David R. Henderson  

The Glories of Competition

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From today's Wall Street Journal, a front-page article by Geoffrey A. Fowler titled, "Price Cuts Electrify E-Reader Market":

Two of the leading makers of electronic-book readers, threatened by the success of Apple Inc.'s iPad, slashed prices Monday in a move that could further drive e-readers into the mainstream.
Early Monday, Barnes & Noble Inc. cut the price of its Nook e-reader to $199 and introduced a Wi-Fi-only model for $149. Hours later, Amazon.com Inc. lowered the price of its Kindle e-reader to $189.
Both the Nook and Kindle previously sold for $259. While that was well below the iPad's starting price of $499, the e-readers lack the hit Apple product's color screen, ability to display video and websites, and thousands of specialized applications, or apps.

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CATEGORIES: Business Economics

COMMENTS (2 to date)
The Unbeliever writes:

The really interesting thing is now we have a price on the "free" unlimited cell access. It's $50, the difference between the prices of the two Nook models.

Chris Koresko writes:

I for one am skeptical of the e-book thing.

To my mind, there are big potential benefits of electronic publishing, but from a technological perspective they are mostly captured by a netbook running a web browser. Can anyone name anything significant that a Kindle can do that an ASUS EEE can't?

For reference, I just saw an ad for an EEE with a 10" screen, 160 GB of mass storage, a webcam, 3G wireless and WiFi. This of course has a real keyboard and touchpad, USB ports you can use to add external ones if you want, along with optical drives, printers, scanners, or whatever. It also has a video port so you can connect a much bigger LCD or a screen projector. Of course it runs a mainstream OS (XP in this case) so the software selection is enormously larger than any ebook reader (and it includes programs to read the proprietary ebook formats). If you don't like XP you can easily install Ubuntu or whatever. Size and weight are in line with a hardcover book, and battery life is comparable to the iPad.

Oh, and the price is $200 (refurbished, admittedly), less than half the iPad's price.

But the more fundamental issue from my point of view is that e-books themselves are much less valuable than they could be, as a result of their typically being published in proprietary formats wrapped up in DRM. The Kindle famously had one book disappear (Animal Farm?) from readers whose owners had bought and paid for it, because the publisher decided to change their deal with Amazon. Electronic textbooks are often set up to expire when the class is over, so forget about keeping your college books as the basis for a professional reference library. How do you loan out a DRM-wrapped e-book when you're excited about it and want a friend to see? Give up your Kindle and your whole electronic library for a week? What if you decide you want to read your library on a Linux machine -- do you need to set up Windows on it and download Amazon's proprietary reader software? All in all, it strikes me as a huge pain that might keep it from being worthwhile even if the e-readers and content were given away free.

But they're not. When I checked out on Amazon a book David Henderson recommended a few days ago, it turned out they were selling the e-book version for 33% more than the paperback. Huh?

But to end this rant on a high note, there is one publisher I know that sells their e-books a variety of open formats -- at the user's choice -- completely free of DRM, and at prices noticeably below the dead-tree equivalent. Baen Books. Unfortunately they're exclusively a science-fiction publisher, but they have some interesting commentary on the economics of this kind of publishing, including the observation that the dead-tree sales of books posted in the "Free Library" (no-cost downloads) tend to rise.

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