Fun rumor of the day: $50 Amazon Kindle E Ink Reader to threaten Sony Reader?

Amazon reader deviceWill a $50 version of the rumored Amazon Kindle E Ink reader, subsidized by e-book sales, threaten the $350 Sony Reader? MobileRead is carrying a juicy rumor from a somewhat skeptical Nick Hampshire of Afaics? Nick says a "viable analysis indicates that a subsidised retail price of about US$50 is possible." I dunno, Nick. That would be some subsidy. And even in the States, where laws are looser than in Europe, I wonder if Sony could fire back with a claim of unfair competition. And what happens on the e-book format and price fronts? Would this mean higher prices paid by people herded into Mobipocket format? Here's the exact quote attributed to Nick:

This may only be a rumour but it certainly is a viable option, an analysis of the manufacturing cost of the device indicates that a subsidised retail price of about US$50 is possible. And, from market research we know that this would probably be low enough to create a sufficient demand for e-books and e-reader devices to ensure that the company not only recouped its subsidy cost but created a growing market. However, this would mean subsidising the sale of several hundred thousand Kindle readers.

10 Comments on Fun rumor of the day: $50 Amazon Kindle E Ink Reader to threaten Sony Reader?

  1. Hmmm. I wonder if a $50 price tag will get me to look past the fugliness of the Kindle.

  2. Fugliness? C’mon…it’s just like a high school textbook–So ugly that it begs for defacement–er, modification. Some felt tip markers, some time, and that’ll be won Kool Kindle.

    Maybe they can sell sticker sets to ‘individualize’ your Kindle?

  3. i sorta like it. it looks like something from the set of “space: 1999”, or some other late-1970s/early 1980s view of the tech objects of the future. i’d love to modify it with stickers, paint, and whatnot.

  4. For 50 clams, will Amazon include the Vulcan ears?

    Seriously, though, as an owner of the eBookwise unit, I’m clearly no book machine aesthete (except in the GUI department, where it rocks).

    My hopes are smallishly pinned on the new Panasonic; must have usable PDF, though.

  5. i’m with you there, Richard — useable PDF is a *must*. i’d also like mac compatability.

  6. David Rothman comments:

    I dunno, Nick. That would be some subsidy. And even in the States, where laws are looser than in Europe, I wonder if Sony could fire back with a claim of unfair competition.

    If Sony attempted to file a lawsuit against another company for providing excessive subsidies it would certainly be unintentionally humorous. The retail price for the basic model of the Playstation 3 video game machine is $499 in the United States. Yet, the company iSuppli that performs hardware-teardown analysis estimates that the basic Playstation 3 costs Sony $805.85 to build. Therefore, Sony is currently providing a $306.85 subsidy for each video game machine that it sells. A large subsidy is also provided in the Japanese and European markets.

    Source: http://www.isuppli.com/news/default.asp?id=6919

  7. Thanks for your thoughts, Garson. The lawyers can have fun over these issues. Books just might be viewed differently from video-game cartridges. – David

  8. I still think that the design we all see for the Kindle was for patent filing and that they will have a much better looking device once it’s ready for the public.

    As for the $50 price tag, I have a feeling that the price will be subsidized either by joining a subscription service or with higher priced books. That price reminds me of the $20 printers with $60 ink cartridges. I knew some people that bought replacement ink by purchasing new printers because it was cheaper than buying the cartridges alone LOL.

  9. I think LC and Garson are correct, hardware subsidy is a long standing practice – for years Kodak and Polaroid sold cameras at under production cost, and made the profit on the sale of film. Furthermore given that the standard pricing rule is that retail price is three times manufacturing cost, I would suspect that Sony are already subsidising the Reader to a small degree, and recouping money via e-book sales through SonyCONNECT.

    The important thing to note with the Kindle is the EVDO wireless data communications interface, this will almost certainly only link to Amazon’s e-book retailing site, this means to buy content for the Kindle you will have to buy it from Amazon.

    Our estimate of the manufacturing cost of the Kindle is about US$136 – selling for $50 would require a subsidy of $86 per unit. Given that e-book retail margins for a company like Amazon are well over 50% this would conservatively mean that they would have to sell about $170 worth of e-books for every reader in order to cover costs. Over a twelve or eighteen month period this would not be an unreasonable proposition.

    If this rumour is correct what subsidy by Amazon will do is rapidly accelerate the number of e-reader devices in the market. This can only be good for the market as a whole since it will encourage publishers to take a more positive attitude, and introduce a wider public to the idea of using an e-reader. The subsidy would of course be ended as soon as Amazon felt that it had achieved its purpose.

  10. Very informative, Nick. I’m curious about the public domain aspect. You write: “This means to buy content for the Kindle you will have to buy it from Amazon.” Will users be able to download Gutenberg books?

    And what do you think this will mean to the prices of Mobipocket books for people who don’t use the Kindle?

    Thanks,
    David

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