ereader-shakeup.jpgThat’s the title of an excellent overview article about the state of the hardware ereader industry in BestTabletReview. It’s worth reading.

What about the little guy?

A miracle. For a small manufacturer to break into the eReader big leagues it would take a literal miracle. We’re talking Roy Hobbs stuff here complete with music, lightning and exploding lights. And even if they’re lucky enough to find themselves in Roy Hobbs’ cleats, it will mostly likely turn out like the book and not the movie. Their device would have to be superb, offer something not found anywhere else and be hooked up to a robust and supportive marketplace. More importantly it would have to be cheap. How on earth could any small manufacturer make money on it?


  1. The article asks: “What about the little guy?” and bemoans the high cost of entry into the e-reader manufacturing market.

    I think what’s happening is terrific. Competition is driving intense innovation and lower prices and broader distribution. The market is drastically different today than just one year ago; and greatly different than just six months ago.

    If smaller players can’t keep up and bring something special to the market — distribution, pricing, content, form-factor, features — they will not and should not carve out a niche for themselves. If they want to play with the “big boys”, then they need the capital to build that sort of business.

    A year ago there was: Kindle US. Now there is Kindle 2 International with 3G wireless in 100 countries; B&N Nook based on Android; Kobo, the cheap little reader that could; iPad as the bling-bling accessory. and e-reader software is now on PC, Mac, Blackberry, Android, iPhone and iPad from several different vendors.

    Is there anything to bemoan in the passing of smaller players? Another half dozen will likely disappear before the end of 2010.

  2. “bring something special to the market”

    That was the key thing about most of these small eBook readers.

    Overseas companies (I think MobileRead had a listing with the few real manufactures) sold these guys various blanks that all could do the exact same thing internally and all they had to do was simply re-badge the units with no effort to actually provide customers with anything all that new or different.

  3. It’s not just the small guys getting squeezed out of the market. Bigger would-be players are on their way out.

    Word is, Samsung is *not* going to release their ebook readers in the US. Of the announced but not released products from CES odds are few if any will show up. (I’m doubtful the me-too Acer will hit these shores and not too sure about the Asus.) Basically, the market in 2010 is about basic reading capability at the lowest possible price. And, it looks like the only perceived value-add feature is wireless connectivity.

    The recent baseline re-set has pretty much sucked the margins out of the pre-announced products and preempted their entry to the market, strangling them in the crib as it were. In effect, they are one year late to market; obsolete before arriving.

    Conversely, some of the smaller-but-established players may still survive as specialty/niche products. Pocketbook Global dropped their prices and remain (more or less) competitive, based on design features and firmware quality rather than price or associated bookstore. And they are the best hope the ADE camp has for a 9.7 in reader to compete with Kindle DX. Bookeen and Astak may also have enough mindshare to survive into the new year. Maybe. Beyond those three it looks pretty bleak for other would-be players. (Anybody know if iRiver or Viewsonic actually shipped anything to the US?)

    One thing I would argue about the article’s conclusions is the assumption that all three “name” players are in it for the long haul. I’m not sure it’s all that cut-n-dried.

    Amazon and B&N have built their ebook businesses on direct sales *and* walled-garden ebookstores and they can afford to sell their readers at cost if need be. Sony can’t. Sony’s bookstore has minimal presence in the US and its readers are not locked into it—so they have to compete with Borders, B&N, and everybody else on the ADE bandwagon for ebook revenue—and they rely on the traditional distributor-to-retailer hardware sales channel. That means that even if Sony *wanted* to sell their readers at cost, they can’t; their retail price *has* to provide margin for their channel partners. This leads quite a few people, me included, to suspect the next wave of Sony eink readers will be the last. (Sony may find easier going in the webpad market or they might want to fight it out in the full-feature tablet wars of 2011 instead of trying to carve out a minority stake out of what is clearly shaping up to be a price-driven commodity market.)

    I suspect there may be one more round of blood-letting coming this fall as the e-ink readers adjust to make room for the cheap LCD webpads to come: not the no-name products from start-ups or chinese oems, but from mainstream vendors; LG, HP, Acer, Asus, Dell, etc. At that point the market will stabilize for another 6-9 months and wait for the next technological ripple. (color? sub $100-wireless readers? $79 entry level readers?)

    What shouldn’t get lost in the focus on hardware prices is that this early culling of the reader herd is going to severely impact the market for independent ebook resellers relying on the Adobe ecosystem.

    Moving forward Amazon is going to be a player, no matter what. Eventually Apple will get around to actually stocking the iBookstores and the faithful will start buying up iBooks rather than using the iPad to buy Kindle, B&N, Borders/Kobo, or Blio books.

    On the other end of the spectrum, Fictionwise looks to be on its way out, killed by the loss of its business model in the wake of the BPH price-fix scheme. Others may follow (Booksonboard? Powells? Sony?). B&N and Borders will *probably* outlast most of the smaller players but as long as they’re bleeding B&M money they look to be at serious risk of fading away. Blio, of course, hasn’t even gotten started and they’d better hurry; the window of opportunity to get into the mainstream ebookstore business is quicly closing. Their saving grace is that their product looks to be better suited to the webpads and tablets of 2011 than the eink readers of 2010. But even there, Amazon has already staked a claim with their support for embedded audio/video in some of *their* ebooks. Still, the war for the hearts and minds of rich-content ebook readers is a matter for next year.

    So, the bottom line is that the second half of 2010 is starting to look more like a weeding out of pretenders than an explosion of competitors, both on the hardware and the content sides.

  4. “What shouldn’t get lost in the focus on hardware prices is that this early culling of the reader herd is going to severely impact the market for independent ebook resellers relying on the Adobe ecosystem.”

    Well Adobe made the move into Android with their Adobe Reader and txtr can do ADE ePub files but there still is room for a full on ADE eBook Reader on the Apple iOS system.

    So I don’t count strictly Adobe eBook formats out yet.

  5. Felix, a small correction: Sony e-readers can’t read B&N e-books. B&N NOOKs can read Sony e-books, but not vice-versa. B&N uses its own DRM system, and Sony hasn’t incorporated that into its readers yet (it’s in the 9.1 version of Adobe Reader Mobile).

    The Sony e-book store is probably the most comprehensive source of ADE e-books in the US market at the moment. They need to get their head out of their… er, out of the sand, though, and make it more convenient for people who have non-Sony ADE readers to buy from their store. I expect we’ll see a bunch of dirt-cheap LCD-screen ADE e-readers popping up, which should be an opportunity if Sony gets their act together. Heck, they should already be selling to the Kobo Reader and NOOK owners.

    As for B&N’s (corporate) future, their financials are quite solid and they’re shifting their stores away from reliance on book sales. They’re also making big investments in their online sales and e-book operations. They’re not at all in the besieged situation that Borders is in.

    I’m waiting to see what happens with Google Editions. That could be nothing, or it could be another major disruption. We’ll see.

  6. Adobe Reader is a different product (a PDF viewer) than Adobe Digital editions (an ebook reader/DRM manager). The Android App is the former, not the latter. No Epub support.
    ADE for Android *shoud* be available any day now but not yet.

    The problem for ADE bookstores on webpads is the same they face on iOS devices; Kindle and B&N are already there. As the market gets partitioned, every Kindle eink reader sale means one (or more) guaranteed customer for Amazon’s bookstore, every Nook sale means a B&N-skewed customer, while all other devices get competed by availability and/or price.

    It’s a matter of having a guaranteed customer base vs having to fight for every single sale. And since the price-fix five don’t allow discounting, what do the generics have to offer US buyers?

    I’m not counting out ADE itself, if nothing else because it powers most of the regional, non-english ebookstores, but the generic *US* ebookstores relying solely on it are going to be under serious pressure.

  7. USA is not the only market in the world. European and Chinese markets are completely different (and smaller, at the moment). Barnes & Noble and Kobo don’t sell their ereaders in Europe. And Kindle’s got a small market share.

  8. @Stefano: you are 100% correct. The USA is *not* the only market in the world. You are also correct that the Euro and Asian markets are different. They are smaller. They are fractured. They are also more immature; neither coherent nor integrated.
    Things *are* different outside NorthAm.
    (No price cuts, for one. No high volume players for another.)

    The thing is, what happens in NorthAm is going to impact the other markets. By setting up expectations. By disrupting business models. By setting standards that may or not fit the smaller markets.

    We already see it in the struggles of the smaller euro vendors trying to replicate the 3G-based connectivity of the Kindle and Nook. In the formats they use and don’t use. In trying to secure ongoing ebook revenue to supplement the sale price of the device. In failing to survive.

    We see it in the struggles of asian vendors to ship competitive products to market; in the way they introduce me-too products that are effectively obsolete before shipping. Ebook readers may be built in Asia but the standard and specfications to which they are designed come from America.

    The difference between the markets is critical because whenever there are two drastically different markets for the same product, the product will evolve to fit the needs of the larger market. Economies of scale rule and they do not favor small, fractured, immature markets. Not when there are big, integrated, content-rich markets to address. America has the buyers and the ebookstores and the ebooks. One unified market, 350 million strong (give or take another 10 million illegals and a few hundred russian spies).

    The big lead, the small follow or die. Not pretty, not fair, but that’s the game.

    Precise numbers are not broadly available but last year iCooler issued a self-congratulatory press release when they hit 4 figures in sales. Now they are gone. BeBook is a Euro survivor that at CES2009 loudly proclaimed they had sold 25,000 units. iRex probably ran about the same in volume until they ran out of cash.

    By contrast, while nobody knows how many Kindles are actually out there, we know for certain they are millions. It takes a *lot* of 25,000-a-year companies to get to even one million.

    Apple’s iPad (admittedly a peripheral player in the ebook business) is moving devices at something like a million-a-month clip and cellphones at a higher rate. Barnes and Noble is reported to be shipping even larger numbers than Amazon. And their aggressive pricing suggests they are selling, too. So were’re likely looking at a NorthAmerican market that is soaking up well north of 2 million units a year versus a collection of smaller markets moving tens of thousands. Who are the asian OEMs and component suppliers going to listen to? Which buyers are they going to target?

    The reality is that the economies of scale that are allowing the product category to mature are coming out of North America, not out of Asia or Europe. Absent governmental regulation (which I fully expect to see any day now, starting, naturally, in France) the rules of the game will be set by the american marketplace because this is where the product is selling in anything resembling quantity. This is where the volume is. And, irritatingly to many, where the ebooks are. All the pieces are in place, ready to support the business.

    When B&N reset the competitive baseline for ebook readers in the US they reset it for the entire industry. Because, for now, as goes the US so goes the industry. If all the generic asian readers shown at CES in january looked like Kindles it’s because Kindles sell. Iliads? Not so much.

    The market follows Kindle. And Nook. And Apple.
    And their buyers. If US buyers favor 3G connectivity over touchscreens, the market will offer 3G, not touch screens. (Anybody want to bet what the next Sonys offer?) If US buyers favor direct bookstore links, the products with them will flourish and the products without will lag. Good bad or indifferent this is simply the reality of a competitive marketplace. One more time: volume rules.

    And the ebook formats the world reads?
    Amazon controls the Kindle and Mobipocket formats. Adobe and B&N control ePub. (Never mind the toothless standards committee; ePub is what Adobe says it is, period.) What remains? FB2 from Russia but with no DRM support you don’t see much commercial use. Microsoft’s LIT is a Legacy format as is Barnes&Noble’s Ereader. Pretty obvious by now, right? The commercial ebook formats are all controlled by american companies.
    The bookstore technologies are American-controlled.
    The dominant reader designs are american.
    And what is the single biggest complaint you see about ebook sales? Territorial restrictions. All the ebooks available in the US that are NOT available to offshore buyers.

    The North American market isn’t the only one but it *is* the market that is *nurturing* and defining the industry. That is *not* going to change any time soon.

    What happens here affects everybody. It is worth understanding it. Ignore it at your peril.

  9. It may be sobering to add that Kobo has probably sold more than 25,000 e-readers since its Canadian launch May 1, Aussie launch late May, US launch June 17 to date. Meaning it is now, or soon will be the 4th most widely distributed e-ink reader … in something like a 90 day window. Nor is Kobo funded by a giant company like Amazon, Sony or even B&N. So there IS room for new players but they must have a solid game plan, proper financing, compelling partnerships and an end-to-end solution for the customer.

  10. Indeed. Kobo is a very good example of how to play the new market.
    There *is* room for other players but they do need a coherent vision of who their customers are and an integrated strategy for supporting the product.
    Kobo has both.
    Latching on to Borders in the US and Indigo in Canada were both excellent moves. They’ve had a very good launch. And their response to the reset was pretty good.
    What would-be players can’t do anymore is just pump out hardware and expect customers to survive on their own. The most common question I saw on the BeBook forums while waitng for the regular firmware of the month updates were all about where to get books. That and gripes about how geo-restrictions meant they couldn’t buy books when they found them.
    In fact, the gift card approach is an excellent tool and, marketting-wise, better than the traditional “100 Gutenberg ebooks” preload. It gives the buyer a choice of titles to get started *and* it gets them used to going to the partner ebookstores.
    Of course, pretty soon the key question for Kobo is going to be: What next?

  11. Felix, your comment that the European and Asian markets are smaller, fractured, immature, incoherent might be valid for Europe; it certainly is not true for Japan, and in many respects is also not true for the China markets.

    Japan has 40% of the US population but last year had ebook sales valued at $652-millon (up from $527-million in 2008). While Softbank and a couple of other etailers dominate, there are well over 500 Japanese websites devoted to selling ebooks. The systems in place for acquiring ebooks are way ahead of anything in the US, with options to buy or rent (pay about $1 for a 48 hour rental, for example). Bear in mind that over 80% of the Japanese population has fast broadband at home (40 Mbps and up) and has had 3G for a number of years with penetration now about 80% of the market (with no data caps). Smartphones in Japan act like debit cards — you can “swipe” them to pay your subway fare, or one-click to make an online purchase without needing to type anything.

    I can remember ebooks on the Sharp Zaurus in Japan in the very early 90s. Current sales look to be divided nearly evenly between portable device sales (mainly smartphones) and what the Japanese describe as “PC Sales” which include ebooks for reading on computers as well as reading on ebook readers. Most of the major brand consumer electronics companies in Japan produce and sell ereaders for the domestic market.

    The Chinese market is not as mature, but is already large and growing fast, with smartphones currently dominating ebook sales.

    I believe the reason why ebook readers similar to the Kindle are not so popular in Asia is a result of information density. One Chinese character = one word, so an iPhone or iPod screen can carry about the same amount of information in Chinese that you would see on a Kindle in English. Fro my own experience, I find Chinese newspapers easier to read on my iPod; on my iPad the page has too much information. Current projections are for about 3-million dedicated ebook readers (a la Kindle) to be sold in China this year. Ebook sales in China this year should exceed $30 million in value.

    I should also point out that Kobo’s partner with the deepest pockets is a Hong Kong company with a family relationship to HWL, the Hong Kong investors who launched the Orange brand cellular business in the UK, were an early investor in what became T-mobile in the US, and currently operate a 3G network under the ‘3’ brand in Australia, Austria, Denmark, Hong Kong, Ireland, Israel, Italy, Sweden and the United Kingdom.

    The world does not actually revolve around the US, Felix, and paying attention to what is really happening elsewhere can be instructive.

  12. This is another nonsense prediction article. Firstly the big publishers will be forced in the next few years to supply their ebook to ALL competition for sale. They won’t be able to restrict their books to their own site or their special partner. So there will be a huge range of web sources to buy from.
    Secondly eReaders will become 10 times cheaper to make and will become almost disposable. There is always room for a new idea and newcomers in these markets. But it will be software driven. There will still be the dominance of the big players but because of the opening of the market there will be plenty of room for innovative readers,

  13. @ric; I hear you. There is action on ebooks all over.
    But the topic here is *eink* readers…

    And, isn’t that massive japanese market aimed almost exclusively at *cellphones*? Sony had to drop their eink readers at home (for a while they only sold them in the US) and only now are they bringing their new readers to japan because Amazon is rumored to be preparing an entry. Irex claims they went under because the couldn’t get their new reader through FCC certification in time. The same reader they were planning to sell, with less features, for more in their native euro markets. That’s a lot of trouble, betting (and losing) the company on a distant market, you don’t do that unless you have to. Unless there is no other option. iRex had no option. They simply could not sustain their business on the other markets alone.
    And the chinese eink readers, if the native market is enough to sustain them, how come their designs are all Kindle wannabes (and previously Sony 505 clones)? That is the behavior of followers, not leaders.

    Sure, there are other markets and it is important to follow them all. But the topic of the article, and the debate, is the *ebook reader* market, not ebook use per se, which is definitely way more mature in Asia. (Not going to debate what I wasn’t addressing.)

    And the debate is definitely not about what *publishers* may or not be doing. (huh?) That is not what the article is about. And that is not what I’m talking about.

    When it comes to *eink reading devices*, (note that I singled out the iPad and iPhone as peripheral to that market?) the market is focused on the US. Because that is where the volume lies. For now.

    I know folks don’t like it but that *is* the state of the dedicated reader industry today. The leaders are Kindle and Nook. Sony’s (california-based) operation is third. Everybody else is taking their cues from them.

  14. Article:

    Their device would have to be superb, offer something not found anywhere else and be hooked up to a robust and supportive marketplace.

    Newcomers into the eReader market place must enable their product to have access to published ebooks to be successful. So the Publishing industry and it’s structure is intrinsically very relevant.

    The state of the market today is also irrelevant. The article is making assertions about the future.

    For a small manufacturer to break into the eReader big leagues it would take a literal miracle.

    The Chinese market is a latent giant, with no allegiance to people like Amazon or B&N. eReaders will become so cheap to make and so light and easy to carry in the next couple of years that the market will explode. There is nothing stopping new innovative eReaders coming into the market. Nothing.

  15. A post on a Usenet forum today:

    SteveH :

    Been a bit bored this afternoon, with no energy to do anything after a
    70-ish hour week at work last week.

    So I got around to browsing iBooks.

    There’s one particular book I want to read (Start the Car – The World According to Bumble by ex-cricketer David Lloyd).

    Price at Amazon – £9.49.
    iTunes store audio book – £7.95
    Kindle Store – £7.16
    iBooks – £13.99

    This is the kind of thing so many of us are really annoyed at.

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