Kindle, Nook, Other E-Readers Wrecking Publishing Industry: Report

By: Nicholas Kolakowski

Amazon's Kindle, Barnes & Noble's Nook and other e-readers could undermine the market for paper books, wrecking publishing industry revenue.

Amazon’s Kindle, Barnes & Noble’s Nook, and other e-readers might dangle the prospect ofconvenience for millions of bibliophiles around the world, with their light weight and instant access to whole libraries of e-books, but a new analyst report suggests the devices could eventually prove bad news for the publishing industry as a whole.

“The book publishing industry has entered a period of long-term decline because of the rising sales of e-book readers,” reads an April 28 research note from IHS iSuppli, which predicted a decrease in book revenue at a compound annual rate of three percent through 2014—a reversal from the period between 2005 and 2010, when revenue rose.

For the traditional book publishing industry, the implications of the rise of the e-book and e-book reader markets are frightening, given the decline in paper book printing, distribution and sales,” Steve Mather, IHS iSuppli’s principal analyst for wireless, wrote in an April 28 statement. “The industry has entered a phase of disruption that will be as significant as the major changes impacting the music and movie business.”

The firm predicts that physical book sales will decline at a compound annual rate of 5 percent. While e-book sales will rise during that same period, the increase won’t cover the revenue gap created by the decline in the physical book market. By 2014, the research note predicts, e-books will occupy some 13 percent of U.S. book publishing revenue, more than twice its current level.

However, e-readers will find some significant competition in tablets such as Apple’s iPad.

“Dedicated e-reader shipments will fall short of some expectations, partly because of encroachment from media tablets, which many consumers will use to view e-books,” Mather wrote. “Price declines for e-readers will be less than many expect, since makers of such devices already have cut prices to the point where they earn near-zero margins.”

That being said, e-readers could also become more like tablets: Barnes & Noble’s Nook Color now boasts some tablet-like features, including an integrated email application, support for Adobe Flash Player and access to applications like Angry Birds. Amazon could potentially follow suit, at some point, with either a full-color Kindle or an Android-based tablet that emphasizes e-books.

“Barnes & Noble is not targeting Apple with this device. Instead, it’s targeting Amazon, trying to undermine today’s black-and-white Kindle as well as tomorrow’s color Kindle tablet,” James McQuivey, an analyst with Forrester, wrote in an April 25 corporate blog posting soon after Barnes & Noble’s announcement of the new features. “Barnes & Noble may have come to market with its original e-ink Nook second, but its Nook Color upgrade gives it the upper hand in the war over the serious reader.”

For the moment, Amazon seems focused on enhancing the Kindle’s reading capabilities. On April 20, the company announced a Kindle Library Lending feature, due later in 2011, which will allow readers to borrow Kindle e-books from more than 11,000 libraries in the United States. Amazon is also seeking to broaden Kindle adoption with an ad-supported device that retails for $114, slightly cheaper than the basic Kindle at $139 and the Kindle 3G at $189.

But in the fight for dominance between these e-readers and tablets, will printed books prove the ultimate casualties?

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