Price cuts still not deep enough for e-reader market

Price cuts made by Barnes & Noble and Amazon on their e-readers still don’t go way deep enough to make their Nook and Kindle gizmos nearly cheap enough.

B&N cut the price of its Nook e-reader to $199 while a little later Amazon took the axe to its Kindle e-reader price and positioned it at $189.

The move is seen in the USA as a reaction to the popularity of the Apple iPad but it won’t be long before the Nook and the Kindle themselves are viewed as the overpriced models they are.

At this year’s Computex in Taipei, one company was showing off a full colour e-reader with a distributor price of $59 – that gives enough margin to undercut both the Nook and the Kindle by as much as $100.

A distributor we spoke to said he was convinced that the machine was good enough to be attractive to people with a $99 price tag.

Many observers believe the basic business model that Amazon, Barnes & Noble and indeed Apple are pushing is deeply flawed. Publishers are hoping that they will be quids in by essentially licensing their books to people who have to pay through the nose for both e-reader and for their reading matter.

The better analogy is with printer manufacturers, who subsidise expensive and highly priced printers with “consumables” like printing ink and paper. The electronic e-reader is the medium but it’s definitely not the message.

With typical ingenuity, we’d expect Taiwanese and Chinese manufacturers to get their teeth into the e-reader market and rapidly bring down prices for gadgets they’re producing.

And provided they get wide enough distribution, that will likely stifle the cosy little deals that the big publishers are striking with  Apple, with Amazon and with Barnes & Noble.

As with other technologies, the economies of scale and Moore’s Law will affect the price of e-paper and that means, inevitably, that prices will fall over the next coming years.

Will anyone then want to pay $500 for an Apple iPad? We kind of doubt it.