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Behind Amazon's Kindle price drop

By Andrew Heining / July 9, 2009

The Kindle 2 at an Amazon.com news conference in New York Feb. 9.

Mark Lennihan/AP

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By now you've probably heard that Amazon quietly and without fanfare dropped the price of its Kindle e-book reader on Tuesday. The device can now be had for $299, down from $359.

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As soon as the story hit, tech news outlets were scrambling to make sense of the move, not taking at face value Amazon's explanation that an increase in production volume has allowed them to pass savings on to the consumer. After all, the Kindle 2 was only just released five months ago, and such an early price drop seems unusual.

Channel Web's Chad Berndtson, in two posts about the announcement, reminded us that this is the first price drop in the Kindle's history. He also speculates that sagging sales and the crowded e-book market have caused Amazon to make the cut to better establish itself as the first name in e-books. (But Amazon hasn't disclosed sales figures for the Kindle or its larger-screen Kindle DX, making such claims hard to substantiate.)

PC World's Melissa J. Perenson agrees. "Amazon knows that it must push its price down fast in order to establish itself as a leader in the category going forward and to remain competitive as competing models emerge," she writes. "No longer is the Kindle the only practical option for reading digital books, and if Kindle doesn't quickly achieve iPod-like traction and even dominance, more-splintered approaches to digital reading may gain ground."

Cheap enough?

Harry McCracken over at Technologizer touches on the mythical price that lulls the masses into buying: "I’m not sure if there’s such a thing as a magic price point that makes the Kindle an iPod-like breakout hit, but if there is, $299 probably still isn’t it. But a $199 Kindle might appeal to a much broader audience."

One thing that could lower the price of the Kindle and has been making waves lately? In-book advertisements. As Matt Shaer pointed out this week, patent documents indicate Amazon seems to be toying with the idea of embeding them in e-books.

Publishers getting paid

On the other side of the e-book equation, Bloomberg on Thursday reported that Amazon's stranglehold on the e-book market has publishers quaking in their wingtips.

Amazon.com, which cut the Kindle’s price yesterday, pays publishers $12 to $13 for Kindle editions of books on the New York Times best-seller list, and typically sells them for $9.99, said Paul Aiken, executive director of the Authors Guild, a New York-based group providing legal support to writers. Publishers are concerned that Amazon.com will start demanding lower prices from them so it can start making more money on digital books, he said.

If Amazon retains its hold on the market and that happens, publishers are in trouble. How can publishers break out of it? Competition. "Publishers hope new players like PlasticLogic, FirstPaper, ScrollMotion, and Google's e-publishing service could help turn the tables in their favor," Silicon Alley Insider's Preethi Dumpala writes. "But so far, Amazon has an early lead."

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Follow us on Twitter, and head over to Marjorie Kehe's Books blog for more on the Kindle.

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