11 Kindle thoughts for 2011

Posted on December 17, 2011 by switch11

The Kindle family has had a very busy 2011. Here are 11 thoughts:

  1. It’s pretty remarkable that ’1 million Kindle devices are being sold every week’. 
  2. Kindle Fire is diluting the Kindle brand. In these senses: Forums are now taken over by Kindle Fire owners, People have begun to associate Kindle with ‘Tablet’ (as opposed to eReader), the concept of ‘eInk Kindle as the best reading experience’ is slowly being eroded, the visibility of eInk Kindles is diminishing. iPad wasn’t the Kindle Killer but Kindle Fire might be.
  3. Kindle Fire is surviving despite being the anti-iPad. Is it polished so much it shines and glitters? No. Does it have 100,000 apps for it? Not even close. Does it convey status? Not exactly. Does it meet some unknown bar of ‘feels right and scrolls magically’? Probably not since no one knows what the bar is. While every company was trying to win by cloning the iPad, Amazon has taken the route B&N did and won by anti-cloning the iPad.
  4. Kindle Fire has shown the power of the Amazon and Kindle brands. Any other company which released a Beta Stage Tablet (which, quite frankly, is what Kindle Fire is), would have been skewered over an open flame with an extra dose of not-iPad barbecue sauce. Kindle Fire owners are almost universally willing to wait for software upgrades.
  5. Amazon has really messed up on the eInk Kindle front. If there are serious doubts whether Kindle 4 and Kindle Touch are even as good as Kindle 3 (they aren’t, if you’re wondering) – then there’s a problem. If Nook Touch and Kobo Touch cannot be ignored in any ‘Best Touch eReader’ conversation, and are even being picked as the winner in some conversations - then Kindle Touch isn’t good enough.
  6. It’s an unknown whether Amazon will focus as much (or even much) on Kindles. A part of me still thinks Amazon approached books because there was no other company seriously making a device for readers. That eInk Kindle was just a dry run and the ultimate aim was to make a mini-Amazon store. Kindle Fire is much closer to that. Amazon is focused on gaining Amazon.com customers and getting them to make Amazon.com purchases. Kindle Fire becomes much more important when you view things in that context. 
  7. Books are almost destroyed in terms of value. There are 300+ indie authors each day making their books free. There are hundreds of books on sale for $1 and $2 every month. The price pressure is incredible. Instead of being the preserve of gatekeeper Publishers, books are turning into the preserve of Supermarkets that use books as loss leaders.
  8. Bestseller Lists and Kindle Daily Deal are turning into the ONLY channels (B&N also has equivalents). These 2 sources are becoming the only sources that hold any power. There’s not really any other way that you can reach a large number of Kindle owners.
  9. Publishers still don’t get it. However, they are beginning to get it. Can’t really expound much on this without it taking over the post. In Summary: Publishers are now beginning to do what they should have ideally done 10 to 20 years ago to safeguard against what Amazon has done (reduced books to loss leaders). It’s amazing that they did not understand this even after Kindle was released. It’s almost as if they’re in a time-warp and realize things 3 to 5 years too late.
  10. Readers now need Publishers. We’ve gone through the Golden Period and now we’re in the muck. Who’s going to pick out the quality books? Not Amazon. It benefits from users coming to Amazon, getting frustrated with the slushpile, and buying something else instead. Think about what Amazon has done – it’s randomized free book offers and turned the Kindle Store into slot machines. You don’t know whether you’ll get rewarded or not. You do know that you’ll go to Amazon.com.
  11. Amazon’s 10 year plan might have NOTHING to do with books. All along the belief everyone was laboring under was – What is Amazon going to do with all this power? Is it going to take over Publishing? Perhaps the question should have been – What is Amazon going to do with this gigantic pile of loss leaders? Is it going to reduce books to complimentary glasses of lemonade that get customers in and get them to pay for a 4-course dinner?

Strangely enough, all this writing has brought on a few more thoughts:

  1. In a perfect market for books, there would be very little money left for 99% of Authors. The average author want to be read much more than the average reader wants to read.
  2. Amazon cares far more about bringing users into the Amazon eco-system than what happens to the future of paid books. Nothing wrong with that. Unless you’re an Author or Publisher who needs for there to be a future for paid books.
  3. Some readers want prices to go down from $10 to $1. Yet they still want Stephen King and Pat Conroy level books. This is the second biggest threat to the future of books.
  4. The biggest threat to the future of books is that the market is going to be controlled by a few stores/platforms. These few stores/platforms will have so much power they can do anything they wish.
  5. There’s not really a way back to a sustainable system. Amazon pays authors 35 cents for a $1 book, or it pays a few cents for the download costs of a free book. It then gets $X via other purchases by the customer who came in for the free/cheap book. Why would Amazon ever go back from this system? Ask any store whether it’d be willing to pay 2 cents per customer visit.
  6. All the eReaders and Tablets create an opportunity for a new platform to rise that goes direct from readers to authors. We need someone crazy like Craig Newmark or Jimmy Wales to say: Let’s just get authors 90% or 100% of what readers pay. What Louis C. K. is doing – except with a platform that lets any author do it.
  7. Books are in danger of going the way of content on the Internet. A large platform/search engine does Divide & Conquer and just uses content/books as free material to run ads against or as a lure to attract users.
  8. Author should be asking themselves why they are getting only 35% from books that are below $3. Why isn’t Amazon factoring in the money it makes from other things users buy? The 70% cut should be across all book prices. It’s a bit of a joke that an indie author strengthening Kindle sales and the Kindle Store and Amazon.com by selling his book for $1 gets only 35%.

This year has shown me a few things (which might be wrong assumptions or might be right ones) -

  1. Amazon understands what it is doing.
  2. Hardly anyone else understands what Amazon is doing. Perhaps no one at all.
  3. The same thing that Amazon has used to kill Publishers can be used to remove Amazon from the equation.
  4. Readers’ loyalties only lie with themselves. And to an extent with Authors. Amazon’s move to lock-in Kindle Store purchases now seems necessary and hardly evil.
  5. B&N will survive. If Amazon tries to buy it, there will be FTC and Justice Department interventions. Amazon should have bought it when it had the chance.
  6. Kobo is far, far more dangerous than anyone realizes. We’re talking about a company that is surviving amongst monsters. It’s evolving very, very fast. Kobo 1 was so bad it almost seemed a practical joke. Kobo Touch cannot be ignored. Kobo might be beating Amazon handily in eInk readers by mid 2012 (if it keeps improving at this rate).
  7. Authors are royally done for. The iron-handed but somewhat benevolent dictators/gatekeepers are being replaced by an unthinking, uncaring platform.
  8. The Book Revolution is almost certainly going to turn into the Book Apocalypse. Unless something or some company stops it in 2012 and 2013. We have just a few years to stop the ongoing destruction.

2011 has seen such rapid developments, especially in terms of the devaluation of books, that it’s very tough to figure out where we’ll be headed next. Unfortunately, 95% of the possibilities are dark and disquieting.

Filed under: kindle | Tagged: , | 7 Comments »

Kindle 3 year anniversary thoughts

Posted on November 24, 2010 by switch11

We just passed Kindle’s 3 year anniversary.

As the Kindle 3 and Kindle WiFi get ready for a holiday showdown with Nook Color and the new Sony Readers it’s worth taking a moment to reflect on how far we’ve come. Let’s look at the big Kindle + eReader surprises, the disappointments, and the hard to believe things.

12 Biggest Kindle, eReader Surprises

  1. Reading is cool again.
  2. That eReaders made it. While all of us were hoping that a device made just for readers would survive – you have to admit that most of us had a few niggling doubts.
  3. That eBooks are now 9% of the book market and might be 10% by end of 2010. To put it another way – Not only did eReaders survive they took the book market and in just 3 years turned 10% of it into ebooks.
  4. Apple getting into Books and releasing iBooks. It’s just not a good fit.
  5. We still don’t have a decision on orphan works and we still don’t have an offering from Google. 
  6. Amazon and Sony stuck with a dedicated eReader. At every turn it seemed like the companies would morph their eReaders into tablets and it’s a pleasant surprise that 2 of the big 3 have stuck with dedicated eInk eReaders.
  7. That the main-stream media and tech blogs still don’t get it. Just one more million eReaders sold and then they’ll believe eReaders really do exist – they promise.
  8. That there’s an entire eco-system around eReaders – Blogs, sites, cover manufacturers, independent authors, service providers, ebook publishers, iPhone book app publishers, public domain book sellers, and people making software for eReaders.
  9. The sheer number of companies that are taking a shot at making an eReader or selling books.   
  10. That ePub has amounted to nothing. eReaders supporting ePub were supposed to take over the world – Well, where are the 75% of people who were waiting to buy eReaders supporting ePub?
  11. That we’ve gone from $399 to $139 in 3 years. Price drops are expected but to drop to a third in 3 years is a good surprise. This probably also reflects Amazon’s focus on selling books rather than eReaders.
  12. The company behind eInk selling itself right when eReaders really began to take off.

A little more on one of the biggest surprises – That eReaders made it.

eReaders have made it and they’re transforming Publishing

We have somewhere between 5 and 10 million eReaders in the US. That’s exactly 5 to 10 million more than what the experts thought would sell.

eReaders have resulted in ebooks accounting for 9% of total book sales. They’ve given independent authors a channel to reach customers directly. They’ve put the fear of God into Publishers.

Companies like Apple and Google are trying to jump in. Every Tablet is pretending to be an eReader or claiming to be ’great for reading’. Every company under the sun is making its own eReader.

eReaders have made Reading cool again.

One survey says eReaders are the #2 most wanted gift this Christmas and another says #3. Yet another survey says that more kids over 13 wants eReaders than iPhones. A high school in Florida has given every student a Kindle. Kids are reading again.

Lots of kids and grown-ups who couldn’t access paper books can now use large size fonts and text to speech to access books.

10 Biggest Disappointments

  1. That there isn’t a tough 4-way or 5-way race in eReaders. All we have in dedicated eReaders is Kindle 3 in front with Sony and Nook 1 struggling to keep up. B&N is trying to create the reading tablet segment which is commendable but doesn’t do much good other than motivate Amazon to launch a color Kindle sooner.
  2. That there isn’t a tough 3-way or 4-way race amongst ePaper companies. All we have is eInk and a bunch of companies that love to talk about all the amazing technology that they will one day show off at CES and then never release.
  3. Publishers – They’ve been raising ebook prices, limiting availability, turning off text to speech and LendMe. Worst of all, they kicked off the Agency Model in early 2010 and almost managed to slow down ebooks.
  4. We don’t yet have a color eInk eReader. We don’t really have any big breakthroughs – unless you consider the 50% better contrast of eInk Pearl to be one. In 3 years all eInk/PVI has done is taken us from 8 shades of grey, decent clarity, and 1.2 seconds per page turn to 16 shades of grey, much better clarity, and .5 seconds per page turn. eInk technology seems to be following reverse Moore’s Law – Every 2 years the technology improves 25%.
  5. Sony – It started the whole category but lost the script and is now fading away.
  6. B&N creating a reading tablet instead of making a dedicated, eInk-based Nook 2. Nook Color is very impressive but it’s not a device crafted for dedicated readers.
  7. The hotshot color eInk technologies have all failed to show up – Pixel Qi, Fujitsu, Mirasol, eInk’s own color eInk, Keny Displays, Nemoptic, Bridgestone’s QR-LPD, and LiquaVista are all still ‘in development’ or ‘arriving soon’. There’s talk of a Mirasol eReader debuting in Q3, 2011 which would be almost exactly 4 years after the Kindle 1.
  8. The non-stop deaths and disappearances of smaller eReader companies. Everyone from Readius to Skiff to Cool-er to Notion Ink to Plastic Logic is either dead or indefinitely delayed.
  9. That apps and services for eReaders haven’t really arrived. Where’s the great recommendation engine? Where’s the eReader to eReader social network? Where are the services and software that will add real, solid value to readers’ lives?
  10. Larger screen eReaders. Kindle DX is one of the few available choices. All the large screen eReaders seem expensive when compared to the smaller eReaders. A lack of competition has really hurt this segment  

The first 2 disappointments are critical and may very slow down the advance of eReaders.  

Lack of Competition = Lack of Innovation

We currently have Kindle with a huge lead in eReaders and PVI is the only viable ePaper manufacturer. That just kills innovation.

When the Nook first came out we saw Amazon add PDF support, cut prices, and add a bunch of other good features. With the threat of a Nook 2 looming we saw a Kindle 3 that was an improvement across the board and much cheaper.

Now, with B&N releasing Nook Color instead of Nook 2 and Sony Readers being priced so high, who’s going to force Amazon to evolve?

It’s the same with eInk/PVI which is happy to add one feature per decade while other ePaper makers produce Press Releases rather than ePaper.

In both eReaders and  eInk/ePaper we need a lot of competition – competition that forces Amazon and eInk/PVI to improve, competition that forces all eReader companies to evolve, and competition that will undoubtedly create revolutionary new technologies that will accelerate eReader and eBook adoption.

11 Hard to Believe Things

  1. Amazon’s level of dominance – 50% to 70% of eReader sales, 80% or more of eBook sales. An iPad survey claims more iPad owners use Kindle for iPad than iBooks – for the first time ever an iPad survey might be right.
  2. Nook and Sony Reader both being sold out during 2009 holiday season and handing everything to Amazon. You have to try very hard to run out of stock during holiday season - Despite Amazon messing up in 2007 and 2008 its competitors didn’t learn and gave Amazon the market.
  3. B&N releasing an eReader in 2009 and B&N releasing a Reading Tablet in 2010. At some level you expect B&N to slowly die without putting up much of a fight. You don’t expect it to be the catalyst that re-invigorates eReaders and forces Amazon to evolve Kindles drastically and rapidly.
  4. Publishers refusing to see the opportunity. You go up to a Publisher and tell him – Let me get rid of used book sales and book lending and eliminate returns and shipping costs. Let me also give you the opportunity to instantly meet user demand, know how well books are selling, and figure out what’s working and what’s not. The Publisher punches you in the gut and starts running around finding ways to upset readers. It makes no sense.
  5. The wide range of patents filed. Qualcomm has a device with 3 screens which morphs into different devices based on how you arrange the screens. Amazon has a patent for a device that recognizes gestures and also a patent for an electronic pen that syncs with the cloud. If even one of these patents makes it into an actual eReader it’d be a big step forward.
  6. Kindle Store becoming a viable place for independent publishers to not only get book deals but also to make a living. It’s only a few authors at the moment but it’s bound to increase.
  7. Publishers letting new publishing upstarts like Rosetta Books and OR Books get digital rights for a lot of good backlist books.
  8. That we still don’t know how many Kindles have been sold.
  9. New York Times will have an eBook Bestsellers List. It’s just 3 years and already there’s a separate eBook Bestsellers List.
  10. Amazon still doesn’t support library books.
  11. The sheer number of free book offers. It’s mostly the Kindle Store but even other stores get a lot of free offers. Now that we have days with 10+ free kindle books it’s hard to believe there was a time when there were no free book offers (most of 2008).  

For me the hardest thing to visualize/comprehend is that there are now millions and millions of people with Kindles – It’s 100 huge stadiums full of people – each holding a Kindle.

It’s morphed from the early pioneers into pretty much 20% of the book reading population of the US.

Looking back in Wonder

Here are a couple of posts you might find interesting -

  1. Kindle, eReader Thoughts at the end of 2009. 
  2. Kindle’s First 2.25 years.  

It’s strange to see some things stay exactly the same and other things morph so dramatically.

Where are we headed?

2011 and 2012 promise to be very interesting and exciting.

Will we get to tens of millions of eReaders sold a year? Will eBooks account for 25% or more of market share? Will $75 and $100 eReaders become commonplace?

Will Amazon continue to dominate both eReaders and eBooks? Is there any revolutionary new technology or business model waiting to wrest away the momentum? Could Nook Color put B&N in the drivers’ seat?

Will we really see color eInk based eReaders next year? Does Apple really have a 7″ mini iPad that’s focused on reading? What will Google Books look like and what eReaders and devices will it tie up with?

What eReader services will we see? Will Kindle Apps and Nook Apps make a difference? Will someone create a better reading app for iPhone and iPad than Kindle for iPad and Nook for iPad?

The Kindle 3 is likely to take over the dedicated eReader market this holiday season and color eInk eReaders are set to arrive in 2011. Beyond that, everything’s up in the air.

There’s a lot to look forward to and we might be about to enter the golden age of eReaders - perhaps even a golden age of reading.

Filed under: kindle | Tagged: , , | 14 Comments »

eReaders, Kindle gaining traction

Posted on September 22, 2010 by switch11

Perhaps it’s due to the Kindle 3, perhaps it’s due to eReader ownership reaching a tipping point, perhaps it’s due to everyone finally realizing eReaders aren’t going anywhere – eReaders and the Kindle are gaining a lot of traction. 

People are beginning to realize eReaders are more than a fad

There’s a very real sense that eReaders could be something BIG - In particular, a lot of people are beginning to feel that eReaders are set to explode this holiday season and will keep growing all through 2011 and 2012.

People finally feel that eReaders aren’t just a 1 or 2 year craze that some loony ‘reading people’ are indulging in.

For a lot of us this has always been obvious - 

the Kindle and Nook and Sony Reader obviously have a future. After all, books are a $23.8 billion a year business and tens of millions of people in the US love reading and eReaders are particularly suited to reading.

It’s also easy to be optimistic because we’ve seen eReaders add-on features and cut price relentlessly.

As the technology and devices evolve eReaders can take over all of reading – not just reading of books.

However, for people who aren’t into reading the Kindle has been an inexplicable device. Now that there’s a Kindle WiFi available for $139 and our investment in Kindles and Nooks has resulted in feature-rich eReaders at prices non-readers consider reasonable they’re beginning to realize eReaders really are great for reading.

The net result is that for the first time there is a belief spreading amongst the general population that eReaders like Kindle and Nook are here to stay.  

People still haven’t crystallized that they can read more than books on Kindles. They still don’t see that their assignments and papers and shopping lists and work documents will someday be read on a dedicated reading device. However, at least they’re beginning to see eReaders as the best option for reading books.

What are the signs that eReaders + Kindle are gaining traction?

Well, let’s start with a poll since we know how amazingly unreliable they are. It’s the first time a poll has found that there’s a strong future in store for eReaders.   

Harris Interactive Poll says 12% of Americans want to get an eReader

Lots of interesting data points from this Harris Interactive poll on eReaders in America (courtesy Reuters) -

  • Poll of 2,775 US adults. 8% already own an eReader.
  • 12% plan on buying an eReader in next 6 months.
  • 60% said they were not at all likely to buy an eReader.
  • eReader owners far likelier to buy books than non-owners. What a surprise.  
  • 26% of eReader owners bought 21+ books in the last year. Across owners and non-owners the figure was just 12%.
  • 36% of eReader owners read 11 to 20 books in the last year. Across owners and non-owners the figure was 21%.
  • 53% of eReader owners said they read more now than they read 6 months ago.

That last point is pretty important as Information Week points out -

Over half of the poll respondents said they read more with e-readers.

“At the moment, it is too early to tell for sure, but this early evidence is pointing to something good,” according to Harris, “People seem to be reading more if they have an e-reader which is something the publishing industry, which has been decline over recent years, is sure to celebrate.”

The Publishing Industry is certainly celebrating increased book purchases by eReader owners.

It’s celebrating by trying to kill eReaders and eBooks.

While it’s pretty obvious that 8% of Americans don’t own eReaders it’s still interesting to see the 8% and 12% figures. If 20% (or even 10%) of Americans end up buying an eReader we might see a wide-spread reading renaissance.

There are stronger signs that eReaders are set to take off

We have signs far more reliable than a poll of 2,775 random people -

  1. eReader sales are almost certainly in the millions. News sites like DigiTimes that cover the supply-chain in Asia say eReader sales are in the millions, analysts say eReader sales are in the millions (Forrester estimates 5 million Kindles and 1 million Nooks have been sold), and even secretive Amazon has revealed that ‘millions of Kindles’ have been sold.
  2. eBook sales are now 8.5% or so of the book market. Even Publishers have admitted this.
  3. Amazon and Sony are both running TV Ads and have been since late last year. If they weren’t selling a decent number of eReaders they wouldn’t have been spending a ton of money on TV advertising.
  4. Amazon, Kindle, and Sony are continuing to invest in eReaders. Sony and Amazon just released new models and B&N has Nook 2 at the FCC.
  5. eReaders are being sold at more and more stores including BestBuy, Target, and Airport Stores. B&N is revamping its stores to create more space to sell Nooks – that strongly suggests sales are good.
  6. Amazon is planning an App Store. There must be at least a few million Kindles in circulation for Amazon to think a Kindle App Store is viable.
  7. Amazon has said Kindle 3 is the fastest selling Kindle ever. At the minimum that means eReader sales haven’t died.
  8. The revolutionary and magical iPad hasn’t managed to kill eReaders. If Steve Jobs’ marketing sleight of hand can’t kill eReaders there might not be anything that can.

Perhaps the biggest sign eReaders and the Kindle have well and truly arrived is that the Kindle skeptics are changing their stance.

Trefis goes from Kindle-doubter to believer

We’re at a point where even sites with ultra-conservative Kindle sales estimates think the future is bright. Trefis has these Kindle sales estimates (including Trefis members’ Kindle sales estimates in italics) -

  1. 200,000 Kindles in 2008.
  2. 1 million in 2009.
  3. 2 million in 2010. Trefis members estimate 3.5 million Kindles will be sold in 2010.  
  4. 3 million in 2011. Trefis members estimate 5.23 million Kindles will be sold in 2011.
  5. 5.46 million in 2013. Trefis members estimate 8.12 million Kindles will be sold in 2013.

200,000 Kindles in 2008 and 1 million Kindles in 2009 are perhaps the most conservative estimates for Kindle sales I’ve ever seen. Yet, this ultra-conservative financial website (Trefis) goes on to predict 3 million Kindles sold in 2011 and 5.46 million Kindles sold in 2013. Even the skeptics are becoming believers.

So, is everyone right to believe in eReaders?

If we turn contrarian, and to some extent we should, now would be the time to start doubting the Kindle’s prospects (and the prospects of eReaders in general).

There are definitely a few risks – iPad 2, a drastic move by Publishers, Google Editions changing the game, Android Tablets, piracy.

There are also some signs supporting the theory that eReaders have won or are about to win – ebook sales traction, eReader sales traction, much lower eReader prices, wider range of books available as ebooks, lots of improvements in eReaders, lots of awareness, international spread of ereaders and ebooks.

There’s something missing though. The fact that so many people have started thinking eReaders are here to stay while we know that eReaders aren’t yet selling tens of millions of units a year means that we’re probably at an inflection point.

  1. eReader makers could become lazy and greedy like netbook makers and that would open up an opportunity for another product to come in and destroy them.
  2. eReader makers might slow down their pace of improving eReaders and that would mean Kindle and Nook would no longer be able to compete against ever-improving smart phones and the new Tablets.
  3. Publishers might make a last-ditch stand that could possibly stall eReaders. It would require Publishers to pull off things perfectly but it’s not out of the question.

If there was ever a time for Amazon and B&N and Sony to bring their A-game – this is it. In the next 9 to 18 months they could turn eReaders into a 20 million units a year business or blow it all up.

It’ll be interesting to see whether Kindle 4 and Kindle 5 and Nook 3 and Nook 4 can continue the torrid pace of improvement Kindle 3 has shown.

Filed under: evolution | Tagged: , | 1 Comment »

What’s the 1 best thing for Kindle, eReaders?

Posted on August 20, 2010 by switch11

With the Kindle 3 already here, the Sony 650′s details leaked, and Nook 2 waiting to pounce in September we have a pretty good idea of where we stand.

Where we stand with Kindle, eReaders

Here’s a quick list -

  1. Price – We’re doing very well on price with $189 to $200 prices for the 6″ eReaders and $130 to $150 prices for the 3G less 6″ eReaders. The larger screen models are still rather expensive at $379 for the Kindle DX.
  2. Technology – eInk Pearl makes the screen contrast excellent and Sony 650 supposedly pulls off touch without hurting readability. Apart from that we’re doing pretty poorly – No flexibility and no rollable screens, no unbreakable screens, and the best bet for color (Qualcomm Mirasol) just announced a facility that’ll mass-produce screens only in 2012.
  3. User Friendliness – This is going amazingly well. eReaders are still easy to use and getting easier. They are also expanding to low vision readers (super size fonts in Kindle and Nook), blind readers (voice guide and text to speech in Kindle), and other demographics.
  4. eBooks – This is a mixed bag. We’re at 8.5% market share for ebooks and we’re also saddled with the Agency Model. It’s very encouraging but there are still threats including vague hints of advertising in books.
  5. Killer Features – Well, across the various eReaders we have Library Books, Accessibility, eInk Pearl, Read to Me, Lend Me, Amazing battery life, much improved page turn speeds, changeable font sizes, respectable PDF support, good browsers (Nook and Kindle), support for more and more languages, touch and free hand drawing, great size, low weight, and a few other killer features. Doing pretty well here.
  6. Formats and Interoperability – This is a royal mess. Even the ePub companies can’t work well with each other and when they do they make it incredibly complicated to use ePub. You’ve got to love how ‘open’ ePub requires Adobe Digital Editions, PC to eReader transfers, and all sorts of 20th century mechanisms.
  7. Survival – Everything’s good here. eReaders are alive and kicking. They haven’t been eaten up by or morphed into great-for-nothing, good-for-everything devices.
  8. Market – The market continues to expand with predictions that 10 million eReaders will be sold in 2010 though it’s disconcerting that over 70% of those sales are expected in the last 5 months of the year.
  9. School and College – Not much progress here. The lack of touch makes eReaders irrelevant (except for English majors and perhaps a few others). Sony has touch but no large screen eReader. It’s hard to get excited by Blio and NookStudy - they’re not eReaders and they involve reading on LCD screens.

All in all some things are going very well (price, killer features, survival, market size, user friendliness) and some are bumbling along with ups and downs (interoperability, school+college, technology, ebooks).

Which brings us to the point of this post – Figuring out the 1 thing that would have the most impact and the most positive impact on eReaders.

Candidates for the 1 best thing for eReaders and Kindle

Let’s list as many as we can -

  1. Killer feature or breakthrough based on software. Perhaps a company comes up with some software that just revolutionizes reading and ebooks and eReaders.
  2. Killer feature or breakthrough based on hardware. Perhaps eInk makes a major breakthrough, perhaps chip makers make a breakthrough.  
  3. A huge jump in ease of use. This is a bit harder to imagine as eReaders are already pretty simple. However, it’s possible.
  4. Steve Jobs level marketing magic. The major impediment in eReaders’ path to domination is Perception – some people don’t realize it’s just like reading a book, other people don’t realize how much better the reading experience is than on LCD screens, and a few people just can’t get over the touch and feel of books. Add on the 70% of people who have no idea what an eReader is and you suddenly realize the need to market and promote eReaders.
  5. The end of DRM. Since DRM is supposedly the root of all evil perhaps removing it would lead to something magical and revolutionary.
  6. 1 common format. Another thing that is the root of all evil (interesting isn’t it – two roots of evil) is the lack of a common format. Perhaps removing this would lead to amazing things.
  7. 1 eReader winning out. It’s possible though not probable that a dominant eReader would be a good thing.
  8. A permanent tie between 2 or 3 eReaders. This is much likelier to be good for eReaders – constant competition would mean constant improvements. 
  9. Huge cut in prices on large screen eReaders. Hard to make a case for this when the 6″ eReaders are doing so much better. Perhaps the school and college angle.
  10. 6″ eReaders hitting $99. We mean the big three – Kindle, Nook, Sony Reader. We’re already at $139 but the magic $100 figure may very well be the secret.
  11. Death of the Agency Model. Well, it isn’t really hurting eReader sales or eBook sales and $14.99 has morphed into $12.99 so this is unlikely to be the one.
  12. eReader App Store. This is a total wild card. As opposed to Facebook and iPhone which are in some ways blank canvases and where people have a lot of time to waste eReaders already have their killer function – reading.
  13. Arrival of color. Color has so little to do with reading books that this is unlikely to be the most impactful change we could have.
  14. Unbreakable screens. This would help a lot.
  15. Kindle for Kids or Sony Reader for Kids. This has two consequences – a lot more sales, inculcating a love of reading before school work kills the possibility.
  16. Actual Internationalization. eReaders that support all languages and book rights that work across the globe.
  17. Writing capability. This would be huge.

A lot of the items on this list would be impactful. It’d be a fun exercise to run a bunch of readers through the list and have them prioritize these features or cast a yes/no vote on each.

Top 7 Candidates for huge Kindle, eReaders impact

Well, here are the ones that, in my opinion, could have the most impact -

  1. A permanent tie between two or three eReaders. This would be a dream outcome as the companies would always be competing and improving. 3 or 4 would be much better than 2.
  2. $99 prices on eReaders from the Big 3. It’s hard to discount this as casual readers are a pretty important market and the fact that eReaders turn some casual readers into frequent or even hard-core readers is even more important.
  3. Writing Capability. Perhaps the one thing that instantly transforms eReaders from niche devices into devices with incredibly broad appeal (school, college, work, replacing paper).  
  4. Actual Internationalization. The US has almost single-handedly taken eReaders from an idea to millions of sales a year. If we can get the whole world to participate we would transform books and eReaders.  
  5. Huge jump in Awareness. If the rate of increase in awareness could be accelerated things would become much easier. We saw this with Oprah’s Kindle endorsement and you have to wonder if that’s scalable – Surely, every country and every state has its own equivalent of Oprah.
  6. Major hardware breakthrough. Could we get an eInk related breakthrough that changes things massively? Perhaps unbreakable screens.
  7. 1 common format. There’s so much drama around interoperability. You almost feel it’d be worth fixing just to get people to stop complaining about it. If those people then become positive and embrace eReaders whole-heartedly this would be a huge factor. If they just find something else to complain about (books not being free, Amazon and B&N dominating, no free coffee) then the format issue would prove to be a red herring.

These are all very good candidates – My money’s on one out of ‘A permanent tie between two or three eReaders’, ‘Writing Capability’, and ‘Actual Internationalization’. The others are very promising too (especially Awareness) – However, any 1 of the latter three could transform eReaders just by itself.

Filed under: evolution | Tagged: , | 3 Comments »

eReaders, Billion Dollar Businesses & Evolution

Posted on August 18, 2010 by switch11

My favorite thing about the Kindle 3 is that it’s evolution at work.

It’s a product (species) realizing it’s in danger and evolving (adding features, cutting price, improving at what it does best) to be more fit – to survive.

There’s a post by Dave Winer related to this concept. He talks about how Asus is killing itself in Netbooks because it isn’t evolving -

Asus says the iPad is cutting into netbook sales. I’m not surprised. Asus’s response to the iPad has been to stop improving their netbooks.

The product they’re shipping now is in no way different from the one they were shipping six months before the iPad shipped. It isn’t even cheaper.

There are two fundamental mistakes here – Asus has forgotten what made its Netbooks amazing and hasn’t kept the price gap between netbooks and notebooks that was there in 2007 (the gap that helped netbooks become enormously successful). Asus has also forgotten that it specialized in making great netbooks – It’s now under the illusion that there’s something wrong with making netbooks and that it should be making Tablets instead.

You have to keep running and keep evolving

Business is funny – You start off in a market and no one cares. You do well and show there’s money and suddenly you get all sorts of companies trying to steal your market via all sorts of strategies. 

Consider the eReader market and the Kindle -

  1. Chinese clone eReader makers tried to steal the market via low prices. 
  2. Plastic Logic tried to steal it via new technology (when previewed in 2008 the technology was a big deal).
  3. Pixel Qi is trying to steal the market by turning every netbook and tablet into a Transformers style eReader + Netbook.
  4. Apple is trying to steal it by pretending its Tablet is a better eReader than dedicated eReaders.
  5. B&N is trying to steal it with Nook. A lot of credit to them for delivering a solid product.
  6. Sony is trying to get back the market it lost – though only half-heartedly.
  7. Google and lots of companies will try to steal the ebook revenue stream.

There are multiple threats -

  • There are companies that try to create a better competing product. Ex: Nook. These are not very dangerous because the competition is right in front of you. 
  • There are companies that try to steal the most profitable parts. Ex: Google. These are pretty dangerous as they may commoditize you.
  • There are companies that try to re-imagine the entire market in a way that gives them an advantage. Ex: Apple. These are the most dangerous – If you aren’t careful you forget what you’re good at and start competing on their terms.

The last is what’s happened to Asus.

It’s great that Amazon has avoided the grand Apple manipulation/trickery and stuck to reading – the release of the Kindle 3 reaffirms Amazon’s focus on reading.

The ‘multi-purpose device future’ fallacy

There are some things that aren’t supposed to survive but do – Microsoft’s dominance in OS and Office, people wanting customer service via real people rather than algorithms, devices that focus on one thing.

This is what everyone who believes in the multi-purpose device future fallacy thinks -

Amazon is losing a huge opportunity. It’s making a mistake by keeping the Kindle focused on reading. It’s going to get killed by multi-purpose devices.

However, they’re missing the much, much bigger picture – The Kindle has a shot at replacing paper. Look around and you see all the different ways paper is used – labels, notebooks, papers, documents, books, newspapers. It’s an almost endless list.

All of that is going to be replaced by something one day because we’re either going to run out of trees or we’re not going to have enough gasoline to transport and process them. There is going to be a huge opportunity for eInk based products.

Guess which company is going to be the most qualified and the most prepared? Hint: It’s the company that is causing even Chinese clone eReader makers to give up.

So the iPad’s siren call is hardly seductive - Why don’t you pass up the soon-to-be multi-billion dollar business you are the leader in (not to mention the business you specialize in) to focus on an unproven niche that you have neither the lead in nor the expertise for?

Netbooks are forgetting what their core value proposition was

It was – a really cheap computer on which you can do 75% of the things you do on your big computer.

The pace of evolution of Netbooks was breath-taking – until the companies started self-sabotaging themselves. They didn’t want to be selling $300 computers when they could sell $700 computers. Two things happened in parallel – Those $700 laptops fell to $400 and $500. Netbooks stayed stationary at $300 to $400.

Suddenly the main value proposition was gone.

Netbooks went from around half a million in 2007 to 11.4 million in 2008 to 30 or so million in 2009. This year they stalled. Their pace didn’t slow down because of the iPad – It slowed down because they were no longer half the price of laptops. They stopped evolving.

Contrast these two devices -

  1. July 2009 – Asus Eee 1005 HA. 8.5 hours battery life, $350,  Intel N270 Processor, 10.1″ display.
  2. August 2010 – Asus Eee 1015. 13 hours battery life, $379.99, Intel N475 Processor, 10.1″ display.

In 1 year we’ve had the battery life go up 50%, the processor get a little faster, and the price go up $50. No wonder netbooks stopped growing at 300% to 600% a year.   

We had companies selling 30 million netbooks a year but instead of going to 100 million netbooks a year they decided they should try to see how close they can get to laptops in price.

Luckily Amazon and B&N are much, much smarter than Asus and Acer.

Kindle 2 to Kindle 3 is a pretty big jump

Yes, it could and should have been even bigger. However, consider the differences -

  1. Kindle 2 in July 2009 was around $299, it didn’t have PDF support, it wasn’t available internationally, it didn’t have rotation support, and the screen was good but not great. It also didn’t have accessibility.
  2. Kindle 3 in August 2010 is $189 (with a $139 Kindle WiFi option), there’s really good PDF support, 1 month battery life (double), double the memory, much faster page turns, international availability, rotation support, the new eInk Pearl screen, and a dozen other improvements (especially in fonts). It’s also accessible and has a new WebKit browser and WiFi.

A lot of credit to Amazon (and to B&N) for pushing eReaders. If Kindle and Nook had stayed as stationary as netbooks they would be dying too. They haven’t – they’ve evolved so quickly and the companies behind them have invested so much that Wall Street is upset with Amazon and B&N is struggling.

Evolution applies to companies too

Companies not only have to compete and fight off competitors in the markets they own, they also have to evolve and find new niches and markets that will sustain them in the future.

Consider a few companies -

  1. Apple is building each product line on top of the previous ones – iPods, iPhones, Macs, iPads. They all combine to create this Apple eco-system and Apple nation that lets Apple launch even more new product lines. It’s creating an interesting symbiotic relationship where owning one product makes you feel perhaps you should own the others.
  2. Amazon has a few major bets for the future – Kindle, Amazon Web Services, Shoes and Clothes. Interestingly enough its entire main business (retail) is a huge bet. Amazon is delaying gratification far more than any other company and you have to wonder just how much money it’ll make when it finally decides to cash in.
  3. Microsoft, for all the flak it gets, is pretty secure – Windows and Office are making more money than they ever have (just check the balance sheet if you find it hard to believe), there are new successes (Xbox Live, Xbox), and there are the low profile billion dollar businesses (SharePoint, Server Tools).
  4. Google - Don’t really know what to think or say. Search is a behemoth. Every other business Google goes into it seems to only want to compete on zero price. The whole ‘live by the sword, die by the sword’ aspect couldn’t be more true. Google is using its ability to leverage Free as a weapon/differentiator in every business but it’s also blowing up every potential revenue stream – It’s beating its opponents by blowing up the profitability.

Free is such a scourge and such a disease that we don’t even have other huge multi-billion dollar companies. Where are they?

If Google from 1998 is the newest company with multi-billion dollar profits you have to wonder whether the entire 1999 through 2010 stretch has been an utter waste financially. Skype had a profit of $13 million in the first 6 months of 2010. Facebook is still hiding behind terms like cash-flow positive.

If companies with hundreds of millions of users are having a hard time making profits it’s time for companies to pick a different branch of evolution – preferably one that rules out Free and ‘Freemium’ and every other ‘sounds too good to be true’ strategy dreamt up by Internet start-ups.

eReaders and eBooks will spawn lots of billion dollar businesses

The top 2-3 eReader makers will have billion dollar businesses. The top 2-3 ebook stores will have billion dollar businesses. The top company providing services to authors will be a billion dollar company. There will be new Publishers and new Platforms that might become billion dollar companies.

There are lots of opportunities. Of course, an essential prerequisite is to keep out the scourge of Free and the Internet Start-ups. Authors and Publishers should be as wary of Internet companies as they would be of the red death. Internet companies are the Anti-Midas companies of our times – the true enemies of profitability.

Skype sees 124 million users per month. Only 8.1 million are paying users. It made $406 million in revenue and the profits were just $16 million. That’s $2 profit per paying customer per 6 months. 12.9 cents per customer per 6 months. You could make more profit per customer from a lemonade stand or from a newspaper route.

That’s how amazing our new Internet companies are – They are less profitable per customer than your kid’s paper route.

With eReaders and eBooks we’ve found what might be the next big businesses. Not just in the US – all over the world. A business where users are gladly paying $5 to $10 per book and buying multiple books per month. If an average Kindle owner buys 3 books a month and Amazon makes $1 per book then in 6 months it’s making $18. That’s 139 times more than what Skype makes per user.

The scary part is that there’s a pretty decent chance eReaders really blow up. That there are tens of millions of eReaders sold and then hundreds of millions of eReaders sold. It’s not out of the question that we have 50 or 100 million Kindle owners in 2015 with each making Amazon $36 a year just from ebooks. That’s $1.8 billion a year in profits – from selling ebooks.

It’s puzzling isn’t it – That Amazon is #1 in 2 businesses that might each generate billions in annual profits for it and it isn’t ditching those to try to imitate Apple and its iPad. Too bad it isn’t like Asus which is pretty much ditching the netbook business that went from 400,000 units sold in 2007 to 30 million units sold in 2009.

Filed under: evolution | Tagged: , | 5 Comments »

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