If you thought the e-reader market was already confusing—with Sony, Amazon, and Barnes & Noble all offering their own unique versions of e-book devices based on the same underlying electronic paper display technology from Cambridge, MA-based E Ink—get ready for a new level of chaos. Companies like Interead in England and Irex in the Netherlands also make e-book gadgets with E Ink displays, and thanks to a collaboration between E Ink and Santa Clara, CA-based Marvell Semiconductor, the hurdles for other companies experimenting with e-reader technology are about to get a lot lower.

In fact, at least three new e-book devices containing a new chip jointly designed by E Ink and Marvell are expected to come to market this winter: the Que proReader from Mountain View, CA-based Plastic Logic, the enTourage Edge from McLean, VA-based enTourage Systems, and the Alex Reader from Fremont, CA-based Spring Design.

Inside all three devices will be the Armada 166E, a so-called “system-on-a-chip” that combines a display controller designed by E Ink with other key components needed in any portable e-book reader today, such as a microprocessor, memory, wireless modems (Wi-Fi, Bluetooth, and 3G) and power management devices. The existence of the Armada chip was revealed today in a joint announcement from Marvell and E Ink. The companies said they have already begun shipping it to their customers, the e-book device makers.

The fruit of a three-year collaboration, the Armada chip is reportedly smaller, thinner, and—crucially—cheaper than the electronics built into previous generations of e-book devices. A Marvell executive quoted by Dow Jones speculates that Asian manufacturers might eventually be able to use the Marvell chip to build readers for one-fourth the cost of the current generation of products (the Kindle and the Nook both retail for $259, and Sony sells its readers for $199 and $299).

Such massive price reductions are probably needed before e-book reading devices can break past the early adopters willing to pay a premium for new technologies, and reach the general consumer market. But these extreme price drops may still be a ways off: for now, putting the display controller on the same piece of silicon with a microprocessor, memory, and other components will probably yield an equipment cost savings of 15 to 20 percent overall, says Sriram Peruvemba, E Ink’s vice president of marketing.

The Armada chip is also built to rapidly render high-resolution documents such as PDF files, and to speed up operations such as turning a page in an e-book. All current e-book devices that use E Ink’s electronic paper displays, Peruvemba explains, include E Ink’s own controllers, branded Metronome and Apollo. Not only do these controllers use outdated …Next Page »

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There’s a big argument over whether venture capitalists and even angel investors are doing as many early stage or small deals these days. The general sentiment is that no, they aren’t. Since we began our monthly roundup of Massachusetts venture deals back in June, however, we’ve argued that the data doesn’t support that view: virtually every month, the number of seed and Series A rounds has topped the number of later-round financings, and often by a wide margin.

Now comes what could be another blow to the small-deal naysayers: new data on the extremely small deals—those between $100,000 and $1 million—that typically aren’t reported in financing tabulations. As my colleague Greg Huang, Xconomy’s Seattle editor, wrote in his own look at small deals in the Northwest earlier this week: “Though small in size, these investments need to be included along with the bigger deals that get more press, if you want a more complete picture of the funding landscape in the innovation community.”

It turns out there were 10 of these “under the radar” high-tech deals—7 in Massachusetts, 2 in Connecticut, and 1 in New Hampshire (see table below)—in New England in September, according to data supplied by our partner ChubbyBrain, a New York-based information services company that tracks VC, angel, and other investments in private companies.

Six of the 10 deals involved equity investments; the remaining four were debt financings. And they spanned a wide range of fields from medical displays to tracking tags to new approaches to education. To me, the most interesting was OmniGuide, a Cambridge, MA, company we’ve written about before that took in $249,999 (you gotta wonder why that figure). OmniGuide, which raised $1.8 million in May, $25 million last year, and some $50 million before that (it’s a long story, go here), makes highly precise optical laser scalpels; its chairman is Analog Devices founder Ray Stata, and the CEO is MIT materials scientist Yoel Fink.

As the parent of two teenagers, I was also highly interested in the Westonian Group, which raised $170,250. The Westonian Group doesn’t appear to have a website, but it is the company behind Abroad101, a website for sharing information about study abroad programs.

Here, then, are our 10 “under the radar” deals from September.

Carrot Medical (Waltham, MA)                 Equity           $635,000
Ultra-high-definition displays for medical images

SoundTag (Braintree, MA)                         Equity          $535,000
Tracking tags for priority shipments

TenMarks Education (Newton, MA)          Debt            $350,000
New approach to math, science, and English education for children

SpecPage (Attleboro, MA)                           Equity          $313,000
Product marketing information exchange for food service and janitorial industries

SeeClickFix (New Haven, CT)                    Debt              $265,000
Technology for reporting and tracking non-emergency issues via the Internet

OmniGuide (Cambridge, MA)                   Equity             $249,999
Designs and manufactures highly precise optical laser scalpels.

Validus DC Systems (Brookfield, CT)         Debt              $204,000
Direct current power infrastructure for data and telecom centers

Paneve (Florence, MA)                                 Debt               $175,000
Software and hardware to reduce the costs of delivery and display of video media content

Westonian Group (Weston, MA)                Equity             $170,250
Company behind Abroad101, an interactive online community around study abroad programs

EnerTrac (Hudson, NH)                               Equity              $125,000
Fuel, oil, and propane tank monitoring products

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Wireless digital photo frames, considered one of the hot new categories in consumer electronics back in 2006 and 2007, haven’t taken off as quickly as expected. People love digital frames, but they’ve tended to buy them as gifts pre-loaded with photos they uploaded to the Web, meaning many frames still don’t come with their own connection to the Internet. That’s a problem for Wellesley, MA-based Frame Media, whose whole business, when I last profiled the startup in 2007, revolved around providing fresh digital content for the frames, such as news and sports headlines, weather, and photos shared by friends.

But while Wi-Fi-equipped frames are still playing catchup, another channel for the company’s programming is emerging: so-called “connected screens,” meaning a whole variety of Internet-ready displays that are turning up in homes and offices. As a result, Frame Media is rechristening itself Thinking Screen Media, and going after what CEO Alan Phillips calls “a whole category [of displays] defined primarily by the fact that, unlike PCs, they are limited in their ability to easily search and configure content.” That includes not just digital frames but high-definition TVs, cable set-top boxes, game consoles, Internet radios, and even printers.

Through its FrameChannel platform, Thinking Screen works with publishers such as Time magazine, the New York Times, People magazine, and Weatherbug to offer more than 1,000 channels of content customized for such screens. (Users choose and configure the information feeds at Thinking Screen’s website.) The company is also partnering with virtually every consumer-electronics company on the block—names like Kodak, Motorola, Nintendo, Philips, Samsung, Sony, and Toshiba—to make it easy for device owners to activate the feeds on specific devices.

“Most of the connected screens haven’t hit the market yet, but they will over the next six months,” says Phillips. In particular, Phillips says, “We’ll see an aggressive push by TV manufacturers to enable TVs to go beyond video.” A taste of what he’s talking about already familiar to millions of video game fans is the home screen of the Nintendo Wii, which, in addition to games, offers links to news, weather, shopping, and photos.

The 15-employee startup collected $5 million in Series A funding from Longworth Venture Partners and CommonAngels in May 2008, and there are plans to raise a Series B round this fall, Phillips says. When it comes to supplying content for tomorrow’s connected screens, Thinking Screen has both technical and strategic advantages over existing and potential competitors, he says.

San Diego-based Chumby, whose interactive media player displays information through “widgets” analogous to Thinking Screen’s channels, is the company’s closest competitor, in Phillips’ judgment. But he thinks Chumby will have a hard time delivering …Next Page »

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Redmond, WA-based Microvision (NASDAQ: MVIS), a display technology company, announced today it has received a $15 million investment from Taipei-based Walsin Lihwa, a wire and cable manufacturer. The deal comes in the form of a sale of common stock to Walsin Lihwa’s subsidiary, Max Display Enterprises Limited, as well as a warrant to purchase more shares.

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A group of E Ink investors with concerns about Prime View International’s move earlier this month to purchase the Cambridge, MA-based e-paper display company will likely try to prevent the sale when it comes up for a shareholder vote, according to a source familiar with the company.

E Ink has roughly 100 separate shareholders; it’s not known how many of them oppose the sale to PVI, a Taiwanese firm that assembles e-book devices for the likes of Amazon and Sony and is already the largest buyer of E Ink’s display technology. But the source—an insider with deep knowledge of E Ink who requested anonymity for lack of authorization to speak on the record—says the proposed sale agreement, which has already been approved by E Ink’s board of directors, will likely be defeated when E Ink shareholders get the opportunity to vote on it.

A vote has not yet been scheduled. E Ink, for its part, says it intends to complete the proposed $215 million sale. “The Board of Directors of E Ink has voted in favor of the sale agreement with PVI and the company fully intends to consummate the transaction,” E Ink said in a statement released last night through a spokesman. The sale, first announced June 1, is subject to approval by PVI shareholders and regulators in both Taiwan and the United States.

Shareholder discontent about the proposed sale surfaced Saturday in an article by Boston Globe reporter Robert Weisman. That article focused on concerns about the $215 million bid offered by PVI, which some shareholders reportedly believe is too low, given new estimates that the MIT spinoff’s revenue from e-paper sales, which are soaring thanks to the popularity of Amazon’s Kindle e-book devices, could top $110 million this year.

That was one of the shareholder concerns relayed by Xconomy’s source. Investors are doing the math, the source says, and concluding that $215 million is an inadequate offer for a company that may be one of the fastest-growing startups in the Boston area.

But the source lists several other factors that have become sticking points for certain E Ink shareholders. In particular, the source says, companies that are considered strategic investors in E Ink, because they are in related industries such as publishing and electronics, are concerned that the acquisition of E Ink by PVI would give control of E Ink’s unique electronic paper technology to a single company.

In particular, Hearst Interactive Media, E Ink’s largest single strategic investor, is concerned about the idea of being locked into PVI as a supplier of e-paper for its digital newspaper project, called FirstPaper, the source says. (Hearst had not replied to a request for comment by the time this article was published.)

Fears about monopoly control of e-paper may have been exacerbated by a statement from PVI’s chief financial officer, Stephen Chen, on the day the acquisition was announced. Dow Jones Newswires quoted Chen as saying, “We can lower costs and dominate the market by acquiring E Ink.”

The depth of PVI’s pockets, or lack thereof, is another issue for E Ink shareholders, the source says. The company is a small-cap corporation listed on Taiwan’s ROC Over The Counter Stock Exchange, with a total market capitalization of just over $750 million. According to the source, the company does not actually have enough cash on its books to pay the promised $215 million for E Ink, and has been attempting to raise the capital needed to close the deal on the strength of E Ink’s newfound success selling the display material used in the Kindle. Investors would prefer to deal with a buyer that’s able to raise the capital on its own merits, the source says.

We have requested comment from PVI, but as of press time, the company has not responded.

The concerned E Ink shareholders aren’t simply holding out for a higher bid from PVI, according to the source. Rather, there’s a growing feeling among this contingent that the Cambridge company should stay independent, and try to cash in on the rising e-book tide.

We reviewed all of the shareholder concerns listed by our source with E Ink. The company declined to provide further comment.

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MyVu, a Westwood, MA-based maker of wearable video displays, has raised $3.25 million in new funding, according to documents filed today with the Securities and Exchange Commission. MyVu raised $11.5 million in Series B capital in January 2006; investors in that round included Atlas Venture, Hillman Capital, and Intel Capital. Representatives of Atlas and Hillman are listed in the “related persons” section of the current SEC filing. MyVu did not immediately respond to our request for comment about the funding. We reviewed MyVu’s video goggles in May, 2008.

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Wade Roush wrote:

E Ink, the Cambridge, MA, company that invented the electronic paper technology behind Amazon’s Kindle e-book devices and Sony’s PRS-500 line, announced today that the same 9.7-inch screen going into the new Kindle DX will be available as part of prototype kit that will go on sale this month, before Amazon ships its own device.

The so-called Broadsheet AM300 kit—which includes an active matrix electronic ink display, a Marvell XScale processor, a Bluetooth transceiver, an MMC card reader, lithium-ion batteries, all mounted on a Gumstix computer board—will cost $4,000. Another kit including the 6-inch display used in the current Amazon and Sony devices is already available from E Ink’s online store for $3,000.

E Ink’s prototype kits are intended for hardware engineers developing next-generation electronic paper devices. Indeed, because E Ink will sell the basic technology to anyone, the larger 9.7-inch screen could become the basis of a number of devices that compete directly with the Kindle DX.

The success of E Ink’s so-called “Vizplex” e-paper films—which contain millions of tiny balls filled with electrically charged black and white particles—”has prompted a lot of interest in eNewspaper and eTextbook applications,” Sriram Peruvemba, E Ink’s vice president of marketing, said in today’s announcement.

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A Boston startup called A2aMedia announced today that it has been selected by the Miami Heat basketball team to install a giant LED video display, some 3,400 square feet in area, on the side of the team’s arena in Miami. Consisting of a new kind of see-through, woven metal mesh invented by German architectural supply firm GKD, it will be the largest LED display in the southeastern United States, according to the company.

Because the mesh design is more efficient than other large LED displays and doesn’t block views from inside the buildings where the displays are hung, the technology could lead to broader use of large-scale, outdoor video advertising.

The Heat, the 2006 NBA champions, chose the so-called “Mediamesh” technology for its American Airlines Arena because it wanted to provide visitors with “the most dynamic and exciting entertainment experience possible,” said Eric Woolworth, president of HEAT Group Business Operations, in a statement today. The new display, scheduled to be installed this spring, will “establish a more interactive relationship between the Arena and the people and tourists of South Florida” and will “solidify the American Airlines Arena as a trendsetting landmark,” Woolworth said.

A2aMedia is the exclusive North American distributor for GKD’s technology, and the Miami stadium is its first installation. (See a video showing how the display will look in Miami here.)

While anyone who has been to New York’s Times Square or Tokyo’s Ginza shopping district is familiar with large LED video boards, what’s new about the Mediamesh design is that it fits over an existing building like a curtain, resembling the mesh security curtains rolled down each night by mall retailers. Every fourth horizontal rod in the stainless-steel curtain is a tube containing red, green, and blue LED nodes, which function as the pixels in giant video animations driven by computers. From inside a building, the mesh blocks only 30 percent of outdoor light; from the outside, it looks like a solid screen.

“We offer the only media façade that can be installed on a glass surface without obstructing the view,” says Brian Schuvart, senior vice president of sales and marketing at A2aMedia. “This opens up a huge range of exciting installation possibilities that cannot be offered by any other media company.” Indeed, the technology could allow builders to plaster nearly every available surface of a building with an animated display—a special boon in districts like …Next Page »

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Beaverton, OR-based Planar Systems (NASDAQ: PLNR), a maker of monitors and displays, announced it has sold its remaining interest in its CoolSign Digital Signage business to CS Software Holdings. Terms of the deal were not disclosed. In November, Planar sold part of CoolSign to Bally Technologies, for gambling applications.

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Redmond, WA-based Microvision, a mobile imaging and display company, announced it has been awarded a $750,000 contract to begin developing a high-definition, see-through eyewear display. The name of the customer was not disclosed. The wearable display is designed to be full-color and transparent to the surroundings.

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Kopin Corp. (NASDAQ: KOPN), a Taunton, MA, semiconductor manufacturer that makes tiny LCD displays for devices such as MyVu’s wearable displays, said yesterday that it plans to use cash on hand to buy back up to $15 million in company stock. Kopin CEO John Fan said in a statement that the company believes its stock (which is trading today in the neighborhood of $2.14 per share) is “currently undervalued” and that the repurchase program is “a prudent use of capital that underscores our commitment to building long-term value for our shareholders.”

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Cambridge, MA-based LocaModa, whose software lets people using cell phones and computers connect with public displays in indoor and outdoor locations, said today that it has launched a multiplayer, cross-platform word game called Jumbli. The Web- and text-messaging based game allows players on social networking sites such as Facebook to compete with audiences interacting with advertising-supported LocaModa displays in hundreds of locations, including a Jumbotron display in New York’s Times Square. “LocaModa is uniquely positioned to tap into and monetize over 36 billion previously unreachable, cross-channel advertising impressions in over 300,000 social locations in the U.S. alone, with immediate global growth potential,” LocaModa CEO Stephen Randall told Xconomy by e-mail today.

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Boston’s .406 Ventures said today that it has “entered into an equity partnership” with Cambridge, MA-based Ambient Devices, known for its Ambient Orb, Ambient Umbrella, and other wireless displays designed to convey useful information at a glance. The two companies did not disclose the size of the investment (which is Ambient’s first from an institutional investor), but a .406 press release made a point of saying that the company’s current leadership team, including CEO Carl Yankowski and founders Pritesh Gandhi and Ben Resner, will continue to head the company—suggesting that .406 may have acquired a large portion of Ambient’s equity in the deal.

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Last spring, Wade wrote about Seattle-based GalleryPlayer’s software, which allows users to display high-resolution photos and artwork on HDTVs. Now GalleryPlayer has apparently “ceased operations” as of July 30, as reported by the Seattle P-I, citing a message on the company’s website. GalleryPlayer was founded in 2003 by former Amazon exec Scott Lipsky.

But Lipsky’s website now says the company “was sold in August, 2008. Buyer data confidential—transaction pending.” So watch this space…

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Frame Media, the Wellesley, MA-based provider of content for digital picture frames that we profiled last September, has raised an additional $3 million in what it’s calling a Series A-1 investment round. The round, led by Longworth Venture Partners and CommonAngels, brings the company’s total funding to $5.2 million. Digital frame owners can use Frame Media’s Web-based interface to select advertising-supported content channels such as news, sports, weather, and stock photos.

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PE Week Wire is reporting, based on a regulatory filing, that Watertown, MA-based QD Vision, which is building brighter, more efficient displays based on “quantum dot” technology, has collected $9 million of a $16 million Series C funding round. Existing backers Highland Capital Partners and North Bridge Venture Partners are leading the investment. As we reported last week, QD Vision also procured an investment recently from In-Q-Tel, the venture investing wing of the U.S. intelligence community.

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At QD Vision in Watertown, MA, engineers are building on nanoscale “quantum dot” technology pioneered at MIT to create a new generation of light-emitting devices (LEDs) that could eventually be used in video displays with brighter colors, blacker blacks, and far higher energy efficiency. And gradually the company has been showing up on the radar screens of outside supporters and investors— including In-Q-Tel, the venture wing of the U.S. intelligence community, which announced a strategic investment in QD Vision yesterday.

The amount of the investment wasn’t disclosed, but QD Vision says that it brings the total government funding it’s won in the last year to $5 million. The company also has funding from the National Institute of Standards and Technology’s Advanced Technology Program and the Air Force Office of Scientific Research.

QD Vision doesn’t yet have a commercial product, but if its development efforts are successful, it could find itself at the center of a revolution in display technology. Current liquid crystal displays (LCDs) are illuminated by electricity-thirsty fluorescent backlights and produce muddy, impure shades of red, green, and blue. By contrast, QD Vision’s “quantum dots”—tiny semiconductor crystals only a few nanometers in diameter—produce highly pure colors when stimulated by electrons, and require much less electricity in order to glow brightly.

The four-year-old company’s main backers to date have been Highland Capital Partners and North Bridge Venture Partners, which provided initial venture support, as well as a $7 million Series B round last year. Accompanying the strategic investment by In-Q-Tel was a “technology advancement agreement,” which amounts to a longer-term promise that the organization will help QD Vision get its technology off the ground and adapt it for the specific needs of users in the intelligence community.

Exactly what those needs might be, no one is saying. But it’s not hard to imagine how brighter, crisper, less energy-hogging LED-based displays might be useful in IT-driven intelligence-gathering and command-and-control applications. “The fact that they excel on color purity and brightness combined with efficiency is what’s rare” about QD Vision, says Donald Tighte, In-Q-Tel’s vice president of external affairs. “A lot of solutions in the display marketplace hit two of those three—for example, you can get greater brightness in your laptop screen but you pay a premium in terms of the power drain on your battery. But [this technology] combines excellence in visibility, purity, brightness, and energy efficiency. It’s one of the things that has us excited about the company’s commercial applications and also, we hope, it’s applications within the intelligence community.”

The QD vision deal is only In-Q-Tel’s second investment in the Boston area since the organization set up a local office in Waltham, late last year. The first was in Cambridge, MA-based CoreStreet, which is developing smart-card-based access systems for secure buildings. But even before it had a local office, In-Q-Tel was an active investor in Boston-area technology firms with intelligence-related technologies, including Basis Technology, BBN Technologies, Ember, Endeca, Metacarta, Polychromix, Sionex, Spotfire, Streambase, and Traction Software.

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Luminus Devices of Billerica, MA, has struck another deal for the distribution of its “PhlatLight” super-bright LED technology, the company announced today. Under the agreement, Toyota Tsusho America, will distribute and support television and projector PhlatLight products in China, Taiwan, Korea, and Mexico. A separate agreement inked last week will facilitate the distribution of PhlatLight technology for general illumination.

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If you’re not crazy about the compact fluorescent lights being touted as the future of home lighting, but you want something more environmentally conscious than Thomas Edison’s old incandescent bulb, Luminus Devices of Billerica, MA, may soon have just the thing for you.

Luminus makes very bright LEDs, and has been doing a nice business for itself selling them to companies like Samsung—which uses them as light sources in large-screen projection TVs over 50 inches—and LG Electronics, which builds them into portable projectors. But last October Luminus announced it wanted to expand into the general illumination business, and hired as its director of sales David Sciabica, a former vice president for sales at Philips Lumileds, that lighting company’s LED division. This week Luminus inked a deal with Avnet Electronics Marketing of Phoenix, AZ, which sells various electronic components in more than 70 countries. Avnet will provide distribution, design, and supply-chain services for Luminus’s Phlatlight technology in the illumination market.

“Phlatlight” comes from the term “photonic lattice,” the technology that makes Luminus’s LEDs so bright. An LED is basically a tiny bit of semiconductor. When you run electricity through it, some percent of the electrons get converted into photons—but a fair number of those photons get reabsorbed and turn into heat before they make it out of the LED. A photonic lattice is a regular series of features inscribed into the LED, with spacing close the wavelength of the light involved. The lattice forces the photons to travel along desired paths, so more of them make it out of the LED, producing more light.

“PhlatLight LEDs produce thousands of lumens from a single large chip and are uniquely suited to replace halogen, arc and fluorescent lamps in many applications such as entertainment, architectural and medical lighting,” said Cary Eskow, director of Avnet LightSpeed, the Avnet division that will handle the LEDs, in a statement announcing the deal.

The photonic lattice technology came out of the lab of MIT professor John Joannopoulos, and was further developed by Alexei Erchak, who earned his Ph.D. there in 2002 and co-founded the company with Joannopoulos that same year. The company has at least 11 US patents and has reportedly raised $67 million in financing.

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An “electronic paper” screen created by Cambridge’s E Ink is the heart of the new Amazon Kindle e-book reading device, introduced yesterday amidst grand pronouncements about the beginning of a new era of electronic book publishing and reading. “This is the future of reading. It will be everywhere,” said business writer Michael Lewis, who ought to know; he’s famous for writing The New New Thing, about the creation of the first commercial Web browser. No less a personage than Toni Morrison, the Nobel Prize-winning novelist, calls the Kindle “ideal” for the traveling reader. Which is hard to argue with; the device can hold 200 books in its memory, yet thanks to the light and power-efficient E Ink screen, it weighs less than a paperback and can be used for at least 30 hours before needing to be recharged.

Kindle, three years in the making (and already sold out, according to Amazon’s product page), is a project with great personal significance to CEO Jeff Bezos, who emceed a ceremony launching the device in New York City yesterday and admits on Amazon’s front page that he is “infatuated with the idea of electronic books.” I feel the same way: I would be truly delighted if someone introduced an electronic reading system with the magic combination of usability and price needed to finally pry the reading public away from printed books, which, while highly evolved and quite wonderful in their way, are part of a criminally wasteful publishing economy in which 25 percent of books are pulped each year without ever having been opened. Alas, Kindle is not it.

The electronic paper technology created by E Ink, which I profiled at length on November 1, does go a long way toward solving the usability part of the problem. The 6-inch Kindle screen—which is identical to the screen used in a competing e-book device, the Sony PRS-505 Reader—uses E Ink’s proprietary “VizPlex” film, in which transparent sheets of electrodes create patterns by attracting or repelling magnetically charged black and white particles that float inside tiny microcapsules. Like paper itself, the display uses reflected rather than transmitted light, and is therefore much easier on the eyes than conventional LCD screens. Dave Jackson, E Ink’s director of marketing and planning, says the version of VizPlex that E Ink created for the Amazon and Sony devices reflects 40 percent of the light it receives—up from 32 percent in the company’s previous generation of e-paper, and approaching the reflectance of newsprint.

But I’m sorry to say—at the risk of repeating myself, since I also wrote a downbeat review of the Sony Reader for Technology Review in January—that E Ink’s technology isn’t enough to make Kindle the breakthrough e-reading device that I and thousands of other e-book fans have been waiting for. For one thing, and I won’t belabor the point (because others have been making it repeatedly), it’s ugly. It’s all angles and corners and buttons and wheels. If the iPhone were a sleek black-and-chrome swan, Kindle would be its geeky gosling cousin. Even the dot-com-era Rocket eBook, a much heavier, bulkier, LCD-based e-book device made by NuvoMedia (where—disclosure time—I worked for about 18 months from late 1999 to 2001), was more elegant.

But even if the Kindle were beautiful, there would still be the problem of price. Price, meaning both the $399 cost of the device itself—a very steep admission ticket to the world of electronic reading—as well as the $9.99 that Amazon is charging for New York Times bestsellers and other new releases. Yes, $9.99 is a big markdown compared to the typical $25 cover price for a new hardcover (and even compared to the $13 to $18 you’ll pay for a hardcover at Amazon). But it’s not nearly big enough. For better or worse, consumers have gotten used to paying low-single-digit dollar amounts for electronic content. A song on iTunes still goes for $0.99, a TV show for $1.99. Netflix rentals will run you $1 or $2 per DVD, depending on how many you go through in a month. It may be a travesty that undermines all the great traditions of literature and authorship, but my bet is that people simply won’t pay $10 for access to the electronic version of a novel, which is, after all, just a few hundred kilobytes of 1s and 0s (and with an e-book you don’t even get the paper this information is usually written on).

The habit of reading among the English-speaking public—I’m talking about the mass public here, not the educated elite—has gone through at least two great flowerings. One was the era of the penny dreadfuls and dime novels, which ran from about 1840 to 1885. The second followed the invention of the mass-market paperback in the mid-1930s. Both revolutions in reading hinged on revolutions in printing technology and price; it simply became much cheaper to make and buy a book, and readers responded to the new plenty with savage appetites.

Something similar has happened on the Web, where virtually all written content is free, and which, thanks to the Internet terminals in public libraries and programs like One Laptop Per Child (where Amazon could have looked for some design lessons), is spreading beyond the middle- and upper-class homes that can afford computers. But no e-book reading or publishing system, and certainly not Kindle, has taken on the price challenge. In fact, Amazon’s system makes reading more expensive than before (unless you’re the sort who buys lots of hardcover books, in which case you’d still have to buy about 100 Kindle Editions before the discounts would cover the cost of the Kindle device).

I don’t know when, if ever, the economics of publishing will tilt in favor of e-books. It’s true, of course, that electronic gadgets always decline in cost over time—and if the Kindle dropped to around $199, I would probably buy one myself. (On that point, though, it’s not clear how quickly Amazon will be able to cut the Kindle’s price, since the VizPlex film in the screen, as I noted in my story about E Ink, remains a high-priced specialty item.) But the prices of Kindle Editions are probably even more critical to the overall success of the new publishing model Amazon is trying to create. For the Kindle system to catch on as a real alternative to print books, I think prices for new releases would need to drop to the $5 level or below.

And that’s just not going to happen—not as long as the New York publishers have anything to do with it. So for now, the Kindle and its remarkable e-paper screen will remain a curiosity—a toy for early adopters—and lots of real paper books will continue to be pulped every year as the same publishers struggle (and fail) to predict exactly how many copies of Lemony Snicket parents will buy for their children this Christmas. The future of reading is still safely in the future.

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