Kindle 3, eReader Wars – Sept 2010

The Kindle 3 faces two interesting new challenges – Sony released its new eReader models today and Borders cut the prices of the Kobo and Aluratek eReaders.

How much of a threat to the Kindle 3 are the new Sony Readers? What impact will the $99 Aluratek eReader have on the eReader wars?

Let’s dive into the specifics and see what impact these changes might have on the  eReader Wars.

Kindle 3, eReader Wars – Borders selling $99 eReader

Borders has reduced the prices of two eReaders – Aluratek Libre is now $99 and Kobo eReader is now $129. All the talk of us seeing $99 eReaders by end 2010 seemed presumptuous until a few months ago. Today, we already have $99 eReaders.

The Aluratek Libre at $99 puts some pricing pressure on Kindle WiFi but not much since Aluratek’s eReader isn’t very good. The Kobo at $129 isn’t really a factor since Kindle WiFi is much, much better than the Kobo eReader.

A few months ago the Kobo eReader at $149 was the first eReader from a big/well-funded company to break the $150 price barrier and there was talk of it stealing away market share from the Kindle. It’s a reflection of how quickly things are changing that today, even at $129, it’s an after-thought. The Nook WiFi at $149 and Kindle WiFi at $139 are much better options.

Not having a competitive eReader is the least of Borders’ problems.

A World without Borders?

Borders is really struggling. For Q2, 2010 it had a loss of $46.7 million and NY Times chronicles Borders’ dismal state -

  1. In the last  3 years Borders has reduced its store count by almost half. This includes exiting the UK.
  2. It raised capital in Q2, 2010 by selling $25 million worth of shares to a cigarette executive who became the largest shareholder. 
  3. It sold its Paperchase chain for $31 million.
  4. It still has debt of $262.1 million.
  5. Sales at Borders stores open at least a year fell 6.8% in Q2, 2010.

Its share price also took a hit – falling 4.5%. Basically, Borders doesn’t look like it’s going to survive – It is hardly in a position to mount a serious threat on the eReader market. With the $149 Kobo Reader and the Aluratek Libre it was trying to corner up the lower end of the market but Kindle WiFi has destroyed that opportunity.

The lower prices of the Kobo and Aluratek eReaders don’t change the fact that they aren’t very good – they couldn’t even compete with Kindle 2. Put them up against the Kindle WiFi and the new Sony Readers and they are terribly inadequate.

Kindle 3, eReader Wars – Sony releases pricier eReaders

Sony seems to have given up on trying to beat the Kindle 3 and seems focused on creating the perfect product for a market that only exists in its imagination. It talks a lot about how it couldn’t afford to put WiFi into its $179 Sony 350 and its $229 Sony 650 without taking a moment to wonder how Amazon and B&N managed to produce WiFi capable eReaders at sub $150 prices.

It’s also got really strange priorities – It seems to be more interested in building a device, selling it, and running away than in earning money from ebook sales. In a sense it’s trying to build TVs and hoping cable companies supply the service and content. The only problem is the cable companies in this market have their own TVs.

The net result is a beautiful eReader (good-looking, good features, touch screen) that doesn’t really have good infrastructure or a good store to back it up. It’s an eReader made by a company that doesn’t really grasp that people are going to read books on the eReader. Sony is trying to provide one part of what the customer is asking for and is hoping the other parts just magically appear.

Is Sony using really smart strategy or deluding itself?

There are three entirely reasonable possibilities -

  1. Sony has figured out that it can get a solid #2 or even a #1 spot by selling higher end eReaders with touch screens and selling them all over the world via their retail channels.  
  2. Sony has decided it’s just too much work to compete with the Kindle 3 and has given up on the US market.
  3. Sony is delusional and it’s convinced itself that the product it has to offer meets the needs of the eReader market perfectly. If you look at Sony 650 and contrast it with Sony 600 the only thing Sony has changed is that the touch screen now doesn’t hurt readability. In almost every other way it’s the same product.

We do have to give credit to Sony for differentiating and managing to release eReaders with touch screens. The lack of WiFi and the high prices are madness - However, the touch screen gives Sony an angle that it might be able to leverage to generate sales despite the high price.  

Kindle 3 to be sold at Staples

Amazon isn’t exactly sitting still and it’s begun to expand the Kindle’s retail presence. Kindle 3 will be sold at Staples stores starting this Fall. Reuters reports on Kindle 3 at Staples -

Staples will start selling the Kindle at its more than 1,500 U.S. stores starting in the autumn, the company said.

It plans to sell the $139 version of the Kindle, the 3G model and the more expensive Kindle DX.

Staples makes a lot of sense as the $139 Kindle WiFi and the $189 Kindle 3 are both good products that meet the needs of businesses looking to cut down on paper and printing costs. Additionally, the prices are low enough to entice some Staples customers into impulse purchases.

5 million Kindles sold?

The Reuters report goes on to talk about Kindle sales estimates -

Forrester Research estimates that Amazon has sold about 5 million Kindles since the product’s launch in 2007, and that Barnes & Noble has sold 1 million Nooks since their introduction last year.

Every day there’s a new Kindle sales estimate – 5 million is one of the higher ones. Keeping Kindle sales figures secret is the gift that keeps giving.

Nook 2 still missing in action

If Nook 2 really is slated to be launched in parallel with B&N’s big in-store push for the Nook (which starts around September 4th/5th) then we might soon find out what B&N has in store for us.

At the moment, Nook 2 is missing and every day readers are picking Kindle 3 and Kindle WiFi over Nook and further increasing Amazon’s lead. It’s hard to understand what’s stopping B&N from announcing Nook 2 and letting readers place preorders.

Google Editions still missing in action

The other mystery is around Google Editions which was supposed to launch in summer 2010. It would make so much sense for Google to team up with one or both of Sony and B&N and with every smaller eReader to take on the Kindle Store.

It already has Android in nearly every non-Kindle eReader and it’s already providing a million public domain books (via Google Books) to nearly every non-Kindle eReader. It might as well add the store. Most eReader makers are desperate and this would be the perfect time to push and promote Google Editions. 

Apple doesn’t announce iPad 2 at today’s Apple Event

There were rumors that an iPad 2 would be announced at today’s Apple iPod event. That didn’t happen and there wasn’t any mention of iPad sales figures either. Perhaps they are being saved for a later conference that would also see the announcement of the iPad 2.

It’s pretty likely that we’ll see the iPad 2 arrive by October/November of 2010. The main question is price - At $350 or higher there is little threat to the Kindle 3 but at $300 or below iPad 2 would start eating up pieces of the eReader market.

There’s still a lot left to be unveiled

Nook 2, iPad 2, and Google Editions are far more important than the over-priced Sony Readers and the irrelevant Aluratek and Kobo eReaders.

Kindle 3 has the eReader market all to itself but that might change any day as Nook 2 is probably going to be released/announced soon. Apple will probably wait till holiday season to make a splash and Google might just be waiting for a certain settlement. Sony has kicked things off and Borders is doing it’s part – However, the real fun has not yet begun.

2 Responses

  1. I wouldn’t be so quick to dismiss Sony until you try one of their new devices out. Like Apple, they have years of experience integrating elegant hardware with software to create a pretty good user experience. So the WiFi/3G Daily Edition Reader is $110 more (with bigger screen) than Kindle 3. What if the Daily Edition lets me borrow one bestseller a year from the local library instead of paying Amazon $12.99? How about two or three bestsellers? Not a bad return on $110 extra invested…

  2. The case of Sony is simply typical Sony. I’ve been burned by that company too many times and won’t go back. The last “burn” was on their Clie PDA’s and discision to “get out of the PDA market” after having produced some of the very best Palm OS PDA’s. They left a whole lot of people stranded and have a habit of doing so.

    Another case in point is the Memory Stick memory card format. They were going after the “blades” much as Gilette had done with razors, but eventually had to cave to Secure Digital (SD) format.

    They’ll never learn. Sony is not the company it was ten or fifteen years ago.

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