Digital Books

There has been a growing interest in the digital book market this year, with many of the big players bringing products to market. Amazon surprised with their original Kindle, a technology that it would have no doubt calculated as one day eating into its traditional book market. This year has seen Sony enter the fray, and now Barnes and Noble has also come out with an Android powered eReader ('the Nook'). And in the background are lurking devices from companies such as Asus and News Corp (which mistakenly sees this business model as a panacea for the declining newspaper industry).

But what are they fighting for? The market for education has to be huge - gone will be school bags overstuffed with books; everything on one, streamlined device just makes sense. But beyond education, the picture becomes a little murkier. Is there a huge market for standalone book readers, for an additional device? Possibly not. An intuitive solution would be the merger of the laptop and book reader into an all in one solution tablet computer. Carrying around a smartphone and tablet means that in two devices I have a phone, GPS, PDA, computer and all of my books and documents; that sounds like a powerful value proposition. But the technology is not there yet, and it may be a while before a vendor is not only able to amalgamate all of these devices, but also wrap them up in an interface that is intuitive and productive (and there is still the issue of colour which would be a requisite for textbooks - current eReaders are black and white). A smartphone, a laptop AND a book reader, is just one device too many.

But there are other barriers other than technology. One of the reasons behind the rush to enter this nascent market is the drive to establish a digital book ecosystem and capture as much market share as possible. Businesses in this sector see the iTunes model and understand the overwhelming power it has given Apple within the digital music sector. And yet those very same companies, particularly Amazon (which usually has a good feel for its customers needs), are making the same mistakes as the music industry when it was dragged kicking and screaming into the digital age. One fact not mentioned enough is that buying a Kindle book does not give you control over it; the book sits on Amazon's servers, and should Amazon wish to delete it, they can (as they did recently with some of George Orwell's books over a copyright dispute - customers were not consulted, and one morning just found they no longer had access to a purchase they had made). This form of DRM, and any other measures that prevent customers from doing anything they would do with a physical book, will hold back this market. It was interesting to see that the Nook has a function whereby a digital book can be lent to a friend; on closer inspection it came as no surprise to find that this feature was restricted to the point of being useless.

Overall it's an interesting, but promising market. How quickly it matures will depend not only on technology and vision, but also on whether the players have learnt from past strategic mistakes of the other industries that have made a tentative transition to digital.

By M. Sumra, MBA Class 2010