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Book and Reading News

Kindle 2 for $299

At its release, Kindle 2 was estimated by iSuppli to cost $185.49 to manufacture. Amazon’s top-line margin was $173 at the Kindle 2’s $359.00 list price. Today, the device has been repriced to $299, breaking a price barrier, $300, that’s still too high for many people. The change is significant, because it will force already profit-challenged competitors to price their hardware lower. The move could strangle some competitors before they find traction with readers.

The price of components is likely falling, because of the rising demand for E-Ink displays and growing volume of Novatel EV-DO modules sold for Kindle and other devices. For the most part, though, this is simply an offensive move against “less expensive” readers, such as the $250 Cool-ER and Borders £189 ($314) UK’s Elonex reader.

Amazon is in an excellent position to put price pressure on hardware competitors, reducing the competition it faces in e-book sales from formats the can be read on these devices. It can sacrifice hardware margin to drive content revenues. The danger, from publishers perspective, is the control Amazon seeks to exert over e-book pricing, which Bloomberg reports is increasing.

Unless Kindle opens up to other formats, I think the combined market power Amazon wields will backfire on Jeff Bezos. The publishing industry could shift their support to an alternative e-book device (Plastic Logic, for example) or channel (Scribd or Apple’s AppStore) in a stand against Amazon’s requirement that all books be priced at less than $12.50.

Of course, pricing is a powerful market lever, but it’s not the only factor in the creation and promotion of creative and intellectual works. At some point, quality and features—extending the book beyond the replication of a page in digital form—will become critical factors in the success of a work, and that will shift the entire market’s attention away from the cost of e-reader hardware.

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