Business ideas that changed the world: The e-reader

Growing Business looks at the business idea that ushered in the Kindle and e-books – transforming the publishing industry dramatically

When: 2007
Where: USA
Why: The advent of e-reader technology is transforming the publishing industry and driving the decline of printed book sales
How: Development of screen technology in e-readers led to e-ink (electronic ink), which was later combined with Wi-Fi to create a superior device
Who: E Ink Corporation and Amazon
Fact: The first-generation Kindle sold out within five and a half hours

E-readers have been available for years now, but initially consumer interest was relatively lukewarm – until the Kindle was introduced into the market. While Amazon’s e-reader range dominates the market, there are numerous others providing healthy competition, plus e-book offerings on tablet computers.

The incredible rise of e-reader technology shows just how powerful it is as a concept. It already threatens to replace the oldest and most durable form of media in history.

The background

Perhaps the most remarkable thing about e-readers is how long they took to become mass-market alternatives to the printed word. With the technological boom of the last 20 years we have seen the digitisation of more or less everything that could be digitised, from music to television, and now the book is part of that revolution.

When personal computers arrived on the scene in the late 1980s, there was talk of delivery of books digitally to your computer screen – an idea later pushed in the early 2000s by American author Stephen King, who charged users to read a novel, The Plant, that he serialised online. But the idea was unpopular – users were confined to their computers in order to read the content and the bright computer monitor proved unpopular for reading for any great length of time. King later abandoned the project.

Around this time, the first e-book readers appeared on the scene. But these early devices, the RocketBook and Softbook, had flaws that meant they could never be considered a serious challenge to the printed word. The bulky and heavy devices were still fitted with backlit LCD screens for reading, causing the same problems with eyestrain that computers have – and meaning that the battery life clocked in at a paltry two hours or so. The readers still had to be connected to a PC to receive content, and the selection of books was poor.

It was, in fact, a small Massachusetts company that finally made the e-book revolution possible, by overcoming the biggest obstacle to a successful device – the screen. E Ink Corporation, founded in 1997, pioneered a completely new way of displaying text; unlike an LCD, the screens do not have pixels, but rather are made up of millions of ‘microcapsules’ filled with tiny, positively charged black pigments and negatively charged white pigments, floating in a translucent gel. This was a markedly better way of displaying text. Static pages require no electricity to display them, vastly improving the battery life of devices (they only use energy when turning pages), and, more importantly, the screen reflects rather than emits light; creating an experience much closer to reading an actual book.

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Kindle wasn’t the first to use E Ink’s electronic paper display – an e-reader using electronic paper was released in Japan as early as 2004, when Sony, together with Philips, launched its first reader device, Librié. The Sony Reader followed in 2006. Yet the first-generation Kindle, launched in the USA in November 2007, was the first to marry Wi-Fi technology with an e-ink display, to create an e-reader that had no need for a PC. Despite the $400 price tag, devices sold out in five and a half hours.

However, the Kindle did not immediately become a worldwide household name. The first-generation device was not released outside the USA, and rumours that Apple was set to release a tablet created a buzz of anticipation that one multi-functional device would soon be available. Yet, after the much-heralded release of the iPad in 2010, it soon became clear that regular readers were experiencing the same eyestrain from the LCD screen that they experienced when reading on a computer, stimulating further interest in the sunlight-resistant, matt-screen Kindle. That said, Barnes & Noble launched NOOK Color and Pandigital, its Novel Color eReader, with the LCD-based devices selling well and blurring boundaries between tablets and e-readers.

In February 2009, the second-generation Kindle was released, with another major innovation being the free 3G connectivity of the product. This allowed users to begin downloading books straight out of the box, without the need for a personal Wi-Fi network. In October 2009 an international edition of the Kindle was finally released outside the USA, after Amazon reached agreement with 3G operators in over 100 countries.

The Kindle has undergone a number of revisions since then, with the current flagship of Amazon’s e-readers being the Kindle Voyage, which is the thinnest model yet, weighs less than 6.4 ounces and has the highest resolution, contrast and brightness of any to date. The Voyage also has the ability to store up to 4GB, has an adjustable ‘reading light’ preference and comes with a page turner that provides feedback vibration to let you know when the page is turning.

Commercial impact

Book publishers, particularly in the USA and UK, have realised that e-readers must be embraced, and most book publishers now offer their publications in digital formats.

For the moment, the Kindle remains the leading name in the e-readers sector – helped by substantial above-the-line advertising campaigns – though it has experienced stiff market competition from other tablets like the iPad. In addition to the Kindle, Barnes & Noble, and Sony account for much of the e-reader market.

The Kindle benefited enormously from being owned by and promoted through the world’s largest online retailer, Amazon, with a nearly seamless purchasing process for users. Barnes & Noble, the world’s largest bookseller, is also well placed. Sony too can rarely be discounted as a technological force for change.

Futhermore, the first Kindle also coincided with the launch of Direct Publishing, a new business model that allowed independent authors to publish their work direct to the Kindle store, initially keeping 35% of revenues (this was later increased, following criticism, to 70%, if the author met certain conditions).

Amazon remains coy about sales of the Kindle, but it has been estimated that over 500,000 were sold in the first year, and some anonymous company insiders reported that unit sales rose above four million in 2010. As for the sales of the e-books themselves, Forrester predict that by the end of 2015 the figure will be $3bn. Such figures mark a major shift in purchasing habits – and ignited fears of the end for the ubiquity of the printed word.

What does the e-reader look like today?

For many customers, their initial reservations about electronic books have clearly been assuaged, thanks to the evolution of e-readers and the continually growing selection of titles. Amazon’s Kindle Fire can store either 6,000 books, 10 movies, 80,000 apps or 800 songs on its 80GB hard drive. Users of Kindle e-readers in the UK can select from more than a million book titles. Meanwhile, Barnes & Noble in the USA can boast two million titles available to its e-reader users. Combined with increasingly competitive pricing, improved battery life and the lighter, yet equally durable, range of devices, the rapid propagation of available titles will undoubtedly eat away at any major remaining advantage the book has over its digital cousin.

The e-reader continues to evolve as readability and indexability of digital devices could also, potentially, mark the realisation of the long-heralded concept of paperless communication, such as in offices and educational institutions. The ability to annotate pages on screen could allow readers to engage with study books and official documents through the device, potentially reducing the high density of paper matter that currently characterises some sectors, such as law. However, the e-reader is still predominantly adopted as a leisure device.

The Kindle Direct publishing model also threatens to break down the old relationship between publisher and author, granting greater freedom (and higher profits) to writers, while diminishing the necessity for publishers.

When publishing a work in physical format, having a publisher is absolutely necessary for success – they take a large slice of the royalties, but pay for the printing, distribution and publicity essential for the launch of any book. E-books can be infinitely copied and the costs needed to publish them are essentially zero, meaning that independent authors can bypass publishing houses and keep a more substantial proportion of the royalties for themselves.

But we should not underestimate the incredible durability of the traditional book. Worldwide, the paper book still dominates, and has done so in more or less the same form since the invention of the printing press in the year 1440. It still has advantages over the Kindle that perhaps can never be addressed – it never runs out of battery life, and it provides a sense of tangible ownership that e-readers will never quite replicate.

In fact, e-readers and other tablet devices appear to be decreasing in popularity. According to a 2014 report by the International Data Corporation (IDC) tablet shipments decreased by 3.2% year on year with Amazon experiencing a 69.9% decrease in Kindle shipments.

It seems unlikely that parents will start reading their children bedtime stories on a Kindle and forgo the pleasure of their offspring turning the pages with them, or that art and design books will be replaced on a coffee table by the display of an e-reader. And though there is no debating that e-readers have dramatically impacted the book publishing world; for many readers, the sharing of much loved tomes between friends and family members is a key part of the reading experience – and always will be.


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