Caught up in a discussion about how the eReader market MUST be suffering from the introduction of the iPad, we came across some research released this week from Digitimes, a publication about the industry from Taiwan.
It claims to show that 740,000 e-readers shipped were shipped in April-May alone, with 270,000 of them being the new Barnes and Noble Nook, and the Amazon Kindle shipping to retail just 118,000 devices. That shipment rate would put us on track for 4.4 million ereader shipments, when last year some estimates say that around 5 million ereaders shipped globally. The important thing is that these new numbers are factory shipments, leaving factories to go to retailers, and they are worldwide. Amazon has been selling these devices for a while, and is rumoured to be planning a new product introduction in the next two months. It is thought that it is winding down inventory. There is also seasonal variation, with a concentration of orders in the second half of the year.
At Barnes & Noble, the $5 billion US bookstore chain, is in ramp up and is building up stock of its new Nook ebook reader, but it will also be ensuring that it can use some of the devices in every one of its 1,400 plus stores. But even accounting for ten or even 20 of these per store, there is still, very clearly both a belief that the US market can absorb that amount of devices, and presumably some evidence from pre-orders that the Nook is already selling in volume. Best Buy, which is also planning to sell the Nook, will also be gearing up for its stores.
At the B&N stores it encourages reading (browsing) of all in-store books on either your own Nook or one that you borrow from the store, and that, plus the WiFi provided by Starbucks in-store coffee shops, as well as the coffee and browse atmosphere which its shops are famous for, mean that B&N is bound to build the ebook habit rapidly among the millions of people who go to its stores.
Amazon may well be below par on re-orders, since sold over 3 million Kindles during 2009, which would mean that for April and May we might have expected more like 500,000 Kindles in two months instead of a mere 118,000. You can take this either way. Amazon may recover to that level of 275,000 devices a month or perhaps both the Nook and the Sony ereaders will eat a chunk of that. Or maybe the iPad really is eating a hole in this market.
It doesn’t look like it, if DisplaySearch is to be believed. Screens that have e-ink in them shipped under 1 million in 2008, and then over 5 million units in 2009 according to DisplaySearch, and they are on track if you take the first two quarters of 2010, to ship at least 7 million during 2010 and maybe a whole lot more since traditionally the sell through rate rises in the second half of the year. Most e-ink screens right now go into ereaders.
DisplaySearch goes further and says that the total e-paper market will grow from $431 million in revenues in 2009 to $9.6 billion in 2018, a compound annual growth rate of 41% for revenues and 64% for unit shipments. A 64% rise in units in 2010 would mean at least 8.2 million units will ship.
It is also possible that the Digitimes research only takes in locally produced e-ink screens, and that it is missing some devices made outside of Taiwan and China.
So we think that these reported factory shipments are actually low in the Digitimes report, and they will recover as new generations emerge, and that the iPad is only creating NEW ereaders right now, so far 3 million more of them, instead of damaging the existing market.
We know Amazon is preparing a new Kindle version in July-August and Sony is also preparing a new reader, and to ensure there is a distance from the iPad end of the market, these single use devices will adjust pricing downwards to make the iPad less of a threat, a move evidenced by both Amazon and B&N dropping prices on their ereaders last week. The original Nook is now $199, the WiFi version just $149. The original Kindle is $189, both significant price drops.