EA Flips For Nintendo DS: Reader Apps Tested For Portable Gaming Devices

[Posted by Sarah Rotman Epps]

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.

Why is this interesting?

• The market for digital reading is much bigger than the market for dedicated eReader devices. Nintendo has sold more than 100 million DS units worldwide, and Sony has sold more than 50 million PSPs. That's a huge install base! For context, Apple has sold more than 30 million iPhones and 20 million iPod touches. The market for dedicated reading devices is much smaller--Forrester estimates that so far Amazon has sold about 1.6 million Kindles and Sony has sold less than 1 million Reader devices--but it's catalyzing a shift in consumer behavior toward digital reading across devices.
• Portable gaming systems reach a demographic that isn't served by eReaders today. As we published in a report earlier this year, the first wave of eReader adopters were older, male, high-income tech optimists, and the second wave is a slightly younger, female consumer who buys and reads a lot of books. Though there might be some gifting potential for older kids with Sony's $199 Pocket Reader, for now, these are not devices for kids. For publishers, it makes sense to reach kids on devices that kids already own, including portable gaming devices. In its Flips press release, EA notes that 2 million 8- to 11-year-olds in the UK own Nintendo DSes.

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B&N Nook: Taking On Amazon Head To Head

[Posted by Sarah Rotman Epps]

The eBook wars continue.

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.

What we'll be looking for in the press conference tomorrow is an indication of how the Nook will be distributed and marketed. B&N has assets Amazon doesn't have, including more than 700 retail stores in 50 states and massive marketing reach. B&N will need to use all the tools in its arsenal--merchandising it prominently in its stores, promoting it through advertising, email marketing, etc.--to make up for lost time since the Kindle's launch in 2007.

A reporter asked me recently, "Is Barnes & Noble too late?" Too late...for what? Too late to steal market share from Amazon? No. Too late to save its own cost-heavy business, which will see smaller revenues as eBooks grow as a proportion of sales? Sadly, yes. Ask any veteran of the digital media wars: It's hard to compete for digital dimes when you pay your brick-and-mortar rent in analog dollars.

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Amazon Kindle launches globally, sort of

By Ian Fogg (bio, recent research or follow me on twitter)

Today, Amazon have launched a new Kindle that they are marketing internationally. Prior Kindle models were limited to use in the US. Key details:

• Big promotion in the centre of the front page of Amazon sites in the UK, France, Germany and Japan.
• Only for sale on Amazon.com and priced in USD at $279 (i.e. a $20 mark-up over existing Kindle2). Promotions above have links to Amazon's US site to buy.
• Books are also for sale only via Amazon.com and are also priced in USD (at least for now).
• This is the first Kindle that uses a GSM-standard mobile phone radio -- rather than CDMA -- for wireless downloading of books, sync of reading position with other Kindles and the iPhone Kindle app (i.e. to drive Amazon's Whispersync consumer cloud service).
• Uses AT&T's mobile network and AT&T's global mobile roaming partners for Whispersync.
• When outside the US, Kindle owners pay an additional charge for each book downloaded, currently USD1.99 per download. I imagine this also includes downloading PDFs via the email to Kindle conversion process and downloading small items like blogs or newspapers.

I'm frankly astonished that Amazon is marketing the above product internationally so strongly. Instead, it looks like a great fit for US residents who want to own a Kindle that works both in the US and when they travel abroad. Or, Amazon could have chosen a much softer and lower key international promotion on their various global sites.

For European or Japanese residents there are multiple barriers to adoption and use of this Kindle, which will cause serious issues for Amazon's famed customer service reputation: As everything is currently priced in dollars, consumers outside the US will likely hit additional credit card fees when they buy; import of the Kindle will likely incur significant customs charges; and the per download roaming fee will rapidly add up to a significant sum given it hits on every newspaper or book download.

So, why have Amazon chosen to market this product so significantly on their various non-US websites today, ahead of the launch of international Kindle stores priced in local currencies?

I suspect this indicates that Amazon has failed to secure the international mobile operator partners it needs to offer Whispersync without per use fees, and by making such a big deal of this launch internationally Amazon hopes this will put pressure back on those partners to come back to the table. But if so, then why has the Kindle iPhone app not also been launched on those countries' Apple App Store's for use on the iPhone? The iPhone version wouldn't have those same data roaming costs when a consumer is in their home country of the UK, France etc. as iPhones are sold with inclusive mobile data. Other thoughts? Please comment below.

Google's Big Week: Fast Flip Launches; reCAPTCHA Acquired; Lawsuit Heats Up

[Posted by Sarah Rotman Epps]

First, apologies for the radio silence--it's end of quarter here at Forrester, and I've been busy adding to shareholder value, etc.But I did want to add a quick comment on what's happened on the Google/publisher/eBook scene this week, as Google:

Launched the Fast Flip application. Google's launch of the Fast Flip application is an olive branch extended to publishers. For those of you who haven't used it, it's pretty cool: You search for a term, like "Kindle," and the results are presented as screenshots of major media publications (BusinessWeek, Fast Company, The Atlantic, NYTimes, Slate, etc.) that have covered the topic recently. You can read about a screen's worth, and flip to the next one by clicking the big arrows on the left or right, or click into the story to go to the publisher's web site and continue reading. Google shares ad revenue with publishers, and shows just enough content to encourage click-through to the publisher's site, where users see more ads.

Our take: For Google, the Fast Flip is an attempt to be a better partner to publishers. As much as publishers would like to think that Google needs them, only the reverse is true. But Google is starting to invest more in creating goodwill for publishers in the newspaper, magazine, and book sectors, and the Fast Flip is part of that effort.

For publishers, the Fast Flip is a much bigger deal than it is for Google. The user experience is clean and fast, and gives readers the right balance of offering enough content to be useful but withholding enough to encourage click-through. It's a much more engaging experience than reading news feeds on your Google Reader or iGoogle page. Consumers who try it will like it, and given Google's scale, the revenue-share could be significant for publishers. It's also an ego victory for publishers: They've finally coaxed Google to share its Midas touch.

Acquired reCAPTCHA. Google announced it is acquiring reCAPTCHA, the technology that crowdsources teaching computers to be better at interpreting scanned text, for an undisclosed sum. reCAPTCHA's technology is used to protect sites from fraud and spam, but many of the words used in the decoding puzzles come from scanned texts of old newspapers and books. It's not hard to see why this would be a useful technology for Google to own.

Our take: Even as resistance to Google's settlement with authors and publishers heats up (the Justice Department filed its concerns today), Google is doubling down on its investment to scan the world's book collection. As we've mentioned before, Google's progress towards this goal has been impressive: They have 1/15 the number of books that Harvard does, and 1/32 the number of books the Library of Congress has.

This is an incredible feat, and the business implications cannot be overstated. It's no wonder why Amazon, Microsoft, and Yahoo don't want Google to succeed: They are all looking at an industry of print book sales (worth $25B in the US alone) that is just beginning a process of digitization. As with other forms of media, when books are digitized, value is destroyed--the $25B US book industry won't be worth $25B in 5 years, but new value will be also be created in the process. Google intends to benefit from the value being created in digital books through advertising, and this is huge. There are few other media that currently contain no ads--cocktail napkins, highways, and bathroom stalls have all succumbed, but books are blue ocean for advertising.

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New Forrester Report: The eReader Price Squeeze

[Posted by Sarah Rotman Epps]

A new Forrester report on the eReader market just went live (clients can access the full version here).

In brief: We surveyed 4,706 US consumers in an online survey to find out what value they place on eReader devices. We used a Van Westendorp Price Sensitivity Meter methodology to ask consumers four open-ended questions:

• At what price would you consider an electronic book device/eBook reader a bargain?
• At what price would you consider an electronic book device/eBook reader expensive but still purchase it?
• What price would be so inexpensive that you would question the quality of an electronic book device/eBook reader?
• What price would be so expensive that you would not consider buying an electronic book device/eBook reader?

We plot all the data and to find the optimal price range for different segments of consumers--what price you'd have to charge for the device to get the maximum number of consumers buying an eReader.

What we found was that the price points for how most consumers value eReaders is shockingly low--for most segments, between $50 and $99. (Currently, eReaders in the US are priced between $199 for the Sony Pocket Reader and $489 for the Kindle DX.)

Here you can see the breakdown for how different segments of consumers answered the question, "At what price would you consider an electronic book device/eBook reader expensive but still purchase it?":

Of the 181 million US consumers who are online, 14%, or 25 million consumers, say that eReaders priced at $199 or higher — the current price range for eReaders — are expensive but they'd still consider them for purchase at that price point.

What this means: The maximum addressable market for eReaders as they are currently priced is substantial--but to reach the largest market possible, the prices will need to come way down. And even then, eReader are never going to be as big a market as mp3 players, which 110 million US consumers own.

But they will still have phenomenal social and economic impact as they catalyze a new behavior of digital reading across multiple devices. We're just at the beginning of this revolution...

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Sony's Big Announcement: Open Content, Strong eReader Lineup For Holiday Season

[by Sarah Rotman Epps]

At a press conference this morning at the New York Public Library, Sony announced:

 

• The much-anticipated debut of its wireless Reader, the Daily. At long last, Sony announced what the market has been waiting for--a wireless Reader device, which will run on AT&T's 3G cellular network. (AT&T will also power the network for the Plastic Logic eReader when it comes out next year.) Like its brethren, the Sony Pocket and Touch Readers, the Daily has Sony's hallmark high-quality design, and frankly, makes the Kindle look like an oversized calculator. Its touch-operated 7" screen has a vertical orientation evocative of a newspaper column. Sony didn't announce its content partners, but many of our newspaper and magazine clients have told us they are in conversations with Sony and we expect additional announcements later this year. The device will ship in time for the holidays and will sell for $399.
• Our take: The new screen size is an elegant solution to the problem of how to optimize for newspaper and magazine content without building an oversized, ungainly device. (The Daily is slightly smaller than the Kindle 2, and with its built-in cover weighs the same as the Kindle 2.) Unlike the Kindle, the Daily is a touchscreen. Even with the higher price, this is an attractive product for consumers who value Sony's design and touchscreen along with wireless access.
• Better integration of free public library eBooks into its store. Sony has partnered with Overdrive to integrate public library access into the Sony eBookstore. From the "Library Finder" feature in Sony's store, users type in their zip code and are directed to the eBook borrowing page of their local library, where they can check out an eBook (in PDF or ePub format) for 21 days. Eventually, Sony's Reader devices will also include this integrated library search and borrowing function, but for now library books will need to be sideloaded into the device.
• Our take: This is not just good PR and a public service, but also a smart business decision for Sony. Sony is telling consumers, "you don't need to buy our content--or buy any content--to get value from our devices." Enabling consumers to access free eBooks via the public library network and Google's public domain collection (which now tops 1 million volumes)--and letting consumers buy ePub books from other sources and read them on Sony's devices--greatly expands the value proposition of its devices. And by going open, Sony helps compensate for its biggest weakness: its lackluster eBookstore, which pales in comparison with Amazon.com.

 

Overall, these and previous moves put Sony in a strong position to compete against Amazon this holiday season. Sony's well-designed product lineup--which offers value-seeking consumers the Pocket Reader at $199, those willing to trade up for more features the Touch at $299, and wireless junkies the Daily at $399--will measure up well against the ugly duckling Kindle 2 and Kindle DX. It helps that Sony's products will have distribution in more than 8,600 stores, including Best Buy, Wal-Mart, Costco, Target, and others; the Kindle is available in just the 1,200 Targets (in addition to Amazon.com, of course).

 

With the right products and the right distribution, now it's up to Sony's marketing team to persuade consumers that a Reader is the perfect holiday gift, superior to the popular Amazon Kindle. With a campaign that includes TV, online, print, and in-store efforts from September to January, Sony is putting serious resources behind this product push.

 

Stay tuned for Forrester's updated holiday outlook for the eReader market--it will be an exciting holiday season, that's for sure.

 

And then there's next year...

 

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Cleantech: Kindle Really Is Better For Environment

[by Sarah Rotman Epps]

A new report from the Cleantech Group (available for purchase or to Cleantech clients) takes on a big question: Are the Kindle and other eReaders really "green"?

 

In Forrester's surveys, we've found that of US online adults who are interested in eReaders, 51% say they're interested because they think that eReaders are "better for the environment." But I've often wondered if consumers just believe that eReaders are green, or if they really are.

 

Here's my take on Cleantech's findings:

 

• Yes, eReaders are greener than print. The report looks at the carbon footprint of print production and distribution of books, newspapers, and magazines, as well as the negative impact of the Kindle and its brethren on the environment (mining, energy use, water waste, disposal, etc.). Cleantech uses Forrester and other data to estimate the extent to which using an eReader would offset print use. Comparing the relative impact of print waste, eReader reduction of print waste, and eReaders' own waste, Cleantech finds that "When compared to what it would replace, the Kindle consistently comes out ahead," calculating that the Kindle's own carbon footprint would be offset by its benefits after 1 year of use.
• But they will only have a positive environmental impact if publishers cut back on print. Cleantech makes reasonable assumptions about the extent to which consumers will use Kindles to buy eContent, but it acknowledges that "any reductions in emissions are fully dependent on the publishing industry reducing production of physical books." This is a key point: Publishers actually have to print and ship fewer books in order for eReaders to have a positive environmental impact. Right now, sales of eBooks are small ($113 million in revenue in 2008, accounting for less than 2% of US book sales), and sales of newspapers and magazines on the Kindle are too small to count. We and other analyst firms predict rapid growth of eReaders and content sales, but publisher behavior will ultimately determine the overall "green" impact of eReaders.

 

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Textbooks On iPhone: New CourseSmart App Launches Today

[Posted by Sarah Rotman Epps]

Today CourseSmart, a joint venture of five of the biggest textbook publishers, is launching an iPhone app to augment its Web subscription service for eTextbooks. Its subscription service offers access to more than 7,000 textbooks, at an average of 50% off print prices. Currently, CourseSmart has a few hundred thousand student subscribers, out of a potential addressable market of 13 million US college students (they only target higher education, not K-12, for now).

The iPhone app is nice, with a snappy thumbnail browse feature. It's not something you'd read on, per se, but offers easy access to look up something, search for something, or access your notes. Having the option of mobile access will undoubtedly increase the appeal of CourseSmart's subscription service, assuming the company is successful at marketing the new feature.

Currently, CourseSmart's content isn't integrated into the Kindle or other dedicated reading devices; this app marks its first move into increasing access to eTextbooks on any kind of mobile device. Maintaining print-identical formatting and pagination is a crucial aspect of its product; eReading devices aren't ready to support this type of content yet, but the iPhone is a move that makes sense.

The app is significant, too, for what it implies about Apple's intentions (or lack of) for entering the eBook space itself. Apple's recent approval of this app refutes the rumors about Apple killing eBook apps categorically. We still think, though, that Apple could easily add ePub file support to the iTunes store, and in doing so, become a huge player in the eBook market overnight, which would render many eBook apps unnecessary. (CourseSmart doesn't use ePub format; it has its own proprietary image-based format.) For now, though, CourseSmart has a big head start in the eTextbook market, one that other eBook sellers like Amazon don't come close to matching.

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Forrester: New eReader Data Suggests Amazon Vulnerability

[Posted by Sarah Rotman Epps]

Just a quick note to say that we've got a new report up on the changing demographics of eReader buyers: "Who Will Buy An eReader?," available in full to Forrester clients.

First, eReader interest and awareness is definitely growing, as you can see:

Second, the types of consumers likely to buy an eReader are changing. While early adopters of eReaders were a perfect storm of demographics for Amazon (they could afford the device, they have a need for the device in business travel and urban commuting, they like technology, and they buy lots of books online), future prospects for the devices look completely different. They're more likely to be female, less tech optimistic, and they read a lot (on average, 5 books per month) but they buy and borrow books from multiple sources, as opposed to buying lots of books online.

The big takeaway is that this could spell trouble for Amazon, if competitors can move in to better serve the later waves of adopters who don't have as strong a relationship with the eCommerce giant.

I've heard from clients that they're already seeing this shift--more women buying the devices and shopping for eBooks. Looking forward to continuing the discussion...

Sony + Google: 1 Million eBooks And Counting

[Posted by Sarah Rotman Epps]

The eBook arms race continues.

Today Sony announced that its public domain offerings from Google in its eBook store has reached 1 million volumes. That's a lot of eBooks. For context, the Library of Congress has 32 million books and is the world's largest library; Harvard's collection is 5th largest at 15 million books. (Thanks, Wikipedia.) So we're merrily trucking along at digitizing the world's collection of books.

(By the way, if you've ever wondered how Google goes about digitizing books, check out this cool graphic from their patent.)

This news follows Barnes & Noble's announcement last week that they, too, have a partnership with Google, and will be offering their content in their eBookstore via apps on smartphones and PCs (and eventually the much anticipated Plastic Logic eReader).

Here's what I think the implications are:

• eReader device manufacturers realize that without content, their products are doorstops. If CE manufacturers have learned anything from Apple, its that no matter how sexy your hardware is, content sells a device. Among US online consumers who don't currently own an eReader, 21% say that a "greater selection of eBooks" would be a feature most likely to cause them to consider an eReader (source: Forrester's North American Consumer Technographics(r) Media & Advertising Online Survey, Q2 2009).
• Open platforms are an effective strategy for battling Amazon. The definition of "open" is up for debate--B&N claims that their platform is open, but you can't buy books from their store and read them on the Sony Reader or the Kindle. But Amazon's platform is undeniably the least open--if you were really determined, you could sideload Google eBooks and library books onto your Kindle, but it's really a device optimized for buying books from Amazon and reading them on the Kindle (or the iPhone app for the Kindle). Sony and B&N have countered Amazon's completely closed platform by integrating Google's content more seamlessly into their eBookstores. Giving consumers more choice of content, including free content, is good marketing, even if consumers end up just buying bestsellers anyway.
• We are witnessing the beginning of the complete digitization of books. This is truly a transformational moment in the history of human communication and technology: We are taking humanity's entire collection of print books, centuries in the making, and digitizing them in less than one human's lifetime. When you think about what changes have occurred related to the digitization of music, it makes you a little bit awed at what's to come for books.