As was surely inevitable, the early changes in the offerings of the various players in the e-reader arena have slowed, and now, the real battle begins. The pricing wars, that see who is serious about survival have begun, with the early player being Barnes and Noble, with cuts in the price of the nook, and also a lower priced version, which only includes wi-fi connectivity, to put pressure on others at the $150 price point.

Larry Dignan, from ZDNet, has more of the details –

Barnes & Noble cut prices for its nook e-reader from $259 to $199 and introduced a $149 Wi-Fi version in a move to put pressure on Amazon’s Kindle and grab more market share.

The move is likely to put Amazon on the defensive and the e-commerce giant appears to have been either caught flat-footed or resting on its early Kindle lead. Many folks have noted that Apple’s iPad is a dedicated e-reader killer, but let’s exclude Steve Jobs & Co. from the picture. Even excluding Apple, Amazon looks a bit behind the curve on e-readers.

Consider the following:

  • Barnes & Noble is using its stores for nook distribution and has integrated the device with its retail experience nicely. Barnes & Noble also inked a distribution deal with Best Buy.
  • Sony’s Reader franchise also enjoys broad distribution and hits multiple price points ranging from $169.99 to $349.99.
  • Meanwhile, Amazon lacks a Wi-Fi only option and will run you $259. Amazon did do a retail distribution deal with Target and has only just started running ads to promote the Kindle. These ads also indicate that Amazon needs to promote the Kindle more. Before the nook, iPad and better competition, you’d never see Amazon promoting the Kindle in the back of Business Week and other magazines and on TV.

And now Amazon is going to look like its playing defense again. Amazon will have to cut prices. I’ve been researching e-readers for a few weeks now. The difference between the $259 price point and $199 is huge. At $199 and lower, you figure you can get ROI in a year while you ponder whether you want or need an iPad (assuming you primarily intend the device to be for reading). Sony with its multiple price points was gaining traction in my little buying/research experiment.

Now the nook may be back on the table. The Wi-Fi version—the current nook minus 3G—will offer complementary AT&T hotspots and at $149 looks like a good deal.

The big point here is that Amazon’s Kindle is off the table at $259—unless of course that price falls.

Simply put price matters, but ultimately Amazon needs to cook up Kindle 3 and quickly. If Amazon doesn’t move the needle again on e-reader innovation it’s going to be stuck playing a game where price is the only real differentiation.

Stifel Nicolaus analyst George Askew said in a recent research note:

We believe Kindle’s retail presence signals a need for Amazon to combat the popularity of Apple’s iPad. The Target partnership provides Amazon the ability to display the Kindle to consumers in a physical retail environment. We believe that Kindle’s availability at Target should mitigate competition from Sony’s eReaders. Sony sells multiple eReaders through Target at price points of $169.99 and $199.99. The pricing difference notwithstanding, we believe that Amazon’s eBook network, and wireless connectivity, make it an attractive alternative to Sony’s eReaders.

Dignan’s own personal research shows how tricky this little play is becoming. If the prices were spread a little more, if the economy had not taken a tumble, if Apple had not come out with such a compelling device at a price that makes many wonder if they can skip a netbook or notebook, and use the desktop at home with the iPad on the go…

All of these things figure in, and all will be important to some buyer, that will be slightly differentiated from others – that is why the market place is difficult to predict and very exciting.

As I have said before, there will be a big shakeout, and it has started. The end result will be a core of two, possibly three players, all well under their current costs, and then the iPad at the top, for Apple took that part of the market when it entered, and no one else seems to have the nerve to play in their part of the market. I had thought that we would see some larger player take on Apple, and frankly, I thought it would be Microsoft, both because of a natural order of things and the hubris of Mr. Ballmer.

But it hasn’t happened yet. What we are seeing is the opening salvo, and things will get bloody before long. Have you already purchased? If so, you have more than a little interest in the outcome. If not, you can calmly remain an observer only, ready to pounce on the best choice for you when the dust clears.

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I have never met a man so ignorant that I couldn’t learn something from him. Galileo Galilei

Slots Do you ever wonder if Vegas has a line on the outcome of the e-reader wars?


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