Apple to Lower iPad Price in Response to Kindle Fire, Says Report

By Jeremy Greenfield, Editorial Director, Digital Book World, @JDGsaid

Apple is likely to lower the price of its iPad 2 tablet in response to a market-share grab by No. 2 competitor Kindle Fire, according to a new report.

“Apple may reduce the pricing on the iPad 2 when the company introduces the iPad 3…in the same way that the company continued to offer the iPhone 3 when it rolled out the iPhone 4,” said the report from IHS iSuppli, an El Segundo, Calif.-based technology research unit of global research firm IHS.

Amazon Inc., the maker of the Kindle Fire, will ship an estimated 3.9 million units of the device in the fourth quarter this year, according to the report, vaulting it into second place in terms of market share at 13.8% of units shipped. Apple has a commanding 65.6% of the market share in the fourth quarter.

The Fire was able to take so much market share in its debut quarter due to its low $199 price, a new benchmark for the industry. According to the report, Amazon’s strategy is to sell as many Fires as it can to hook users into its commerce engine and its Prime streaming content and shipping program, for which customers pay about $80 per year. The Fire itself costs about $201.70 to produce, not including research and development and software costs, IHS iSuppli estimates.

While the industry awaits Apple’s response, the overall tablet market is set to explode in the coming years. Nearly 150 million tablets will be shipped next year and nearly 300 million will be shipped in 2015, according to the report.

Publishers should note that the trend of readers moving to digital formats is accelerating, said Rhoda Alexander, senior manager for tablet and monitor research at IHS iSuppli.

“If you’re not in the digital publishing space, you need to get there in a hurry,” she said. “This is how consumers are going to be reading for the most part moving forward.”

Another recent study by UK-based research firm Juniper Research projected that the worldwide portable e-book market would grow to nearly $10 billion by 2016. The report also predicted that 30% of that market would exist on tablets and 55% of it would exist on dedicated e-readers.

“E-readers will continue to grow in the market, but they face a strong challenge from tablets,” said Alexander. “People are purchasing multipurpose devices instead of single-purpose devices.”

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