Market Analysis: Are eBook Readers Really Facing Extinction, or Are They Here to Stay?
There are certain topics that seem to strike a nerve. Otherwise, I can’t explain why they constantly grab attention with the same arguments. Alongside very serious socio-political issues, this also applies to topics in consumer electronics. Smartphones and tablets dominate this sector as strong revenue market segments. But eBook readers aren’t exempt from (biased) reporting either.
Recently, an old headline is making the rounds again: “eReaders are finished.” Many media outlets, even reputable ones, report something along these lines. Why is that? There are currently two reasons.
Declining sales as a reliable indicator?
For one, Bitkom recently released the sales forecast for dedicated reading devices for this year. According to it, only around 570,000 devices can be sold in Germany in 2015. In 2014 it was 770,000, in 2013 1.09 million, and in 2012 680,000.
eReader sales forecast for 2015, doesn’t look so good
At first glance, this suggests a problematic development for the segment. Especially tablets and smartphones threaten the eBook readers because you can read just as well on these multifunctional competitors – at least many analysts believe so.
What they completely overlook in evaluating sales figures: eReaders have a significantly longer lifespan. The technological progress in dedicated reading devices has always been slower. For many owners of a functioning device, there is often no particular reason to switch early. I myself read for years on my Sony PRS-505 and PRS-650 devices, even though newer models were long available.
You can observe a very similar effect with tablets. The sales figures for flat computers literally exploded after the introduction of the first Apple iPad. However, last year there were already first signs of a cooling of the growth. Here, too, switching devices with a new model generation is often unnecessary.
With smartphones, it’s obviously different. Every year, new models are introduced that bring changes in camera, display, chipset, design, and software. These are significant enough to trigger a “must-have” effect for many people. Some carriers have therefore begun to make popular smartphones available to existing customers even before the minimum contract period ends.
Tablets and eReaders not exclusive
But: At some point, every market reaches a certain saturation level. eBook readers are no exception, tablets as well, and it will eventually be the case with smartphones too. There is no unlimited growth. However, this does not mean that the device segment suddenly dies out. That happens only if there is a better replacement. VHS was replaced by DVDs, compact cassettes (by minidiscs) by CDs, and so on.
You might argue that this relationship also applies to eReaders and tablets. You can also read on flat computers. This is repeatedly confirmed in various surveys: Tablet owners also read digital texts on them. This is the primary reason why the demise of eBook readers was predicted years ago.
However, there seems to be a fundamental misunderstanding on the part of analysts regarding the role of dedicated reading devices and tablets. Many think they know that eBook readers offer no advantages over tablets (and large smartphones) and are therefore cannibalized. The fact is that eReaders still provide the better, more paper-like and eye-friendly reading experience.
In the already well-saturated U.S. market, dedicated reading devices have long secured a fixed spot in the consumer electronics market. The tablet competition seemed to have only a marginal impact on sales success. The situation in Germany is similar: the growth years of eReaders (2011-2014) were at the same time the most successful for the tablet and smartphone market. Quite strange, isn’t it?
Sales figures for smartphones and tablets in Germany; Source: Bitkom
The recent Bitkom survey indirectly confirms this picture: According to it, 34 percent of digital readers use eReaders to read eBooks. 38 percent use smartphones, and only 20 percent use tablet PCs. However, it is questionable what is summarized under the term eBook. Does it include random PDF texts found in abundance online, or does it refer exclusively to works purchased in shops?
62 percent of respondents read on regular PCs? eBooks? Or are random PDF files from the internet included here?
41 percent of respondents say they read on a notebook, 21 percent also read on a stationary home computer. Additionally, 78 percent say they read only on a single device. If you recalculate the shares, you find that about 38 percent of respondents read fiction on a computer. Personally, I find that … unlikely. Last year, the ratio looked quite different.
Consumer demand is clear
Such consumption analyses are always very interesting but not as clear-cut as often suggested. If you shift the focus from consumers to manufacturers, there’s really no doubt about the success of eBook readers.
In recent years, Amazon has regularly released new reading devices since the first Kindle, which are extremely popular (judging by the number of customer reviews). Not only in the USA but also in all other countries. The tablet business, on the other hand, is sluggish. Amazon is one of the biggest losers here. That’s probably why the e-commerce giant has shifted to the low-cost route with the new Fire generation. At the same time, the Kindle eBook business continues to do very well.
The Tolino Alliance initially started with the Tolino Shine and later added two tablets (Tolino Tab 7 and Tab 8.9) to their lineup. With the next product cycle, they reduced it to one flat computer (Tolino Tab 8) but kept two dedicated reading devices (Tolino Shine and Vision 2) in their lineup. In a few days, they will also introduce two new eReaders: Tolino Shine 2HD and Tolino Vision 3HD. They are expected to introduce only one tablet.
Kobo has introduced three new reading devices in the past 12 months (Kobo Aura H2O, Glo HD, and Touch 2.0) and removed two tablets (Kobo Arc 7 HD and Arc 10 HD) from their lineup.
PocketBook introduced seven eBook readers last year but only three tablets. This year, there was just one new eReader introduction (PocketBook Touch Lux 3) and no new tablets.
As you can see, all major eBook providers are still primarily focusing on dedicated reading devices. Although Amazon has a range of different tablet PCs in their lineup, these are intended to strengthen their multimedia offerings (movies, series, music, apps). As mentioned earlier, this segment is anything but a success story for Amazon.
And, of course, there’s still the biggest brick-and-mortar bookseller in the USA to mention. Barnes & Noble believed in the analyses a few years ago and prematurely wrote off eBook readers. Instead of advancing the development of dedicated reading devices, they added two fairly high-quality tablets to their lineup. However, these could ultimately only be sold with massive discounts. This even went to the point where they included the Nook Touch free with the purchase of a tablet. Simultaneously, their market shares in the US eBook market plummeted. By now, the Nook business is in shambles – despite years of great tablet offers.
Finally, I also want to mention Sony: The Japanese electronics company completely withdrew from the international eBook market, despite having previously focused on tablets and especially smartphones. If these two device categories were really of such enormous importance to the digital reading market, why did the eBook business still fail? In Europe, they at least had several shop solutions in place, a strong market presence with eReaders, and even provided an Android app. Best conditions for a successful eBook business on smartphones and tablets, right?
At the same time, you might want to ask why companies like Apple, Samsung, & Co. don’t have significant market shares in the digital book market, even though they dominate the smartphone and tablet market.
Thus, it can be concluded: eReaders remain the cornerstone of the digital book market. It may be true that reading also happens on tablets and smartphones, although the significance seems to be overestimated. Barnes & Noble is the best example of this.
Waterstones distances itself from Kindle
Now we come to the second point mentioned at the beginning: Waterstones is pulling Kindles from their range. Previously, Amazon and the British bookseller collaborated on selling eBook readers. At the beginning of the year, the CEO of the bookstore chain expressed criticism regarding the sales figures of dedicated reading devices.
Even then, some media picked up on these statements and predicted the end of dedicated reading devices.
As The Bookseller reports, Waterstones is now making a clean break. Because Kindle sales are “pitiful,” they prefer to use the space in stores for printed books, as these have increased by almost 5 percent. Blackwell echoes this sentiment. eReaders are also selling very poorly there.
Finally, the article also features a comment from an analyst who calls eBook readers perhaps the shortest-lived consumer electronics sector.
This initially sounds problematic, but it’s not the case upon closer inspection. Blackwell sells Barnes & Noble devices. As mentioned earlier, the US bookseller has already lost considerable ground in its home market. It doesn’t come as a surprise that this is the same in Europe. The currently available Nook Glowlight was already technically outdated when it launched, and tablets mostly aren’t bought from booksellers.
At Waterstones, a few other factors likely led to the end of the Amazon partnership. The collaboration caused some surprised looks back in 2012. After all, the retail giant is in direct competition with brick-and-mortar bookstores. In 2012, the “Boycott Amazon” campaign even started due to questionable tax constructs and working conditions.
But more than that: The Kindle system is completely closed. It’s entirely unclear how the financial compensation looked. It’s probable that Waterstones received money both for the sales space in the stores and for subsequent eBook sales. However, it’s just as likely that the revenue sharing was time-limited.
Amazon handles it similarly with Amazon Source. The program offers independent US booksellers the opportunity to add Kindle devices to their lineup. In return, they get 10 percent of the follow-up sales for two years. For Amazon, it’s a long-term lucrative business, for the booksellers only as long as the device sales remain at the same (high) level. But throughout the entire time, they are essentially shooting themselves in the foot by directly enabling the main competitor to gain new customers.
If Waterstones and Amazon had a similar agreement, the downturn in brick-and-mortar Kindle sales also equals a medium-term loss of eBook revenue. It makes sense for them to return to focusing on their core business.
Waterstones operates an ePub shop …
In this context, it’s also worth mentioning that Waterstones operates its own ePub shop. Let that sink in. The book chain sells Kindle reading devices, but sells eBooks in the ePub format on its homepage. It’s no surprise (pardon the language) that such a harebrained sales concept isn’t successful. The Tolino Alliance shows how to properly implement a multichannel strategy.
Given that online retail is now even more established than it was in 2012, it wouldn’t be surprising if Kindle sales have shifted more towards online. If you take a look at the UK Amazon homepage, this assumption seems to be confirmed. All three available Kindle models consistently receive new customer reviews. The Kindle Touch, which hardly seems to gain traction in Germany, is even the most successful model in the UK. There doesn’t seem to be a notable slowdown in sales compared to previous years.
eBook readers and tablets will merge
In summary, it can be stated that the available data can certainly be interpreted to predict the end of the eReader segment. On the other hand, the same arguments have been heard for over three years, and the market development of the key eBook providers paints a different picture.
However, I personally have no doubt that dedicated eReaders will eventually disappear from the market. At least in their current form. In the future, there will be display technologies that combine the advantages of E-paper and regular LCDs. When that time comes, the line between tablets and eBook readers will blur.
The previous attempts (Qualcomm Mirasol, Notion Ink Adam …) to establish such a combined device type have so far failed miserably due to unconvincing implementations. Currently, it’s known that Amazon is working on the Liquavista technology, and Qualcomm is continuing to improve and finalize the Mirasol technology. Japan Display is also researching in the same direction.
But it will probably be several more years before we reach that point. Until then, E-Ink technology will likely continue to develop, so there will always be a reason to eventually switch to an even better dedicated reading device. Based on the market development so far, I believe a complete end to eReaders can be ruled out.
