Amazon.com launched a cheaper, wireless-only Kindle on Wednesday, betting that the $139 price will turn its latest electronic reader into a mass-appeal device as Apple Inc's iPad gains ground.
The world's largest online retailer and leading e-reader seller also revealed its third generation Kindle, some 21 percent smaller and 15 percent lighter than the previous version, but still priced at $189.
Amazon does not give sales figures for the Kindle, but said last week that its growth rate tripled after it cut its price on the device from $259 and said e-books were outselling hardcover books. Apple has said it sold more than 3 million iPads, starting at $499, since the product was introduced in April.
At these price points, we're starting to accumulate evidence that this is a mass product, said Chief Executive Jeff Bezos in an interview at company headquarters in Seattle. This is a very broad audience.
Amazon's sales success with the Kindle has allowed the company to lower the price even as rival devices have entered the market, he said.
We've sold millions of the prior generation of Kindle and we're going to sell millions of these, Bezos said. And when you get up into that kind of volume, you're able to do a lot of things with the manufacturing models and supply chain in terms of driving down the cost.
The devices, which are now available for preorder, will begin shipping Aug 27.
Amazon has improved the contrast on the screen of its newest Kindles, but the size of the 6-inch reading area remains the same. Page turns are also faster and some 3500 books can now be stored, double the previous amount. Both models have a one-month battery life.
Forrester analyst James McQuivey said he had not expected a lower-priced Kindle until later in the year.
It suggests that Amazon really means it when they say they're in this device business to stay, he said.
THE NEW BOOKSHELF
The Kindle has been a much talked-about growth engine for Amazon and a departure, given the company's strength in retailing, not manufacturing. But Amazon has managed to parlay its vast collection of book titles into a revenue driver for the Kindle, where the bulk of its 630,000 digital books on offer can be ordered for as low as $9.99.
The Kindle, introduced in late 2007 for $359, has gone through a series of price reductions in light of increased competition from Sony Corp, Barnes & Noble, and most recently the iPad, a multimedia tablet that includes e-reader functions.
E-readers allow consumers to read books, magazines or newspapers on a paperback book-sized tablet that downloads content digitally. Although an instant hit with gadget hounds, their relatively high price has been a barrier to many.
But the $139 price for Amazon's new WiFi version is just above the $99 price point that many analysts have cited as required for mass adoption.
We think at that price point that people are going to buy multiple Kindles for their household, Bezos said.
Although the market for tablet computers is expected to soon eclipse that for e-readers, Amazon's latest move gives the company some breathing room, McQuivey said.
Amazon wants to sell you enough of these so you can have a couple lounging around the house. It becomes a new bookshelf. That's the model they're going for, he said.
Bezos said that in the next several months, the company would add more retail venues where the Kindle could be purchased, beyond Target Corp and airport bookstores run by HMSHost. Amazon will continue to run television ads, he said.
Bezos declined to answer whether Amazon would be able to make a profit on the lower-priced Kindle. Some analysts say Amazon now benefits most from sales of content, rather than devices.
We are focused on making both parts of the business into stand-alone businesses, Bezos said.
While the price of the Kindle itself once subsidized Amazon's low e-book prices, where digital titles were sold below cost, that dynamic has now shifted, McQuivey said.
It's the old razors and blades thing. You give away the razor and sell the blades in perpetuity, he said.
Bezos reiterated that the company was focused on improving the Kindle and had no intentions of competing more narrowly with tablet makers like Apple.
This is the third generation of Kindle and we will have a 4th generation, a 5th generation, a 10th generation and a 20th generation. We will be working the whole time to perfect the purpose-built reading device, Bezos said.
(Reporting by Alexandria Sage; Editing by Michele Gershberg, Leslie Gevirtz)