Amazon Kindle will be the sole survivor of the eReader Apocalypse

Amazon Kindle will be the sole survivor of the eReader Apocalypse

Summary: Like the reptile that inhabits the namesake river and has outlived its Cretaceous ancestors, Amazon and its Kindle will remain the sole survivor of the eReader Apocalypse.

SHARE:
49

Like the reptile that inhabits the namesake river and has outlived its Cretaceous ancestors, Amazon and its Kindle will remain the sole survivor of the eReader apocalypse.

Was that a Discovery-channel enough of an introduction for you? No? Well to hell with it then, go cue up Shark Week on your DVRs.

Today Amazon issued a major retaliation in the price war which Barnes & Noble started over e-Reader units just over a month ago -- it announced two new and lower cost Kindle units that would begin shipping in late August and primed for the upcoming holiday season.

The Kindle 3.0 will come in two versions, a Wi-Fi only model for $139.00 and a model with both Wi-Fi and 3G for $189.00, which now matches features, is slimmer and lighter and also cheaper than its direct competitor, the Barnes & Noble Nook.

Also Read: Kindle, Nook and e-Reader Devices Face Mass Extinction

Well, to be perfectly honest, I still believe that multipurpose devices such as the iPad and low-cost Android tablets will eventually eradicate this dedicated eReader market entirely, like the meteor that plowed its way into the Yucatan 65 million years ago and laid waste to almost all life on this world. But more on that later.

Of course, I knew well ahead of time that these price cuts were going to happen, and the actual "death" of the Kindle was actually going to be a slow and agonizing one. Alas, Bloomberg decided to take me to task for that today for declaring Kindle's obituary a bit too early.

Also Read: iPad Killed Kindlenomics

As I said in my previous piece, the war of price cuts will eventually result in a situation where the margins on these devices reach zero. $139.00 clearly isn't zero margin. What is zero margin, then?

Well, I think it's around $99.00.

If you assume that the E-Ink Vizplex screen, the most expensive component costs Amazon and B&N between $60-$70, then we can also assume that the support electronics, lithium ion battery and casing are around $20-$30, and marketing overhead per device is around $10, then that gets us pretty close to that $99.00.

I expect that around the same time in August of 2011, or maybe around the holiday season of next year we will indeed hit that $99.00 number for Wi-Fi eReaders. I believe Amazon is the only company that is able to stomach selling their device at margin or almost at a loss, because they can sell a ton of content on a ton of readers at that price. For a while, but not indefinitely.

We might even see this rock-bottom price surface earlier for "Prime" members who pay the $80 a year privilege of getting free 2-day shipping on virtually everything in Amazon's inventory, or for new Amazon credit card sign-ups. At $99, as a Prime member, even I would have to say uncle and call it a no-brainer.

As of the release of Kindle 3, I'm quite certain that SONY is out of the race entirely. They haven't been able to match the features or the content of Kindle or Nook at the previous price points let alone the new ones from a month ago. I expect that as a species, the SONY Reader is going to be fossilized before the holidays. To the La Brea Tar Pits with you.

I think we can also say with great certainty that all the also-rans in the black and white e-Reader race are crocodile-food. You know, like the Kobo and the Spring Design Alex? Gone.

I believe that Barnes & Noble will have to drop the price of their Wi-Fi Nook accordingly before this holiday season, from $149 to $129.00. At that price, B&N may very well hit its zero margin threshold because its purchasing power can't be anywhere near as good as Amazon's when it comes to bulk component costs.

So when Amazon eventually does pull the trigger and go to $99, the Nook as a device will almost certainly be history. Barnes & Noble should continue pursuing their innovation with their excellent iOS and Android apps and concentrate entirely on content sales at that point. They have a year to sell out remaining Nook inventory, but they would be foolish to invest in newer hardware designs post-release of Kindle 3.

As the sole survivor of the price war apocalypse of 2011, Kindle will enjoy total domination and nearly complete monopolization of the eReader device category. That is, until the sub-$150.00 7" Froyo-based Android Tablet devices and "iPad mini" arrive. Both use software platforms that can currently run Kindle and Barnes & Noble ebook software, and eventually they will start to eat into sales.

Android may not be much of a tablet player now, but this time next year, when there are over 150,000 apps and the software is running very solid, things could very well be different.

What iPad mini, you say? If you believe current industry scuttlebutt, LG, the current supplier of displays for the iPad, is running fresh out of IPS LCD screens in multiple sizes and is finding difficulty in meeting demand. That points towards a smaller and presumably less-expensive iPad which will be announced sometime next year. I expect the device to sell between $299.00 and $349.00 for the entry-level version. I first postulated we'd see this device next year back in April. We'll see if it proves correct.

With pressure coming from Android in similar price points to a zero-margin Kindle and from a year-old and highly mature iPad application ecosystem, not to mention mature Kindle software for both Android and iPad, only the most absolutely hardcore E-Ink fans are going to stick around with a dedicated device.

Also Read: iPad vs. Kindle, Which is the Better eReader?

Indeed, to continue to drive demand for the product, Amazon's last resort may be to give the device away for free to Prime customers -- a move that is probably around a year and a half to two years away. But until then, the Kindle is going to be the veritable Crocodile of the Amazon, the only surviving member of its species from a pre-historic age.

Will the Kindle emerge as the sole survivor of the eReader Apocalypse? Talk Back and Let Me Know.

Topics: Hardware, Amazon, Mobility

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

49 comments
Log in or register to join the discussion
  • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

    Jason, please step back and take a refresher course in economics. The kindle and iPad/andriod tablets are not subsutute products. If amazon does manage to squeeze out all of the competition you will see the price of the kindle hold or perhaps rise slightly.
    The war is not for the hardware! The battle is for the sale of ebooks. An andriod tablet running a kindle app only benefits amazon's ebook platform.
    There is clearly a market for dedicated ebook readers. How big is it I have no idea, but given the fact that both amazon and barns and noble are selling hardware at what appear to be very low margins would sugguest it is of a reasonable size. If there were no market for a dedicated device I think we would see one if not both drop out of the hardware game and sell ebooks via there iOS, PC, MAC and Android software.
    The relative lack of buzz surrounding iBook sales further indicates to me that amazon and barns and noble are on to sometime with dedicated readers. As I have said before when I want to read I do not want the distraction and temptation of a multi-purpose device.
    jhuddle
    • Right a couple of other points

      @jhuddle You are right that what Amazon really wants is to sell e-books. They probably don't much care if it is to read on a Kindle or using a kindle app on some kind of multi-purpose pad. Another thing to consider here is that Amazon would probably be glad to sell you a Kindle at a significant loss on the sale of the device. This is a very similar situation to the cellular providers where you can get a discounted or even free phone by locking into the carrier's voice and data plan. I bought my Motorola Droid for $99 and got one for my wife for free under their buy one get one free plan they offered a couple of months back and I think Amazon will go with similar schemes in order to sell the e-books.

      I think the main purpose of the Kindle in the first place was to seed the market for the sales of e-books and they don't care if they ever make a dime on the device.
      cornpie
      • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

        @cornpie Carriers like Verizon are able to take "losses" on cell phones via subsidization because they are making it back on the monthly service under 2 year contract agreements with the customer, which has significant termination fees associated with it. Amazon cannot do this, they cannot guarantee revenue by giving out the units for free unless they are customers with a proven track record for spending money, like Prime members. Nobody is under a contractual obligation to buy a certain amount of books. That's why their best bet is to try to get their books out on every platform as possible, which is what they are doing.
        jperlow
      • Not sure you understand the whole picture with Amazon's Kindle strategy.

        @jperlow Your predications in this space have been consistently wrong and significantly over-simplified. The point on which you are most consistently wrong is that you see little value in dedicated e-ink reader devices. I think the market is showing otherwise.

        The iPad is no doubt an interesting device. But as the recent overheating woes show, it's not a great all-purpose e-book reader. It's sort of good as an e-book reader in some circumstances. Bottom line is that there will always be a healthy market for dedicated e-book readers, and Kindle will always lead that market. But there will be enough people loyal to Nook, Sony and other platforms to sustain the platforms for some time to come.

        Nook will never dominate the market, but it will consistently be an important part of B&N's mix, and will probably churn out a nice profit in terms of both hardware and content sales for years to come.
        RationalGuy
      • Jason . . .

        I still think that before the end of this year, you'll see either Amazon or F&N resurrect the old "Book of the Month" club, or the RCA Record club idea:

        Agree to just purchase 12-20 books, over the next two years at regular club prices, and they'll give you the reader for free!!!

        NOW does it sound unrealistic? I didn't think so . . .
        JLHenry
      • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

        @Jason Perlow:

        One more time, you have been proven wrong:

        May 26, 2011: "Apple's iPad: an underachiever in the book market"

        [Publishers and agents] estimate that Apple sales are around 10 percent of the e-market, far behind the believed 60 percent to 65 percent for Amazon.

        A strong No. 2 to Amazon has emerged, but it's Barnes & Noble, which launched the Nook late in 2009 to skepticism about everything ... [Barnes & Noble] promoted the Nook relentlessly through its superstores and now has around 25 percent of e-sales, publishers say.

        The original Nook was released on October 2009, while the iPad 1 in April 2010. So, after more than 1 year, the iPad has been unable to catch up. It has just half of the Nook ebook marketshare despite the difference in release dates between both devices was just 6 months.

        So, who will survive the eReader apocalypse? Well, perhaps the iPad won't.
        nomorebs
    • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

      @perlow you are only partly right. Amazon is willing to take a chance on the fact that they will sell enough books to cover the cost of the hard ware. since they produce the device they don't have the same exposure as the phone companies. That is why cell companies need to guaranty they will recoup their cost on the hardware.
      jhuddle
  • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

    Well, my wife reads a lot and loves her Kindle. She also has an Android phone which certainly isn't going to replace the kindle as a reader. At the same time she doesn't need the IPAD just to read books. My daughter has a Kindle and it is on the Christmas wish list of several people I know. I think there is a market for the kindle and it will continue. If I was Amazon I wouldn't release any Kindle Software for the IPAD. Non-tech types who read more than they sit at the computer will want and need the kindle rather than the IPAD.
    Nemesis2All
    • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

      @Nemesis2All Nah.. Kindle on iPad is burying iBooks in iPad book sales. This is a very low overhead high margin sale for Amazon. They are brilliant to cannibalize book sales in iTunes by offering an app on every platform. You by a Kindle book, you can read it on PC, MAC, iPad, iPod Touch, iPhone, Blackberry and Android...right now. It will keep the highlights and page you are on in sync across devices and keep a copy on its servers for you to re-download at will so you don't have to make backups.

      Kindle is awesome...the device yes...but the platform is even better.
      condelirios
      • Considering Amazon won't release Kindle sales numbers

        It's a safe bet that the iPad has already outsold the entire installed Kindle base by 5 to one or more, making the idea that you'll want to read an ebook on multiple devices rather meaningless. When one device owns the market, what advantage multiple platforms? How many windows programs maintain a Linux counterpart? Or even an OS X counterpart?
        frgough
  • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

    It's all about choice.

    E-readers gained market share when there was nothing remotely equivalent out there. The e-reader is now competing with the iPad and no self-respecting Apple afficionado is going to be seen with a kindle when they can show off their shiny new tablet.

    With more devices on the horizon new buyers will now have to weigh up the value of a dedicated e-Reader against a multi-function colour slate.

    For most consumers it will not be viable to have two such devices. The whole point of the slimline slate form factor is to make it light and easy to stick in your bag when travelling. Stick two of these puppies in your bag and it's now the size and weight of a small laptop, totally defeating the object.

    For now the iPad's cost is keeping the dedicated devices very much in the game but if the Android equivalents really do fall in the same general price vicinity as the Kindle then I think the audience for the single function b/w e-reader will be tiny compared to that for a multi-purpose colour slate.

    That's not to say "nobody" but tiny - I'm sure there'll be some diehards who value the dedicated nature of an e-reader and as Jason says, if there's going to be a survivor in that dedicated e-reader market the Kindle will have gained enough of a foothold in the market to be it.
    ken_1969
  • Nobody reads on iPad

    iPad cannot be used for reading any ebooks. Look at Pixel Qi vs iPad videos on Youtube. The only way tablets will be used for reading anything more than twitter messages will be if they get to use fully reflective screen technologies like Pixel Qi LCD technology.

    Amazon is making huge profits on content for the Kindle.

    Other e-ink makers will make profits too by getting a share in sales through the Google Editions e-book store that is coming out next month. Basically, any manufacturer can sell a Android based e-ink e-reader for $99 and make 4% or whatever revenue share from Google Editions for all the e-books that will be bought on the device.

    And in fact, people that own e-ink e-readers buy 10 times more books than people who don't have such a device.

    Again, there is absolutely no way that the ipad can replace e-ink e-readers for reading, not as long as they don't use Pixel Qi screens.
    charbax@...
    • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

      @charbax@... <br>Have to disagree with you on this one. I use my iPad for reading books all the time, indoors & outdoors. I've got iBooks, Kindle, B&N eReader, and Kobo readers installed along with Zinio for magazines and a couple of comic book readers as well. I've read on planes, in the car, at the gym, sitting outside (hard to do but doable), and in bed before calling it a night. Add to that the GoodReader app for reading PDF files, like the Manning early access books, and Quickoffice for MS docs and I can say I read & write on the iPad just like a notebook.
      tpiselli
      • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

        @tpiselli You hit the nail right on the head. The iPad is a great portable, all-purpose device that is horrible for reading outside. Most avid readers go to the park, beach, patio, etc to read which is why there will always be a market for e readers and why the author of this article is completely wrong.
        guzzlamiamor
      • @guzzlamiamor

        No, most avid readers find a comfortable chair in a comfortable room and spend the day reading.
        frgough
  • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

    Right now I'm waiting to see what standard my local library will use for ebooks - right now I believe they are looking into using overdrive which the Kindle does not support but the Nook does support. And if that is the case I'll go with the Nook over the Kindle... Although in all honesty if the kindle does drop to $99.00 I might have to get one of those and keep on checking out physical books at the library...
    athynz
  • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

    I disagree that the iPad will take over the Kindle. have you tried reading ANYTHING outdoors in the sunlight with an iTouch/iPhone/Droid? It's nearly impossible and sucks the battery life QUICK. The Kindle is for a reader - that's it's sole purpose and that's why it will survive!
    MelliJellyBean
    • Yawn. This meme is getting old

      All serious readers only read outside. The iPad can't display in direct sunlight. Ergo the iPad is a failure.

      The only issue I take with Perlow is the idea that the Kindle ever was a success in the first place. Amazon has never revealed their sales figures for the device. That should tell everyone that the numbers they have actually sold are pathetic. I would surprised to find they've moved more than 300,000 units total over the lifespan of the product.
      frgough
  • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

    I've played with several ebook readers and the only positive I see with these devices is not having to carry a lot of bulky books. Having said that, I prefer actual books. I like the smell and feel of books. Count me as a dinasour.

    BTW: GO GATORS!!!

    Bert
    riverab@...
    • RE: Amazon Kindle will be the sole survivor of the eReader Apocalypse

      @riverab@... I have to agree. I have a Nook and while it works fine and is great when I travel, at home I still prefer paper. Of course, I also have thousands of albums and CDs. So like a lot of my cretaceous cousins I still prefer physical content in my lair.
      Scubajrr