Kindle Review – Kindle Fire Review, Kindle 4 Review

Nearly all the current discussion around the eBook Reader market focuses on one Reader killing every other.

It’s almost as if people think of the eBook Reader wars as a playoff where one Reader wins the Superbowl or the World Series and every other Reader loses and goes fishing.

What if the most likely scenario is not dominance by one eBook Reader?

The eBook Reader Market is more likely to fractionate than be dominated

There are five main reasons why it’s unlikely that one company will be able to control the majority (greater than 70%) of the market -

1. The eBook Reader market is actually 7-10 very different sub-markets. 
2. There is a huge amount of competition and the competitors are almost neck to neck.
3. The market size is too big.
4. There are too many ideologies and belief systems at work.
5. Companies want complete control.

Let’s consider each.

The Reader market is made of drastically different sub-markets

It’s extremely unlikely that one Reader can meet the needs of the different sub-markets for eBook Readers -

1. People who read a lot and mostly books. 
2. People who want to read newspapers and magazines.  
3. Students who want color textbooks and annotations and perhaps ways to waste their time while pretending to work.
4. Business users who’re willing to pay a lot more for Word and Excel support.
5. People who want an electronic journal that they can also read on.
6. People who want to be able to read once in a while and want an eReader that does more than just read.
7. People who want netbooks with more readable screens.

Consider the latest Apple iSlate rumor (strangely, from the previous head of Google China) -

 the Apple tablet just looked like a bigger iPhone, with a 10.1-inch multi-touch screen, and awesome user interface, and it combines the functions of a netbook and a kindle, coming with 3D technology, virtual keyboard,video conferencing, e-reader, netbook features.

The Apple tablet would sell at a price of less than one thousand dollars, and Apple was planning to produce 10 millions units of this tablet at the first year.

Apple are hoping that they can produce something that combines the function of a netbook and a kindle and then app makers can leverage it for different purposes.

However, there’s no way they can get each and every sub-market.

1. People who mostly read books will stick with the Kindle or another dedicated eReader because of the eInk screen and reading related benefits.
2. Business People will want business specific features.

Apple are literally leaving it to Apps to turn the Apple iSlate into a close to ideal device for each sub-market. That’s extremely unlikely as apps can’t morph hardware.  

Note: Apple are trying to create morphable hardware – look at the rumors of a screen that becomes a tactile keyboard when touched a certain way.

There is a huge amount of competition, and everyone’s clustered together

My current reviews for the Kindle, the Nook, and the Sony Reader Touch have them at 8.5/10, 8/10, and 7.75/10.

There is a lack of adequate differentiation because -

1. Everyone is stuck with the same eInk technology. 
2. Competitors are willing to open up their platforms (and sacrifice profits) to compete.
3. Kindle development has been somewhat slow for most of its lifetime – not really waking up until Nook lit a fire.  
4. No one (except Amazon) knows how big the market is so most attempts are tentative attempts.  
5. Companies keep coming up with new ideas and new paradigms.

Amazon made a huge mistake by being content to be the ’25% better’ best Reader – as opposed to the ‘absolutely untouchable, way better than everyone’ best.

To be fair it’s hard to be the latter as companies are dumb enough to sacrifice profits or let other companies take over control of the profits – sometimes you can’t (or don’t want to) compete with stupid.

The net result is that the competition is brutal. CES 2010 is going to see Dell, Asus, Lenovo, and a couple dozen other companies jump into the eBook Reader market.

1. Just the sheer amount of choice is enough to confuse people.
2. Making a choice is tougher because there are so many different ‘killer’ features and no one Reader has most of them.

The market size is huge

Everyone’s focused on what the market might be today or what the market for people reading books is.

To get a more accurate market size estimate we have to factor in -

1. Market size in 5-10 years.  
2. Reading in general – that means work and school and blogs and news and books and magazines.
3. The possibility of a market equivalent to desktop computers or laptops or netbooks or TVs or cameras.

For one company to dominate an entire market this huge is almost impossible. The #1 company might own 40-50% of the market – However, even 10% of the market is going to be 20-30 million units a year (talking 10 years down the line).

Companies want complete control

What makes it tougher is that companies want to control the entire value chain.

1. It’s not Microsoft that’s just controlling the software or Google that’s just controlling the search. 
2. It’s companies trying to own the hardware, the channel, the customer relationship, the store, and every single piece of publishing.
3. Apple and Amazon are the biggest entities and they want everything.

Consider areas where a company is dominant-

• With Microsoft you have hardware manufacturers, software companies, and lots of other stake-holders.
• With Search you have lots of websites and people as partners.

It’s a win-win situation.

When you’re not willing to share your enemies band together, people specialize in small niches where they outperform you, and in general you feel the wrath of violating an unspoken social contract/understanding.

That’s why complete dominance isn’t tenable.

There are too many ideologies and belief systems at work

Consider just a few of the beliefs people are kicking around -

1. People don’t read any more. 
2. Books are dying out. 
3. Physical books are better. 
4. DRM is evil.
5. Systems should be open.
6. $10 prices aren’t sustainable.
7. Books should be interoperable.
8. Sharing of eBooks should be allowed.
9. We don’t really own books any more.

If we lived in an alternate world where people didn’t value openness (of the platform and of the format), the Kindle (or the iSlate) would destroy the competition.

• However, some people will never buy the Kindle because it’s not an ‘open’ platform.
• We’ll get the same thing with Apple and its closed App Store.
• There will be companies glad to push openness and use other ways to lock people in i.e. path of least resistance, power of defaults, reciprocation, etc.

Different people are going to pick different poisons.

What happens once the eBook Reader market fractionates

 5 important things will happen -

1. There will be 7-10 clear smaller markets. Each will be dominated by one or two companies.
2. There will be no company that is #1 in more than 3 markets. Even with different product lines. 
3. There will be one or two companies that will rise up and dominate ebooks and search/discovery of ebooks. It might be a single company – the Microsoft of eBooks.
4. The #1 company is going to be absolutely huge even though it will probably own just 40-50% of the overall total market. My money’s on Apple or Amazon and we’re talking 5 times the share price in 5-10 years.
5. The starting point i.e. where people start to look for eBooks will control much, much more than people understand. If a too-smart company owns the starting point they’ll try to commoditize everyone else in the equation.

The last point is the one that is the most fascinating.

It suits every other part of the pipeline if all the other parts gets commoditized -

1. eReader companies will try to commoditize eBooks. 
2. eBook companies will try to commoditize eReaders.
3. Starting points will try to minimize everyone else’s role.
4. Platforms/Ecosystems like Apple and Amazon will try to keep out everyone else.

The Apple/Amazon strategy is the most profitable – However, it’s also the most vulnerable unless one of them manages to get a 50-70% share early on (at/by the end of 2011).

If only one of them were to enter the market they’d destroy everyone else, even the search engines. Too bad both of them want to take over. 

It’s too bad because they’re the only companies that will leave value for authors and content creators – every other company is just going to commoditize and marginalize content creators.

Filed under: evolution Tagged: | future of books, future of ereader