Tablets Outpacing E-Readers by 2012: In-Stat

Tablet shipments will outpace those of e-readers by 2012, according to a new analyst report. How will that affect Amazon's Kindle strategy?

Tablet shipments will outpace those of e-readers by 2012, according to a new analyst report.

Research firm In-Stat's survey of 1,000 U.S. respondents found that some 38 percent owned a tablet, versus 26 percent who packed an e-reader. Moreover, it estimated global e-reader shipments at 40 million by 2015, a significant number that will nonetheless be outpaced by tablets.

"Of the two, the tablet market is the stronger and more sustainable opportunity," Stephanie Ethier, an In-Stat senior analyst, wrote in a June 20 research note. "In fact, e-reader manufacturers will soon begin adding tablet-like devices to their lineups in order to take advantage of the tablet frenzy. Barnes & Noble already offers the Color Nook, which is often compared with a tablet, and Amazon, the leader in the e-reader space with its Kindle, will likely launch a tablet device later this year in an effort to compete head-to-head with the iPad."

In other words, tablets' "multifunction" experience, according to In-Stat, will "represent a stronger opportunity for suppliers and manufacturers" than e-readers, which aim primarily at delivering an optimal e-book experience.

Whether tablets and e-readers are direct competitors is a matter of debate. Tablets certainly offer e-reading software, often through companies like Amazon, which also build e-readers. However, e-reader defenders argue that the devices offer a superior reading experience, particularly for long periods of time and in bright sunlight, as well as longer battery life. On top of that, steadily declining prices for devices like the Kindle and Nook have helped spur e-reader adoption in recent quarters.

Other analysts have suggested that e-readers' popularity will eventually impact the publishing industry as a whole, eroding the market for "traditional" paper books.

"The book publishing industry has entered a period of long-term decline because of rising sales of e-book readers," read an April 28 research note from IHS iSuppli, which predicted a decrease in book revenue at a compound annual rate of 3 percent through 2014-a noted reversal from the period between 2005 and 2010, when revenue rose.

The firm predicted that physical book sales will decline at a compound annual rate of 5 percent. While e-book sales will rise during the same period, the increase won't cover the revenue gap created by the decline in the physical book market. By 2014, the research note predicts, e-books will occupy some 13 percent of U.S. book publishing revenue, more than twice its current level.

However, IHS iSuppli analyst Steve Mather also sees e-readers as facing substantial competition from tablets in the years ahead.

"Dedicated e-reader shipments will fall short of some expectations, partly because of encroachment from media tablets, which many consumers will use to view e-books," he wrote in an April 28 statement. "Price declines for e-readers will be less than many expect, since makers of such devices already have cut prices to the point where they earn near-zero margins."

The question now, then, is what e-readers will do to blunt that step. Barnes & Noble's full-color Nook already tries to address some tablet concerns, via features such as Webmail. But will Amazon do something similar with its next Kindle?