The Kindle, the Nook, the Nook Color, and the iPad seem to have wrapped up the reading device market.
Kindle Store, Nook Store, and a few other stores, like Kobo Store, seem to have wrapped up the ebook market.
We also have very scary competitors like Apple and Google entering the eReader and eBook markets. It makes you wonder.
Are there still opportunities for smaller players in eReaders + eBooks?
Well, there are a few things that come to mind -
- Indie authors get a shot. So, there’s definitely an opportunity for authors to hit it big.
- Accessory makers have a big opportunity – Kindle cases, Nook sleeves, reading lights and such.
- If one or both of Kindle App Store and Nook App Store take off, then developers get a shot.
- Smaller Publishers get a chance – It’s a sliver of a chance, but it’s there.
- Companies that provide services to authors get a chance.
Interestingly, the more chaos there is, and the more fragmented the eReader market, the better the opportunity for each of these companies to be able to rise up and become a significant company.
Most of the best opportunities are disappearing
Here are some of the opportunities that are disappearing quickly -
- eBooks – Not only do you have to compete with companies that have eReaders, you have to compete with companies that have huge amounts of customers.
- eReaders – Nearly all the smaller companies showing off eReaders at CES 2010 are dead or missing. How is a small company supposed to compete with entrenched giants?
- Software – There’s not really any opportunity here. You can sell through eReader stores, and that’s it. Some of the software that could have sold really well i.e. PDF support, ePub readers, etc. will probably not be let in.
- Services to Authors at Scale – There are giants rising up here too.
- Physical Book Stores – Book stores are getting squeezed. When Barnes and Noble can’t compete with eBook Stores, how’s an indie bookstore supposed to?
What’s happening, is that we have a few giants taking over what they assume will be the lucrative parts of the eBook ecosystem (ebooks, ereaders, services to authors), and leaving the scraps to everyone else (accessories, advertising, small apps). It’s understandable – It just puts smaller companies, and indie developers, in a very interesting position.
How do you make a service or a software for readers?
What if someone wanted to make the PDF Reader for eReaders?
Well, there would be a few problems -
- There are 5 different devices with 5 different App Stores. It’s 5 times the work.
- Each store has different rules and different restrictions. In a lot of cases the restrictions include ‘no generic readers’ and an app like PDF Reader for eReaders would never get approved.
- Lots of stores would factor in the impact a very good PDF reader would have i.e. the possibility of lower book sales. They would be even less likely to approve it.
- There is very limited discoverability in the various stores, and the focus is on books, so software would get killed. PDF for eReaders would end up competing with NY Times Bestsellers.
- There isn’t really an avenue other than the Bestseller lists. The rich get richer, and the poor fade away into obscurity.
You also have a few additional problems - someone else would make a free PDF reader, eReader companies would prefer you have a free PDF reader since that helps them more than you selling your PDF Reader for $10, customers would expect the sort of customer service they get when they buy a $100 piece of software.
Basically, it’s really difficult for an Adobe or a Twitter to rise in eReaders because everything is very constrained.
What if someone wanted to make a Social Network for Readers?
This would be even more problematic -
- A few eReaders don’t have wireless. A few have wireless charges.
- The eReader companies would probably ban any app that connected Kindle owners with Nook owners. Imagine the dangerous network effects that would create.
- eReaders don’t yet support incremental payments in their app stores, so you couldn’t do add-on charges.
- Kindle and Nook both provide free Facebook and Twitter hooks. It reduces the motivation for readers to pay for another service, or even to use it.
- eReader companies would probably worry about the PR implications of letting everyone talk to everyone.
Logically, there’s a huge opportunity to take the millions of Kindle owners, the millions of Nook owners, and people who read on other devices, and hook them up with each other. However, Amazon owns Shelfari and wouldn’t let GoodReads in. Sony would want it to be done via a PC connection, and B&N would probably want to extend its LendMe App rather than let a third party in.
eReader companies are intentionally, and unintentionally, killing off a lot of the things that might take eReaders to the next level
Consider 4 examples of things that might take eReaders and eBooks to the next level (and, in italics, the likelihood of them happening anytime soon) -
- A Common eBook format. Impossible – Each company wants to lock-in ebook revenue.
- Accessories and peripherals that work across all devices. Not going to happen as there are no standards. When Kindle 2 and Kindle 3 don’t have the same separation between the slots for the Kindle hinged covers, you can’t really expect different eReader companies to agree on anything.
- Common software across eReaders, so software companies have a large enough market, and will devote lots of resources. Impossible – Each company wants to have its own ecosystem.
- Killer Software that adds a lot of value to eReaders. Impossible – Only a few eReader App Stores are present. They’re all young, and they don’t allow fundamental things. If a company wanted to create a Multi-Level Folders app it couldn’t – neither for Kindle, nor for Nook. The App Stores just don’t give that level of access.
None of these is going to happen – Even though each needs to happen.
Kindle and Nook didn’t have Folders until this year. Neither has multi-level folders. If a company was allowed to make Folders for both (or either), we would have seen companies step up with beautiful examples. At least one company would have sold 1 million copies of a Folders software, at $5 per copy. Instead, no company made a dime.
All the big opportunities are constrained
It’s interesting when you think about it -
- The eReader Market is fragmented and eReaders don’t talk with each other.
- All the leaders have closed ecosystems.
- A lot of the big opportunities are off-limits.
- eReader companies also sell eBooks, and are also dipping their toes in Publishing.
- eReader companies also provide services to authors.
There isn’t very much left.
If a small company were to say – Let’s try to make it in eReaders and eBooks. Well, there wouldn’t be very much of an opportunity.
Are eReader companies hurting themselves by being so protective of their fiefdoms?
Currently, eReader companies seem to be saying -
We are really concerned you might topple this beautiful little ebook revenue stream we have.
Yes, yes, we know eReader owners would like a better ePub reader, a better PDF reader, multi-level folders, and personalization, and all manner of advanced reading apps. Yes, someone would write something that tracks reading history, and someone else would create a great recommendation engine.
However, we’d rather protect the revenue streams.
There are a few assumptions in there. Not the right time to go into them - but still, interesting little assumptions.
What happens with all this protection, is that nothing can upset the excellent little status quo. However, there also aren’t any very exciting developments. eReader companies are definitely hurting themselves.
The big question is – Would they hurt themselves more by letting developers and companies in freely?
It’s all very convoluted
eReader companies don’t want 4 things – Another company to make them look bad by lowering quality, another company to make more profit than them, another company to steal ebook revenue, another company to take over their eReader or their eco-system.
At the same time they do want – To make more money, to improve their eReaders, to improve their ecosystem, to offer more features, to offer more value.
It’s very, very interesting. It’s also very complicated.
Unless there is more competition, we might not see a change from the current closed, overly cautious approach.
Which brings us to things smaller companies can do, to work around the controlled ecosystems of the large eReader companies.
Opportunities for Creative Destruction
The way things are set-up, it’s almost impossible for any company to come in, replace B&N or Amazon, and make $2 per ebook. It’s incredibly difficult.
The big opportunity is to come in, and say – We’ll make just 50 cents per ebook, and give the author more, and give the reader a better price. That might work.
There are some strong unfulfilled needs, and smaller companies can cater to one or more of them -
- Higher cut to Publishers.
- More Control to Publishers.
- Lower prices for readers.
- More control to readers.
- More options for readers – sharing, reselling, freedom from DRM.
- Cross-Device migration. There might be an opportunity for a company to create software that does Kindle to Nook DRM transfers. That would be HUGE.
- Advanced eReader features.
- Author Promotion. Authors are dying to get even a tiny shred of an opportunity. Any company that makes it possible, or easier, for new and existing authors to get more exposure, will get very, very rich.
There are quite a few more unsatisfied needs we could pull up.
The more protected eReader ecosystems are – The more unsatisfied needs there are
It’s such a lovely little game of Chess. You keep out everyone, and make your ecosystem very safe. At the same time, everyone in the ecosystem gets antsy because there isn’t enough new, good stuff.
The very things that eReader makers are doing to keep their ebook revenue safe (closed ecosystem, closed format), are the things that are creating strong dis-satisfaction. They are giving smaller companies, and bigger rivals, an opportunity.
It’s a balancing act, and while its killing smaller companies at the moment, it’s getting more and more dangerous. It won’t be long before Amazon and B&N will either have to open up more, or take the risk of losing more than just a small share of the profit.