Kindle Fire is the biggest threat to the Kindle, Nook Tablet/HD is the biggest threat to the Nook

The Kindle Fire and the Nook HD are the biggest threats to the Kindle and the Nook.

First, let’s understand what dedicated eReaders are up against.

The Perception War eReaders have had to Fight

Dedicated eReaders have always had to fight a lot of ‘perceptions’ and ‘prejudices’. Basically, 2007 to 2012 has been an all-out ‘Perception War’.

  1. No one reads any more. It’s a $25 billion a year business in the US (or at least was in 2007) and yet people seem to believe this nonsense.
  2. Readers will not buy a device dedicated to reading. Again, this is beyond ridiculous. For some reason it’s OK for people in every other passion/interest to buy specialized equipment and devices – However, readers are supposed to not buy a device dedicated to reading.
  3. eInk is not better than LCD. Again, we have LCD-compatibles and they exist in a world where they think of LCD-incompatibles much as we think of werewolves and vampires. Surely, they don’t really exist. How could there be someone who wants to read a book in black and white?
  4. If a device can do more than just read, then it’s the best choice for reading. This is one of the funniest arguments. A reader wants to get ‘the best reading device’ and his non-reader friend says – Why not get something that you can do more than just read on? Why do you care if the reading experience isn’t as good?
  5. Readers don’t want to let go of the touch and smell of books. Apparently, from the number of eReaders being sold, they are getting over it.

However, that wasn’t all. Reality wasn’t kind to eReaders either.

The Reality of what eReaders had to Face

In addition to the Perception War, eReaders had to fight some harsh realities -

  1. LCD screens were far, far advanced in their evolution. eInk had (and still has) a really, really difficult task in front of it.
  2. LCD Screens were evolving faster than eInk.
  3. The companies making eReaders (with the exception of Sony) had zero prior hardware experience.
  4. Getting people to spend $399 or $299 and then having to pay again for books.
  5. Users were used to books and bookstores. eBooks was very new and scary.
  6. Publishers were very reluctant to let ebooks grow.
  7. Tablets were evolving much faster than eReaders. The Tablet reading experience (thanks to things like retina displays) was coming closer to the eInk reading experience in overall satisfaction.

It’s a miracle that we are seeing 10 million or so eReaders being sold every year. We started off with forecasts of ‘40,000 Kindles sold and then it dies’. Now, with 10 million Kindles and Nooks and eReaders being sold every year, it’s again time to consider the mortality of eReaders.

Amazon and B&N are more focused on Tablets than eReaders

Somewhere along the way Amazon and B&N realized a few things -

  1. Tablets can evolve much faster than eReaders because the main ingredient (the screen) is evolving much faster.
  2. With Tablets they can sell users books and movies and music and eventually teddy bears and diapers and kitchen sinks.
  3. They can flip the Tablet encroachment (and they have). If this seems an exaggeration, consider that if it were not for Nook Color and Kindle Fire, Apple would not have released an iPad Mini and Google would not have released a Nexus 7. Nook Color and Kindle Fire created and cemented the 7″ Tablet Market.
  4. With Tablets they can reach casual readers who were choosing Tablets over eReaders.
  5. With Tablets they don’t have to wait another 25 years to get color eInk and sell movies.

It’s actually a very smart move by both companies to shift to Tablets. They are now selling to dedicated readers and casual readers. They are now selling books and movies. They are increasing their customer base.

This might be a great decision for Amazon and B&N but it’s very damaging for eReaders.

Amazon & B&N would rather sell Tablets to Readers than Dedicated eReaders

Imagine you’re B&N or Amazon. You have two options.

Option 1: Sell a reader a dedicated eReader. Then make money from ebooks sold. Also, watch while the reader buys an iPad and spends money on movies and music at Apple.

Option 2: Sell the reader both Tablets and dedicated eReaders. Then make money from everything – books, movies, music, apps.

There’s another aspect to Option 2. You’re adding a permanent mini-Store. You can, down the line, sell the user anything you and the user want.

It’s a no-brainer. Selling Tablets in addition to eReaders. Eventually, preferring to sell Tablets over eReaders.

Without Amazon & B&N focused on eReaders they will gradually stop evolving (not that they’re doing a very good job at the moment)

2007 – The First Kindle.

2012 – A Kindle with a built-in light, a touchscreen, and more clarity.

None of that is really very impressive.

Notice everything that’s missing: Color eInk, Flexible Screens, Unbreakable Screens, Video Support, Games Support.

eReaders were already evolving at a snail’s pace. Now that Amazon and B&N are focused on Tablets, where will the fire for eReader improvements come from?

Sony? (Please stop laughing. It’s a serious question.)

So we will see Kindle Fires and Nook Tablets get better and better. We will also see Nook eReaders and Kindle eReaders stagnate. This makes the contrast even sharper. Soon we’ll have eReaders that are stuck in 2008 (2009 if you’re generous) while Tablets zoom into 2013 and 2014.

Is the Inflection Point Past Us?

There was the first inflection point – when Nook Color did well. At that point the Nook eReader suddenly became B&N’s #2 Priority.

There was the second inflection point – when Kindle Fire did well. At that point, the Kindle became Amazon’s #2 Priority.

Amazon and B&N suddenly went from

Worldview 1: eReaders are going to replace paper. We will be selling hundreds of millions of eReaders per year.

to

Worldview 2: eReaders are going to be a niche market. Tablets will eventually replace paper and PCs. We will be selling hundreds of millions of Tablets per year.

We don’t know if either worldview is accurate. However, that’s the shift that happened in B&N’s thinking and Amazon’s thinking.

B&N saw the Nook Color as its future. Amazon saw Kindle Fire as its future.

Have we passed the inflection point of the death of eReaders. I don’t think so.

However, there are three things we can agree on -

  1. The single biggest threat to the Kindle is the Kindle Fire.
  2. The single biggest threat to the Nook is the Nook HD.
  3. eReaders have Tablets blocking their growth path to hundreds of millions of devices sold per year.

From Amazon and B&N’s perspective this is fine. They are exchanging a ‘one digital revenue stream’ device with a ‘multiple digital revenue streams’ device. They are also effectively safeguarding themselves from a world where they are made obsolete when it comes to digital products. However, for anyone who wants ‘dedicated reading devices’ to keep improving, this is sad and unfortunate. We are not going to see very many big advances in eReaders. We might even see them become a niche product and slowly die out.

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