Amazon’s bid to offer its wireless electronic book reader in 100 countries gives it an early lead in the race to dominate the market.
Yet while the move could boost the Kindle’s share of the emerging eBook business to upward of 70 percent, Amazon faces growing competition, plunging prices and increasingly restive book and newspaper publishers.
As a stripped-down device for reading text and not much else, Amazon’s Kindle looks pricey relative to netbook computers with similar price tags of around $200 to $300. And the Kindle’s key hardware advantages look increasingly easy for rivals to match and perhaps even overcome.
To be sure, the year-end holiday season looks to become the break-out year for sales of electronic readers. Market researcher Forrester now says it expects 3 million eReader units to be sold in the United States alone in 2009, up from a prior prediction of 2 million.
Forrester expects Amazon to have nearly 60 percent of the U.S. eReader market, roughly twice that of the Sony eBook Reader’s 35 percent share. Dutch company Irex Technologies, working in close collaboration with bookseller Barnes & Noble, accounts for the remaining 5 percent.
Of course, Kindle’s expansion into international markets stretching from China to Europe should give it an even greater market-share lead worldwide, putting it on a par with Google’s dominance of the Web search market or Apple’s lead in music players and, increasingly, in smartphones.
The Sony eBook Reader so far is only available in the United States, Canada, Britain and a handful of other European markets. Sony makes a cousin of the eReader in its home market, Japan, called Librie.
But many forces are in play that could make it hard for Amazon to sustain its current momentum.
Sony eBook Reader
First, prices are plunging. The start-up Interead has introduced a basic eReader device called COOL-ER Reader that sells for $249. Sony has plans to introduce its Pocket Reader device for $199 in December. Amazon responded by cutting the price of its Kindle 2 reader to $299 from $359 a few months back. On Tuesday, it cut another $40 off the price in the United States.
Amazon provides few details on the costs or sales volumes of the Kindle, but most analysts believe the Kindle business still loses money for the company.
To date, Kindle could boast of a critical advantage over other devices: the capacity to wirelessly download new books or other content in under 60 seconds. Rivals such as Sony’s eBook Reader must be synchronized by users with a computer to receive fresh reading material.
But that’s changing. Sony has announced two new models for the U.S. market with built-in wireless connections provided by mobile operator AT&T, the same carrier that supplies the Kindle’s wireless access.
Irex is also introducing a wireless model. Upcoming eReaders from Asus in Taiwan are expected to have two color screens and open like an actual book. Eventually more flexible, almost paper-like screens should become economical. The problem for Amazon is that many competitors will have access to this technology. This may tempt big players like Apple and Microsoft into the market.
As common standards take hold among publishers of electronic books, it’s hard to see how Amazon can continue to command the margins it currently enjoys on hardcover book sales — triple those of digital downloads. Publishers are unlikely to sit idly by and crown Amazon the king of the eBook trade the way Apple is in music.
The truth is that Amazon is hedging its bets, preparing for the day when selling physical books is displaced by digital media downloads the way MP3s have wiped out CD sales. The online retailer should be congratulated for building what is fast becoming a billion-dollar revenue business, after taking the unlikely role of hardware maker. But, so far, it is hardly a substitute for selling boxes of books.
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