“It was obvious that the price of standalone e-readers had to come down,” said James McQuivey, an analyst at Forrester Research, citing the threat by Apple and other tablet makers. “We just never thought it was going to happen this rapidly.”
Analysts had expected the prices of e-readers would gradually fall because of the natural decline in component costs and the increased profitability of e-books themselves.
Until this spring, e-book sellers like Amazon and Barnes & Noble sold many bestselling e-books at a loss, in order to entice customers. But then five of the six major American publishers agreed with Apple to change to a so-called “agency” sales model. Under the new agreement, booksellers were required to raise prices on many digital books and got to keep a 30 percent commission on the sales, which now allows them to sacrifice some profit on their hardware.
The price cuts should add further momentum to what, despite incursions by the iPad, has been a growing market for dedicated e-reading devices. Amazon and rivals are on pace to sell 6.6 million e-reading devices this year, up from 3.1 million in 2009, according to Forrester.
But even as the market grows, several smaller players have encountered problems. iRex Technologies, based in the Netherlands, recently sought protection from creditors in Dutch bankruptcy court, citing problems with its division in the United States. Earlier this month, the Skiff e-reading platform, developed by Hearst, was acquired by News Corp., casting doubts about the planned introduction of a Skiff reading device.
“I don’t see more than two, or maybe three dedicated reading companies in the market for selling e-books,” said William J. Lynch, chief executive of Barnes & Noble, in an interview. “I think you are starting to see a shakeout now.”
Mr. Lynch also predicted that within 12 months, e-reading devices “that people will actually want to buy” could be available for under $100.
