Amazon (s amzn) is riding the wave created by high Kindle e-book sales and releasing two new Kindle readers. The Wi-Fi model is only $139, and the 3G-enabled Kindle is $189. Both new Kindles have the same 6-inch screen, improved to provide 50 percent better contrast for reading that is easier on the eyes. Even though the screen size is the same as the previous Kindle, the new models are 21 percent smaller and only weigh 8.7 ounces.
The improved screen may be a bigger draw for consumers than the smaller size, as Amazon claims the new technology makes fonts crisper and much easier to read. Pages also turn faster, addressing a common complaint by users of electronic readers.
Amazon is expecting these new Kindles to trigger higher sales due to the reduced pricing.
“Kindle is the best-selling product on Amazon for two years running. We lowered the price to $189 and sales growth tripled. Now, we are excited to introduce a new generation Kindle that is smaller, lighter, and faster, with 50 percent better contrast. Readers are going to do a double take when they see Kindle’s bright new screen and feel how remarkably light the smaller 8.7 ounce design feels in one hand,” said Jeff Bezos, Amazon.com Founder & CEO. “If you don’t need the convenience of 3G wireless, we have an incredible new price point—$139 for Kindle Wi-Fi. Kindle Wi-Fi has all the same features, same bookstore, same high-contrast electronic paper display, and it’s even a tiny bit lighter at 8.5 ounces. At this price point, many people are going to buy multiple units for the home and family.”
Amazon has not disclosed the profit margin on the Kindle readers, and these low-cost readers must be approaching the subsidized range if they aren’t there already. The profitability is likely in the selling of content, so it’s possible these cheaper readers could be selling as a loss leader for Amazon. The electronic reader space is heating up, with Amazon’s competitors also offering devices with similar capability. Are we heading for the eventuality of Amazon giving free (or almost free) Kindles to customers?
If we are, it could be a result of fending off the competition. Barnes & Noble (s bks) is selling a Wi-Fi version of its Nook reader for $149, so Amazon is going after the Nook with its cheaper Kindle. On the high end, there’s competition from Apple’s (s AAPL) iPad, which is a more general purpose device, but also a platform.
In response to other devices — such as smartphones –offering a reading platform, both Amazon and B&N have built the readers into full-blown platforms, with versions of the two reader apps available across multiple operating systems and devices. The winner of the e-book wars will likely be the company that builds the biggest ecosystem for consuming content, and Amazon is already doing a decent job in that area. While electronic readers are important as the primary marketing platform for the seller’s content, they represent only a fraction of the prospective target devices that can consume the content due to these reader apps.
Amazon’s recent disclosure that a big jump in Kindle content sales occurred may have more to do with the release of the iPad than with sales of the Kindle reader. The company had the free Kindle app available for the iPad on the day it launched, and it may not be a coincidence that Kindle book sales jumped at that time. The company will not disclose what percentage of Kindle books sold are for devices other than the Kindle reader. There are currently over 100,000 customer ratings in the iTunes store for the Kindle app, so it’s almost certain iPad owners are buying Kindle books without a Kindle reader in hand.
Customers can pre-order the new Kindles immediately, with shipping to begin on Aug. 27.
Related research on GigaOM Pro (sub. req’d): Irrational Exuberance Over E-Books?