Sony Follows Amazon, Slashes E-Reader Prices

Sony has slashed the prices of three of its e-reader models, following similar moves by rivals and Barnes & Noble, as competition in the e-reader category continues to heat up. Sony and its competitors face a looming threat from the Apple iPad, which includes a color e-reader application.

Another day, another e-reader price cut. On the heels of announcing a retooled-and-cheaper version of its large-screen Kindle DX, Sony slashed the prices of its own e-readers in order to better compete in what has become an ever-hotter market.

The Sony Reader Pocket Edition now retails for $149, the new Daily Edition for $299, and the Touch Edition for $169. That represents a series of price-drops ranging from $20 to $50; previously, the Pocket Edition had retailed for $169, the Daily Edition for $349, and the Touch Edition for $199.

The e-reader arena started heating up on June 21, when Barnes & Noble announced a price reduction for its Nook e-reader from $259 to $199, along with a WiFi-only version of its device for $149. That same afternoon, Amazon announced that the price of its original Kindle would be reset from $259 to $199.

On top of the price cuts, Barnes & Noble and Amazon seem equally determined to not be outdone in the features department, with each company announcing successive software updates. The Nook's latest software update included Android-based games, while the Kindle added social-networking functionality.

Despite the manufacturers' shared determination to trump their rivals in the prices and features departments, each faces a growing threat in Apple's iPad, which includes a full-color e-reader application. During Apple's Worldwide Developers Conference in June, CEO Steve Jobs indicated that some 5 million e-books had been downloaded through the company's iBookstore.

The iPad's success may have also compelled Amazon to introduce a larger, cheaper version of the Kindle DX, which boasts the same-size screen, at 9.7 inches diagonal, as Apple's device. Despite the price-drops for the original Kindle, the Kindle DX had remained relatively untouched until the beginning of July, possibly because the online retailer viewed the market for larger-screen e-readers as relatively uncompetitive.

In addition to a new slate-gray color for the outer shell, the Kindle DX's latest version retails for $379, down from $489 for the previous iteration. Amazon also claimed improvements to the e-ink screen, particularly the "50 percent better contrast for the clearest text and sharpest images."

Despite the steady price decreases, a bottom possibly exists to how far e-reader retailers are willing to let their units' prices fall.

"With these cuts, eBook readers from Barnes & Noble as well as Amazon now are priced at about the breakeven level with their Bill of Materials (BOM) and manufacturing costs," William Kidd, director and principal analyst of financial services for iSuppli, wrote in a June 24 statement following the start of the manufacturers' price war. "With zero profits on their hardware, both these companies now hope to make their money in this market through the sale of books."

The prominent placement of Sony's Reader Store for e-books, with its layout vaguely reminiscent of Apple's iTunes store, suggests a similar model may be in effect for the electronics maker. "This is the same -razor/razor blade' business model successfully employed in the video game business," continued Kidd in his statement, "where the hardware is sold at a loss and profits are made on sales of content."

But more price competition could also help narrow the market, possibly wiping out smaller e-reader manufacturers unable to scale and leaving the bigger players-Sony, Amazon and Barnes & Noble-to face down Apple's entrance into their market.