Apple's iPad has surpassed the estimated ownership base of the Amazon Kindle, according to a July 21 analyst report, and it could exert considerable long-term pressure on the e-reader-as well as erode Amazon.com's leverage with publishers.
"Last night, Apple stated it has shipped 3.27 [million] iPads since the April product launch, surpassing our estimate for an installed base of [around 3 million] Amazon Kindles to date despite supply constraints," Marianne Wolk, an analyst with Susquehanna Financial Group, wrote in a co-authored research note to investors. "However, Kindle device sales have also accelerated recently, with the growth rate of Kindle units up 3x since the June 21 price reduction from $259 to $189."
One Amazon advantage, Wolk added, is its early lead in e-book sales, as well as the overall scope of its offerings: "As Amazon offers more than 630,000 e-books to readers, it has a considerable selection advantage relative to Apple's far narrower title base of 75,000, suggesting Amazon has benefitted short term from the iPad's momentum."
In the long term, however, the online retailer will face additional pressures: from Google and its plans to launch e-book competitor Google Editions; from other e-readers, such as Barnes & Noble's Nook; and from publishers, who will see the iPad's expanding ownership base and use that as leverage in negotiations with Amazon.
"As [Apple's] supply constraints ease, Apple iPad shipments should ramp and it could ship as many as 12-15 [million] iPads in 2010-a compelling base for publishers to consider," Wolk wrote. "At these rates, the iPad should dwarf the installed base of Amazon's dedicated Kindle eReader. Thus, Amazon could see its share of eBooks diminish as Apple's iPad continues to gain traction."
Apple sold 3.27 million iPads in the third fiscal quarter of 2010, contributing to its total revenue of $15.7 billion and a net quarterly profit of $3.25 billion. Analyst firm iSuppli predicted in a July 20 research note that Apple would ship 12.9 million iPads in 2010, followed by 36.5 million in 2011 and 50.4 million in 2012.
Amazon has argued that the Kindle's e-ink screen offers a better reading experience and superior battery life than do tablets such as the iPad, although it has also made a Kindle application available to both the iPad and various other mobile devices.
In its competition against other booksellers, Amazon has resorted to price cuts; in response to Barnes & Noble dropping the cost of the Nook from $259 to $199, the Kindle's own price tumbled from $259 to $189. Other e-readers, including the Kobo offered by Borders, already retail in the $149-to-$169 range.
Amazon's recent software updates to the Kindle and Kindle DX, including a social networking aspect that draws on Twitter and Facebook, suggests the retailer is also interested in building out its devices' functionality to better compete with the iPad's wide range of features. Barnes & Noble has made similar updates to its software.