E-Readers, Kindle, Microsoft, and Sharing

I recently commented in an interesting post from Alec Saunders entitled “Steve Ballmer wrong about e-readers.”  Reproducing Alec’s post here:

“In a vintage Microsoft moment, Steve Ballmer has said that Microsoft doesn’t need to build an e-reader, because the PC is already the most popular reading device in the world. “We have a device for reading. It’s the most popular device in the world. It’s the PC”, said Ballmer.

I wish I agreed.

The fact is, I (and many others) have been debating about buying an e-reader device for some time.  The convenience of the form factor is just too appealing.  An instant-on high-contrast device that I can easily hold while lying in bed or sitting on the sofa, and that can hold a significant portion of my library… well, I can only say that such a device would have huge appeal to me.

Don’t get me wrong.  I read a lot of material on my PC.  I don’t read anything of any length or consequence on the PC, however. I read it on paper.

And more and more, I find myself reading books on my iPhone.  It’s instant on, I can easily hold it while lying in bed, and it can hold a significant portion of my library.  If the screen were a little larger – say 8.5 x 11 inches – it would be perfect.

Food for thought Mr. Ballmer.  Sometime in the not too distant future I’m going to buy an e-reader.  It can’t be a Microsoft product if Microsoft doesn’t make one.”

I thought I’d reproduce my comment here:

‘Like so many consumer electronics topics today, format-wars, fragmentation and use-case dependent diversity will likely dominate. The e-reader is a great technology, for some it will be the answer they seek; for others books are preferred because they can be SHARED, taken anywhere, squeezed into the airplane seat pocket or a carry-on bag without worry, left on the beach, and even read on the toilet (stepping on a book doesn’t break it). E-readers unfortunately lack the ruggedness of a book.

The PC/Mac/tablet can be adequate for reading articles / papers / analysis – especially if any bookmarking/cut&paste is required, or SHARING. Though for some traditional printing on paper is required – could be another e-reader use case here, though I find some PDF documents don’t appear that good on e-readers.

The book market in the US is about $25B. Current Kindle sales are shrouded in mystery but estimates of 1.5M units by the end of the year, and 3M total e-reader units shipped are being made by the likes of Forrester. Focusing on the facts, Sony sold 400k units last year. Where available 35% of book sales are for the Kindle version. Global e-book sales are up 300% last quarter compared with last year to $38M (US book sales were $8B).

As the price of the Kindle continues to drop from $299, to $259 (US only), $279 international version. Though there appears to be a hefty 40% premium on book prices for international Kindles because of roaming data charges.  Once it gets to that critical $149 it will then be in the early majority segment. So e-readers are here to stay and will likely become a significant part of book industry, so its unlikely the Publishers will stop this trend, though there remains a lack of inventory at the moment.

The question of format wars will arise. Currently my books are not dependent on Amazon. But with Kindle the content is dependent on Amazon, and critically it can not be shared. Google will soon be a significant player – will Kindle play fair with Google? There remains some significant uncertainty in the e-reader market.

Maybe the opportunity will be not in the e-reader hardware, but in the format wars, and the winner there will be whoever can solve the sharing issue, allow multiple stores, and have PDFs displayed reliably. So I agree Ballmer is wrong that the PC is good enough, but I’m not convinced MS need an e-reader, rather a solution to the above problems that can allow flexibility in whatever e-reader I buy. Though I think Sony may get there first.’

This got me thinking again about the role of store fronts and operator app stores, see this article on The Emerging App Store Ecosystem. In the e-reader market mobile operators are only providing commoditized transport for the Kindle, no other wholesale capabilities, such as billing, DRM, security, authentication,  type of connection, roaming status, device type, etc.  So does every e-reader have to build their own store, or can operators create a store front infrastructure that makes it easy for any e-reader and any publisher to deliver content to their customers?  The US book market alone is $25B, so there must be enough revenue there to justify operator investment, else Microsoft will do it.