E-Reader Prices Need To Drop To Reach Mass Market
September 5, 2009 by Alex
Filed under Accessories
According to a survey released Wednesday, e-readers will not become true mass-market devices until pricing falls steeply from the $199 to $489 range of today’s products. And even then, e-readers aren’t expected to become as big a market as MP3 players, which 110 million U.S. consumers now own, said Forrester Research analyst Sarah Rotman Epps.
“The price points for how most consumers value e-readers is shockingly low — for most segments, between $50 and $99,” Rotman Epps said. “To reach the largest market possible, the prices will need to come way down.”
Display Price Shock
The biggest obstacle to hitting the $50 to $99 e-reader sweet spot is the cost of the devices’ specialized E Ink screens, currently about $60. However, device makers can be expected to “look for alternative providers of displays if E Ink can’t bring its prices down fast enough,” Rotman Epps said.
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On a more positive note, wireless operators are increasingly willing to subsidize devices other than phones to increase data traffic. In Europe, service providers are already heavily subsidizing netbooks, noted Gartner Research Director Carolina Milanesi.
“Vodafone Italy offers a free notebook for a two-year contract at 39 euros a month,” Milanesi said. “The same broadband contract without the device would be 30 euros.”
Though no network operators in Europe or elsewhere are offering e-readers now, Milanesi believes they are potentially capable of driving competition among manufacturers. “This means that there will be less subsidy available to drive sales of mobile phones and smartphones,” she said. Still, one way for handset and PC makers to fight back is to offer E Ink screen accessories for smartphones and other portable computing devices, Rotman Epps said.
Subsidy Models
Newspapers represent a potential avenue for e-readers to become subsidized. Plastic Logic has already inked a strategic partnership with the Detroit Free Press and The Detroit News under which the two Michigan newspapers will become electronically distributed via the company’s forthcoming Plastic Logic Reader, beginning early next year.
“The newspaper industry faces historic challenges as it attempts to transform itself in the digital age,” said Detroit Free Press CEO David Hunke. “We look to innovative new digital products like the Plastic Logic Reader to help us usher in a new era in publishing by helping us provide our readers all the benefits of digital content while retaining the familiar easy-to-read, paper-like format many readers continue to value.”
The main deterrent to subsidies at the moment is the free wireless distribution model that consumers receive as part of their Kindle purchase from Amazon. The new Reader Daily Edition device from Sony will embrace the same free wireless model when it launches in December.
Rotman Epps said it is “a reasonable assumption” that network operators and newspapers will only subsidize e-readers if they can recover their costs by enticing consumers to sign up for long-term data plans that command monthly fees. “In China, China Mobile will be distributing five e-reader devices next year from their stores; a similar model could emerge in the U.S.,” she said.
Subsidies would increase the market for e-reader devices, Rotman Epps observed. “Forrester forecasts that two million U.S. consumers will buy an e-reader in 2009, which, in addition to the one million consumers that bought one in 2008, brings the total ownership to three million, or 12 percent of the maximum addressable market at the $199 price point,” Rotman Epps said.
