New York: A price war is brewing in the growing market for electronic reading devices.
Barnes & Noble, the national bookseller, announced Monday that it was dropping the price of its six-month-old Nook e-reader to $199 from $259 and introducing a new version of the device, which connects to the Internet only over Wi-Fi networks, for $149.
Responding rapidly, Amazon.com then cut the price of its popular Kindle e-reader below the Nook, to $189 from $259.
The price cuts were made as manufacturers of e-readers faced a mounting threat from Apple's iPad. Even though it is far more expensive than the e-readers, the iPad, which starts at $500, performs a range of functions with a versatile, colorful display that contrasts sharply with the static, monochrome screen of e-book readers. Apple said it sold more than two million iPads in the two months since the tablet's introduction.
"It was obvious that the price of stand-alone 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 best-selling e-books at a loss 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 were able to make a 30 percent commission on the sales, which allows them to sacrifice some profit on their hardware.
Steven P. Jobs, Apple's chief executive, said this month at the announcement for the company's new iPhone model that iPad owners had downloaded more than five million books in the last two months, or 2.5 books for each iPad. It was seen then as a troubling sign for Amazon because it revealed that iPad buyers were willing to make small sacrifices to read books on a general-purpose tablet that is heavier and has a bright LCD screen that can cause eye fatigue.
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 its 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 bankruptcy protection from creditors, citing problems with its division in the United States.
This month, the Skiff e-reading platform, developed by Hearst, was acquired by the News Corporation, casting doubts on the planned introduction of a Skiff reading device.
Plastic Logic, the 10-year-old offspring of Cambridge University, has been delaying its $800 professional document- and book-reading device, the Que. It planned to have the reader on the market in April, but keeps pushing back a release date.
Sony may be particularly affected by the price cuts. It was the first to the market with an e-reader in 2006, but it has fallen behind its rivals because it lacks Amazon's online sales prowess and Barnes & Noble's physical retail presence. Its $169 Pocket Edition model lacks a wireless connection, which suggests that Monday's price cuts will put pressure on Sony to also cut prices. Sony has two other models, the $199 Touch Edition and the $349 Internet-connected Daily Edition.
With recent software upgrades, Barnes & Noble has improved the Nook, which now has features to counter Amazon's aggressiveness on e-book prices and the brand power of the Kindle. Barnes & Noble allows Nook owners to read entire e-books within stores and lend e-books to friends for up to two weeks. Now, with yet another software upgrade, Nook owners have free access to AT&T's nationwide Wi-Fi network.
"I don't see more than two, or maybe three dedicated reading companies in the market for selling e-books," William J. Lynch, chief executive of Barnes & Noble, said. "I think you are starting to see a shake-out now."
Mr. Lynch also predicted that within 12 months, e-reading devices "that people will actually want to buy" could be available for less than $100.