Kindle 2 Price Cut to $259 Doesn't Cut It

Amazon has announced a price cut for its e-book reader Kindle 2, from $299 to $259. The #1 selling device has been a boost to Amazon earnings this year and spurred sales of ebooks at Amazon. Citigroup analyst Mark Mahaney estimates that Kindle sales in 2010 could top the 1$ Billion mark, and account for 4% of total sales at the ecommerce giant. Others in the consumer electronics space are taking notice. Sony has the Reader, IRex has the Digital reader, Samsung offers the Papyrus, and there are also the Hanlin eReader, Plastic Logic Reader and CyBook Gen3. Then there is Apple; how will they respond to this new category?

The $40 price cut comes just in time for the holiday season, but what Amazon is probably after is to maximize their customer base before Apple and Plastic Logic release their rumored competing devices in early 2010. The price will also help the Kindle compete for holiday cash with other gadgets like the gaming consoles whose makers have also dropped their prices recently. As will the new International Kindles announced along with the price cut. But what would allow Amazon to really rule this market, along with a drop below the $200 price point, would be if they dropped the exclusivity and allowed other retailers to sell the device. Imagine if newspapers offered a discounted or even free Kindle DX with a five year subscription contract, just like a cell phone company offers free phones with their contracts.

The other exclusivity to open up would be offering the Kindle as a platform for third party apps- Kindle App Store, anybody? Such a developer program would have to be tightly controlled, of course, to protect core Kindle functionality and prevent retail competitors from leveraging the platform, but Apple has proven the App Store model adds value to a product. Think big, Amazon, think big.