Kindle and Nook Feel the iPad Effect

Both Barnes & Noble and Amazon have cut the prices of their electronic reading devices, but it may still be too late to compete with Apple.

Barnes & Noble’s nook has been reduced from $259 to $199, which may put it closer to the impulse buy or gift category. Perhaps more significantly, the firm has also decided to release a Wi-Fi only version for $149. The lack of 3G access means users won’t have the “get a new book anywhere” function, but there will likely be many potential users who’ll see that as a price worth paying to save $50. The Wi-Fi only model will still have an internet connection in AT&T hotspots and in Barnes & Noble stores.

Meanwhile Amazon has reduced the entry-level Kindle from $259 to $189. That’s quite the series of discounts considering the original Kindle launched less than three years ago for $399. The larger Kindle DX remains at $489 which is looking very expensive after this week’s price cuts.

Is this simply a case of price competition between B&N and Amazon? It’s possible, but the announcements have come in such quick succession that it seems unlikely one is reacting to the other’s move. The chances are it’s more to do with the success of the iPad and the way its book-reading features not only look very impressive, but by most reports are better to use than might have been expected from a non-specialist device.

There’s no denying that if all you want from the device is to read books in the best way possible, dedicated e-readers will usually perform better than an iPad, or even a netbook computer. But a single-function device has to be in a very distinct price category from a multi-function machine, which is why even just changing the first digit of the price tag from a 2 to a 1 might have been an important step for the e-reader firms.

Another effect to watch out for in the wake of the iPad is whether B&N and Amazon reduce the emphasis on the additional features of their devices. While they can easily argue the book reading of the Kindle is superior to the iPad, features such as surfing a monochrome web or playing chess come off as pretty flimsy compared with the Apple experience.

It’ll also be interesting to see if the release of iBooks for the iPhone and iPod touch makes any difference to the e-reader market. My gut reaction is that the combination of small screens and high prices will mean most see it as a poor substitute, but it may deter a few people who’d been on the fence about getting an e-reader.