Monday, March 29, 2010

E-reader smackdown!

The iPad is coming Saturday as a combined e-reader, Internet tablet, oversized iTunes Store client and jumbo iPod Touch game platform. Its most direct competitors seem to be the Amazon Kindle and the Android-based Barnes & Noble Nook.

Who will win this e-reader smackdown? In handicapping efforts Amazon, Barnes & Noble and Apple efforts to win US users, I can think of a number of possible factors:

  • Hardware device form factor, weight, screen, speed, battery life. Advantage: unknown.
  • Software features, easy of use. Advantage: Apple
  • Content variety and depth. Advantage: for now, Amazon
  • Merchandising promotion of content. Advantage: unknown (all three are strong
  • Price of the hardware, the content. Advantage: unknown (price wars have yet to begin)
  • Ecosystem of non-book add-ons. Advantage: Apple, with B&N (via Android) possibly catching up
  • Physical distribution for cross-promotions. Advantage: Both Apple and B&N have a strong retail presence, but only the B&N stores are about merchandising content.
  • File format, potentially reducing switching costs. Advantage: unknown, and unknown if anyone will care.
Obviously much of this is a systems play, with both end-to-end competencies and also the ongoing maintenance and development of a platform and platform-based products. Amazon has online services skills second only to Google, so the back-end is the company’s clear strength.

On the other hand, only Apple has managed platform strategies before — and it‘s done several very, very well. (Let’s ignore the Newton and Apple /// for now.)

Many startup companies are trying to make stand-alone e-readers, but none of these will be able to make the end-to-end systems. The stand-alone play was tried a decade ago with the Rocket eBook — it didn’t work then, even before consumers had three viable systems to choose from.

However, at least two other (self-imagined) systems integrators and erstwhile Apple rivals are conspicuously un-aligned. Microsoft’s efforts to create a music store (think Zune) have failed thus far, but its hardware partners like HP and Dell certainly want to sell tablets — and probably with more to offer than just Flash-based websites that Apple doesn’t have.

The other conspicuous omission is Nokia (and perhaps Samsung and some of the Chinese handset makers). They’re not going to sit idly by as Amazon and Apple swoop up customers and create switching costs, but I don’t see how they can realistically create an alternative on their own. Will Nokia try to add books to Ovi? Will its competitors get the Wholesale Applications Community to create a bookstore too? None of these seem viable.

There will be entry, exit and consolidation. Some of the startups will die. There’s no reason to think that Amazon & BN will make hardware forever, so perhaps some startup’s VCs will merge its portfolio company with the Kindle or Nook spinout.

Perhaps Palm’s investors will merge what‘s left of the company with one of these companies, and then offer it as an open-architecture e-reader company for the libraries of other publishers or retailers. The Nook is being developed in Palo Alto, so presumably it is populated with veterans of all local platform companies (Apple, Palm, Sun).

The one clear opportunity is Barnes & Noble going abroad. Although their sales skew towards the US, both Apple and Amazon think of themselves as global companies and are likely to continue their go-it-alone strategy abroad. Barnes & Noble will have its pick of partners in Europe and Japan if it wants to offer its hardware, back-end systems and ecosystem to retailers that cannot realistically establish their own systems abroad.

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