out the shortcomings of Apple’s new device. However, the number of people who would buy practically any new gadget which has the apple logo on it is very definitely high enough to make a difference to the sales of Amazon’s Kindle reader.
As well as releasing new hardware, Apple also set up their own e-book store and they negotiated a deal with most of the major publishing houses which permitted them to set the sales price of the e-book editions of their publications at whatever they liked. The one condition to this was that they would not allow any other retailer to promote their e-book edition at a lower price than set for the Apple store. This effectively put paid to Amazon’s plans to offer all e-books at $ 9.99 or less, and e-book prices have been climbing since the deal was struck.
It’s a different story with the actual e-book reader hardware however. Barnes and Noble have dropped the price of their Nook reader from $ 259 to $ 199. Amazon have now dropped the price of the Kindle 2.0 from $259 to $189 – a very low number considering that it retailed at $ 359 when it was launched in February of 2009. The price of the larger format Kindle DX has also been reduced from $ 489 to $ 379, an event which coincides with the device’s first upgrade which includes a higher contrast screen and a new body color.
The freshly updated Kindle DX is now more than $ 100 cheaper than the entry level iPad – and it requires no monthly payment to connect to the internet, unlike the iPad. Many people will be happy to pay more for the iPad of course, as it is a more powerful and versatile device.
This downward price trend for e-book readers could be no more than a reaction to the appearance of the iPad on the scene. On the other hand, it could signal a new approach by the likes of Barnes and Noble and Amazon. Given their business structures, it would be quite possible for these companies to take advantage of a higher average e-book price by selling the hardware for less and then making more money on the actual e-book sales over the lifetime of the reader.