eReaders are set to have one of the shortest growth life cycles in device history. Between 2009-2011 the average annual sales of dedicated eReading devices in the US grew by more than 100%. In 2012, US dedicated eReader sales growth will be negative. The decline of the eReader is driven by the availability and affordability of tablets, with global tablet sales in 2012 set to reach more than 120 million.
The Forrester Research eReader And eBook Adoption Forecast, 2012 To 2017 (Global)analyzes eBook adoption drivers across more than 50 countries. Heavy readers like eBooks. In the US, eBook readers read an average of 24 books per year compared with just 15 books for non-eBook readers. In addition, eBook readers are becoming more device-agnostic, with similar eBook reading levels observed across tablets and dedicated eReading devices.
We used the following drivers to calculate our forecast for eBooks and eReaders
We talk to product strategists in a wide variety of industries. Regardless of the vertical industry of their companies, they tell us that the release of new, disruptive products -- like Apple's iPad -- changes their relationships with their customers. Oftentimes, nearly overnight.
Whether their product comes in the form of “bits” (content, like media, software, or games) or “atoms” (physical products, like shoes, consumer packaged goods, or hardware), consumer product strategists must navigate a world filled with a dizzying array of new devices (like mobile phones, tablet computers, connected TVs, game consoles, eBook readers, and of course PCs). We call this proliferation of devices the Splinternet, a world in which consumers access the digital world across a diverse and growing number of hardware and platforms. And product strategists have to react by developing new apps, by crafting digital product experiences, and by rethinking their product marketing.
Delivering digital products across the Splinternet isn’t easy: It requires understanding -- and acting upon -- an ever-changing landscape of consumer preferences and behaviors. It also requires reapportioning scarce resources -- for example, from web development to iPad or Android development. Yet product strategists who fail to contend with newly disruptive devices (like the iPad or Xbox Kinect) will find themselves in danger of being left behind -- no matter what industry they’re in.
We'd like to invite product strategists to take our super-quick, two-minute survey to help us better understand how you are reacting to disruptions caused by the Splinternet:
That's right, I said eReaders. True, it looks like a tablet, runs like a tablet, and delivers a lot of the value that tablets deliver, but the Nook Color's 1.2 upgrade (which is actually a step up to Android 2.2; don't let the numbers confuse you too much) is really a foreshadowing of the future of eReaders, not the future of tablets.
First, the facts. With the new upgrade that will be gradually pushed out to all existing Nook Color devices for free over the next few weeks (or you can download now at www.nookcolor.com/update), the folks at B&N have added some very useful features: an integrated email client, Flash 10.1 support, a curated Android app store (see sidebar), and an improved user experience through a myriad of tweaks. These upgrades make the Nook Color look more and more like a tablet, with a very attractive $249 price point to boot.
Must the iPad now cower in fear? No, not really. Because even at this price point, the Nook Color remains a smaller, less powerful tablet than the iPad. And as we've seen, the range of competitors coming in after the iPad's territory are coming in at higher prices with more powerful features (for example, last week I dropped $529 for an LG G-Slate from T-Mobile with 3D video camera and 4G data plan). The tablet market is gradually moving into higher-power features, not lower-power experiences.
Brace for impact. What I'm about to say is going to make a lot of people angry, including some of the people at Google who are going to rightly point out that when they pre-briefed me on today's Google eBooks announcement, we never once discussed ad-supported reading.
Instead, they told me all about their plan to establish a set of tools that will offer eBooks to people looking for book information through Google's search engine. They explained that this will make it possible for the millions of people who conduct book-related searches every day to have easy access to 3 million books -- some out of copyright, some out of print but under copyright, and a full range of in-print titles including bestsellers. They also described how independent booksellers will be able to use the same set of web-based commerce and reading tools to build their own branded eBook stores to finally extend their brick-and-mortar customer relationships into the digital space.
Since then, I've spoken to half a dozen reporters who were also pre-briefed and they have all had a similar set of questions: can Google compete against Amazon (no, but it can compete against Barnes & Noble), is it too late to make a dent in a mature market (no, less than 10% of online adults in the US read eBooks, there's plenty of room to grow), is Google's cloud-based strategy unique (yes and no, it supports all devices except the Kindle, but the Kindle platform actually supports as many devices as Google will).
Time to get my hands a bit dirty. Last week I posted an eBook forecast with a brief explanation of why the book business may complete its digital revolution more quickly than other media businesses have. Turns out this assertion was more difficult to hear than I anticipated and I got some very insistent (and worth reading) comments. The discussion that ensued both on the blog and outside of it was very complex, this is not a simple matter. However, there are parts of it that are very simple that I have to clarify, even though it means rolling up my sleeves a bit. Allow me to draw into this discussion John Thompson of Cambridge University who gave a very worthwhile interview to the Brooklyn Rail this month to discuss his recently published analysis of the book industry, Merchants of Culture. I will refer to just one of his specific comments:
"There are many people who just love books and they love the ideas that are expressed in books; they love the stories that are told through books and all of it. They’re very attached to it.... They cherish the book. And they believe that this is an artifact that they want in their lives. And some of the technological commentators in this industry just completely miss this point."
Consider it an inauguration of sorts, a celebration of the eBook industry becoming a member of the major media club just as digital music and online video have before them. When you influence a billion dollars, people have to take you seriously. In the book business, it means that traditional publishers can no longer live in deny-and-delay mode; meanwhile, digital publishers get invited to better parties and people in other media businesses like TV and magazines look over and wonder if they could cut a slice of this new pie just for them.
To honor the occasion, we have just published our five-year forecast for eBooks in the US for Forrester clients. The punchline is this: 2010 will end with $966 million in eBooks sold to consumers. By 2015, the industry will have nearly tripled to almost $3 billion, a point at which the industry will be forever altered.
Right now, the number to track – and the one that determines how many eBooks will sell – is the percent of a consumer’s books that are bought and consumed digitally. To get at this number, we have to understand how people get books today. Did you know that the two most common ways people get books today is borrowing them from a friend or getting them from the library? Evidently content – at least in the book business – is already quite free, even without the help of digital.
Today, Barnes & Noble announced the release of NOOKcolor--beating Amazon to the punch of releasing a color eReader that's really a multimedia tablet. Billed as "the reader's tablet" by B&N, the 7-inch device has an LCD screen, weighs less than 1lb., and runs on Android. Though it won't connect to the Android Marketplace, it will run reading-specific apps as well as games like Sudoku and eventually Netflix. At $249, the NOOKcolor fits comfortably in the price range of dedicated eReaders, but it's half the starting price of the iPad--which raises the question, will consumers be comparing the two products? I think they will, especially if they are a current B&N customer or if they want a device primarily for reading that also has other media consumption and Web browsing capabilities. If reading is secondary to accessing other media and the broad Apple or Android app ecosystems, consumers will be better off with a more multifunctional tablet like the iPad or future devices from RIM, Samsung, and others.
Earlier this week, HP quietly released the Slate 500, an 8.9-inch tablet running Windows 7 that's marketed exclusively to businesses. According to HP, 400 customers are currently evaluating the device, which will be sold through HP's direct sales force and through its Web site for SMBs. The Slate 500 is literally just Windows 7 on a slate form factor; the idea is that businesses that run their systems on Windows 7 will be able to use the Slate for enterprise applications (the device doesn't sync with a user's HP PC).
It was a surprising weekend for those of us who had naively imagined that after crossing the River iPad, we might actually get some Elysian rest. But, alas, the fates conspired against us and handed us the curious case of Amazon vs. Macmillan. Or Macmillan vs. Amazon?
For those who actually took the weekend off, let me summarize what happened. John Sargeant, the CEO of Macmillan Books, gave Amazon a wee-bit of an ultimatum: switch from a wholesale sell-through model, where Amazon buys digital books at a fixed wholesale rate and then can choose to sell those books at whatever price it deems appropriate (even at a loss, as it does with $9.99 bestsellers), to an agency model, where Amazon agrees to sell at a price set by the publisher in exchange for a 30% agency fee. Sargeant explained to Amazon that if it did not agree to the switch, Macmillan Books would make its eBooks subject to significant "windowing" wherein new books are held back from the digital store for some period, say six months, while hardback books are sold in stores and possibly, digital copies are sold through the iPad at $14.99.
This is more detail than we usually know about a negotiation like this because of what happened next. Sargeant got off of a plane on Friday only to discover that Amazon had responded by pulling all Macmillan books from the Kindle store as well as from Amazon.com. He then decided to make it clear to the industry (and his authors) that this drastic action was Amazon's fault, in a paid advertisement in a special Sunday edition of Publishers Lunch.
I have a weakness. I like to think big. And when we heard so many juicy rumors about the Apple tablet device, now named the iPad, I knew that with Steve Jobs at the helm, I could afford to think big. So big did I think, that I suggested the iPad should take media consumption to the next level and create an entirely new category of device.
At first, Jobs appeared ready to confirm my suspicions. He said seductive things like, "Everybody uses a laptop and or a smartphone. The question has arisen lately. Is there room for a third category in the middle?" I was sitting on the edge of my seat, ready to hear Jobs demonstrate that new category of device. But he didn't.
Instead, what Apple debuted today was a very nice upgrade to the iPod Touch.
Don't get me wrong. I love the iPod Touch and I was this close to getting one for myself. Now that the iPad has arrived, I can finally get one, the new, big one. But it's not a new category of device. It doesn't really revolutionize the 5-6 hours of media we consume the way it could have. It doesn't even send Amazon's Kindle running to the hills for cover. In fact, the competitor likely to take the biggest hit from the arrival of the iPad is Apple, in the form of fewer iPod Touches sold and fewer MacBook Airs sold.
In the last month the din of rumor and the clamor of speculation inspired by Apple’s expected announcement this week has risen in a crescendo that is about to peak. We’re all convinced this Wednesday’s “one other thing” will be some kind of magical tablet device. We all expect it will be a big deal. And in these past weeks we’ve witnessed a parade of writers, analysts, and consumers who have all published their “wish” or even “guess” (or, in some cases, “fantasy”) lists. But we have yet to see what we think really matters: an Apple “should” list that identifies the things Apple should do to ensure that its device is successful.