Will E-Reader Innovation Capture Customers and More Market Share?Published: December 17, 2009 in Knowledge@Emory
Amazon.com’s Kindle might seem like the momentary gadget du jour, but the growing popularity of e-readers is having a significant impact. According to the Association of American Publishers (AAP), e-books sales have reached $15.9 million, reflecting a 170% increase for September and a 176% increase year-to-date. According to an October report issued by tech analyst Forrester Research, about 1.2 million e-readers are expected to be sold between October and the end of 2009, roughly 40% of the entire year's stock. The latest published reports indicate that the Nook is sold out (new orders won't be filled until early 2010), Sony's Digital e-reader is in short supply, and the Kindle is still available on Amazon.com. By the end of 2010, industry experts predict, 10 million people will be carrying e-readers
If holiday sales stats are realized or exceed expectations, the popularity of e-readers will not only spur innovation and a competition for dominance, but also pose an even greater threat to paper books, say faculty at Emory University’s Goizueta Business School.
Indeed, most technology watchers at Goizueta say that although the Kindle may not be the last word in e-readers, the economics and convenience are so clearly on the side of e-readers that the market for traditional paper books will take sustained hits.
"I like two things about the Kindle,” says Jagdish Sheth, a chaired professor of marketing and corporate strategist. “First, you can store and carry an enormous number of books, which is difficult with regular books. Second, it is very easy to access the book—and instantly.”
This ability to store up to 1500 books in one device and to download a book in just a minute or two from most countries’ cellular networks has made the Kindle a boon to a number of Goizueta professors.
Beyond the convenience of being able to carry a library twice the size of the original Library of Congress in your briefcase, e-readers, say professors, are actually a pleasant way to read. Andrea Hershatter, associate dean and director of the Goizueta BBA program, says the electronic ink screen, which is not backlit like a computer screen, makes the experience of reading the Kindle surprisingly close to the experience of reading on paper.
“After reading about three pages, you forget that you are not reading a book,” says Hershatter, who is also a senior lecturer in organization and management. “Unlike the iPod, for example, the Kindle does not elevate the experience of its function through the sheer joy of its technological and design brilliance. Instead, it fades nicely into the background and does its job, allowing the book or other content to take center stage.”
Benn Konsynski, a chaired professor of information systems & operations management, likes the e-readers so much he has two: the original 6” Kindle and the 9.7” DX, launched in May. His favorite feature is the ability to instantly access books. “If someone makes a book reference, I can pick it up wherever I am and start reading it,” he says. Goizueta's Hershatter goes a step further. If she's attending a lecture, she will download a book the speaker references even before he moves to the next slide.
E-books in the classroom
The functionality and mobility of e-readers is also making it an attractive alternative in the classroom. Konsynski is now working on a project to determine if students would benefit from using e-readers. Steve Walton, a professor of information systems & operations management and associate dean of the Goizueta Executive MBA Programs, says that 20 of the 85 members of the weekend EMBA class of 2010 will start reading all their cases and textbooks on Kindles next term.
Since Goizueta's modular and weekend formats allow busy executives to earn a top-ranked MBA without interrupting a challenging career, Walton says, it wasn't difficult finding volunteers out of that band of road warriors willing to replace their heavy textbooks with a single light device. The students liked the idea of not having to lug their books with them anymore. “Plus,” he says, “it’s cool.”
But Walton does anticipate the possibility of a few glitches. One is that the pages are all in black and white, which may make reading charts more difficult. Another: Kindle books don’t have page numbers. On the upside, users can bump up the font size, same as with a web page. (And if your eyes are too tired even for the largest font, a robotic voice can read your book aloud to you.) The downside: what do you do when your professor asks you to turn to page 25? Designed for recreational reading, the Kindle counts by line, not page number, making it difficult to navigate in a nonconsecutive way, according to Walton.
E-reader competition heating up
At the moment, the Kindle seems to be in the lead, ahead of Barnes & Noble’s e-reader counter-hook, the Nook, and Sony’s Digital Reader. Forrester Research estimates that Amazon will sell 3 million units this year. But Goizueta faculty caution that it is still too early to call a winner in the e-reader wars. For one thing, the technology is changing rapidly. The same advances in three technologies that made e-readers possible—improved screen technology, battery life, and cellular connectivity—continue to evolve, says Ashish Sood, an assistant professor of marketing who studies introductions of new technology into a market.
For another, Kindle's popularity is attracting plenty of competition. Many new models are expected to arrive in 2010, and some of them may turn out to have important new features. The Nook, for instance, has a feature that lets users borrow each other’s books, and some critics have given the interface high marks. Tech sites are also awash with rumors about the many anticipated new entries, including those by Microsoft and the most-feared name in media technology, Apple, which is expected to announce its entry into the text business on January 19 with a touch-screen tablet a bit like the iPhone, but three or four times larger.
As a historical matter, the early entrant is often not the eventual winner in a consumer technology race. Russell Coff, an associate professor of organization & management, points to the little-remembered fact that Apple actually invented the first PDA, called the Newton, in the early 1990s under CEO John Sculley. Apple’s PDA, however, failed to find a market for itself, and the Palm Pilot, released in 1996 by Palm Computing Inc., captured the market’s attention.
Most of the time, this period of experimentation settles on a “dominant design” (the tendency of new products to settle over time into a certain iconic design that consumers expect). That’s not to say, Sood notes, that the best design will win. In his research on product introductions, Sood has discovered that elements other than design often play a role in whether a particular product emerges as the front runner. For example, when it comes to content, Sony claims to offer more books for its reader than Amazon, having made a deal with Google for 600,000 titles in Google’s online library. Critical to market dominance might be penetration in schools and universities with good content for these markets, adds Sood.
Technological Lockout or the degree to which one of the players is able to lock readers into its own software is another level at which professors expect the battle of e-readers will be fought. Right now, Kindle mostly reads specially designed files that run only on Kindle software, but some observers don’t think Amazon will be able to maintain that lock for long. Coff predicts that e-readers will ultimately be coded for a common format, a bit like PDFs. Amazon and anyone else trying to sell a device that uses only proprietary files will face resistance, he says, and will eventually have to back down in the same way that Apple had to retreat from its attempt to sell songs on iTunes coded only in its proprietary language.
So which of these contenders gets to be the maker of “the book iPod”? "It depends on how the product features of e-readers evolve," observes Sood. Unlike a fax machine or a computer modem, the relationship of the e-reader isn’t to other users, but to the e-bookstore, which he argues may make such interoperability less important.
Consumer habits play a role in adopting technology
Sood’s not sure that the e-reader product itself will stay in a tidy niche. “Frankly, I think over the long term e-readers are going to be a niche market in themselves, because customers don’t want to carry one more device just for reading,” he says. "Netbooks and mobile devices like smartphones will soon incorporate e-reader capabilities creating competition for dedicated e-readers."
Sood believes that newspapers and books will still appear on paper for some time to come. A fan of print publications who says he likes to look at his Wall Street Journal for a few minutes while drinking his morning tea, suspects that although the e-reader market will develop rapidly, the shift toward e-reading will take much longer. Habit plays a huge role in the adoption of devices like this, he says. Even Hershatter says at this point she views the Kindle as another way to enjoy books, not as a replacement for them.
Ironically, the rapidity of the shift in the market may also paradoxically slow down adoption. Why? Potential users may decide to wait and see which design catches on in the market. After all, consumers don’t want to be stuck with outmoded technology; think Beta format or eight-track tapes.
To build more brand loyalty, Hershatter says Amazon should do more to make it difficult for Kindle users to switch to another e-reader. “So far, they have attempted to do so by archiving purchases electronically, but I think there are many more ways they can build in loyalty, like discounting the price for upgraded versions to current Kindle owners, providing some sort of limited sharing system, and discounting conversion of previously purchased hard-copy items to Kindle format,” she says. “The evolution of the iPod provides a very useful parallel, and I assume Amazon is looking hard at Apple as a template for how to manage and stay on the forefront of this technology.”.