New Media - Ratings and Research
| Will e-readers burn bright and fade? |  |
November 03, 2009 12:23 PM ET
By Matthew Deegan and Dave Hendrick
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With analyst estimates pointing to a coming acceleration of e-reader sales, companies such as Amazon.com Inc. continue to insist that digital books will not be cannibalistic to print products. Senior Vice President of Operations Marc Onetto recently spoke to an audience at the University of Virginia's Darden School of Business. At the event, he said his company views the Kindle as a complement to traditional book reading, and insisted Amazon saw its foray into digital books as the chance to act like a young startup, rather than one of the most powerful names in retail, again by experimenting with new models. Still, Amazon has quickly become arguably the best-known player in the young space, and while the company does not disclose units sold, CEO Jeff Bezos recently said the device was the company's top-selling item in both unit sales and dollars. The company's reign will be increasingly tested in the coming months, however, as Barnes & Noble Inc. and others are poised to join the e-reader fray. About 1.2 million e-readers will be sold in the U.S. in the fourth quarter, and sales will double to 6 million in 2010 from 3 million in 2009, according to recent projections by Forrester Research. The author of the report wrote that e-readers will be a "breakout success" this holiday season because of "falling device prices, more content availability, better retail distribution and lots and lots of media buzz." ThinkEquity analyst Edward Weller is less bullish on e-readers, however. Speaking to SNL Kagan, Weller said sales will increase by 2x to 3x this holiday season over last, but he was skeptical of their long-term prospects. "I think [stand-alone] digital readers will grow very rapidly and disappear, because everything will be a digital reader in five years," Weller told SNL Kagan. "When you can get a GPS in your phone, why would you buy a separate GPS? It's the same kind of thing." As for Amazon's Kindle specifically, Weller, like Onetto, views the Kindle as a generally complementary product. The analyst sees the Kindle as a gateway to one of Amazon's core businesses, its books, and as another means to connect its customers to that business. "I think all of their most important customers started with them and are committed to them mostly because of books," Weller said. As Barnes & Noble, Sony Corp. and other companies develop their own e-readers, Weller foresees the Kindle incrementally losing e-reader market share. However, he said that is not something Amazon executives will lose sleep over. "Amazon doesn't have to make money on it, because they're selling the razor that will help them sell a lot of blades," Weller said, adding, "It's not about the e-reader." In another sign that the company is as interested in selling "blades" in addition to the "razors," Amazon opened the Kindle store up to certain Apple Inc. products and recently unveiled the Kindle for PC application, which allows consumers to buy e-books to read on home computers. | 
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