The e-reader business model may still need work,
but it looks like the devices will stick around one way or another.
The implications, as well as the ironies, of the digital book are numerous. While obviously cutting edge, digital reading devices appear strangely anachronistic amongst their multi-tasking, media-rich cousins: the smartphone, netbook and laptop. But given the success of Amazon’s Kindle, consumers apparently like the idea of a device devoted to reading that enables them to carry an entire personal library on one device.
For the e-reader to carve out a market of diverse devices and survive beyond the Kindle’s relatively short run, complexities abound, not to mention a few questions that need answering. Two in particular: Can the e-reader remain a book-centric device? What’s an acceptable price point? It will be imperative that Amazon and the ensuing crowd of e-reader suppliers answer these and other questions as they make their way to market.
Price point on e-readers is a problem if only because there are so many alternatives on which one can already read and store a digital library (such as laptops, smartphones and netbooks). Additionally, those other devices can do more than just read books; they can connect to the Internet, make calls, play games, create documents and thousands of other computing tasks. The Kindle-2 allows readers to listen to MP3s and browse the Web (in 16 shades of grey) on a limited browser. But the device’s core functions allow users only to buy books on a wireless connection and read them.
Josh Martin, senior analyst of media and entertainment devices for the Yankee Group, thinks Amazon understands that the Kindle isn’t for everyone. “I think the genius of Amazon is that they’re trying to attract both the Kindle market and those reading digital books on other devices … Amazon is in the business of selling content, not hardware,” Martin says.
Amazon may be signaling its awareness of the Kindle’s limited market with its acquisition of LexCycle, the company behind the iPhone e-book application, Stanza, that allows iPhone and iPod touch users to read digital books in various formats.
So who is buying the Kindle? In what was admittedly an informal piece of research, CNET recently conducted a poll of 700 Kindle users aimed at understanding the consumer demographics. The survey revealed that more than half of those Kindle-2 users surveyed were over the age of 50, and nearly 70 percent were over 40.
Granted, those numbers were not generated by hard science, but they do hint at the kind of crowd with enough disposable income to go out and purchase a Kindle, and that crowd is definitely not the broad, tech-savvy bunch that has kept a popular device like the iPhone on its feet for the past two years. But that older demographic’s lack of tech-savvy may be just the reason that the simplistic, single-minded Kindle appeals.
BROADENING THE MARKET
Given the relatively narrow reach of the Kindle, Amazon recently took it upon itself to broaden the device’s audience, this time with the large-format Kindle DX. The DX accommodates the graphics and margin-laden layouts of newspapers, textbooks and periodicals.
Martin identifies two distinct aspects of the DX, the newspaper side and the textbook side, and he tends to find both troubling for different reasons. On the textbook side, it’s all about price point and practicality.
“The textbook piece is interesting in that it overcomes a lot of the aspects surrounding hardbound books like heavy backpacks, and with updates there’s the green aspect. But I don’t think there’s going to be a lot of mass buys right now. With the recession and teachers getting fired left and right, can you imagine a school district saying we’re going to spend a million dollars on e-readers?”
Frank Lyman, executive vice president of marketing for CourseSmart, a company that makes e-textbooks for use on laptops, agrees that digital books like the DX will be a part of academia in the future, but he notes that they’re still a relatively young technology with a lot of kinks.
CourseSmart currently offers around 6,400 e-textbook titles, with a fully downloadable version or cloud-based format that’s available via an Internet connection. Lyman says the high ownership of laptops among students and expensive textbooks are key reasons students will refrain from purchasing a Kindle right now.
Lyman cites a 2008 survey of 27,317 college students by EduCause Center for Applied Research (ECAR), which found that 80.5 percent of college students owned laptops.
THE DIGITAL NEWSPAPER?
The Kindle DX was released with announcements that the Boston Globe, The Washington Post and The New York Times will all subsidize the device for those who live in areas where home delivery is unavailable but still want to purchase a long-term subscription. Martin says the idea is fundamentally flawed.
One reason Martin cites: Newspapers are going out of business. People increasingly are using the Internet to get their news in real time, suggesting that the “morning news” paradigm is on its way out altogether.
But Jim Patterson, president of wholesale for Sprint, the company behind the Kindle’s wireless service, says Amazon is experimenting with ways newspaper subscribers can get updates from the newspapers that offer subscriptions on the DX. He also notes that offering newspapers on the Kindle is an exciting business model for carriers, as it makes efficient use of the data network.
“We like the Kindle model, especially when newspapers are delivered. Magazines and newspapers are being downloaded in the middle of the night at off-peak hours … It’s a short, small packet, and we can use our network very efficiently to provide it,” Patterson says.
A STARTING POINT
While there seems to be great enthusiasm surrounding e-readers in general, there’s also a growing voice that seems unsatisfied with current business models. Bill McCoy, general manager of digital publishing for Adobe, predicts Amazon’s current closed model for its content is going to have to change.
The DX is the first of the Kindle products to come with support for Adobe’s PDF files, which McCoy says is perfect for formatting content on different sized screens. Adobe also offers content providers the ability to decide whether they want to protect a piece of content or not.
“We applaud what Amazon has done, but we really think it’s just the first inning. We don’t think the closed model that Amazon has adopted is really viable. We don’t think it makes sense for publishers, consumers or for Amazon for that matter,” McCoy says.
Perhaps the most obvious sign that a technology has yet to flower is when you hear people like Patterson start talking about future use cases. He envisions scenarios that go far beyond the Amazon model. “The e-reader model, the Amazon model, is a model that’s expandable beyond books and literature. This model as a whole could and will change the way businesses work and transact,” he says.
Imagine an insurance giant with a completely digitized file database and every employee using an e-reader-type device that connects to that database over a network like Sprint’s. Patterson says that such a scenario is not only a green solution but a more secure one.
“The information never leaves the Sprint network and is stored on secure servers. I now have a secure way to manage those documents. I didn’t have it when it’s paper, because it’s paper and it can be copied. I think there’s a market there that allows documents to be more effectively controlled than on paper.”
If Patterson’s prediction holds true, then at least one question will be answered: The e-reader will end up being more than a book-centric device.