Delays in rolling out Plastic Logic’s Que, a higher-cost e-reader marketed to business travelers and executives, have reached the point where customers’ preorders are being canceled. While other e-reader manufacturers have engaged in a price-cutting war, with Amazon.com’s Kindle and Barnes & Noble’s Nook both recently dropping below $200, Plastic Logic seems determined to sell its product at a premium-a strategy that could very well be backfiring.
In an e-mail sent to a customer, who forwarded it to eWEEK June 24, Plastic Logic CEO Richard Archuleta implied that the Que had hit another roadblock.
“We’ve been working hard to bring the world’s first product based on plastic electronics technology to market-and have decided that delaying the device a bit longer will result in [sending] a better product to you,” read the June 24 e-mail. “With that in mind, we need to let you know that since your unit will not ship on June 24 as planned, our automated ordering system has automatically cancelled your order.”
However, the e-mail added, “We do hope … that you will stay on our list of customers interested in knowing about our progress and details of our upcoming product shipment.” Archuleta then insisted that the device will, in fact, eventually see a commercial release: “We continue to be excited about the potential that our thin, light and shatter-proof ProReader will offer to business users everywhere, and hope we can count you among the first to experience this groundbreaking device.”
Archuleta had previously sent an e-mail to customers in March, saying the need to fine-tune the Que had delayed the device’s release until summer.
This particular customer’s Que order had been for $649.99. By way of comparison, Barnes & Noble’s original Nook device now costs $199, reduced from $259 earlier in June, while Amazon’s Kindle retails for $189. The Kobo, which is marketed through Borders, sells for $149, and Sony’s Reader Pocket Edition sells for $169.
In a June 25 e-mail to eWEEK, a Plastic Logic spokesperson wrote: “Plastic Logic has informed preorder customers they have decided to delay the device a bit longer … They continue to refine the product, its technology and features and are anxious to get in the marketplace as soon as possible.”
While e-reader prices have dipped, one analyst holds that there’s a limit to how low manufacturers can go. “With these cuts, ebook readers from Barnes & Noble as well as Amazon now are priced at about the break-even level with their Bill of Materials … and manufacturing costs,” iSuppli analyst William Kidd said in a June 24 statement. “With zero profits on their hardware, both these companies now hope to make their money in this market through sale of books.”
In that way, Kidd suggested, the e-reader market is emulating another consumer-tech segment: “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.”
But unless the segment introduces another technological advance, such as color e-ink screens, e-readers are unlikely to see a significant increase in users, according to Kidd: “There is no visible short-term solution to drive significantly more sales of e-book readers, except to use price as a tool.”
Plastic Logic seems to be avoiding the price-reduction strategy, however. In a conversation with eWEEK at January’s Consumer Electronics Show, Stephen Glass, Plastic Logic’s senior director of technical marketing, voiced the company’s rationale for selling a 4GB Que for $649 and an 8GB model for $799: “It’s a higher price point because it’s a different demographic: customers who want to read business documents.”
Glass also pointed to the Que’s ability to add comments, highlight text and scribble on documents with a fingertip as another competitive differentiator. “The rest [of the e-reader manufacturers] aren’t doing that, at least in a way they can annotate,” he said.
In the interim, however, rival e-reader manufacturers have been introducing new features for their software. In May, Amazon.com updated the Kindle to allow users to share favorite ebook passages with other readers via Facebook and Twitter, zoom in on PDF documents, and organize books and documents into specific categories. Around the same time, Barnes & Noble added new features to the Nook, including the beta version of a Web browser.
While the burgeoning e-reader market led a number of smaller manufacturers to debut prototype devices at CES, many of those offerings have not hit the market; the combination of Amazon.com’s and Barnes & Noble’s marketing muscle with the debut of Apple’s iPad may have made the e-reader marketplace an unfriendly one for startups.
“I don’t see more than two, maybe three dedicated reading companies in the market for selling ebooks,” William J. Lynch, CEO of Barnes & Noble, told The New York Times June 21. “I think you are starting to see a shake-out now.”
Editor’s Note: This article has been updated with a quote from a Plastic Logic spokesperson.