On the e-reader price war and the shake-out of the market

Best Tablet Review has an interesting article on the ereader price war and the current state of the market.They argue that

The first point I want to raise is when the price war started. BTR assumes (like most people) that the Nook Wifi started the price war. I disagree. Kobo started it when they launched their $149 ereader. I still don't think much of the hardware, but at the time that was a very good price.

BTW, the second battle of the ereader price war wasn't the Nook Wifi; it was when Sony dropped their prices (before the Nook Wifi). They called it a sale at the time, but that was just to hedge their bets.  Also, I think they were responding to the price of the Kobo ereader, not anticipating the B&N price drop. They were trying to find a better price point for their ereaders (whoops).

BTR goes on to predict that only the big three (Amazon, Sony, B&N) will survive and it will be hard for anyone else to enter the market. This is very likely true, but it is only true if you ignore the rest of the world.

The ereader price war has so far been confined to the USA. It has yet to affect the other major markets in Europe, Asia and Australia.When you add them to the pot the prediction is false. And the Big Three soon becomes the Big Four, possibly even the Big Five.

One company that BTR left out was Pocketbook. Pocketbook will survive the US based price war just fine. In fact, they're in a better position than Sony because they don't depend on the US market for survival. Pocketbook is based in the Ukraine and Russia, and the USA is actually their least important market. I mentioned last week that they lowered their prices. You might have noticed that I didn't comment on the fact that their prices are higher than everyone else. I passed because their prices staid slightly more expensive than everyone else. If they're happy with that price point, then they must know what they're doing.

Pocketbook was one of the Big Four. I have the feeling that there is actually a Big Five, but I'm not sure yet who that last company is. It's not Bookeen or Bebook, but it might be Hanvon or Gajah. Hanvon was working towards a $100 ereader before the Nook Wifi, and Gajah is the most widely distributed ereader manufacturer that you've never heard of.

So who's going to survive? My prediction is that all will survive just so long as they can stay financed. Once they have money troubles they're dead. No one will finance them because of the price war.

About Nate Hoffelder (11466 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader: "I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

4 Comments on On the e-reader price war and the shake-out of the market

  1. I just want to mention one reader you left out: the Boox. Ever since I did a post about its manual, I’ve been getting emails requesting a copy of the manual (which Boox stupidly removed from its own website). This seems to be popular in Europe, but I have no knowledge of how good it is. That people *need* the manual for it can’t be good news, tho, huh?

    Does the Pocketbook use Adobe DRM?

    • Nate the great // 8 July, 2010 at 1:58 pm // Reply

      The Boox is made by Onyx, a Chinese tech company started by a couple ex-Irex people (the competent ones, obviously). The Boox was picked up by Bebook as the Bebook Neo. It’s also being sold in Singapore (I forget the brand name).

      Onyx have some of the best people, but they are a small tech start up. Survival is iffy at best.

  2. Alexander Inglis // 8 July, 2010 at 8:43 pm // Reply

    Here’s another view.

    Either the e-reader companies want to be a CE manufacturer (in which case the $19 “dollar” store Chinese import eventually wins) or the e-reader companies want to be a conduit to content. I believe the latter is the only route to long-term success and, for that reason, I count Sony out of the mix and Kobo in. Amazon is in the for the long haul; and someone who comes up with a cheap and cheerful (probably Android-based) knock-off of the iPad will also be a player.

    The Nook is probably doomed because Barnes & Noble’s core business is in serious trouble. Kobo’s challenge is to forge more relationships to expand to Europe, starting with Britain – Waterstones or WH Smith, anyone?

    All the other players — Astak, Pocketbook, Bookeen and others — will have a tough time surviving to the end of 2010. They have poor distribution and no credible partnerships in content to make them the “goto” device, even in a niche market … and must command premium prices for their hardware.

    Still standing in 2011: Kindle, Kobo, Nook, Sony, iPad, some Android clone … and even among these, one or more may exit the stage before the end of 2011. There is no reason to buy an e-reader unless you intend to, well, read. The device needs to source and deliver content easily: this is the wild card Amazon brings and only Apple may be able to duplicate (thanks to its iTunes experience).

  3. I think the Kindle format will go obsolete. Being the first to market and the first to be a hit with consumers doesn’t prevent this. Think betamax, OS/2, and mac computers in the 80s. Rant to follow.

    Pretty much every other ebookstore, and most ereaders use ePub, libraries have adopted it, and publishers have shown a willingness to fight for it through the agency model. Eventually, publishers will want to pull support from one format or the other altogether, and since EVERY real (read: places your authors can appear in person to actually create demand for their books) bookstore is behind Epub (Barnes and Noble, Borders, and now Books-a-Million) the choice seems somewhat obvious. Especially with Amazon’s new restrictions and the fact that they charge the publisher’s a 3G download fee.

    The only thing stopping this from happening right now is that noone is within spitting distance of Amazon, but that will change soon.

    If you do a google trends search for .epub then one for .mobi, you’ll see the new standard format has been growing exponentially over the last three years, while .mobi peaked in 2006 and has been in decline ever since. (.azw doesn’t even show up, but it makes since that noone would search for it). A trends search for just epub (no dot) is even clearer.

    Barnes and Noble has now 29,979 fans as of right now on facebook, a number which has grown from 27,172 since last week. Kindle has grown from 69,716 to 71,613 in the same time. This means Nook is already 42% as popular as Kindle, and is adding fans at a much more rapid pace. (Actual sales numbers would be nice, but this and digitimes guesses are probably the closest you’ll get, Nook vs. Kindle on google trends is somewhat revealing as well, but it’s hard to seperate out buzz from genuine interest) Kobo is doing pretty well according to facebook as well (5,723 fans, in a very short time). Ibooks apparently sucks, as they have precisely 31 fans, but I’m sure that the actual market share is higher for apple.

    Amazon’s business model requires SOLID market leadership and popularity. It will turn against them even at 50%, maybe even 60% market share. That’s the point at which exclusivity begins to just look like incompatibility. Given the number of other epub-compatible competitors, and the trajectories of Kobo and nook alone, to me it now looks inevitable that they will not be able to keep it above those numbers.

    Also, about the financial strength of B and N and Borders: anytime they run into any cash trouble, they’ll just get bailed out by Ron Burkle and Bennett Lebow, respectively. Amazon can’t count on winning that way.

    Note: while I was ranting Nook hit 30,000 fans. Congrats!

Leave a comment

Your email address will not be published.