$299 Kindle 2: Amazon Hears Footsteps, Drops Price

[Posted by Sarah Rotman Epps]

Amazon dropped the price of the Kindle 2 today from $359 to $299. Are we surprised? No. It's predictable that prices decrease for consumer electronics as manufacturing volume scales up (just ask those poor saps who paid $499 for a 4GB iPhone in 2007). But there's also some pricing pressure specific to the eReader category that Amazon is responding to. In particular:

• The barrier for entering the market is dropping. Taiwanese manufacturer Netronix is cranking out stripped-down, less expensive eReaders for companies like Interead and Borders UK. Interead's Cool-er Reader retails for US$249; Border's Elonex retails for £189. Neither has wireless connectivity, but they each expand consumer choice for a lower price. What's more, they were developed and brought to market rapidly--the Cool-er Reader took only 6 months from concept to retail.
• Smartphones and netbooks put a ceiling on how much eReaders are worth. If you can buy a fully-functioning netbook for $300, it makes consumers think twice about shelling out even close to that much for a single-function device like an eReader. In addition, Forrester data shows that in 2009, 83% of US adults own a mobile phone, and they're using these multifunctional devices for reading, too. There have been more downloads of iPhone eBook apps than there are Kindles and Sony Readers combined. Undoubtedly that's why Amazon bought Lexcycle, whose Stanza iPhone app was downloaded 1 million times in 2008, and leading Canadian bookseller Indigo has launched Shortcovers, whose apps for the iPhone, BlackBerry, and Android had more than 300,000 downloads in the first 120 days.

We have some really cool new survey data on what consumers are willing to pay for eReaders (we used a Van Westendorp Price Sensitivity Meter, for all you data nerds out there, to gauge optimal pricing for different customer segments) that we'll be publishing soon. Here's what you can expect to see on the eReader space from Forrester in the coming months:

Forrester Teleconference, "How Big Is The eReader Opportunity," July 15, 11am
Forrester report, "Who Will Buy An eReader?" (July)
Forrester report, "The eReader Price Crunch: How Much Are Consumers Really Willing To Pay?" (August)
Forrester report, "The Content And Features Consumers Want From eReaders" (August)
Forrester report, "Convenience Quotient: Reading On eReaders, Smartphones, Netbooks, and Print Books" (September)

Good stuff--stay tuned!