Amazon Gets 1 Stop Closer to Free

Kindles continue to get cheaper, and this time it has nothing to do with Amazon.com (Nasdaq: AMZN  ) .

AT&T (NYSE: T  ) has agreed to sponsor the Kindle 3G with Special Offers that serves up screensaver ads to dormant e-readers, driving the price down from $164 to $139. The ad-free Kindle 3G remains perched at $189.

It's a bold move, matching the price of Barnes & Noble's (NYSE: BKS  ) entry-level Nook that lacks 3G connectivity. Readers need to locate a hot spot to download fresh content. The subsidized price also matches the $139 that Amazon charges for its Wi-Fi Kindle, though Amazon also offers ad-supported Wi-Fi Kindles for $114.

AT&T's sponsorship is essentially shaving $50 off the 3G model. Why couldn't it do the same with the Wi-Fi version to bring that one all the way down to $89?

Well, the key here is the 3G.

"Kindle 3G is by far the fastest-growing connected device on the AT&T network," AT&T's Ralph de la Vega claims.

Keep in mind that this doesn't mean that AT&T is sponsoring the 3G connectivity itself, as a spokeswoman clears up to PaidContent.org. Amazon is still covering the data charges consumed when owners are browsing through Amazon's store and downloading fresh newspapers, magazines, or books. AT&T is simply making its own luck by making sure more e-reader buyers -- and advertisers -- go through its wireless network by making the 3G model as cheap as the Wi-Fi competition. The move will also make it harder for Amazon to consider switching to a different carrier.

The e-reader market has come a long way since the first Kindles rolled out in 2007 at a $399 price point that seems ghastly in retrospect.

Remember when there was the fear that Apple's (Nasdaq: AAPL  ) multifunctional iPad would nudge e-readers toward obsolescence? Well, that obviously didn't happen. Amazon, B&N, and Sony (NYSE: SNE  ) simply made sure their e-readers could get better and cheaper. By sticking to its $499 entry-level price, every price cut on the e-reader site widens the differentiation between the two devices.

It won't be long before we see a fully subsidized Kindle. If AT&T can sponsor the 3G model, why can't a newspaper company bundle a long-term e-reader subscription with the rights to serve up ads beyond the screensaver and home page?

Prices continue to inch lower one way or another, and now we're simply on a race to free.

Have you recently become an e-reader convert? Share your thoughts in the comment box below.

The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of AT&T, Amazon.com, and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.  

Longtime Fool contributor Rick Munarriz owns a Kindle and an iPad, but he uses his iPad a lot more. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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  • Report this Comment On July 14, 2011, at 6:22 AM, bourse wrote:

    ...it's exactly the point! Kindle will follow the way other electronic devices went down: the commoditization until it will be more or less free!

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