Apple unveils iPad. Your move, Amazon

ipad_vs_kindle.top.jpgBy David Goldman, staff writer


NEW YORK (CNNMoney.com) -- Why would anyone buy a Kindle for $259 when they can have an iPad for $499?

That's the question that Amazon.com (AMZN, Fortune 500) and many consumers are likely asking themselves after Apple (AAPL, Fortune 500) Chief Executive Steve Jobs finally unveiled his company's much-hyped tablet device on Wednesday.

The iPad has all the mobility and much more functionality than the Kindle or any of Amazon's competitors, including the Sony (SNE) Reader and the Barnes & Noble (BKS, Fortune 500) Nook. So, the question for consumers will be: Is access to the Internet, 140,000 apps, music, movies and photos worth springing the extra $240?

"People will do the cost-benefit analysis in their own heads and say, 'If I can read books on one thing and read books, newspapers and CNNMoney.com on this other thing and get a full color experience and get apps,' it's not a very difficult decision," said David Wertheimer, executive director of the Entertainment Technology Center at the University of Southern California.

That cost-benefit analysis over the Kindle is what Steve Jobs is banking on.

"Amazon's done a great job of pioneering this functionality with the Kindle," Apple's CEO said at Wednesday's iPad event in California. "We're going to stand on their shoulders and go a little further."

Before you decide, let's take a closer look.

Display

On the surface, it's really no comparison. The iPad has a 9.7-inch, full-color, high-resolution, LED-backlit screen. The Kindle has a 6-inch black and white screen with no backlight. Amazon offers the larger Kindle DX with a 9.7-inch screen, but that costs $489 -- only $10 less than the lowest-priced iPad.

But Kindle users love to tout the device's "e-ink," no backlight display.

"Heavy readers don't like staring at a backlit LED display," said Dmitriy Molchanov, e-reader analyst at Yankee Group. "E-readers are easier on the eyes."

This one is a wash. Are you going to spend hours a day reading books and newspapers? The Kindle is probably for you. But for the casual reader, the iPad's screen is a winner.

Books

Both Amazon and Apple have struck deals with the big publishers, so most bestsellers should be available on both devices.

Unlike Amazon, which forces publishers to package its books in a special, only-for-Kindle format, Apple has embraced the so-called ePub industry standard. Still, those books will be locked, so the books you download at Apple's iBookstore can only be read on the iPad.

So what this category really comes down to is the price. Almost all e-books at Amazon's digital bookstore are all available for $9.99 or less. Apple's iBookstore will sell most bestsellers for prices in a range of $12.99 to $14.99.

This one goes to Amazon.

"In the end, it's all about what the consumer will be willing to pay, and Amazon is leading in that battle," said Molchanov.

Still, if the iPad really takes off like many tech analysts think it will, then Apple is in a position where it can charge higher prices.

"Apple is a brand that doesn't discount, because when demand is high enough, you don't need to cut prices," said Nancy Koehn, Harvard Business School historian and author of The Story of American Business: From the Pages of the New York Times. "Apple can price e-books higher than Amazon, and they'll get people to buy them."

Connectivity

Surprisingly, this one is all Kindle.

Apple will unveil two different kinds of iPads: One with Wi-Fi capabilities and another with Wi-Fi and an ability to connect to AT&T's (T, Fortune 500) 3G network. The lowest-priced iPad with 3G goes for $629 with a $14.99 per-month connection plan for 250 MB or a $29.99 per-month rate for unlimited data access.

Amazon's Kindle offers 3G access via the AT&T network for free. It's all built-in and ready to go as soon as you turn it on.

"The out-of-the-box experience of the Kindle is unparalleled," said Wertheimer. "The average user doesn't have to think about the network, username, or the authentication process."

Strong advantage: Kindle.

Function over price

The ultimate question. If you're just looking to read books, magazines, newspapers, etc., then the Kindle has a leg up. But is the Kindle still worth $259 now that you know you can get an iPad for $499?

Most analysts say, "Probably not." As a result, experts widely predict that the iPad's cost will force Amazon's hand, and the online retailer will slash the Kindle's price very soon.

By how much is up for debate. According to a recent Yankee Group study, the "sweet spot" for e-readers is $150, at which point the market for Kindles, Nooks and Readers will soar. Molchanov, the author of the study, said he expected e-reader prices to drop 15% per year before the iPad was released, but he now expects a much more significant price drop this year.

Apple and Amazon appear headed on a collision course. But the fact is that these two devices are very different -- one is optimized for reading, and the other is optimized for mobile entertainment. If the Kindle's price takes a significant enough dive, both devices may be able to coexist.

"If Amazon is going to play the cost-cutting game, there is plenty of room for consumers to pick up both of these devices," said Koehn. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,810.06 91.06 0.51%
Nasdaq 4,712.97 11.10 0.24%
S&P 500 2,063.50 10.75 0.52%
Treasuries 2.32 -0.02 -0.86%
Data as of 7:04am ET
Company Price Change % Change
Bank of America Corp... 17.12 0.12 0.71%
Kinder Morgan Inc 39.75 -0.17 -0.43%
Apple Inc 116.47 0.16 0.14%
Intel Corp 35.59 -0.36 -1.00%
Microsoft Corp 47.98 -0.72 -1.48%
Data as of Nov 21

Sections

This arrangement, announced Friday, illustrates how the lines have blurred between traditional TV networks and newfangled options like Netflix. More

The Obama administration is touting that its immigration action will boost wages. But the hike amounts to only $170 a year by 2024. More

Obama doesn't have the authority to create a startup visa, but part of his reform announcement could include a workaround for entrepreneurs: 'parole status.' More

Nearly half of all Americans say there's a chance they'll have to work during a holiday between Thanksgiving and New Year's, according to a new poll. And one in four say they'll have to work whether they want to or not. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.