Hours following Barnes & Noble dropping the price for its Nook reader to $199, Amazon has slashed the price of its smaller Kindle to $189.
Prior to this price cut, the Kindle and Nook were priced at $259.
There's clearly a war going on between Amazon and Barnes & Noble,the objective being to capture as much of the market share as possible. The idea isn't to make money from the hardware, but from the books subsequently sold. And you can't transfer books bought on one platform to another, which means you roll the dice, take your pick, and live with your decision (hence the reason why many eReader owners turn into such vuvuzlela carrying zealots for the platform they chose).
Both the Kindle and Nook share similar features - an eInk screen, built-in (and free) cell connection to download books, Linux/Android OS. All that differs is the place you buy the books from. Down, once again, to ideology.
Then there's the iPad. Apple shifted 2 million of these in 60 days, so it's potentially captured what could be a fair chunk of the ebook market, something that both Amazon and Barnes & Noble should be worried about. On the plus side, both companies do offer apps for the iPhone and iPad allows users to buy and view content, so in that respect Apple offers a convenient convergence device. This Kindle price cut positions Amazon's hardware at less than half the price of the lowest-spec iPad.
Amazon might have been first with the Kindle, and there's no doubt that the company has managed to lock a fair chunk of the market to it's format, but Amazon isn't a hardware vendor (neither is Barnes & Noble for that matter) and has in the end underestimated the rate of change in the hardware sector. The Kindle of 2010 is basically the same device as the Kindle of 2007. Amazon's "if you build it, they will buy" approach worked, but left the company vulnerable to more agile players, leaving the book giant with little more than price cuts as ammo.
The problem with the Kindle (and Nook) is that it's a one-trick pony. One-trick ponies are cool in an ecosystem where there are no other ponies doing tricks. Add more ponies doing more tricks, and the one-trick pony gets long in the tooth real fast. This is the problem Amazon is now facing up to. eInk screen aside, the iPad does more than the Kindle can dream of doing, and in a world where people want to carry with them fewer gadgets, the Kindle will lose out.
The clock is ticking. Unless Amazon can find a model that allows it to offer a greater subsidy for the Kindle, it's basically toast.
I still hold by my belief that the Kindle is living on borrowed time, and that three years from now it will be gone.