E-Reader Price War May Be Brewing

Sony (SNE) has cut the price of its entry level e-reader by $30 to $169.99. The product is called the Pocket Reader. But, according to the company's U.S. website, the discount is only good until April 3. That seems odd timing since that's the same day Apple (AAPL) launches its iPad tablet computer. According to The Wall Street Journal, "Forrester analyst James McQuivey predicts that single-purpose e-reader prices will drop to as low as $99 by next year."A price of $99 would be well below what firms like Amazon (AMZN) and Barnes & Noble (BKS) are now charging for their e-readers. Amazon's lower priced Kindle, which has a six inch screen, sells for $259 and the Barnes & Noble Nook retails for the same amount. The lowest priced iPad with 16 GB of memory, which has a more powerful processor than standard e-readers, will cost $499.

It's not uncommon for the price of consumer electronics to drop over time as markets become more competitive and component prices fall. But the cut in the Sony e-reader comes within a few months of its launch. That raises the question of whether Sony is wiling to lose money to pick up market share. Sony won't disclose the cost of building its e-reader, so it is nearly impossible to tell how much financial risk the Japanese company is taking.

Sony has certainly been bested at nearly every turn by Apple and other competitors including Nintendo and Microsoft (MSFT). Sony's VAIO PC, for example, only has a tiny piece of the computer market. Apple has taken Sony's place as the world's leading innovator in the consumer electronics sector.

Sony's strategy may get e-reader makers to drop their prices, or Sony may get customers that it would not have gotten if its e-reader was priced higher. It may also be making a move that it can't afford, at least for any long period of time.

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