Editor's Note: This is the first of a two-part series on the explosive growth of e-readers. Come back on Monday for part two, which examines if e-readers can help save the newspaper industry.
Is there an e-reader on your gift list this year? It wouldn’t be a surprise—the technology press touts that the 2009 holiday shopping season (actually, all of 2010) will see the ascent of the e-reader as the ultimate mobile accessory, delivering novels and newspapers to a public clamoring for convenience
Once a boutique, almost novelty device, the e-reader market is steadily filling up. According to an August report from the Association of American Publishers, electronic-book sales increased 177 percent, to $96.6 million, over 2008 numbers.
Industry pioneer Sony and its upstart rival Amazon, with its Kindle series of devices (this year, the company is believed to have sold three million units), must now battle for market share against iRex Technologies’ iRex DR800SG, the soon-to-be released Alex from Spring Design, and offerings from Barnes & Noble.
Earlier this month, Barnes & Noble announced that sales of its device, the Nook, have been so great the company is sold out and unable to deliver any new orders in time for the holiday season. In a statement, Barnes & Noble said that “while we increased production based on the high consumer interest, we've sold out of our initial Nook allotment available for delivery before the holidays."
Barnes & Noble has also partnered with Plastic Logic to sell the Que, a device which is being marketed as “the first 'proReader' designed for business professionals."
Unlike the Kindle, the Que not only allows a user to download and read books, newspapers, and magazines, but also business documents in Word, PowerPoint, PDF, and Excel. Despite having its own e-reader, Barnes & Noble sees the Que more like a companion device to the Nook. Both readers come with access to the company’s e-bookstore’s more than 1 million titles.
Impressive as that sounds, says Michael Norris, a publishing industry analyst with Simba Information, the larger issue is market share for e-readers. “It’s kind of a hard sell to me that a device that cost $250 to $500 is being pitched to a generation that won’t even spend 75 cents for a newspaper,” he says. “And we’re supposed to believe it’s going to help save the newspaper industry? The whole idea that there is an ‘iPod for books’ just waiting to be invented is ridiculous.”
Besides, says Peter Farago, vice president of marketing for research firm Flurry, there already is an iPod for books; it’s called the iPhone. In a report released by Flurry on November 1, e-book apps for the iPhone exceeded the popularity of games apps on the App Store for the first time, with one in every five new apps available on the store being an e-reader.
“It’s all converging — ‘one device to rule them all,’” Farago says with a laugh. “When I look at the iPhone survey, you are talking about one device that can have all your personal information; its modular, so you can add whatever you need. First it was games, now its books.” (Amazon does offer the Kindle e-reader app for the iPhone, and it just announced the program will be available for the Windows 7 operating system.)
Is there an e-reader on your gift list this year? It wouldn’t be a surprise—the technology press touts that the 2009 holiday shopping season (actually, all of 2010) will see the ascent of the e-reader as the ultimate mobile accessory, delivering novels and newspapers to a public clamoring for convenience
Once a boutique, almost novelty device, the e-reader market is steadily filling up. According to an August report from the Association of American Publishers, electronic-book sales increased 177 percent, to $96.6 million, over 2008 numbers.
Industry pioneer Sony and its upstart rival Amazon, with its Kindle series of devices (this year, the company is believed to have sold three million units), must now battle for market share against iRex Technologies’ iRex DR800SG, the soon-to-be released Alex from Spring Design, and offerings from Barnes & Noble.
Earlier this month, Barnes & Noble announced that sales of its device, the Nook, have been so great the company is sold out and unable to deliver any new orders in time for the holiday season. In a statement, Barnes & Noble said that “while we increased production based on the high consumer interest, we've sold out of our initial Nook allotment available for delivery before the holidays."
Barnes & Noble has also partnered with Plastic Logic to sell the Que, a device which is being marketed as “the first 'proReader' designed for business professionals."
Unlike the Kindle, the Que not only allows a user to download and read books, newspapers, and magazines, but also business documents in Word, PowerPoint, PDF, and Excel. Despite having its own e-reader, Barnes & Noble sees the Que more like a companion device to the Nook. Both readers come with access to the company’s e-bookstore’s more than 1 million titles.
Impressive as that sounds, says Michael Norris, a publishing industry analyst with Simba Information, the larger issue is market share for e-readers. “It’s kind of a hard sell to me that a device that cost $250 to $500 is being pitched to a generation that won’t even spend 75 cents for a newspaper,” he says. “And we’re supposed to believe it’s going to help save the newspaper industry? The whole idea that there is an ‘iPod for books’ just waiting to be invented is ridiculous.”
Besides, says Peter Farago, vice president of marketing for research firm Flurry, there already is an iPod for books; it’s called the iPhone. In a report released by Flurry on November 1, e-book apps for the iPhone exceeded the popularity of games apps on the App Store for the first time, with one in every five new apps available on the store being an e-reader.
“It’s all converging — ‘one device to rule them all,’” Farago says with a laugh. “When I look at the iPhone survey, you are talking about one device that can have all your personal information; its modular, so you can add whatever you need. First it was games, now its books.” (Amazon does offer the Kindle e-reader app for the iPhone, and it just announced the program will be available for the Windows 7 operating system.)
For Farago, the problem facing e-reader developers like Amazon and Plastic Logic is that it’s “going to be difficult to produce their devices at a lower cost than Apple can produce an iPhone.”
Right now setting up the industry is expensive, he says. Once e-reader developers get into mass production, they need the software to pull the hardware sales. Over time, the price to make each additional piece of hardware will diminish, and the one-time, big fixed cost will eventually get amortized across all the units Amazon or Plastic Logic produce.
“Hardware is a loss leader. That’s why you have to have content,” Farago says. “You make back the money on content sales.”
He cites as an example Microsoft’s Xbox. Early on in its foray into videogames, Microsoft lost $100 with each Xbox console it built, right up until the release and popularity of the game Halo, says Farago. “Remember, it wasn’t really the hardware that made the consumer go to Best Buy, it was the game, the application. The Xbox’s ‘killer app’ was Halo.”
With more than 50 million iPhone and iTouch devices in service, Apple has by virtue of ubiquity the upper hand in the e-reader market, Farago says. (Even Norris admits his wife reads books on her iPhone.) And if the rumors about Apple’s iTablet device are to be believed, the Cupertino, California-based company could be sitting on the Kindle killer. According to the Sydney Morning Herald, “the tablet is tipped to be a larger version of the iPhone. It is small enough to carry in a handbag but too big to fit in a pocket. It will have a touch screen and be targeted at users who mainly want to surf the Web, read books and newspapers or watch movies.”
At present, the iTablet remains a mythological creature, the unicorn of e-readers, with recent reports saying the device would cost upward of $800 with its launch date pushed back to the middle of 2010.
“Can Apple come out with a competent e-reader?” Farago asks. “They are known for their desktops and laptops and a phone. They have 30-years of competency in hardware, and they are pretty much not interested in the content—they make money on the devices. They have made so many, the price to build has gone down, but they can still charge a premium.”
Source: Portfolio
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