Amazon Needs To Show Me A $99 Kindle

[Kris777]

I just came across this interesting article:
http://bigthink.com/ideas/20880

...
Amazon probably couldn’t have afforded to pursue a penetration pricing strategy long term, especially since they have no idea how long it will take to make electronic book readers ubiquitous. But this $99 threshold is pretty powerful. I never even considered owning an IPhone until recently, when—you guessed it, Wal-Mart started offering the discontinued model for $99.

Show me a $99 Kindle, Mr. Bezos, and you'll get me and a few million more customers to reach for our wallets.

[Iphinome]

Nice as it would be $99 would probably leave no money left over to cover the wireless delivery and browsing charges.

I suppose it could be a non wireless kindle but then it would mean using kindle for pc software and being unavailable to non mainstream os's. or it would mean dropping the DRM and emailing you the file. The publishers won't go for that.

[Ervserver]

I'd buy a $99 Wi-FI Kindle

[JaneD]

This is how I feel about the iPad. I really want one, just cheaper. Like drop it to $250 and I'd buy it.

I guess it's true "every man has his price." And his price is usually substantially under list.

[m-reader]

I don't understand what is the fixation with $99 price. I think the e-readers are pretty cheap already - considering how much we spend on gadgets in general.

Another problem with unrealistic pricing expectations is that it's pretty anticompetitive. Large companies can fight price wars and in short term there is a tangible consumer benefit. However, in the long run it buries smaller competitors, raises the barriers of entry to other players eventually leading to fewer choices in the market and harm to the consumer.
How does that saying go? Not everything that shines in gold!

[GeoffC]

Originally Posted by m-reader

I don't understand what is the fixation with $99 price. I think the e-readers are pretty cheap already - considering how much we spend on gadgets in general.

Another problem with unrealistic pricing expectations is that it's pretty anticompetitive. Large companies can fight price wars and in short term there is a tangible consumer benefit. However, in the long run it buries smaller competitors, raises the barriers of entry to other players eventually leading to fewer choices in the market and harm to the consumer.
How does that saying go? Not everything that shines in gold!

as we are already experiencing.

[stargazertony]

I disagree. Amazon, nor anyone else, doesn't need to show anybody a $99 reader. Perhaps they will come along but as above posters mentioned, the cost to competition would be great. A $99 reader might spur a glut of sales initially, however many of them would be to gadget freaks who will find out that they will have to actually read to use the device and then be relegated to the pile of all the other unused gadgets they have. E-readers are kind of a niche market. Not everyone is going to want or buy one.

[Maggie Leung]

Originally Posted by JaneD

This is how I feel about the iPad. I really want one, just cheaper. Like drop it to $250 and I'd buy it.

I guess it's true "every man has his price." And his price is usually substantially under list.

According to various tear-down estimates, that's about what it costs Apple to build the lowest-end model iPad.

[fjtorres]

1- The tear-down estimates, at introduction, were that the K2 cost about $185 to build. Some component costs, most notably the screen, have dropped a bit so a fair estimate would be to say the current build cost probably runs around $160.

2- Going by the price differential between the Wifi Nook and the 3G version, the added cost of of the 3G connectivity (hardware and service) runs about $50. Thus one could reasonably project a WiFi-only Kindle to cost about $110 to build. Wifi chips don't add much to the cost of a reader. (About $8). So even a USB-only Kindle (which is *not* going to happen any time soon) would cost about $100 to build.

3- While a $99 Kindle is theoretically possible, the negative effects to competition might stir up regulatory issues (especially in already-hostile Europe) that Amazon wouldn't want to deal with, so forget about a loss-leader Kindle unless B&N gets there first, allowing Amazon to claim self-defense. Best guess is that a wifi-only Kindle would run at least $129 and more likely $139 (the current price for refurbs).

4- Component prices will continue to drop, especially if the current (and next) wave of Kindles and Nooks continue selling at current rates, so a $99 connected Kindle might be possible in a year or so. But unless somebody else forces their hand, Amazon isn't going there willingly. Not any time soon. Remember, the K2 launched at double the build price so for Amazon to *want* to go that low the build cost would have to run more like $70, and prferably $50, for Amazon to go there.

5- The next big development for Kindle, and probably the reason for a WiFi Kindle to appear, is that Kindle is going to have to move into B&M retail sales. Target is *not* going to be the end of it. It's doubtful WalMart would want to carry an Amazon product but Best Buy and Radio Shack would. Sears and other department stores. Once a product reaches B&M retail, the question of channel conflict arises; Amazon would have to price the B&M product the same as the online product. Which means forgoing whatever profit the retailer is getting out of the reader. So, even if Amazon could comfortably sell their reader at $99, they would want to keep it higher so they can accomodate their retail partners. (And, paying retailers to sell your product negates a lot of the gains from the incremental sales B&M retail might add over direct sales.)

6- Finally, there is the matter of sales rate. Sure, a $99 Kindle would sell more than a $150 Kindle. Or a $129 Kindle. But how much more? As pointed out, dedicated reader devices *are* a niche market; even at $99, that's still the price of a dozen paperbacks. For a reader to make sense you need to be somebody who reads at least a book a month. And that demographic is not *that* big. Realistically, the biggest costs associated with ebook reading aren't from the reader device but the books themselves. And the Psychological value of $99 over $129 isn't enough to draw in many more buyers; certainly not enough to forgo the extra margin.

Bottom line? Not in 2010. Maybe in (late) 2011.

[Kris777]

Originally Posted by stargazertony

E-readers are kind of a niche market. Not everyone is going to want or buy one.

cell phones were a niche market not so long time ago too
:

[fjtorres]

But telephones stopped being a niche long long ago.

Book reading, in all forms, is a niche.
Sounds like you'd be surprised at how many people go through life without doing any recreational reading. Steve Jobs was only slightly exagerating when he said nobody reads.

[Talldog]

I have a feeling we'll see a (relatively) cheap 6" WiFi-only Kindle sooner, rather than later.

[rcuadro]

Originally Posted by Kris777

But this $99 threshold is pretty powerful. I never even considered owning an IPhone until recently, when—you guessed it, Wal-Mart started offering the discontinued model for $99.

The $99 iPhone is the last model and you can get one from anywhere really. Heck, you can go straight to Apple and get the 3GS for $99. The iPhone 4 on the other hand...

The only time I see a discounted Kindle is when the new one is released and they can sell the K2 for a deep discount. At least I hope so

[RyanMWilliams]

Originally Posted by fjtorres

But telephones stopped being a niche long long ago.

Book reading, in all forms, is a niche.
Sounds like you'd be surprised at how many people go through life without doing any recreational reading. Steve Jobs was only slightly exagerating when he said nobody reads.

A bit more than slightly exaggerating. The '07 NEA study said 1 in 4 Americans didn't read a book in the past year, which is what the news focuses on for 'nobody is reading!' headlines. But that means 75% of Americans did read! 68% of Americans have a library card, and library use has been increasing. A 'typical' American might only read four books in a year but 'readers' tend to read a lot more than four books! Bowker's 2009 figures showed 288,355 titles printed in one year. Publishing is an over $20 billion dollar industry. Sure there are a lot of people that don't read but there are far more that do.

[TallMomof2]

Originally Posted by fjtorres

But telephones stopped being a niche long long ago.

Book reading, in all forms, is a niche.
Sounds like you'd be surprised at how many people go through life without doing any recreational reading. Steve Jobs was only slightly exagerating when he said nobody reads.

My husband does very little recreational reading and what he reads is either guitar or history related. IRL, I know only a handful of strong recreational readers. There are too many other distractions such as television, movies, and the internet that compete with recreational reading. Plus, recreational time is at a premium for everyone I know because of long working hours, family and community commitments.

I'm sure we'll eventually see a $99 Kindle as the cost of components decrease but not in the near term. My first home PC, outside of the Radio Shack TRS80, cost me $5K back in 1996 or 1997. In the last couple of years I've spent that much to build five PCs and a media server and purchased a couple of laptops.