"Do-or-Die" time for Sony's eBook business

According to Engadget, Sony has dropped the prices of all of the eBook readers that it sells in the U.S. The entry-level Pocket Edition dropped from $169 to $149, the mid-range Touch Edition went from $199 to $169, and the high-end Daily Edition with 3G went from $349 to $299. The problem is that none of the models are competitive with comparable models from Amazon and Barnes & Noble. The Sony Pocket Edition has a smaller screen and lacks the WiFi of the comparably priced nook. The Daily Edition has essentially the same features of the Kindle 2 and nook 3G, but it costs $100 to $110 more. The Touch Edition is priced $20 less than the Kindle 3G but offers much less value for the money.

Sony has a very difficult decision to make, at least in the U.S. eBook market: Dramatically decrease costs and/or improve specifications to be competitive with the Kindle and nook, or get out of the business. Borders, which was one of Sony's primary sales channels, now has its own hardware reader, the Kobo, which is comparable to the Pocket Reader. It's in Borders' interest to promote the Kobo over Sony's products. Also, the deal that Sony had to make the Wall Street Journal available on the Daily Edition is non-exclusive, and readers can get a much better experience with the iPad.

Sony's eBook business has always been opportunistic; the eBook business unit is headquartered in San Diego, while most of Sony's businesses are headquartered in Tokyo. It's inconceivable that Sony's Vaio PC business unit isn't working on a tablet to compete with the iPad, and the eBook team may well find itself competing with its sister PC business unit.

I suspect that Sony will get out of the dedicated eBook reader business and shift its focus to Vaio-branded tablets and convertible PCs. The eBook group in San Diego may be maintained in order to write eBook reader software and to operate Sony's own eBookstore. However, the "sweet spot" for dedicated eBook readers is rapidly falling below $100, and it's not likely to be an attractive business for Sony.