To the astonishment of many, Amazon on Thursday unveiled a greatly improved edition of its Kindle eReader at bargain basement pricing.
Offering a 20% faster refresh rate and 60% higher contrast than the Kindle 2, the third generation Kindle is priced at just $139 for a WiFi-only model and $189 for a version outfitted with both 3G and WiFi.
The Wi-Fi-only Kindle 3 is $10 cheaper than the Wi-Fi only edition of Barnes & Noble’s rival Nook. Yet although consumers will undoubtedly enjoy the increasingly small pricetags, these two book selling giants could be shoving other eReader makers out as they keep pushing down pricing.
Uses same E-Ink Pearl display as Pricier Kindle DX
Amazon’s third generation Kindle will weigh 8.7 ounces and it is going to measure 7.5 by 4.8 by 0.34 inches. With a memory capacity of 4 GB, it will be able to hold 3,500 e-books.
The next Kindle will use the same E-Ink Pearl display as the higher-end Kindle DX. Amazon has completely redesigned the chassis design for the Kindle 3 with easier-to-use buttons and a simplified keyboard.
The new e-reader is going to come with a new WebKit-based browser. Other new features will include the ability to change line spacing and typeface. The device is going to be available in a choice of graphite or white casings.
“Kindle 2 out of stock! Kindle 3 must be on the way!”
Amazon ran out of stock on the Kindle 2 about a month after reducing pricing on the earlier device from $259 to $189, slashing the Kindle 2’s pricetag only hours after B&N had cut the Nook’s from $269 to $199.
On Wednesday of this week, Amazon was still taking online orders for the Kindle 2, Yet customers trying to buy the earlier eReader were told that the item was temporarily unavailable, and that they’d be e-mailed later with delivery dates.
Upon getting wind of the out-of-stock notice, Jim Friedland, an analyst at Cowen & Co,, told his clients that a third-generation Kindle must be ready for the starting gates.
The analyst also pointed to other recent signs in this direction, including the availability of new chips to improve the Kindle’s response time and cutbacks by Amazon on orders of Kindle 2 screens
Amazon Will Take a Hit on its Hardware
With pricing so low on the Wi-Fi-only Kindle 3, Amazon will probably manage to entice new waves of consumers into the world of eReaders, even in today’s cautious economy.
Amazon stands to take a loss on its eReader hardware, though. Even before the advent of the third generation Kindle, Amazon and B&N were both at the break-even point for materials and manufacturing costs, said William Kidd, director and principal analyst for financial services at iSuppli.
Given zero profitability from their hardware, both companies are now hoping to make their money in this market through the sale of e-books, said Kidd.
“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,” he noted, in a recent report
Will other eReaders Survive?
Not every company in the e-reader space is a book-selling giant, however. Smaller companies have been standing in line to sign up for deals with publishers and book sellers for distributing content ranging from newspapers to textbooks. Yet if they aren’t able to make a profit on their hardware, too, how many of them will be able to survive?
Devices that look particularly vulnerable include Plastic Logic Cue’s reader, still priced at $650 for the basic version, and the Kobo E-Reader, no longer the least expensive reader around at pricing of $150.
On the other hand, other low-cost eReaders are also on the way. Also on Thursday, for example, Copia announced the Wave5, a 6.7-oz, 5-inch e-reader with a 5-inch capacitive touchscreen LCD (800-by-480), 64 MB RAM, 2 GB onboard storage, and an SD card slot, priced at $99.99. Copia’s new Wave7 — a similar e-reader outfitted with a 7-inch screen — will sell for $129.99.