At what price glory? Pricing rumors and speculation
I almost made this part of a general Round Up, but there was just too much going on in prices to let it get mixed in with other things.
Rumor #1: The price of the Kindle is going to go down
This one is very buzzy right now, and it makes some sense. We have to clarify a few things, though.
There are two current Kindle models. One is the Kindle DX, at $489, and other is the Kindle 6″ (formerly the Kindle 2) at $259.
They’ve both been at those price points for a long time. For the DX, it’s been since it’s release on May 6, 2009.
The Kindle came down in price when the Kindle International was released on October 7, 2009. The first Kindle had been introduced at $399.
Six months is not that long at a price point, even in consumer electronics.
Why the speculation that one or both models may be reduced?
Well, there’s this thing called an iPad…
The iPad is going to be released April 3rd. It’s lowest configuration is $499…ten dollars more than the DX is currently.
Whether we dedicated EBR (E-Book Reader) users like it or not, people are definitely going to think about the iPad for reading. We’ve seen a couple of surveys where reading is one of the most popular intended uses.
Despite playing music and a couple of games, people buy the Kindles to read. If they think the iPad is a reasonable way to read, you can’t have a Kindle for almost the same price and have it sell widely. For ten bucks more you get movies, e-mail, color?
I think Amazon will either have to significantly lower the price of the DX, or drop it altogether.
I’m actually leaning towards the latter. People like them, yes, and Amazon could sell refurbs, but I can’t see them dropping the price enough to make the sales continue. I don’t think Kindles are large margin items…in other words, I don’t think you could cut the price by a third and make money on them. They must be kind of costly after sale as well, with all the Customer Service calls.
They might lower the price and try it, though.
The 6″, on the other hand…I think that price will come down. Let’s say they take it down about 25%, to $199. $199 is a very different feeling price than $259. It seems like a lot less than half of $499.
Any other reasons to think this might happen?
Well, I can testify that there has been a lot of interest in the Delstar OpenBook…lots of traffic finding my blog that way. I think people would be very disappointed in it, generally…you can’t read most famous books on it. Why the buzz? It’s $100 at Walgreens right now.
Sony also lowered the price of one of its readers. Their Pocket edition is marked down to $169 right now. When does that price go back up? April 3rd, the release date for the iPad. It’s important to note, this is not Sony’s Touch Screen edition, or the only one with wireless download. The latter is the Daily Edition…and it’s still $399.99.
Borders is going to have the Kobo reader in their stores…for about $150. This doesn’t have a wireless connection, either, from what I’ve heard.
So, just like publishers were afraid that $9.99 prices for e-books might lead to price value devaluation (thinking that the “right price” for a book is lower than it has been), Amazon may have to face that with EBRs.
Even though the Kindle is arguably much better than the Kobo or the OpenBook or the wired Sony, people may not realize how true that is.
I’d also think the nook (sic) from Barnes & Noble must cost more to manufacture than the Kindle. It has the same E Ink screen from Vizplex, but it has a second screen as well. B&N might not be able to match a Kindle price cut.
It’s also possible Amazon has another device coming out in the first quarter of 2011, with a touch screen and color. That’s my guess.
I think Amazon needs to concentrate on content, and be very, very careful about getting into the hardware wars (where it is a novice).
My guess? April 3 (or 4th), the Kindle 6″ drops to $199. The Kindle DX may go to $399…and then sell out of existence as a current product.
Rumor #2: iBooks prices for bestsellers will be $9.99
Even though there is an
allegedly leaked screenshot
I don’t buy it.
Oh, I’d really like this to be true…I think a lot of people would. Not because I buy books in that price range all that often, but because I want to see the explosive growth in the e-book market continue. Raising the prices is like lowering your foot…on the break. On the other hand, there are going to be a whole more “cars” out there. The e-book market will probably continue to expand, regardless.
Why don’t I accept this one?
First, let’s assume that what we’ve heard about the “agency model” is true in its basics. The publishers set the prices, and get 70% of the sale price (which will be the same as what used to be called the “list price”).
So, number one: Apple wouldn’t set the price in the iBooks store…the publishers would. Apple couldn’t guarantee that the prices would be any particular amount.
Second, it would be illegal for the publishers to get together and agree on a set price point for books. They can independently come up with the same price point, but they can’t all say to each other that $9.99 is the right price.
Third, the publishers have been making a fuss about the $9.99 price point being too low for a long time: why would they now adopt that level when they don’t have to do it?
Fourth, that would be huge drop in the money they would make.
Under the old “wholesale” model, they set the list price where they wanted. The retailers (like Amazon) would pay them fifty percent of that…and then the retailers (who have the expertise in direct sales to customers, in my opinion…I’m a former retailer) set the sale price for the customer.
I checked ten of the New York Times bestsellers: the average Digital List Price was $26.48.
Now, under the wholesale model, they would have gotten $13.24 per download on those.
In the agency model, they would get 70 percent instead of 50 percent…but it would be of that $9.99. That means they would get about $7 per book…only about 53% of that $13.24.
What sense would that make?
You could say, “Oh, but then the price would be the same as it is at the Kindle store.”
The agency model means that the prices at the Kindle store and iBooks will be the same…and it will be whatever they (the publishers) decide it is!
They can raise the prices and the percentage they get.
The publishers have cited prices for new bestsellers of $12.99 or $14.99, somewhere in there.
That does mean they make less money, by the way. To make $13.24 at 70%, you’d need to set the price at $19. I don’t think they are going to do that commonly, by the way…they’ll raise the prices on the backlist to make up for it.
Why would there be a screenshot showing prices at $9.99, then?
Three main possibilities:
1. The prices will actually be $9.99
2. Apple was experimenting with the prices before release. They could have intended the word to get out, or it could have just been a fluke…somebody caught it while they were running some test. A lot of books will be less than ten dollars, of course…books that have a current paperback version.
3. It’s a fake.
I don’t know which of the three it might have been. I’d like to see the prices at $9.99 for popular bestsellers. That’s the case if it’s reason number one.
Summing up: my best guess is that the Kindle 6″ will go to $199, and iBooks will not be $9.99 for bestsellers.
We’ll see what happens, though…I don’t have a spotless prediction record.
This post by Bufo Calvin originally appeared in the I Love My Kindle blog.