E-Reader Sales Going Up, Prices Down, While Competition Heats Up

By Michael Stillman

The prices of electronic book readers are tumbling, sales are increasing, and intense competition is boiling just below the surface. The electronic book reader market is still nascent and small, but the major players in this field are undoubtedly looking at this like the cell phone market in the '90s, or the cable television market in the '70s. They were insignificant compared to landline telephones and antenna televisions, but a revolution was brewing beyond the horizon. We foresee a pitched battle for what may one day soon be the cell phone of books, and at the moment the two major competitors are looking like Amazon and Google.

Forrester Research, a firm that makes its living by figuring these things out in advance, recently upped its projection of eReader sales for 2009 by 50%. That represents an increase of 1 million units from 2 to 3 million for the year. Admittedly that's a small base, but they are now saying we could see in excess of 6 million units sold in 2010. That would place 10 million of these in use in the U.S. by the end of next year.

Meanwhile, Amazon announced it was reducing the price of its most popular model of Kindle eReader to $259. The Kindle was priced at $399 a year ago, but was cut to $359 by the beginning of the year, to $299 in July, and now to $259. Don't expect this price to hold for long. Amazon is competing with Sony's eReader, which is priced at $199.

However, we see the battle more between Amazon and Google than Amazon and Sony. The two are approaching the competition from different angles. Amazon is offering an integrated solution. You buy a Kindle eReader that accepts books from Amazon's e-store. It's one-stop shopping. On the other hand, Google doesn't even make an eReader. Instead, it provides the electronic books that can be read on others' eReaders, computers, maybe even cell phones (if you don't mind reading small text). They have been creating a massive and controversial database of books (see The Google Settlement elsewhere in this issue of AE Monthly). That battle is being fought primarily over the obscure world of "orphan books," but that may be more a smokescreen for the serious business of electronic versions of new books. Look for Google to become a major supplier of these electronic texts. Titles from Google Books are already available for your Sony eReader, and recently it was announced that Google's e-books will be available through Barnes and Noble.

Amazon has the head start in this business. Forrester estimates they have 60% of the eReader business, but Sony grabs the lion's share of the remaining market - 35%. Since Sony seems an improbable prospect for the book-scanning business, and Google an unlikely candidate to produce electronic devices, we imagine this partnership will endure for the foreseeable future. Though currently the leader, Amazon could have its work cut out. The breakdown reminds us of Microsoft and Apple. Apple provided an integrated computer system - you bought the software and hardware from them. Microsoft produced the software, but left it to others to build the hardware. They just made sure that all of the hardware vendors other than Apple used their software. Microsoft became far more successful than Apple. Apple has had something of a rebirth in recent years, but has done so by selling other products, and making software that many people consider superior to Microsoft's. Still, it has a tiny share of the computer business. Open platforms, wholeheartedly supported by Google, generally are the way to go, but Amazon is relying on an Apple-like closed system.

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E-Reader Sales Going Up, Prices Down, While Competition Heats Up

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E-Reader Sales Going Up, Prices Down, While Competition Heats Up

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