In its second-largest acquisition, Amazon buys the company for $970 million.
As the iPod transformed music, Amazon’s Kindle and similar devices are changing the way consumers buy and read books.
Digital books that can be read on computers or other electronic devices have been around for more than a decade. But it was Amazon.com Inc.’s introduction of the Kindle in November 2007 that moved e-books beyond the realm of early adopters and opened up the prospect of a transformation in book retailing, one of the mainstays of e-commerce.
The rapid consumer acceptance of e-book readers has led to a scramble for control of everything human beings have committed to paper, a contest that has drawn in such technology giants as Google Inc. and Microsoft Corp., as well as publishers, authors and book retailers. While much is in flux, it’s becoming apparent that bookselling will never be the same.
E-books still account for less than 2% of book sales, according to publishing industry estimates. But in 2008, the first full year Amazon’s Kindle was available, e-book sales hit $113 million, up 68% from $67 million in 2007, reports the Association of American Publishers. And sales from January through June this year have been steady at $14 million a month, the association reports, on track for $168 million in 2009, a 48% jump over 2008.
Already 5.8% of consumers own dedicated e-book readers, and 11.6% plan to buy one, according to research firm In-Stat. Device-makers will sell 2 million e-book readers this year, Forrester Research Inc. says.
Amazon’s Kindle owns close to 60% of the market and Sony’s Reader nearly 40%, according to Forrester.
For consumers, finding, browsing, buying and reading e-books has never been easier than it is today. It’s an experience akin to digital music.
Using devices with wireless network connections, consumers can browse and buy directly from online bookstores. On all e-book readers, with and without wireless connections, they can browse and buy on an e-commerce site and transfer files from their PCs to the reading device. In both cases, files are stored and managed on the device and the PC through software from the device manufacturer.
E-books are similar to digital music in another way: One device-maker/retailer with a proprietary digital file format was a couple of years ahead of competitors and gained a market share that may never be beat. For digital music, it’s Apple Inc.’s iPod and iTunes store. For e-books, it’s Amazon’s Kindle and Kindle Store.
But Amazon faces growing competition. Plastic Logic Ltd. and Irex Technologies offer e-readers and will debut wireless versions next year that will feature BarnesandNoble.com as their official e-books store. Digital reading also is spreading to mobile phones and potentially other devices. Most smartphones’ app stores offer free programs that link to e-book sellers; these apps include the popular Stanza (now owned by Amazon.com) and one for the Kindle. While there are rumors that Apple may introduce a tablet PC that could read e-books, Apple is mum on the subject.
10 major sellers
There are about 10 major e-books retailers, led by Amazon.com. Others include BarnesandNoble.com, BooksOnBoard, Borders Inc. (which also sells the Sony Reader), The eBook Store from Sony, Fictionwise LLC (acquired in March by Barnes & Noble) and Shortcovers (a division of Indigo Books & Music Inc.).
Google offers more than 2 million free e-books that are in the public domain (also referred to as out-of-copyright) and in the PDF file format that any PC can read. It may soon get into the business of selling e-books.
However, a dispute over a proposed settlement of a class action lawsuit filed by some authors and publishers against the search engine giant is holding things up.
Google has been scanning public domain and out-of-print books in a successful effort to amass an e-books collection that towers over the market. It reached a $125 million settlement with groups representing authors and publishers that would give Google license to all books it has scanned, though authors with out-of-print books who object can have their books removed from Google’s library.
A coalition of library associations and non-profit groups, along with Google rivals Amazon.com, Microsoft and Yahoo, oppose the settlement. And in late September, the Justice Department issued a legal filing to the United States District Court for the Southern District of New York, saying, “This court should reject the proposed settlement and encourage the parties to continue negotiations to comply with Rule 23 [for class action lawsuit procedures] and the copyright and antitrust laws.”
Google emphasizes that the settlement is not exclusive, and that any other company can scan the same books and work out agreements with publishers and authors.
Unlike BarnesandNoble.com and Sony, Amazon does not have an agreement with Google to let its users download Google e-books. Amazon with its Kindle, like Apple with its iPod, seems to be set on maintaining its proprietary e-book file format that can only work with its own device.
On that note, Amazon declines to comment on whether it will adopt the increasingly popular ePub standard file format that some e-book sellers use and other e-book retailers are considering. The ePub standard includes a digital rights management component that sellers can use; or, sellers can use their own DRM technology to prevent the illegal copying of e-books.
“Amazon has a nice position as a market leader and doesn’t want Google to compromise that,” says Sarah Rotman Epps, a Forrester Research analyst who follows e-books.
The big chains
BarnesandNoble.com and Borders are also going after Amazon’s e-book business, but Rotman Epps is skeptical.
“When consumers think about buying books, especially online, they automatically think of Amazon.com,” Rotman Epps says. “I’ve seen nothing to suggest Barnes & Noble or Borders have a convincing strategy to steal e-books market share from Amazon. They are at best positioning themselves to benefit off of a category that is growing overall.”
BarnesandNoble.com begs to differ. It cites a 2009 EquiTrend Brand Study conducted by Harris Interactive that shows Barnes & Noble is the No.1 bookseller in terms of brand equity. In other words, when people think books, most first think of and are satisfied with Barnes & Noble. And it says it has an advantage because Amazon only sells online.