Sony Turns the Page with Its New Reader

In mid-July, Forrester Research called's Kindle e-book reader devices "the flame that lit the wildfire" for digital reading. Rival Sony (SNE) is adding its own fuel to the fire with two new e-book readers (including a cheap, stylish, pocket-size device) that could boost consumer adoption of Sony's Reader.

With the new $199 Sony Reader Pocket Edition and $299 Reader Touch Edition, expected to go on sale Aug. 25, the consumer electronics giant is trying to prevent Amazon from becoming the runaway leader in a market that's expected to grow explosively in the next 10 years. Sony's Pocket Edition will be $100 cheaper than Amazon's Kindle 2, while the more expensive version will offer touch technology that lets readers swipe their finger across the screen to turn pages.

More Content OptionsSony aims to expand the e-book reader market by offering customers more choice than Amazon (AMZN), which requires users to purchase books and other digital media from its online bookstore. Sony will match Amazon's $9.99 price for new releases and best sellers, while letting users load free content from its link to Google's catalog of 1 million public domain books and at public libraries.

"Our goal is to expand the market and provide greater access to what consumers want to read, when they want to read it, whether they buy, borrow, or get it for free," says Steve Haber, president of Sony's Digital Reader Business Div.

For Sony's executives, making Reader a success has become a point of pride. Sony was first to market five years ago with a digital book reader, a device sold only in Japan that used electronic ink technology that mimics the look of copy on a page. It quickly followed with a sleeker U.S. version called the Sony Reader PRS-500, only to see Amazon's Kindle come along a year later and grab the lion's share of sales. Unlike Sony's devices, the Kindle lets U.S. consumers wirelessly download books, newspapers, and magazines.

Plans for Worldwide Wireless Sony has said it's working on its own wireless device but hasn't said when it will launch. Company insiders say the delay has been caused in part by technology considerations connected with Sony's view that consumers should be able to download content wirelessly anywhere around the world. Amazon uses Sprint's (S) proprietary wireless technology to download new books and other material instead of the more common worldwide GSM cellular standard, which currently limits Kindle sales to U.S. customers.

Even without a wireless device, Sony's new products are likely to boost sales during the holiday shopping season. Sony is dramatically expanding its retail presence and will sell the devices, cases, and other accessories online, at Best Buy (BBY), Wal-Mart Stores (WMT), Target (TGT), Costco (COST), and nearly a dozen other retailers.

The new Sony devices address the top three barriers consumers say have kept them out of the market for electronic readers. According to a Forrester survey of 4,000 consumers, respondents said they wanted cheaper devices, cheaper books, and hands-on experience with the devices. "The fact that these two devices don't have wireless suggests that Sony isn't trying to beat Amazon at its own game, but is trying to redefine the terms of engagement," says Forrester Research analyst Sarah Rotman Epps.

Shortly after the August Reader launch, Sony plans a heavy marketing campaign that will include in-store demonstrations, videos, and online ads to showcase the features of each product. The Pocket Edition device offer a 5-in. screen and comes in red, blue, and silver. The 6-in. Touch Edition lets users tap a word to pull up a dictionary with its meaning, and use their fingers to scribble notes. It will come in red, black, and silver.

E-Readers Are Poised for Growth Sony says Americans will purchase 2 million electronic readers this year alone, vs. 1.5 million sold since the format was introduced. Its new Pocket Edition is expected to appeal in particular to first-time buyers and women because of its small form and ease of use. Unlike earlier iterations of the Sony Reader, the new devices, and the company's updated online bookstore, will be compatible with Apple's (AAPL) Macintosh computers.

For all the hype, digital sales accounted for only $113 million, or about 2%, of $32.4 billion in U.S. book sales last year. But consumer awareness is rising sharply around the world, forcing authors and traditional bookstores to rethink their distribution models.

Sony will need all the extra heft it can get to catch up with Amazon. Analysts say in the two months after the Kindle 2's February introduction, the retailer sold more than 300,000 units. Amazon recently cut the price of the device, which sports a 6-in. screen, to $299 from $359, and introduced a larger-screen version called the Kindle DX.

The e-book reader market is expected to get even more heated in coming months. Samsung recently unveiled its own electronic reader in South Korea and has said it will expand to other markets soon. Meanwhile, book retailing giant Barnes & Noble (BKS) is partnering with hardware maker Plastic Logic to deliver a device early next year.

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