Amazon: Time To Cut Kindle To $149, Piper's Munster Says
With the Apple (AAPL) iPad getting glowing reviews with sales scheduled to launch Saturday morning, the Street is getting increasingly nervous about the impact the device is going to have on sales of the Amazon.com (AMZN) Kindle e-book reader.
Context & Ripple Effects
This call doesn't come out of nowhere: back in March 2009, Business Week was already asking whether Amazon's deal to put Kindle software on Apple devices made the reader itself a cannibalization risk. A year on, the question has inverted — instead of worrying about Kindle apps on iPhones, the Street is worrying about what Apple's own tablet does to Kindle hardware.
The timing sharpens the point. Apple launches the iPad Saturday morning on the back of glowing reviews, and Piper's Gene Munster is telling Amazon to move first — cut the Kindle to $149 before Apple gets a week of sales data. The syndication of this argument across outlets the same day shows how quickly Kindle pricing has become the live debate.
First-order effects
- Munster's $149 target puts direct pressure on Amazon's Kindle hardware economics right as the device faces its first credible multi-purpose rival; every week at current pricing is now framed as share ceded to the iPad.
- Apple's Saturday launch immediately changes the buyer's calculus for anyone considering an e-reader, since a device that reads books plus everything else resets expectations for what $489-plus buys.
Second-order effects
- If Amazon follows Munster's advice, the Kindle becomes a cheaper front door to the Kindle bookstore, shifting the competitive fight from device specs to who controls the customer's e-book purchases — terrain Apple is entering directly.
- A sub-$150 Kindle would squeeze the rest of the dedicated e-reader field, which lacks Amazon's retail scale to absorb thin hardware margins.
Third-order effects
- The pattern points toward dedicated readers being priced as loss leaders attached to content stores — the razor-and-blades structure migrating from gaming consoles into books.
- If tablets keep absorbing single-function devices' jobs, hardware makers without a services business behind the box face structural margin erosion rather than cyclical pricing pressure.
The trend: Multi-purpose tablets are forcing dedicated e-reader prices down and pushing the profit pool from the device into the attached bookstore, a shift whose cadence is set by Apple's launch cycle.