Are Amazon Kindle and Sony Reader Too Expensive?

 
 
By Nicholas Kolakowski  |  Posted 2009-09-05 Email Print this article Print
 
 
 
 
 
 
 

Although Amazon.com, Sony and other e-reader manufacturers have generated a massive amount of publicity surrounding the releases of their newest mobile reading devices, the penetration rate of e-readers among consumers will only reach mass-market levels if price points fall even further, according to an analyst report from Forrester. In addition to the consumer market, Amazon.com, Plastic Logic and other companies have been targeting e-readers at SMBs and the enterprise.

Amazon.com, Sony and others may have gained substantial publicity over the summer for their e-reader devices, but mass-market adoption of digital-book readers may be unobtainable unless these companies lower their prices, according to a report from Forrester Research.

When it comes to e-readers, Forrester suggested that it all comes down to the bottom line-one that consumers apparently want to see dropped beneath current levels. The latest-generation Kindle DX, with a 9.7-inch screen, sells for $489 from Amazon.com, while the original Kindle sells for $299. On Aug. 5, Sony announced that it would release two e-readers within a month with $299 and $199 price points, in a bid to counter Amazon.com.

But, according to one Forrester analyst, those prices may not be low enough.

"The cost of the display component is high and sales volumes are still modest, yet consumers demand and expect ever-lower prices," Sarah Rotman Epps, an analyst with Forrester, wrote in the Sept. 1 research report. "The bottom line: E-reader product strategists will have to educate consumers and innovate to bring prices down. Even if they are entirely successful at both of these feats, e-readers will never be mass-market devices like MP3 players."

Companies manufacturing e-readers face downward pressure from cheap smartphones and netbooks, as well as consumers who remain sensitive to price in the midst of a global recession. The price of device components, Epps added, also remains a major difficulty in lowering the overall price of e-readers; for example, the E Ink screen for the Kindle line costs Amazon.com an estimated $60 for a 6-inch unit, while larger screens obviously cost more.

While executives such as Amazon.com CEO Jeff Bezos may want their e-readers to achieve wide penetration of the customer base, Epps suggested that this may prove an unrealistic goal.

"Even if sales far outpace our initial forecasts, e-readers will not reach the adoption levels that MP3 players have," Epps wrote. "In 2009, 110 million U.S. consumers, or 61 [percent] of the U.S. online population, own an MP3 player."

A more realistic model for e-reader progression may be the digital camera, "which took more than 10 years to reach 50 million U.S. consumers, then had a hypergrowth year in 2003, and more recently has seen sales taper off as multifunctional phones have replaced the need for a dedicated camera device."

Like digital cameras, e-readers could effect a change in consumer behavior, specifically by making broad swaths of the population embrace reading from digital screens in lieu of paper. In order to make that happen, Epps suggested that companies educate consumers about the product with campaigns such as the "Reader Revolution" campaign launched by Sony in October, and push to lower the price of e-readers through multiyear subscription models, cheap accessory devices and low-cost display technology.

Current e-reader prices of $199 and up will have an estimated market of 25 million, according to the report: "Forrester forecasts that 2 million U.S. consumers will buy an e-reader in 2009, which, in addition to the 1 million consumers that bought one in 2008, brings the total ownership to 3 million, or 12 [percent] of the maximum addressable market at the $199 price point."

Lowering the price to $50 would pique the interest of both consumers and high-earning frequent readers. However, given the cost of components, "e-readers will require some form of price subsidy to attain more mass-market reach," the Forrester report said.

E-reader makers have also been marketing to the business community. An upcoming e-reader device from Plastic Logic, which will debut in early 2010 and let users download documents in a variety of formats via AT&T's 3G network, is expressly aimed at small and midsize businesses and the enterprise.

Meanwhile, Amazon.com's Kindle DX features a larger screen intended to not only display newspapers and textbooks, but also PDFs and other presumably business-related documents.

Although such an e-reader device could have definite utility for business, it would face sizable competition from a number of alternativies, including netbooks and the much-rumored Apple tablet PC. If Apple chooses to pair a tablet with a push to sell digital books and other documents through the iTunes store, it could drastically affect the e-reader ecosystem.

 
 
 
 
Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.
 
 
 
 
 
 
 

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