Price cuts continue to benefit consumers in the electronic reader (e-reader) market as U.S. online retailer Amazon.com announced this week that a new version of its Kindle DX will be available at $ 379 — an almost 100 dollar discount from its original $ 489.
The new Kindle DX, which will be available for shipment on July 7, will feature a new graphite enclosure and a sharper ink display with 50 percent more contrast, according to a statement issued by the company on Thursday.
The announcement came at the heels of a series of price reductions made earlier last month on Amazon’s smaller Kindle model and Nook, the e-reader developed by U.S. bookseller Barnes & Noble, bringing price levels down to $189 for the Kindle and $149 for the Nook.
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Since Amazon first introduced the Kindle in 2007, the company has reduced prices by more than half, especially as competition in the e-reader market heats up. Currently, there are more than 30 dedicated e-readers available, with more options expected as companies like Apple and Toshiba look to make headways into the e-reader device market.
Although management at neither Amazon nor Barnes & Noble could be reached for comment, analysts say that the latest price cuts were caused in part by the growing popularity of Apple’s recently launched tablet computer iPad. Since its public release in April, Apple has sold more than three million units of iPad, with customers downloading approximately five million e-books from Apple’s iBookstore. While these price reductions may help devices like the Kindle and Nook retain their current market shares, analysts said the devices themselves are no longer bringing in a profit for their parent companies.
According to a recent study released by market research firm iSuppli, these e-readers are now priced at an approximately breakeven point with their “bill of materials” and manufacturing costs. “With zero profits on their hardware, both these companies now hope to make their money in this market through the sale of e-books. This is the same ‘razor/razor blade’ business model successfully employed in the video game console business, where the hardware is sold at a loss and profits are made on sales of content,” iSuppli director William Kidd recently said in a written statement.
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Currently, studies by Goldman Sachs suggest that Amazon commands 50 percent of the e-book space, with Apple accounting for 10 percent, and Barnes & Noble holding on at 5 percent. Balance is expected to shift in the next five years with Apple gaining 33 percent of the total market, Amazon retaining 28 percent, and Barnes & Noble controlling 15 percent by 2015.
Pricing the e-book content on e-readers has also been a contentious subject, as both publishers and struggling book stores like Barnes & Noble see it as an opportunity to regain footing in the digital age. Earlier this year, Barnes & Noble, which had been suffering losses in its physical stores for several quarters, named William Lynch, the lead behind the launch of the Nook, as the company’s CEO.
Sales estimates for e-readers are expected to more than double in 2010 from its 2009 levels to approximately 11 million e-readers, according to iSuppli.