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September 27, 2006

Blog 2 - Is Sony Leading The Next Digital Revolution?

Sony, the Japanese based electronics giant, announced on Tuesday Sep. 26, that it will launch a new electronic book store on the Internet. (Click here to read the article) Accompanying the online book store will be the Sony Reader, which is a device that will enable people to view these online books. Starting October 1st, people will be able to download books from various publishers, such as HarperCollins and Simon & Schuster. This is just a glimpse of what the device will look like:

The Sony Reader

Figure 1: The Sony Reader will be about half the size of a paperback book and have 10MB of built-in memory--enough for 20 books.

For starters, the book store will hold 10,000 different books that will sell at a discount of 25% from the original paper versions. The new visual display device mimics the quality of paper, according to reviewers. However, its price of $350 might deter many customers from buying the device in the first place. Just based on the price, this device will be more attractive to heavy book readers or organizations (i.e. public library, schools, companies) that require the use of many materials. Unless the price drops, it will not target the mainstream Americans. Another disadvantage of the new device is the fact it does not have a backlight feature. Much like a regular book, the new device requires an external light source for reading in the dark.

At the same time, the lack of backlight enables the device to have longer battery life, according to Sony. Moreover, several RSS feeds will be available through the new device. However, Sony will block most RSS feeds and blogs, only Sony authorized services will be allowed. This feature gives Sony an aspect of monopolistic domination, yet could also limit the growth of the market.

The new service by Sony is still expensive and might not be the most efficient substitute for books. However, if the new device does enable people to see text in a resolution that resembles paper, we predict that this is the beginning of a new revolution. When more companies enter this emerging market and drive down the prices, this product might reach every home.

Translate these features into the world of economics:

  1. Macroeconomic growth. Those of us who didn’t fall asleep in Econ 102 – Introduction to Macroeconomics – will know that the increase in Technology will allows for more efficient use of labor, capital, and natural resources. In this case, ebook will allow for a more efficient distribution of books. A key concept to grasp here is that book is not your everyday product. It’s something that has the power to educate people through the distribution of information.
  2. Positive Externalities: Conservation of trees via not printing for books will benefit the economy directly and indirectly. The decrease in demand for lumber will drive down the price of lumber. This will decrease the marginal cost of production for many firms (i.e. furniture makers, etc), which will benefit the consumers through lower cost. This will also help avoid the deforestation in many parts of the world, which has been linked with all sorts of problems – destruction of ozone layers, flooding, and pollution to name a few.
  3. Real Income Increase: Cost of books can essentially be slashed by at least 25% using this new technology. When these devices do get caught on to the mainstream, this means real money savings for millions of people. This, in fact, is an increase in the real income that people can spend.

This new technology could end the elimination of rain forests in places like South and Central America. This new technology could inspire a child in Louisiana to pursue higher education. But most importantly, this is truly another layer in the freedom and accessibility of information. Imagine a person in Iran or Zanzibar with an instant access to possibly every book out there.

Posted by orshotan at September 27, 2006 11:47 PM

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