Today the long-anticipated joint venture betweenConde Nast, Hearst, News Corp, Time Inc and Meredith Publishing became official. These firms -- all of them up against the ropes in an effort to deal with declining magazine ad revenue and the lackluster performance of online ad models -- have decided that to face the digital future, they'd rather do it hand-in-hand.
The motivation for the union is simple: eReaders are taking over the book publishing world, meanwhile magazines are left in the dust, with no devices they can call their own.
I mean, really, have you tried to read Business Week on your eReader? It ain't pretty. And on the Kindle, most magazine publishers want to charge you for the painfully slow page turning experience of the device all in exchange for the convenience of automatic delivery to your portable device. So the industry -- seeing a world that is evolving without their interests in mind -- is joining hands to solve two problems:
The official announcements about the Nook went out yesterday and much has been said about the device, such as whether it trounces the Kindle (it does not) and whether the delay in shipping (units you buy today, for example, are expected to ship January 15) will permanently keep the Nook out of the running (it will not).
Because so much has already been said, we paid attention to what hasn't yet been said -- as far as we can tell, by anyone. It's this: the Nook is the first eReader to hit the market that has any kind of social connectivity built in to it. I'm referring to the "loan a book" feature the Nook offers. Read reviews like the one at CNET and you'd think that the book loaning feature is a flop because: a) it only applies to select books (at the publishers' whim) and b) it only lasts for 14 days.
I'm gonna tell you a secret: it doesn't matter how limited today's loan a book feature is, it's a huge step in an increasingly important direction for eReaders.
People share books. They share them, and then they talk about them. A lot. This fact is so critical to the way people read books that it is amazing that none of the eReaders yet offered to the market have any meaningful book sharing built into them. So even though the Nook is shipping late (folks, this is the eReader market, demand has been outstripping supply for the past two years now, stop acting surprised that Barnes and Noble and Sony are experiencing delays), we applaud its arrival because it opens Pandora's social box in this space. Once it's open, this box will set free all kinds of goodies that we are excited to have, including:
We've been writing a lot about eReader devices, but let's focus on the content for a moment. Why? Because selling a lifetime of eBook content to consumers is the end game of many companies in this space, especially Amazon and Barnes & Noble. They sky's the limit here. Consumers don't own digital libraries of books, as they did with music: When mp3 players came out, most consumers owned CDs that could be easily burned to a computer and downloaded to a device. Not so with books.
And the market for digital books, while catalyzed by the existence of dedicated eReader devices, will extend across multiple devices including desktops, laptops, mobile phones, netbooks, tablets, MIDs, portable gaming devices, and devices that haven't been invented yet. As we discuss in a new Forrester report, Forrester's data (based on a mail survey of 4,711 US consumers conducted in Q3 2009) shows that 3% of US consumers read eBooks on their desktop computers today; 2% read on laptops; and fewer than 1% read on dedicated eReaders, mobile phones, or netbooks, respectively. When it comes to future demand, 19% of US consumers say they're interested in reading eBooks on their desktop PCs, 14% say they're interested in reading on eReaders, 11% voice interest in reading on netbooks, and 5% say they're interested in reading on their mobile phones. What this means: Consumers are reading books digitally on multiple devices, and they will continue to do so.
2009 has been a breakout year for eReaders and eBooks--device sales will have more than tripled by the end of this year, and content sales are up 176% for the year--but 2010 will be anything but boring. Here are Forrester's predictions for what will happen in the next year:
Allow me to add my voice to the chorus of those applauding the fall of the Berlin wall twenty years ago this month. It was this event that taught me firsthand why revolution is simultaneously impossible as well as inevitable. In 1986 I sat with other students from around the globe just blocks from the wall and debated whether it would ever come down. The naïve among us insisted freedom was imperative: It was inevitable. The others asked if we had stopped to think about the massive relocation of people, economic resources, and government structures that such a revolution would require: It was impossible.
Until it happened, just three years later.
The author, pictured left, photographed in front of the Brandenburg
Gate from what was then the East German side
You may have seen the news about Marvell Technology Group, a chip-maker, integrating its chips into E Ink's display modules. This sounds very tech-y, but it has real consequences for the consumer experience of eReaders. Namely:
It speeds up the refresh rate of the E Ink screen...One of the first things consumers notice when trying out an E Ink-based eReader is the noticeably long delay when flipping a page or taking another action like changing the text size. This is especially annoying on touch devices like the Sony Touch Edition. Consumers are used to the iPhone touch experience, and the experience they have on the Web clicking on links--if they don't get immediate feedback, they assume it's not working. Currently, the microprocessing chip operates outside the display module, which is one reason why it's so slow. Integrating the chip into the E Ink display module will speed up the refresh rate of the screen by as much as half, according to Marvell, in addition to driving down manufacturing costs.
...Which creates a better user experience, and enables animation and other cool stuff. In addition to being generally less annoying for consumers, integrating the chip into the display will enable animated content--not full-on video, but black-and-white animation that will be useful especially for ads. Marvell has announced that they're working with FirstPaper (the secretive company backed by Hearst) as one of their partners, and having seen their device I can attest that they put the technology to good use. Marvell has said they'll announce more partners at CES in January, including companies working on dual-screen devices that need the faster processing capability for video and Web browsing
Something interesting's afoot in the digital reading space. Quietly, companies are testing digital reading applications for portable gaming devices in select markets. Two developments of note:
EA "Flips" for Nintendo DS: A reader app for Nintendo's portable gaming system, offered for now only in the UK. Aimed at 8- to 11-year-olds (a good fit for the install base of the DS). Content partnerships announced with UK book publishers Penguin and Egmont. Revenue model will be bundled downloads of multiple (6-8) titles for an a la carte price of £24.99. Interactive elements include quizzes, operated with the DS's touch screen and stylus.
Marvel Comics and others on the Sony PSP: In August, Sony announced a digital reader app for the PSP that will launch in December in select countries (UK, US, Ireland, Australia, New Zealand and South Africa). It announced a content partnership with Marvel Comics and said there would be more content partners with comics, graphic novels, and manga publishers to come. Marvel digital comics are already available online via subscription ($10/month or $60/year). Details on the app don't say how much comics will be on the PSP.
Tomorrow, Barnes & Noble (B&N) is expected to announce its own B&N-branded eReader device--the Nook, as the Wall Street Journal reported this evening. The device is expected to be wireless and touch-operated, with dual screens--a 6" E Ink display for reading, and a smaller color LCD screen for navigation, video, and...ads?
In other words, the B&N eReader could be a Kindle and an iPhone put together.
I knew from conversations with my own sources that this would be a cool device, but I didn't expect that it would be priced, as the WSJ reports, at $259. This puts the Nook competing squarely with Amazon's Kindle 2--most likely with a razor thin margin, if any, for B&N. To steal market share from Amazon and make up for lost time, B&N is pricing the Nook as aggressively as possible.
Getting the price right is crucial to success in this emerging device market. As we published earlier this year, most consumers expect eReaders to be $99 or less. But we expected something in the range of $399, which would make the device competitive with the other touch + wireless eReaders on the market, the Sony Daily Edition and the iRex DR800SG, both of which will be sold at Best Buy among other retailers. Pricing the Nook a full $140 below these other devices sends a strong signal that B&N is focused on Amazon, not Sony, as competition.
As you've likely heard by now, Amazon has announced a price drop of the Kindle 2 to $259 and the launch of an international Kindle that will run on AT&T and partner networks in 100 countries. Here's our take:
Today we launched a new report, "Forrester's eReader Holiday Outlook 2009" (full version available to Forrester clients here), which updates our projections for eReader sales in 2009 and 2010. The data in this report comes from Forrester's consumer surveys as well as interviews with vendors and retailers.
E Ink recently announced that its 2009 revenues to date were up 250%, and were exceeding its earlier expectations. We, too, are observing the eReader market growing faster than we had expected: We published a report in May, "How Big Is The eReader Opportunity?", that pegged 2009 US eReader sales at 2 million. Our new report ups that projection by 50% to 3 million for 2009, with 30% of 2009 sales occuring in the holiday season of November and December.
There are a number of reasons why eReader sales are growing faster than we had expected, which we detail in the report, including falling device prices, more content availability, better retail distribution, and lots and lots of media buzz.
All these dynamics will compound to fuel more growth next year, and we expect more changes in the market that could push eReader sales beyond 6 million in 2010, bringing cumulative US sales to 10 million by year-end 2010. To get our full perspective on what will happen next year, you'll have to read the report, but here are a few highlights. In 2010, we'll see: