Thursday, October 29, 2009

Is Amazon Shooting the Kindle in the Foot?

Publishers are watching the current price war between Amazon, Wal-Mart and Target with misgivings. The retail and e-tail behemoths are offering loss-leader prices around the 9-dollar mark for many new hardcovers, and some fear that pushing prices on major titles down will devalue other books in consumers' minds.

But what I'm wondering is, will doing this devalue Amazon's hottest property, the Kindle, and its e-reader competitors? The statistics I've seen suggest one big selling point of Kindle is that the very high price of the Kindle is worth paying because once you've done so, you can buy new books at much cheaper prices than their print editions. James Patterson's I, Alex Cross lists for 9.99 on Kindle when it lists at $27.99 in hardback. And the biggest sellers on Kindle are mostly new commercial fiction like Patterson, Dan Brown, and Patricia Cornwell. I suspect Kindle buyers are probably avid fiction readers who go through these books at a fast clip.

But if new bestsellers are 9.00 in hardcover, Kindle ceases to look so economical. As of now, the superdiscount only applies to a small number of titles. But if you're a Patterson or Cornwell fan, and now you can read their new hardcovers for a dollar less than the Kindle version, you may want skip the $259 Kindle investment. One piece I read recently suggests that Amazon, with a huge war chest, can carry on price wars with Wal-Mart for a long time. But if the discounting starts to spread across many more titles Amazon may feel the pain in its Kindle limb before it is suffering badly on hardcover sales.

Maybe what we'll see next is a price war on e-readers themselves.


Unknown said...

Hi Peter
Nice to see you blogging and good to hear your point of view.

From the moment Amazon created an iPhone App through which to buy Kindle books together with their recent announcement that they'll be releasing free reader software enabling Kindle books to be read on PCs using Windows 7 from next month to be followed by Blackberry App and others, it seems to me that they're not so much wedded to the Kindle device as to selling Kindle books to be read however the consumer choses to read them: iPhone, PC netbook, Blackberry and whatever emerges next. In other words, they're more interested in cornering the ebook sales market than the device sales market.

Peter Ginna said...

Steph, I think Amazon is too smart not to want to dominate e-book sales across the board. Nonetheless they are making loadsamoney selling these expensive devices--their biggest selling item in any category according to their Q3 report. That's partly, I assume, why they've been willing to take a loss on every e-book they sell. P-book discounting may have to get more widespread--and I hope it won't--before it really hurts Kindle sales, but it's one possible unintended consequence.