First, you’ve got to assume a useful life—and consider the discount rate. I’m going to assume your e-book reader lasts three years and ignore the discount rate, which is about comparing a buck spent now with a buck saved in a couple of years. For most of us saving a dollar a couple of years from now is not as valuable as saving a dollar now.
Let’s assume you buy your Kindle at $400 and you regularly read best-sellers in paperback at $20 each, but you now buy them for Kindle at $10 each (and we’ll assume that Amazon keeps the $9.99 pricing).
Repaying the $400
To pay for your Kindle, you’ve got to buy enough books to repay your $400 from the savings. Which is 40 books. Over three years, that’s 13.33 books a year. Which would make you a fairly heavy reader.
Now, if you normally wait for books to come out in paperback, your savings drop dramatically. For example, you can buy Wee Free Men by Terry Pratchett in paperback for $6.99. On the Kindle, you save 20% or $1.40. At a savings of $1.40 a book, it would take you 286 book purchases to repay your Kindle or 95 a year.
Let’s make this a bit more real by assuming you read a mix of paperbacks and new best-sellers. As long as you buy at least one best-seller a month, and a couple of paperbacks, you’re talking break-even. Adding a modest discount rate (say 10%) means a few more books, but not too bad.
Makes sense if you buy new best-sellers regularly
Bottom line: As long as you buy best-sellers new on a regular basis, you actually can come out ahead with the Kindle. It’s rougher with the Sony because Sony doesn’t discount so much from cover price (if at all).
This is simply the cost savings from buying books. I intend, some day, to try to calculate what I pay per year for keeping the thousands of paper books in my house–costs I don’t incur for my e-books. I think this makes the economics come out a lot better but no matter how you look at it, a dedicated eBook machine is a good investment only for a dedicated reader. For the average reader (five books a year), figure out how to read on your PDA, smartphone, or even your PC.
(Picked up from Rob’s comments in the TeleBlog.)