E-Readers Need Niche as Tablets Roar Past Them in Shipments, IDC Says

"There’s still a bright future for e-readers,” Mainelli said, basing his outlook on what he perceives as an emerging new reality of “multiple devices per person.” For years the consumer electronics industry talked about convergence, where a single device would take on more roles, “but now we see devices diverging,” he said. “We'll all be carrying more devices as prices come down,” he said. Some devices “are better at certain things than others,” he said, and the e-reader will be relevant for “the long term.” But to expand, the e-reader market will have to grow outside of the U.S., which currently accounts for 79 percent of device sales, followed by Western Europe with 7.2 percent. That will require cooperation with publishers, which won’t be easy because “U.S. publishers went kicking and screaming” into the digital age, Mainelli said. Growth in the mature markets will be driven by libraries and the education segment, and consumers will have to be able to access content “from any device, including those of your competitor,” to be successful, he said.

Amazon holds a commanding lead in market share worldwide with 52 percent of e-reader sales, according to IDC, followed by Barnes & Noble with 21 percent. Pandigital, with 6 percent of the market, is trailed by Sony and Hanvon with 4 percent each. The remaining 13 percent are divided into “others,” according to IDC data. Amazon and Barnes & Noble are “hitting on all cylinders” with their devices, which Mainelli attributed to the “right amount of devices and software.” Both companies would prefer that their customers bought their respective hardware, but “at the end of the day it’s about selling books,” he said. “If you buy into their platform, with apps, they're going to do well.” In terms of connectivity options, the overwhelming majority of e-readers in the market, 73 percent, are Wi-Fi-based, followed by 16 percent that combine Wi-Fi and 3G. Ten percent of e-readers have no connectivity option and fewer than 1 percent are 3G only, Mainelli said.

Price will be a key driver of e-reader sales, and Amazon’s introduction last week of sub-$100 readers will help spur sales, he said. “When you're spending $79 or $99, you worry less about having an old version,” he said.

Rather than trying to compete with tablets, e-reader manufacturers should play to their strength: the avid book reader, “some of the best consumers you can have,” Mainelli said. Not only do e-reader customers have a “voracious appetite for reading,” but they tend to buy more books than tablet customers, he said. He suggested a rental model could be very successful in the e-reader space as well. There’s still overlap between the categories, which even IDC is grapping with when it comes to forecasts. The firm has placed the Amazon Fire into the tablet bucket, where the Barnes & Noble Nook Color will be filed as well. IDC originally counted the Nook Color as an e-reader, until Barnes & Noble expanded the device’s reach with Web-browsing capability and apps.

Education is the “great untapped unknown” for e-readers, according to Mainelli. If given the choice, students would likely choose a tablet for the flashy media option, “but a lot are going to have a notebook, a tablet and an e-reader device,” he predicted. Dedicated readers will be optimized for “marathon study lessons” thanks to long battery life and suitability to library lending, he said. E-readers can also find a home in industrial applications, replacing binders and manuals in factories, and they can be upgraded in the field “across states and countries,” he said.

The social and interactive aspects of e-readers are in their infancy and “not that great,” Mainelli said. He sees that changing. In addition to offering a lending option, e-reader companies have to make it easier “to gift books and the devices themselves,” he said. Hardware, which has fit the “one-size-fits-all” model to date, will improve, he said. He hopes to see specially designed e-books and content bundles delivered by device makers, comparing the idea to Microsoft’s approach with Xbox 360 packages to coincide with specific game launches. An e-reader combo pack bundled with a series of popular books could sell well if the price were right, he said. “You could sell a reader with a whole set of books, or buy in for books still coming,” he said. Genres could lend themselves to certain e-reader device styles and designs. He imagined genre books for people who read five romance novels a week. “There could be a very specific device that appeals to them, whether it’s a book cover or the device itself,” he said.

In the end, e-readers’ success will depend on usability and performance, Mainelli said, and there’s still a lot of room for improvement. He noted that “Amazon made a big deal about having page numbers” at the introduction of new Kindles last week, a basic hurdle for electronic readers that has plagued the Kindle since introduction. “There are clearly issues” around ergonomics, he said. Down the road those could be addressed by devices that use different technologies according to users’ needs at the moment. Rumors of an Amazon device that was a hybrid e-ink/LCD design didn’t come to pass this time around but Mainelli promoted the concept. “LCD is king when it comes to vibrant colors, kids’ books and charts,” he said. When long battery life is the priority, “you could go into e-ink mode,” he said.