Kindle DX Solidifies Amazon's E-Book Lead But Rivals Loom

Amazon.com Inc.'s (AMZN) new Kindle DX will solidify the company's lead in the electronic book reader market, but rivals are poised to launch new products they hope will enable them claw back some of the Internet company's early gains.

Sony Corp. (SNE), venture-backed Plastic Logic Ltd. and secretive start-up FirstPaper are all getting ready to unveil new e-book readers by early 2010. These rivals are pushing open formats and have struck key content partnerships, moves that could cut into Amazon's power over pricing and distribution.

Also looming in the background, Apple Inc. (AAPL) is said to be eyeing the e-book market. Several e-reader applications are already available for its popular iPhone.

"Competitors will attack Amazon's market position by launching new features, expanding content beyond books, dominating markets outside the U.S., reducing costs and improving relationships with publishers," said Forrester Research media analyst Sarah Epps.

Seattle-based Amazon, which launched the DX on Wednesday, clearly has several advantages. Its top-selling Kindle e-reader and online store create synergies similar to those between Apple's iPod music player and iTunes music store.

Amazon hasn't disclosed Kindle sales figures, but Citigroup Global Markets estimates Amazon sold roughly 500,000 Kindle units last year and is on track to generate $1.2 billion in revenue related to the e-reader by 2010, equivalent to 4% of its total sales.

In recent trading, Amazon shares were down 56 cents at $81.34.

The company pressed its advantage by introducing the larger and more expensive DX and announcing deals with major textbook publishers, newspaper publishers and universities in a bid to expand its market. The new Kindle, which will ship this summer, will cost $489, up from $359 for the original model.

But rivals have not been sitting still. Sony, which has sold more than 400,000 e-book readers in the U.S. as of January, is poised to unveil a new device that will match the Kindle's wireless capability. The Japanese company two months ago struck a deal that gives Sony Reader users access to about 500,000 books from Google Inc.'s (GOOG) book-digitization program, almost double the number of titles available on Amazon.com.

Plastic Logic of Mountain View, Calif., plans to introduce its big-screen e-reader in the second half of 2009 and has announced content partnerships with newspapers such as Pearson PLC's (PSO) Financial Times, as well as Barnes & Noble Inc.'s (BKS) Fictionwise.com, one of the largest e-book retailers in North America.

Meanwhile, Hearst Corp. is backing stealth start-up FirstPaper, which is reportedly developing an e-reader built with Linux open source software. Additionally, the burgeoning Chinese market is dominated by Tianjin Jinke Electronics Co. Ltd.'s multi-format and multi-language Hanlin e-book reader.

"The race is on for the $249 price point. Everybody knows they have to get there and then later to $199," said Epps.

-By Scott Morrison, Dow Jones Newswires; 415-765-6118; scott.morrison@dowjones.com

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