How E-Books Are Coming Full Circle, Thanks to Tablets

As tablet sales, led primarily by Apple's (AAPL) iPad, gain momentum, it seems everyone wants in on the market. Not only are traditional computing and smartphone companies launching or announcing new slates, but makers of e-readers look ready to do the same. The Barnes & Noble (BKS) Nook Color, built to run on Google's (GOOG) Android platform, will reportedly gain an app store next month, while Amazon (AMZN) just launched its own app store for Android devices earlier this week, possibly in advance of launching its own tablet. Standalone e-book readers have their benefits, but the shift to reading on multipurpose tablets is on.

Ironically, this situation has come full circle, although I suspect few realize it. I bought my first e-book in October 2003, more than seven years ago. Back then, there were no e-book reading devices. Instead I was reading my digital books on a PDA, or personal digital assistant. At the time, my Toshiba e805 was perfect for reading on the go, with its built-in Wi-Fi and 4-inch VGA color touchscreen. The handheld ran Microsoft's (MSFT) Windows Mobile 2003 operating system, so I had the ability to browse the Web and even install apps (yes, before there was an "app store"). In short, I had a great e-book reader that did a lot more besides.

Then the Kindle arrived in the fall of 2007, and with its arrival, the standalone e-book reader went mainstream. Sure, there were earlier attempts at bringing an e-ink device to the masses—Sony's (SNE) PRS-500 Reader made its debut more than a year before the Kindle—but Amazon's strength of brand and ability to negotiate with publishers, plus the inclusion of mobile broadband book delivery for no additional charge, turned the Kindle into Amazon's best-selling product. A number of other standalone e-ink readers have since followed, creating a whole new market. But the trend began to revert back to multipurpose devices with the launch of Apple's first iPad last April. I ended up selling my beloved Kindle because the iPad did so much more, plus it offered a Kindle app.

Slates With Many Functions

There's still a market for e-book readers that do nothing more than show e-book content. Some people will prefer e-ink displays that cause less eye strain and use power only during page turns, which allows the Kindle to last weeks on a single charge. But the growing tablet market, expected by some to sell 24.1 million or more units this year, indicates people are looking for a mobile device that can browse the Web, run various apps, and even be a portable television and movie theater, in addition to providing a solid e-book reading experience.

But why would Barnes & Noble, Amazon, or others even be interested in tablets when they already make a cut of the digital book content purchases? Two answers come to mind: losing control over that revenue stream on other devices and leaving money on the table.

Apple is set to enforce rules on e-book software for its iOS devices by requiring such apps to offer book content as in-app purchases. Effectively, Apple would earn 30 percent on sales of Kindle and Nook books as a result. The e-book content sellers lose control in this situation and stand to lose profits, as well. To offset this situation, e-book platform providers could raise revenue through the use of their own app stores, thereby gaining a cut of software profits, just as Apple does. By not offering software stores, these companies are letting Google, Apple, and others take that revenue for themselves.

To have an app store though, one needs a platform. Barnes & Noble is already well positioned here, because it built the Nook readers on top of Google's Android platform. In fact, many people are buying the $250 Nook Color both to read books and to hack it into a usable multipurpose slate. If Amazon follows with its own tablet, it too would likely use Android for a few reasons. The app store it just opened for Android devices is a strong sign, but not the only one.

Digital Music Locker

Amazon's MP3 store application for selling digital music appears on most new Android handsets by default—another revenue stream for the company in the world of Android. And as I said in 2009 in a GigaOM Pro article (subscription required), Amazon is perhaps best suited for a digital music locker in the cloud, although I've seen firsthand that Google is already working on a similar offering. In that case, an Amazon Android tablet would be perfectly suited for such a product. Add in support for Amazon's video-on-demand service, and an Amazon tablet could be a multi-threat: e-book reader, Web surfer, application powerhouse, and cloud-powered media streamer.

And that brings us back to 2003, because my little PDA shared all the same functionality, albeit limited by the tech of the time. Does this mean standalone e-book devices are completely on the way out? Not by a long shot, because some buyers prefer a lighter, smaller device that's easier on the eyes, keeps the focus on one activity, lasts for days on a charge, and works well in direct sunlight.

Of course, new, low-powered display technologies such as Qualcomm's (QCOM) Mirasol and Pixel Qi's Adaptive Screen products bring the best of both worlds: an e-ink experience combined with color and fast frame-rates for surfing, apps, and video playback.

These displays may be the final piece needed for Amazon, Barnes & Noble, and other e-reader companies to compete with Apple's iPad in the tablet market with e-reader devices that offer great reading experiences in addition to the benefits brought by a mobile software ecosystem and media services. That's exactly what I expected my mobile device to provide me nearly eight years ago, given the promise of the wireless Web, software, and cloud services. Here we are in 2011, and I'm right back in 2003—just with a far better choice of devices that meet my needs.

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