Reasons Why The Amazon Kindle Will Continue To Prosper Despite The Apple iPad
Monday, September 6th, 2010At this time last year, the market for e-book readers was buoyant. Following the enormous success which Amazon had enjoyed with its Kindle reader – first of all with the Kindle 2.0 in February of 2009 and then with the large format DX edition in the summer of the same year – a veritable host of personal electronics manufacturers were either developing, releasing or updating their own e-book readers so as to get their share of the nascent market.
Sony and Barnes and Noble were bursting a gut to get their new readers launched before the 2009 festive season and Samsung, Plastic Logic, Asus and a host of others were rushing to get their readers on the market as fast as they could. The Computer Electronics Show (CES), which took place in Las Vegas in early 2010, had a special zone dedicated to e-book readers for the first time ever. E-book readers were a rapidly developing, and potentially very profitable, market.
Today, just a few short months later, the scene is somewhat different. The price of e-book reader hardware has plunged. The new third generation Kindle now has an entry level Wi-Fi only model on offer for just $ 139, less than half of the $ 359 price at which the Kindle 2.0 launched. The price of the Nook reader from Barnes and Noble has also been slashed to just $ 149 - and a further cut before the festive season arrives seems highly likely.
A number of e-book readers in development – including Plastic Logic’s Que – have been shelved. The market seems to be entering a new stage in its development - and whether there is any place in it for pure electronics manufacturers or not is highly debatable. Amazon’s business model is very well suited to selling lower priced readers and making a profit on the ongoing sales of Kindle books. Barnes and Noble could employ a similar strategy - but it’s somewhat debatable as to whether or not they could make use of economies of scale in the same way that Amazon can.
Clearly it would be somewhat naive to ignore, or even play down, the impact of Apple’s iPad in this. It’s certain that the price of e-book readers would have trended downwards anyway - but the iPad’s launch certainly speeded things up a bit. However, considering that the third generation Kindles sold out almost immediately after launch – even today customers are facing a three to four week wait for their Kindles to ship – it doesn’t look like the iPad is the long awaited Kindle Killer that it was widely forecast to be.
Even putting the debate about e-ink displays being easier to read on than backlit screens to one side, there is - at this time - enough of a gap between the price of the Kindle and the price of the entry level iPad to ensure that the Kindle will continue to be the more attractive option for anyone who just wants to read books. The fact that the iPad has a monthly download/connection fee will not please everyone.
It does appear that there is sufficient room in the market for both the Amazon Kindle and the iPad to co-exist - for the short term future at least. Other manufacturers, including major players like Sony and Barnes and Noble, will probably struggle badly if e-book reader prices keep falling.