The Future Of Electronic Reading

The future of reading is electronic and is up for grabs, and now everyone wants a piece of the action. The current market is a scrap between Amazon, Apple, Sony, Barnes and Noble, and even Borders in some capacity. There is money, innovation, and disruption in a market niche. It’s the technological perfect storm.

These billion dollar players are all in the same sandbox fighting for the same market, each trying to grow faster than the others as the e-reader market explodes. The biggest difference between these players, beyond their brand names, is the devices that they offer: their cost, their abilities, and their focus.

The divergent nature of the market raises a few big questions. Is the future of e-reading on dedicated devices? What price points will succeed? What feature blend is crucial for consumer adoption? Those questions will drive the next 12 months in the market. Let’s look at where we stand.

The iPod Question

The discussion of features versus simplicity is something that splits the e-reader market into two pieces, dedicated reading devices against multifunction gadgets. The iPad versus the rest, if you want to put is bluntly. The iPad is selling like beer at a NASCAR race, but it is currently far from passing up the Kindle, no matter what metric you pick. To paraphrase an earlier discussion we had on the topic, while the iPad is likely to perhaps pass the Kindle in total units sold this year, aren’t we:

comparing apples (get it?) and oranges. The Kindle is  a dedicated reading device. All it does is read. People buy it to read. People (the vast majority) do not buy iPads to be e-readers. It’s all about the browser, remember?

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Even more, the Kindle has both a larger selection of books and their collection is on sale at lower prices. This means that as it stands right now, the simpler single-use devices have the upper hand; the iPad needs to catch up to beat them.

Oddly enough, this mirrors an earlier Apple success, the iPod. The iPod itself came out and made a niche product mass market just by doing one thing well: music. Apple perfected the store and the device and for years made mountains of cash without ever needing an app store or flashy touch interface. The iPod is still popular because it has content, distribution, and ease of use in one container. That is exactly what the Kindle is doing, using Apple’s formula to try to match their success.

In an odd way, Apple has to fight the battle that it always made its competitors fight, the content war. iTunes has the best musical library for sale anywhere, and anyone who wants to compete has to deal with that. No amount of hardware can fix not being able to buy the artists you want to listen to. Now Apple has the device without the content, books in this case. It is an interesting reverse of circumstance.

A final note, Amazon has by far more industry know-how in regards to books than Apple does, and it has deeper relationships among the big players. Book publishers need to stay on Amazon.com at all costs, giving Amazon leverage to maintain an advantage over whatever Apple does.

Simple Or Not?

As we mentioned, devices aside from the iPad are generally focused, single use gadgets designed to provide you with books on an electronic paper screen. Consumers have taken to them despite their limited use case. Price is a factor in that.

News today has come forth that Barnes and Noble with their Nook e-reader (a very engaging little bit of technology, I can say from hands-on experience), has a new WiFi only flavor that is priced at a mere $149. The 3G version has also received a price drop to $199, making it in the words of Barnes and Noble the “market’s first under-$200 dedicated full-featured eBook reader that offers both free 3G wireless and Wi-Fi connectivity.” Impressive.

The Nook’s specific characteristics aside (it has various tie-ins with the Barnes and Noble empire), this is a very interesting move by the company. The cheapest Kindle costs a some $259, meaning that Amazon finds itself at a significant price disadvantage to a competitor’s reader that may, or may not depending on your view, match the venerable Kindle in quality and ease of use.

Consumers are price very dollar conscious in regards to reading, which is why the Amazon e-book market with its slightly cheaper pricing is a draw in and of itself. Book pricing is war. But with the cheapest Nook now $100 cheaper than the Kindle, the number of books needed to be purchased to close the gap is large. Perhaps large enough to swing market momentum.

The iPad is not in a very strong position in this market. As it is not a dedicated device, people often aren’t buying it for its e-book reading capabilities. Its users are not necessarily the most enthusiastic readers, thus limiting their purchasing potential. Why would anyone buy an iPad as an e-reader when the Nook is $149, the Kindle is $249, and the iPad costs a minimum of $500 and has a smaller content selection?

The Jobs Element

That would be the state of things if we could discount what Steve Jobs can do. He has an uncanny knack for turning things in his favor. He also has a hot product that is going to be the hands of millions of people around the world this year. This cannot be ignored.

Apple also knows how to work with copyright-holders after years with iTunes, despite being less experience in this market than Amazon. With an extremely concerted effort, they may be able to manage to close the content and price gaps with Amazon in the next year. That would still leave them with an overpriced product offering to reach hardcore readers, but it would help them in their pitching. All we can do is monitor this area of the market.

Casual V. Not

This discussion could perhaps have set up a false dilemma if Apple is not shooting to grasp the hand of the heavy reader to lead them to iPad-land. It could be that Apple merely wants to court the casual reader, and is willing to leave the rest to the rest.

Amazon and Barnes and Noble would likely find this to be a sort of truce, but not one that they would want to let stand long. Casual readers are an important slice of the book market; they fuel explosive bestsellers by appearing out of the woodwork at odd moments. You want them.

If Apple is courting casuals, then this is the question: will enough people buy the iPad to ensure a large enough pool of occasional book-buyers to have a marketshare worth talking about. No one can be, or is sure of that. Jobs said that in the early iPad rush some 2.5 books were downloaded per iPad. What percentage of those were free is the bit of information we all want, but it could show strength in targeting casual users.

The Next 12 Months

The iPad will sell several million more units. Amazon should announce their next generation hardware. Barnes and Noble will press their foot and web traffic to sell the Nook. Borders is going to sell several competing hardware options in its stores, and Sony is going to continue fishing to for a killer product (read: one that works).

The battle for the reading market is going to be a blood fight, and it is far from over. The final wildcard would be serious product offerings from publishers themselves, but that is unlikely at best, despite what rumors may say. They don’t have anything near the know how or taste for risk that it would take to walk down that road.

When you break down the market, three players are there: Kindle, iPad and Nook. Simplicity is winning, partially because the most established online player has the content and price edge. The scrappy brick and mortar store is biting back to save their bottom line, and the sexy wizard-like consumer product powerhouse is trying to crash everyone’s party.

From what we know, the most probable situation for next June is a similar stalemate, with each player having grown their revenue along with the expanding e-book market.