June 21, 2010, 3:15 PM

E-book reader price war erupts

Barnes & Noble drops the price of its Nook, then Amazon beats the price.

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Barnes & Noble Inc. ignited a price war this morning on e-book reader hardware. It dropped the price for its Nook 3G—which enables Internet connections via 3G and Wi-Fi networks—to $199, and introduced Nook Wi-Fi—which does not include high-speed 3G connectivity—priced at $149. The two readers are the same in every way except for the differing types of wireless network connectivity.

Further, Barnes & Noble, No. 42 in the Internet Retailer Top 500 Guide, is now offering all Nook customers free access to AT&T’s nationwide Wi-Fi network. Previously, Barnes & Noble provided Nook users free Wi-Fi access at its bookstores.

A few hours after the announcement, Amazon.com Inc., No. 1 in the Internet Retailer Top 500 Guide, announced it was besting Barnes & Noble by $10, by selling its 3G Kindle e-reader for $189.

Experts who follow the rapidly growing e-books market predicted today’s price announcement from Barnes & Noble would prompt a response from competitors, including Amazon.com Inc., Apple Inc. and Sony Corp. It didn’t take long for Amazon.com to act.

“The Nook price-drop was absolutely the first volley of a price war,” says James McQuivey, media technology analyst at Forrester Research Inc. “With the iPad siphoning off the most affluent buyers, dedicated e-readers like the Kindle and Nook have to come down in price, both to attract less affluent buyers and to convince iPad buyers to pick up a low-cost e-reader as well. Plus, now that booksellers actually make money from e-book sales—typically 30% of the purchase price—they can afford to subsidize the cost of the device even more than before. What’s more, now that people are starting to realize that most e-readers are used at home and work, close to a Wi-Fi network, merchants can drop 3G to keep construction cost down and avoid long-term network access costs.”

While dropping hardware prices, Barnes & Noble also has released the latest version of its e-reader software. Version 1.4 enables the connection to AT&T hot spots, locations where W-Fi network hardware enables wireless access to the web. The new software also introduces Go To Page, one of the most frequently requested enhancements, the bookseller says, which allows customers to jump to a specific page number in an open e-book. And it features an “extra extra large” font and performance enhancements to open e-books more quickly.

“People who love to read will find tremendous value with the new Nook Wi-Fi, and our best-selling Nook 3G now at an even lower price,” says Tony Astarita, vice president of digital products at BarnesandNoble.com. “This expanded choice offers dedicated e-book readers featuring e-book sharing, access to our vast eBookstore, great free and exclusive content, and much more. And with expansion of fast and free Wi-Fi access beyond Barnes & Noble stores to thousands of AT&T Wi-Fi hot spots, we’re bringing additional freedom and flexibility to all Nook 3G and Nook Wi-Fi customers.”

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