E-readers on a Path to Extinction

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Tablet devices like the iPad from Apple Inc. (NASDAQ: AAPL), the Nexus 7 and Nexus 10 from Google Inc. (NASDAQ: GOOG), the Kindle Fire from Amazon.com Inc. (NASDAQ: AMZN), and the Galaxy Tab from Samsung Electronics are figured to ship 120 million units in 2012, just two years after the iPad was introduced. E-readers, which became popular in 2007 with the introduction of Amazon’s first Kindle, are slated to ship just 14.9 million units this year.

Shipments of e-readers hit a peak of 23.2 million units in 2011 according to IHS iSuppli, and the decline of 36% in 2012 shipments is just the beginning of the end. By 2016, e-readers are expected to ship a mere 7.1 million units, down two-thirds from their 2011 volume. By contrast, tablet shipments are expected to rise to 340 million units by 2016.

Consumers are willing to pay the substantial price differential between tablets and e-readers for the versatility of the tablets. E-readers are also often sold at razor-thin margins, or even at a loss if the vendor — say Amazon — also sells e-books and other content. The readers can really only compete on cost and that’s a battle that it does not look like the devices can win.

Paul Ausick

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