Apple iPad: End of Road for Kindle?

For the last fortnight, there has been a lot of talk about Apple launching its tablet computer. Apple finally unveiled its much touted device, iPad on 27th January, 2010. Such was the hype of this product that as many as 177,000 tweets happened on Apple within an hour of the launch event. iPad is a sleek looking, multi-touch device that has been positioned as a device between a smartphone and laptop. Due to its design a lot of parallels are being drawn between iPad and Amazon’s Kindle. Some of the analysts and blogs have sounded death knell for Kindle.

Amazon launched its Kindle device and created the e-reader segment. Barnes and Noble later launched Nook to take on Kindle but failed to take off due to product and software issues. However, e-readers caught consumer frenzy and around 1 million e-Readers were shipped in 2008 which are expected to go up to 28.6 million units bu 2013 (source: In-Stat). Nearly half of the e-Reader users spend $9 to $20 per month on the content which means over the life time of the consumer, the content revenues far outstrip the device revenues.

Kindle is a smart device which offers convenience as the value proposition. It is the hardware plus the book store plus the download experience of Kindle that has attracted many users to the e-book category. With Amazon Kindle, the users can download the books anywhere in the world without paying anything extra for the bandwidth. The most important aspect is that the Amazon is the data MVNO in this case and hence the users do not have to worry about buying bandwidth separately. Being the first mover and having a virtual book store is another advantage for Amazon as it has existing relationships with the publishers. Availability of a large collection of books and newspaper which can be downloaded in a hassle free way is a big plus of Kindle. In case of iPad, Apple has struck deal with five publishers (Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster). Unless Apple is able to broaden its base, it is unlikely to challenge the big e-book market.

We should analyze the market of Kindle separately from its DX version. Kindle is for $259 vs. iPad’s price tag of $499 which means that there would be a large segment that may not be willing to spend double the amount to buy iPad. However, the price differential between Kindle DX and iPad is just $10 and iPad offers so much more that Kindle DX. So, unless Amazon reduces the price of Kindle DX significantly, I do not see Kindle DX being able to compete with iPad.

Apple iPad is targeting a larger segment than the e-book readers. All iPhone applications are available on iPad which means that even the Kindle store on iPhone is now available to iPad users. Another functionality that works in Apple’s favor is the fact that it has WiFi which means it can connect to hotspots and download the content fast and/or free of cost. iPad has a color screen as opposed to grey screen of Kindle and can be used for a variety of other purposes apart from book reading. In fact, I am more inclined to say that the threat is higher to the net-book market than the e-reader. There would be buyers for e-readers like Kindle if the devices are priced in the range of $200-300. Kindle @ $259 offers great value. Amazon has already making aggressive efforts to fend of competition by launching KDK (Kindle Development Kit) for developers to develop applications for its device in an effort to make the device more valuable and functional to the users.

So, is game over for Kindle? Probably not yet.

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