E-book readers Kindle new interest

While analysts expect e-book readers to become a new competition arena for device manufacturers, content producers like News Corp. threaten to derail the model with new pricing schemes.

News Corp. boss Rupert Murdoch stirred up controversy this week when he hinted that the company is on the verge of falling out with online retailer Amazon over pricing terms for the Kindle e-book reader.

Murdoch’s firm supplies content such as the Wall Street Journal on a subscription basis to Kindle users, but he is unhappy with Amazon’s cut of the revenue and the fact that Kindle users are Amazon subscribers, not WSJ subscribers.

As a result, News Corp. is trying to increase its share of Kindle revenue, and may even break ties with Amazon altogether. Murdoch said that News Corp. has been in talks with Sony, which last week unveiled two e-book devices, the Reader Pocket and the Reader Touch, the cheaper of which undercuts the Kindle by a good $150 at $199.

Last week Murdoch caused a stir when he said his company would begin charging for access to currently free content before the fiscal year is out – an approach that has met with skepticism from many pundits.

Nevertheless, with handset shipments in decline, device manufacturers are looking to create new form factors to help drive flagging revenues. A number of gadget makers are known to be looking at the netbook space, and Gartner reckons that e-book readers will be another main growth area, even mopping up much of the subsidies operators traditionally saved for mobile phones.

“Mobile operators are likely to drive competition among manufacturers as they start selling e-book readers and mini-notebooks from other manufacturers to foster mobile broadband subscriptions. Operators are also starting to subsidise e-book readers and mini notebooks on contract and this means that there will be less subsidy available to drive sales of mobile phones and smartphones,” said Gartner analyst Carolina Milanesi.