Never mind all the digits and ink being expended on e-readers—until the price comes down to $150 and below, the number of devices sold won’t be close to creating a mass market. Heck, despite all the attention to Amazon (NSDQ: AMZN), Sony (NYSE: SNE) and other efforts, only 6 percent of the roughly 4,700 online U.S. consumers surveyed by Forrester for a value check on the devices said they plan to buy one in the next six months. Another 24 percent said they’d like to hear more about it but the price would have to be cheaper to get them to closer to buying one. (Device makers will be glad to know Forrester says awareness is growing, with the percent of e-reader oblivious consumers dropping to 17 percent from 37 percent in 2008.) The price range that would appeal to most is “shockingly low”: $50-$99.
A little perspective: Forrester estimates that two million e-readers will be sold this year, on top of one million last year. Together, that represents about 12 percent of the maximum market Forrester says would consider buying one at $199 —that’s roughly one-fifth of a group that makes up 14 percent of 181 million U.S. online consumers. Lower the price to $149, and the maximum market increases to 22 percent, or 40 million. That’s a close-to-meaningless number, of course, since maximum doesn’t equal likely. Once you’re past the early adopters and the the high-end next wave, the most likely potential buyers—frequent readers with household income over $75,000—won’t get serious until the price is closer to $50, a price that can’t be achieved without a subsidy.
For now, Amazon is subsidizing the books more than the readers, selling e-books for lower than wholesale hardcover and paying the publishers the difference. Subsidizing the device might sell more books, but it’s hard to see Amazon doing both for long and frankly, it’s hard to see Amazon doing both at all.
Forrester analyst Sarah Rotman Epps suggests finding a way to amortize the cost of the devices, particularly the more expensive models like Kindle DX and the yet-to-launch Plastic Logic, by pairing with publishers like the Detroit Free Press or service providers like Verizon (NYSE: VZ). Use the content or service subscriptions to subsidize the purchase; a two-year subscription would get the price to that $50-$99 range as is the case now with handsets and netbooks.
By Staci D. Kramer