Is there a big eReader opportunity everyone is missing?

The Kindle, the Nook, and other eReaders accounted for over 12 million eReaders sales in 2010 – At least that’s what DigiTimes analysts think.

Even if we were pessimistic, it’d be hard to argue that less than 5 million eReaders were sold.

5 to 12 million eReaders is a hugely significant number, and it becomes more significant when you consider it’s really a platform. First, a little on platforms.

eReaders are massive platforms, eReaders are platforms for massive success

Platforms are very powerful things

Apple sold a lot of iPods. Then it came out with new types of iPods. Then it came out with the iPhone. Then new versions of the iPhone. Then the iPad.

It started by selling music, then expanded into apps, shows, movies, and more.

Microsoft sold a lot of Xboxes. Then it released Xbox Live and racked up tens of millions of subscribers. Then it released Kinect and sold 8 million in the first few months.

It’s selling movies and games and arcade games and lots of other things through Xbox. It’s trying to morph Xbox into a family entertainment platform.

Why aren’t eReader companies looking at eReaders as platforms?

Platforms in the sense that they can deliver a lot of services. Platforms in the sense that they are a platform on which companies can build entire empires.

The success of eReaders is a platform

Success of the Kindle is a platform on which entire families of products can be built and sold. Same thing for the success of the Nook.

Kindle owners are likelier to buy a very good Kindle Phone than a very good Android Phone. That’s just a fact of life – Note that we mean ‘on average’, and not ‘every single Kindle owner’. They are also likelier to pick a very good Kindle Tablet over a very good Nook Color.

It’s the same for Nook owners. They are likelier to buy a Nook Color than an iPad. Again, we mean ‘on average’.

B&N is leveraging its existing customer base with the release of the Nook Color. However, Amazon has done nothing of the sort. Why not?

The eReaders themselves are platforms

The Kindle is a platform and a channel.

Currently it’s selling – Books, newspapers, blogs, magazines, apps.

It could be selling – everything via a shopping app, music. If a Kindle Tablet arrives, that could be used to sell movies and TV shows.

Are Amazon and B&N just waiting for the right moment?

You have to wonder whether Amazon and B&N are just racking up sales and keeping their plans secret. Once they hit tens of millions of eReaders, we’ll see the actual platform aspects unveiled -

  1. A Kindle Tablet and a Kindle Phone will appear as soon as Kindle Sales hit 15 million. By then the Kindle will have too much momentum to be derailed.
  2. B&N will release more devices as soon as Nook and Nook Color hit 5 million sales each. B&N probably wants to sell enough Nooks, and be in a good, defensible position, before announcing new product lines.
  3. Amazon will wait until it has 25 million Kindles and Kindle Tablets in circulation before it reveals the blueprint. Why unveil something early – when competitors like Apple and Google can put up blocks and introduce alternatives. Instead, wait until you are close to unstoppable, and then do a proper unveiling.

B&N grew from a few stores to the biggest chain of bookstores. Then it added toys and games. Then it added Nook and Nook Color. It already knows the powers of being a platform, and it knows how to use past success to build new ventures.

Amazon is an even more extreme example. From selling books to selling kitchen sinks. From selling physical goods to selling digital everything. You can be sure it has plans beyond what we might imagine.

eReader customers are your (the eReader company’s) customers for life

Take a typical Kindle or Nook owner and you get a few interesting things -

  1. The Kindle or the Nook is the path of least resistance for buying books. There’s no reason it couldn’t be expanded to become the path of least resistance for buying everything.
  2. Kindle/Nook is a direct channel to customers. It’s also a store that is with customers nearly all the time.
  3. Customers trust Amazon/B&N, and have a relationship with the company. That’s a very, very tough thing to create.
  4. Trust, the relationship, and loyalty all grow with every purchase. Visit any forum devoted to one eReader, and you’ll see how strongly people feel about their Kindles and Nooks.
  5. Customers want to continue the relationship. You don’t just have a customer – you have a customer that will stick with you unless you make a major mistake.

Quick question -

For an average Kindle/Nook owner, is there any store other than Kindle Store/Nook Store from which the owner makes purchases as often?

The answer is probably No for a surprisingly large percentage of Kindle and Nook owners.

Not only are these customers to whom you have a direct channel - they are also very loyal customers who will stick with you, and whose relationship with you grows stronger every day.

All things being equal, eReader owners will buy everything they can from the eReader company

This doesn’t just apply to books. In fact, that’s the least interesting aspect.

Amazon probably sells a lot more non-ebook things to Kindle owners, than it does to non-Kindle owners. It almost certainly sells a lot more non-ebook things to Amazon customers that are Kindle owners, than to Amazon customers that are not Kindle owners.

Amazon won’t ever release the figures. It’s probably a 100% or higher increase in non-ebook sales.

By selling a user a Kindle, Amazon might be increasing non-ebook purchases by 100% or more. That’s the type of ‘big eReader opportunity’ this post is talking about.

Where’s the iPhone and iPad to go with the iPod (Kindle, Nook)? Where’s the iTunes?

At the moment Kindle and Nook seem content to stay in eReader+eBook land.

Nook Color is a branching out, but it’s still a reading tablet.

Where are the iPhone and iPad equivalents? Is Amazon just waiting to reach a certain figure for Kindle Sales? Is B&N content to keep selling books and only books to its loyal customers? Do Amazon and B&N feel that the eReader market is so big they should focus exclusively on eReaders? Do they first want to cement their dominance in the eReader market?

It makes you wonder.

6 Responses

  1. This has been my view for some time. Amazon has sold us a vending machine and once it can sing and dance for textbooks it will also be the perfect infinite catalogue. At that stage they could practically give it away and still make a profit. It seems inconceivable that this is not being skunked behind the scenes.

    • Wouldn’t be surprised if that was the end goal all along and they just picked books because books are so unfashionable – the ultimate trojan horse.

  2. You are correct on all points! My first ereader (12/09) was a sony, and if I could remember where I left it 6 months ago, I would give you the model number, but to be honest, sony does “hardware” and really stinks when it comes to the library…
    So…I read my kindle books on my blackberry, and I patiently wait for kindle 3, or kindle tablet, or whatever they are cooking up for us…in the intrim, I buy books from amazon (appx 865$ in 2010), then a drafting table (1400$), art supplies, an area rug(1200$), a drafting chair (350$)…the list is longer than I care to admit…
    Amazon should thank sony for all of my purchases…I w originally went to amazon/kindle just to save 8$ on an ebook (sony is almost ALWAYS more expensive than kindle)…after that, it became a habit to check amazon FIRST for my purchases…
    I have the B+N reader on my blackberry, and audible.com…but I am a “kindle” girl..in the same way that some of us purchase Levis and others purchase Wranglers, once you find something that “fits”, the brand loyalty is forged…
    Oh, sure, its difficult to read lengthy tomes on a blackberry with a 3 inch screen, but when the kindle tablet arrives I will be first in line…Amazon will start working the “industrial design” that apple has been working for years, and become an integral part of our everyday lives…
    From the alarm clock that wakes us in the morning to the kindle cell phone we use to communicate to the furniture used in our offices and homes, amazon/kindle will touch our lives each moment of every day…watch out, iCompany, kindle is catching on…

  3. Uh… Have you changed your tune regarding the need for a stand-alone reading device? I’m aware you’re talking about platform, but IMO, that is just a spring board toward multifunction device.

    I’m not against a multifunction devices like iPad, but as you have argued zillion times here, there will still be a market for independent eReader, which is optimalized for reading. Once you add the possibility of other functions, you’ll lost the focus on eReader.

    Having said that, you may be right that Amazon might use Kindle as a platform to reach other markets. I just hope they still make an independent eReader, which is focused only on reading.

    • There are two possibilities -

      1) Add a separate Tablet, then a separate phone, etc. That wold be using the Kindle as a literal platform on which to stand and build out other products. That doesn’t hurt the eReader focus.

      2) Add a shopping app to the Kindle. Add the ability to buy and play music. That would hurt the eReader focus, but Amazon might decide it’s worth the pay-off.

      They will have an independent eReader. But they’ll add a lot of devices to the Kindle family.

  4. Sadly, if the kindle would decide to be a multi purpose platform it will (like many other devices) be blown out by apple, simply because their product already covers most of the features you mention. The kindle however is the best at what it is, which is reading books off from it. Itunes and Amazon do have a free books scheme, where they sell classics for free, which I think is a good feature and really saves on your wallet. I think the only reason that I per say pirate stuff, is because it’s either not reachable through stores, the likes of Amazon US (there are a couple of books that are only out in the US as ebooks, while the hardcover available in the UK only) or ridiculus in price or wanna try them out before I buy them (Pirated a couple of games, but bought them at a later date from places like Steam). I’m not trying to justify myself about piracy etc. I think however that books should have sort of a world wide accessibility of sort.

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