• 22Jun

    Battle of the E-Readers

    A price war is brewing in the growing market for electronic reading devices.

    Barnes & Noble, the national bookseller, announced Monday that it was dropping the price of its six-month-old Nook e-reader to $199 from $259 and introducing a new version of the device, which connects to the Internet only over Wi-Fi networks, for $149.

    Responding rapidly, Amazon.com then cut the price of its popular Kindle e-reader below the Nook, to $189 from $259.

    The price cuts were made as manufacturers of e-readers faced a mounting threat from Apple’s iPad. Even though it is far more expensive than the e-readers, the iPad, which starts at $500, performs a range of functions with a versatile, colorful display that contrasts sharply with the static, monochrome screen of e-book readers. Apple said it sold more than two million iPads in the two months since the tablet’s introduction.

    “It was obvious that the price of stand-alone e-readers had to come down,” said James McQuivey, an analyst at Forrester Research, citing the threat by Apple and other tablet makers. “We just never thought it was going to happen this rapidly.”

    Analysts had expected the prices of e-readers would gradually fall because of the natural decline in component costs and the increased profitability of e-books themselves.

    Until this spring, e-book sellers like Amazon and Barnes & Noble sold many best-selling e-books at a loss to entice customers. But then five of the six major American publishers agreed with Apple to change to a so-called agency sales model.

    Under the new agreement, booksellers were required to raise prices on many digital books and were able to make a 30 percent commission on the sales, which allows them to sacrifice some profit on their hardware.

    Steven P. Jobs, Apple’s chief executive, said this month at the announcement for the company’s new iPhone model that iPad owners had downloaded more than five million books in the last two months, or 2.5 books for each iPad. It was seen then as a troubling sign for Amazon because it revealed that iPad buyers were willing to make small sacrifices to read books on a general-purpose tablet that is heavier and has a bright LCD screen that can cause eye fatigue.

    The price cuts should add further momentum to what, despite incursions by the iPad, has been a growing market for dedicated e-reading devices. Amazon and its rivals are on pace to sell 6.6 million e-reading devices this year, up from 3.1 million in 2009, according to Forrester.

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