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So much for the cold war on hot hardcovers.
Wal-Mart kicked off the hardcover hoedown yesterday, lowering prices on preorders for hot titles such as Dean Koontz's Breathless and Stephen King's Under the Dome -- new releases that typically sell in the high teens through the discounter -- at a mere $10. When Amazon clenched a dagger between its teeth and matched the price a few hours later, Wal-Mart marked down the same titles to $9 apiece. As of this morning, Amazon is right there at the $9 price point, too.
Beyond exploring what these markdowns will do to the margins of both companies -- since you know that the publishers aren't subsidizing these low, low prices -- let's dive right into all of the players poised for punishment.
Barnes & Noble (NYSE: BKS ) is selling the same Dean Koontz book for $16.80 through its site this morning. Borders (NYSE: BGP ) is at $19.60, and Books-a-Million (Nasdaq: BAMM ) is selling it for an astronomical $25.20! Have fun collecting cobwebs, guys. The bricks-and-mortar chains are conflicted when it comes to cyberspace price wars. If they sell the books for a lot less online, they sacrifice walk-in business. Their well-read patrons are anything but stupid.
Amazon, Sony (NYSE: SNE ) , and Barnes & Noble also have to worry about the impact of $9 hardcovers on their e-book readers. The primary appeal of these portable gadgets is that digital books cost considerably less than their hardcover counterparts. However, as of this morning, Amazon is selling the Koontz book coming out next month for $9, even while the Kindle version is priced at $9.99. Digital delivery is convenient and immediate, but Amazon won't sell a lot of Kindles if the digital books cost more than the hardcovers.
In other words, if Wal-Mart and Amazon are serious about the $9 price war on bestseller pre-orders, their combat will inevitably spill over into e-book price wars, too.
It's a great time to be an avid reader. Take advantage of these ridiculous prices before both retailers get cold feet and warm noggins. However, steer clear of this sector as an investment until the rubble settles.