New eReader will go head-to-head with Kindle, Sony Reader

Today a new entrant into the eBook reader game: Interead announced the Cool-er, which is a direct competitor to the Kindle 2 and will sell for about $250. CEO Neil Jones is an English entrepreneur who seems to have done his homework:

  • there are more titles available available at his own eBook store (www.coolerbooks.com) than at Amazon’s Kindle store — 260,000 versus 250,000
  • this eReader supports PDF and many other formats
  • it isn’t tied into Amazon itself; rather it is plug-and-play with any PC or Mac
  • it looks, well … cooler! with many colours and iPod-like styling.

Competition could quickly kill the Kindle. Here’s why…
In the USA, and likely many other countries, it is illegal for a manufacturer to provide its goods to one retailer (or group of retailers) at a lower price than to similar retailers. So a publisher who provides its eBook content for $3.00 or $3.50 to Amazon — presuming a retail price of $10 — must provide that same title at the same wholesale price to Interead’s www.coolerbooks.com store, and to www.smashwords.com, etc. Amazon is betting heavily that it can keep its 65% to 70% margin. It wants to offer discounts on that $10 to attract customers and build repeat customers — hoping to dominate the marketplace. So the $10 eBook might be “on sale” for perhaps $7.50, with the publisher still getting the pre-agreed $3.00. What Amazon is doing is getting publishers to subsidize its discounts, by not paying publishers a fair wholesale price in the first place. This strategy worked very well for Amazon with printed books — Amazon has grown to be the biggest retailer for printed books now. Amazon extracted lower wholesale prices from publishers for years, claiming it was a different type of retailer than bricks-and-mortar stores, so it could legally get a different wholesale price. But the strategy won’t work for eBooks, I predict.

Interead and Smashwords, and other entrants, don’t have to presume to take 65% or 70% of the selling price — smashwords only takes 15%! They can get the eBook content from publishers at the same price as Amazon does, since they are clearly the same type of merchant. So on that supposedly $10 retail priced eBook in the above example, smashwords would pay to the publisher the same $3.00, and could offer the book at $3.53 as its “regular price”! How long will Kindle and Sony customers pay more for their device, and more for their content, when there are convenient alternatives?

Some folks thought we had to wait for Apple to enter this market niche for Amazon and Sony to be given a serious shake-up. Seems the pressure is already building.

Keep tuned …

thanks, cheers,

Bruce

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