The Year of the eReader – Making Way For 2012

The printing press, invented by Johannes Gutenberg in 1440, has been one of the most important inventions in the history of mankind. It allowed for the widespread adoption of paper books, which could be printed cheaply and distributed widely to a formerly illiterate populace. Over the past 500 years, most reading has been done on paper-based products. However, with the arrival of the 21st century, the era of the paper book appears to be finally coming to an end.

As electronic devices proliferate throughout society and content becomes increasingly digitized, paper books are quickly becoming replaced by eReaders, which provides even cheaper access to information through e-books. Traditional paper books are becoming quickly outdated as e-books can be reproduced an infinite number of times and transmitted instantaneously through the internet.

Perhaps the amazing thing is how quickly the change is actually occurring. Even since the release of the original Kindle device in 2007, the writing was on the wall, but even Amazon could not have predicted the speed at which e-book sales would outpaced printed books. Indeed, by early 2011, Amazon announced that it was selling more e-books for its Kindle devices than the combined sales of hardcover and softcover printed books.

Of course, Amazon is only one corner of the publishing world, and printed books will not go quietly into that good night. Although sales of eReaders have been growing rapidly such that nearly 30 million American owned one as of May of 2011, e-books still account for less than ten percent of the entire book market. However, Forrester Research estimates that e-books sales could increase to $3 billion over the next three years, a nearly ten-fold increase from their present levels.

[easyazon-image-link asin="B0051QVESA" alt="Kindle, Wi-Fi, 6" E Ink Display - includes Special Offers & Sponsored Screensavers" src="http://ecx.images-amazon.com/images/I/411H%2B731ZzL._SL160_.jpg" align="left" width="160" height="160"] The current leader in the eReader market is clearly Amazon, which quickly realized the importance of digital content for the future of its business. As one of the earliest e-commerce companies on the internet, Amazon revolutionized the retail business through direct sales over the internet. This strategy put immense pressure on traditional brick-and-mortar retailers like Barnes & Noble and Borders, who struggled to adapt to a quickly-changing environment.

Although many people think of the company as just a book seller, Amazon has always seen itself as much a technology company as a retailer, and it has run its business strategy with this belief in mind. In addition to its myriad product lines, Amazon has fully embraced cloud computing through its Amazon Web Services, creating a product that is rivaling those of tech giants like Google and Apple.

As such, it was only natural for Amazon to adopt eReaders as the future of the book industry. Given its limited business history, Amazon was not saddled with a past legacy like other book retailers, allowing them to effectively pivot towards the electronic medium. Therefore, it was not a huge surprise when Amazon announce that release of the original Kindle back in November of 2007.

[easyazon-image-link asin="B0051VVOB2" alt="Kindle Fire, Full Color 7" Multi-touch Display, Wi-Fi" src="http://ecx.images-amazon.com/images/I/41Xx9W8gdRL._SL160_.jpg" align="center" width="160" height="160"]Since that time, Amazon has been the undisputed king of eReaders; indeed, they currently control more than 50 percent of the entire market. Only Barnes & Noble is even close to overtaking Amazon in this industry thanks to its line of Nook devices, which currently controls a bit more than 20 percent of the market.

Barnes & Noble has been the only traditional retailer to realize the importance of eReaders for their ultimate survival as a company. This realization has been difficult for many companies to appreciate, but the recent bankruptcy of Borders has made it too obvious to ignore. Compared to Amazon, companies like Barnes & Noble are like dinosaurs, saddled as they are with enormous retail locations that drain cash flow away from the business.

[easyazon-image-link asin="140053271X" alt="Barnes & Noble NOOK Touch eBook Reader (NEWEST model, WIFI Only)" src="http://ecx.images-amazon.com/images/I/319qdlTMhFL._SL160_.jpg" align="center" width="160" height="151"]Due to this fact, Barnes & Noble has made a valiant effort to remain relevant in the book industry with its line of Nook eReaders. Indeed, Barnes & Noble has been fairly aggressive in marketing these new devices by setting up kiosks at the front of all their stores, creating a physical storefront for their electronic products.

Barnes & Noble knows that it can not cede the eReader market to Amazon without simultaneously losing the e-book market as well. This is because the eReader is simply the device that is used to access an entire ecosystem of products; in essence, the eReader is a digital storefront. When a person buys an Amazon Kindle, they have easy access to all of Amazon’s digital products, including e-books, music and movies; Barnes & Noble is effectively shut out of the equation.

This is a future that Barnes & Noble is attempting to avoid at all costs. If they fail with the Nook, they will ultimately fail as a business. Thus Barnes & Noble is fighting for its survival as Amazon attempts to leverage its powerful internet presence to corner the eReader market.

Unfortunately for both Barnes & Noble and Amazon, they have more to worry about than just each other. The eReader industry has had to face an entirely different threat with the rise of tablet devices, which provide a more complete computing experience than eReaders, designed as they are to focus just on reading. In this fight, the eReaders must compete with the 800-pound gorilla of tablet devices: the iPad.

The original iPad was released by Apple in January of last year and was quickly embraced by customers as a revolutionary computing device that had the power to supplant both laptop computers and the then-emerging netbook industry. The tablet market exploded, and Apple, which single-handedly created the market, took most of the spoils. Indeed, tablet sales grew to nearly 14 million units in the second quarter of 2011 with Apple, thanks to its iPad 2, taking approximately 70 percent of the market.

The truly amazing thing is that Apple is continuing to grow its market share even after both Research in Motion and the numerous Android manufacturers attempted to piggyback on Apple’s success. Unlike the cell phone market, where Android has made significant inroads on the iPhone, the iPad 2 has remained resilient against the competition of other tablet devices.

Apple sees its iPad tablet device as an entertainment portal for its sale of digital products through its highly-successful app marketplace. With the spread of iPad tablets, for instance, Apple will be able to get more users into its iTunes ecosystem. This puts Apple in direct competition with Barnes & Noble and Amazon, even if it is attempting to cater to a different market than the e-reading devices.

Although tablets would seem to be the more appealing product thanks to their considerable functionality, many users prefer eReaders as the more enjoyable device on which to actually read books and magazines. Unlike the LCD screens on tablet devices, most eReaders employ a technology known as e-ink, which many readers find preferable, especially when reading for long periods of time.

However, both Amazon and Barnes & Noble have seen the popularity of devices that do more than just give users access to e-books. As such, both companies have recently launched competing tablet devices of their own. Amazon’s foray into the tablet market with the Kindle Fire received considerable hoopla, although some of the early reviews have been rather mixed. Regardless, Amazon has been pushing the Kindle Fire hard, even selling the tablet at below cost in order to gain market share on Apple.

Amazon is hoping that its low price point at $199 will help it to compete effectively with the far pricier iPad 2, which starts at $499. As such, it is attempting to employ a similar strategy to the Android smartphone, upon which the Amazon Kindle Fire is built. Although the iOS mobile operating system running Apple’s various devices earns the company huge profits, Google was able to spread its competing mobile operating system, Android, by making it open source and giving it away for free.

This made smartphones running on Android far cheaper than the iPhone, helping it to chip away at Apple’s dominant market share. Regardless, Apple has huge brand recognition and almost unlimited resources, including more than $80 billion in cash on its balance sheet, to fight this battle. In short, it would be an understatement to say that Apple will be a tough competitor to overtake.

Although the eReader market is still up for grabs, there is no doubt that eReaders and other tablet devices are quickly changing the landscape of both the technology and publishing industries. Customers have clearly embraced eReaders as a viable alternative to traditional books. Indeed, Juniper Research expects total shipments to reach 67 million devices by 2016. Although tablet devices have been adopted more quickly than even eReaders, e-reading devices will continue to gain traction in the years ahead.