E-readers defy the odds as Kobo launches new products

Reports of the death of the e-reader, as the saying goes, may have been greatly exaggerated.

On the surface of it, the extinction-through-obsolescence concept makes all kinds of sense, right? E-ink readers only do one thing – they display e-books. Sure, they do so nicely and without glare, but why would anyone want two devices when one – a tablet – can handle that particular chore, plus a thousand others? Why spend the extra money on such a limited, single-use product?

Not surprisingly, analysts have been predicting the death of the single-function e-ink e-reader for some time now. Back in December, market research firm iHS iSuppli issued a report that said e-readers were seeing “an alarmingly precipitous decline,” based on shipments for the parts needed to build the devices.

Toronto-based Kobo, which has just announced a slew of new tablets as well as a new Aura e-ink reader, begs to differ. A third of the company’s e-reader customers already have a tablet, indicating that many people don’t mind owning multiple gadgets, according to Wayne White, executive vice-president and general manager of devices.

Tablets are actually turning people onto e-readers, he says, rather than the other way around. While the multi-purpose gadgets are good for introducing people to e-books, their LCD screens are not ideal for reading. E-readers are more optimized for, you know, actual reading, so many people are considering buying one to be an upgrade.

“There’s a suggestion that there’s a really attractive loop that’s going to occur as tablets create demand for e-readers,” White says.

The phenomenon is similar to what’s happening in cameras, he adds. While ever-improving smartphones have all but decimated the point-and-shoot segment, sales of full Single Lens Reflex cameras are booming. Smartphones are effectively introducing people to photography, at which point many are upgrading to optimized devices.

The trend is translating into positives for Kobo, which was purchased by Japan’s Rakuten in 2011. In May, the company reported a 145-per-cent jump in e-reader sales over the previous year, with average selling prices starting to creep upward, White says. While e-readers have been in a race to the bottom over the past few years, even falling below $100, Kobo’s best-selling product – the Aura HD – sells for $169. The new six-inch Aura reader, which has a slightly less sharp screen, is selling for $149.

E-readers more hassle than convenience?

Some analysts don’t believe the analogies to other devices are entirely correct. E-readers offer better reading experiences for some users, but that doesn’t counteract the inconvenience of having to manage a third or fourth device on top of a smartphone, tablet and laptop, says Kaan Yigit, president of Toronto-based electronics tracking firm Solutions Research Group. And never mind having to deal with an extra e-store stocked with content that isn’t really portable between devices.

SRG’s Digital Life survey shows e-reader penetration at about 20 per cent of online Canadians, which Yigit says is good, but growth started flattening out about a year ago.

“Only six per cent [of respondents] say they will most likely get one in the next year in addition, so the headroom for growth is getting smaller,” he says. “Like it or not, e-reader users are a bit older, so it's not a big stocking stuffer for kids and families as much, though it is probably for your aunt.”

The demise, or flattening out, of e-books has also been widely discussed, but that’s another trend Kobo’s White isn’t seeing. BookNet Canada recently noted that e-books actually dipped in 2012, making up only 15 per cent of total book sales as opposed to 17.6 per cent a year earlier.

White says Kobo is still seeing 50-per-cent growth in its Canadian e-reading business, where it accounts for an estimated 55 to 65 per cent of the market, according to tracking firm IDC (SRG agrees with that estimate, followed by Kindle at 30 per cent and Sony at 12 per cent). It may just be that the competition aren’t doing as well.

“I wouldn’t call that a plateau in any market. It’s still in growth mode,” White says. “A 50-per-cent growth rate is still attractive.”

Over all, the market still has much room to grow, he adds. E-books may never match the music or movie markets, which are largely digital, but they could easily account for half of all sales within the next few years.

“Physical books are not going to go away,” White says. “It’s not going to be the music market.”

On this point, Yigit agrees. About half of tablet owners have an e-reading app such as Kobo, as do about a quarter of smartphone owners. Whether they use them or not is an open question, but the trajectory is looking up, especially with smartphone screens getting bigger. “These are the bigger opportunities for e-books in the next year or two,” he says.