Wednesday, January 5, 2011

Kindle Killer? Probably not, but will the iPad become a Kindle Cannibalizer?

OK, we got it. The iPad is not a Kindle killer. At least that's what we hear in the last couple of days following a recent survey of about 1,000 consumers by JP Morgan’s Internet team. Among other things this survey found that 40% of iPad owners also own a Kindle and that 23% of iPad users said that they plan to buy a Kindle in the next year.

So, no killing, but how about cannibalizing? How much can the iPad (and other tablets) squeeze the e-reader market, making the Kindle the preferred device only for the niche of avid and semi-avid readers?

Let's look first at the JP Morgan's survey. Erick Schonfeld summed it up on TechCrunch (click on the picture to see it in full size)

These are very interesting results. Like many others I also thought that the the iPad will have a greater negative influence on the Kindle and other e-readers sales.

But even though it's clear now that Amazon did a very good job in differentiating the Kindle from the iPad, as well as in marketing it, there is still one BIG question that is still unanswered:

How significantly the iPad (and other tablets) would cannibalize the e-reader market?

Yes, we know that the Amazon did well in 2010 (they won't say of course how many Kindle devices they sold but a recent report from Bloomberg estimated that Amazon was likely to sell 8 million Kindles in 2010), but how well will it do in 2011 and 2012 with dozens of new tablets coming and when the with estimates that U.S. sales of tablet computers will more than double in 2011 to 24.1 million?

I wonder how many of the 40% iPad owners that also own a Kindle bought first the Kindle and then the iPad? I would guess that probably 80-90 percent of them. So what we can learn from it? One possibility that is not mentioned on the JP Morgan's survey is that consumers bought a Kindle because that what was available in the market back then, but they want something that is more than just an e-reader and that's why they bought the iPad when it became available in 2010.

So one possible conclusion can be that the Kindle is not good enough for many consumers, who don't read much, and want to have other features such as internet browsing, e-mail, watching video, and playing games. Now when there will be so many new tablets available, it is definitely possible that this sort of logic will get consumers to buy the iPad 2 or any other tablet instead of the Kindle. The result: The Kindle sales will decline or at least won't grow as much.

True, 23% of the iPad users say they plan to buy a Kindle in the next year, but how many of them will actually do so? I guess this is the variable that will actually determine to what degree the iPad will cannibalize the Kindle sales. If 23% or even 15%-20% of tablet owners will also purchase the Kindle (or Nook or Kobo), then the Kindle will do just fine. But if the percentage would be significantly lower, then Amazon will dominate mainly a relatively small market niche that includes just avid and semi-avid readers that would care about the advantages the Kindle has over the iPad when it comes to e-reading.

Bottom line: Projections for the Kindle sales on 2011 expect less Kindle devices to be sold this year compared to last year (4-5 million in 2011 compared to 8 million in 2010), but we'll need to be patient and wait to the end of 2011 to see the real influence the iPad and other tablets have on the e-reader market in general and the Kindle sales specifically.
Then we'll know if the iPad is really cannibalizing the Kindle or they can both co-exist and grow their sales happily ever after.

Raz @ Eco-Libris

Eco-Libris: Promoting sustainable reading!