The Fast-Growing Market of E-Book Readers

The two main players right now in the electronic book reader market are Sony (NYSE: SNE) and Amazon.com (NASDAQ: AMZN).

While Sony helped pioneer the market for e-book readers using advanced electronic ink technology, it has fallen behind Amazon in the race to transform electronic readers into mass market devices. Sony’s Reader, launched in Japan in 2005, was first to market in the United States in 2006. But Amazon’s Kindle has been a surprise success since its first version was launched two years ago.

But Sony is fighting back – hard. In a direct assault on Amazon in the e-book market, Sony announced that it would convert its e-book store to the open EPUB format by the end of the year. EPUB is an industry standard e-book format that can be read on multiple devices. Amazon currently sells e-books that can only be read on its Kindle device or Kindle software, effectively locking users into the Amazon system.

The EPUB industry format seems to be the wave of the future. It has been adopted by major book publishers such as Random House and Houghton Mifflin. Barnes & Noble (NYSE: BKS), the world’s largest bookseller, has also adopted the EPUB format for its entrant into the market – a reader that will be released later this year from Plastic Logic.

In March 2009, Sony made another important move to counter Amazon’s strength. The company announced a partnership with Google (NASDAQ: GOOG ) by which it will offer 500,000 books that Google has scanned, through its online e-book store. This has made Sony the largest repository of e-books in the world, with more than 1 million, compared with Amazon’s approximately 320,000 e-books.

Sony opened a new chapter in the fight for dominance of electronic books with the introduction of several new e-book readers. Sony introduced two new low-cost versions of the Reader – the Reader Pocket Edition which is priced at $199 and the Reader Touch Edition, a touch-screen version for $299. Amazon’s Kindle, which does not have a touch-screen, is priced at $299 for the standard version and $489 for the larger DX model.

In order to compete more directly with the Kindle, Sony also recently introduced a wireless, touch-screen version of their Reader, called the Reader Daily Edition, which is priced at $399. This new Reader from Sony offers a seven inch touch screen, which is larger than Kindle’s six inches.

The two readers – the Pocket Edition and the Touch Edition – are available right now in the United States. Sony’s Reader Daily Edition will be available in the United States in December. Sony has yet to announce when the Reader Daily Edition will be available in other markets globally. But most likely, Sony is looking to upstage Amazon, which has yet to make its Kindle family of wireless readers outside the United States.

While Sony and Amazon are battling each other, they had better not forget about the 800 pound gorilla who is strongly rumored to be getting ready to enter the e-book reader market. This “gorilla” is known and respected for being a technology innovator and bringing out products which become very popular quickly – Apple (NASDAQ: AAPL). Perhaps Apple will do for reading e-books what iTunes did for music.

An entry by Apple into this market will throw a major monkey wrench into Sony’s and Amazon’s plan for the e-book market. Apple is rumored to be coming out with a tablet computer in time for the holiday shopping season. Given its technological prowess, it is possible that Apple’s new tablet product may be a combination notebook/netbook/e-book reader that will act as both a PC and a book reader. The rumored price for this tablet product from Apple is between $600 and $1000. The price is higher than for just an e-book reader, but any such product will likely prove to be stiff competition for Amazon and Sony.

It is a tough call as to whether Sony or Amazon will come out on top. It’s also a tough call as to whether Apple will even enter the market, and if they do, whether they will quickly dominate the market. Investors should stay tuned, the story is just getting interesting.

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