July 21, 2010
This is a phenomenal week to be covering the publishing industry. Tuesday, Apple released its quarterly earnings. Big surprise, another record-breaking quarter for the folks in Cupertino. A few billion here, a few billion there, blah, blah. How amazing is it that we're not really surprised by such overperformance in an otherwise still-troubling economic environment? Of great interest to me, the eReader guy, was the final iPad tally for the quarter ending June 26th: 3.27 million units worldwide. Still no good guidance on what the US split is, but no matter how you slice it, iPads are hot. (And, no, I still have not bought one, still holding out for iPad 2.0).
And if you follow the implications of that success, as many in the media have, Amazon should just concede the eReader business, pack up its cream-colored Kindle and go home, right?
Wrong. And to prove it, Amazon made a point of announcing some news of its own, the day before Apple's results were public. Amazon flaunted its own success in selling both Kindle devices and eBooks. That's right, despite that iPad upstart, the Kindle is still flying off the shelves, selling more units each month than the month before it all through Q2, when the iPad challenger was supposedly pummeling it. And it's dominating the eBook business as well, selling as much as eight in ten of the eBooks of major bestsellers, seeing its eBook sales rate triple over last year. Oh, and Amazon indicated it sells 1.8 eBooks for every hardback book it sells. That's right, even though it discounts hardbacks to paperback prices for many bestsellers.
Yep, business seems to be going just fine for Amazon. How can this be? It's very simple. Amazon has only barely begun to penetrate the one-fifth of online adults that read more than two books a month. These people love books enough to want a device optimized to provide the ideal digital reading experience, including finding, buying, carrying, and reading books. That device is the Kindle. And at a newly slimmed-down $189, the Kindle is killer affordable.
We're so confident of the long ramp Amazon still has ahead of it that our latest eReader forecast shows that for at least the next year, eReaders of all flavors will outnumber iPads in the US. (Forrester clients can click here to see my latest report, published today, which includes a summary of the forecast and a data dive into a survey of more than 4,000 people about which devices they want most; quick tease here — more people want to buy an eReader of any kind than want to buy an iPad this year though the iPad has more likely buyers than any one single eReader. See the report for more detail.) However, by the time we enter 2012, tablet PCs like the iPad will surpass eReaders. At that point, a healthy 15.5 million adults in the US will own an eReader. And the number will continue to climb, though slowly compared to tablet PC growth. By 2015, we see the eReader market starting to cap at just under 30 million US adults. That's nearly all the people who read 2+ books a month.
At that point, many bargain eReaders will cost just $49 and some of the best will cost only $99 — a price point we believe some Amazon competitors may toy with as soon as this holiday season, especially for bare bones models like the Sony Pocket Reader. One reason that prices will be so low is that by 2015, tablet PCs will compete more directly with high-end eReaders — they'll have reflective displays capable of color at very low power consumption rates. This will make the distinction between high-end eReaders and low-end tablets nonexistent.
At that point, you'll likely own several devices capable of reading books from any number of booksellers including Amazon, Apple, Barnes & Noble and even Sony. But will you buy from all of them? No, you won't. You'll have your favorite eBook seller, just like you have your favorite paper book retailer today. And that's why Amazon is working so hard to remind us that this game isn't over yet. That for a bookseller, this game isn't even about which devices ultimately sell. It's about which bookseller captures the customer today for the long run.
Amazon intends to be that bookseller.