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If you're in the market for an ebook reader, you picked a good time to go shopping. Both Barnes and Noble's Nook and Amazon's Kindle recently received significant price reductions, and it had nothing to do with either company feeling particularly generous. Instead, iSuppli says the price cuts represent a change in business strategy brought on by increased competitive pressure from Apple's iPad.
"With these cuts, ebook readers from Barnes and Noble as well as Amazon now are priced at about the break-even level with their bill of materials (BOM) and manufacturing costs, according to iSuppli's Teardown Analysis Service," said William Kidd, director and principal analyst, financial services for iSuppli. "With zero profits on their hardware, both these companies now hope to make their money in this market through the sale of ebooks. This is the same 'razor/razor blade' business model successfully employed in the video game console business, where the hardware is sold at a loss and profits are made on sales of content."
Barnes and Noble kicked things off on Monday when it slashed the price of its Nook by $60 and introduced an even cheaper Wi-Fi only model, and then hours later, Amazon followed suit with a $60 price cut of its own for the Kindle.
What this means in the grand scheme of things remains to be seen. According to iSuppli analyst Jordan Selburn, ebook reader sales are likely to spike in the short term, as they now cost less than half of an entry-level iPad. But looking longer term, Selburn sees ebook readers becoming more of a niche product.