The price for some e-readers with black-and-white displays could drop below $100 before the end of 2010, and possibly hit $50 in 2011, according to analysts.
Declining prices are just one indication that the e-reader market is young and likely to remain in a state of uncertainty for a few more years, they said.
One major question still on the minds of experts is how long e-readers equipped with black-and-white e-ink displays can survive in the face of competition from full-color tablet computers, such as the highly successful iPad, which offers multimedia functionality and a backlit 9.7-in. LED display.
Adding more complexity to the market outlook, e-readers with color e-paper will appear this fall, said Dmitriy Molchanov, an analyst at Boston-based Yankee Group Research. Fujitsu has shown color e-paper prototypes for years. Meanwhile, Qualcomm, using a different technology, has since 2008 been working on a color Mirasol display that could appear in coming months, Molchanov said.
Also, this month, LG Display revealed that it's working on flexible color e-paper for e-readers or tablets.
Molchanov said color e-paper will force a market split, with Kindle maker Amazon.com leading a number of manufacturers down a low-cost path typified by devices that have black-and-white displays and cost as little as $50. Amazon doesn't plan to introduce a Kindle with a color screen anytime soon, he noted. Meanwhile, Sony, which makes the Reader device, will lead other manufacturers into a "high-feature" segment for devices that have color displays, touchscreens, video support and more, Molchanov said.
Allen Weiner, a Gartner analyst, wrote in a blog post earlier this summer that it is "early in the e-reader evolution" and postulated that the market is becoming segmented three ways.
Many choices for e-reader devices
One of the three "flavors" of e-readers that Weiner expects to see is a class of devices with e-ink displays that cost about $149 or less. That group would include the 6-inch Kobo, which is offered at the Borders Web site for $149.99.
Since Weiner's blog post appeared, Amazon has launched two versions of its next-generation Kindle. Both have 6-inch screens, but one is a Wi-Fi-only model that sells for $139 and the other supports both Wi-Fi and 3G and sells for $189start shipping Friday.
Weiner estimated that the lowest prices for such e-ink display devices would be $99 by October.
The second market segment that Weiner envisions will be made up of "multimedia e-readers" that would have 7-inch color screens and would be priced around $199. In that category, which is for devices that are somewhere between e-reader-only models and multimedia tablets, Weiner puts the Pandigital Novel, which some buyers have found for around $175.
The third category that Weiner expects to see will be filled with "all manner of tablets that offer e-reading, video and some productivity apps." That group will, of course, include the iPad, which starts at $499, as well as tablets that run on the Android, Windows 7 or Hewlett-Packard Web OS operating systems.
There are a number of projections for global sales of dedicated black-and-white e-readers in 2010. Until this year, e-readers were called a niche market, since sales were lower than 10 million. Projections for units sold in 2010 range from 6 million by Yankee Group to 10 million by Display Search, an Austin-based research firm, and 12.2 million by London-based Informa Telecoms & Media.
Informa warned in May, however, that sales will grow to 14 million in 2013 and then drop to 13 million in 2014 because of pressure from emerging color e-readers that offer multimedia access.
While color displays might seem to be what the market wants, Weiner and other analysts see an advantage to using e-ink rather than LCD displays like the iPad's, since LCD screens are backlit and can cause eye fatigue during long periods of reading.
No matter how the market for e-reader devices evolves, there are long-term questions about how soon e-books will overtake print books in popularity. Almost everyone believes the day is coming when e-book sales will outnumber sales of print books, and there are some indicators that e-readers are increasing the amount of reading being done.
Study hints that e-readers improve reading habits
A recent market study examined reading patterns of 1,200 e-reader owners who used iPads, Kindles or Sony Readers (which, like Kindles, have e-ink screens).
The results of the study, which was conducted for Sony by Marketing and Research Resources Inc., showed that 40% of the people surveyed said that they read more with e-readers than they did with print books. Only 2% said they read less, and 58% said they read about the same. The study, which was reported by the Wall Street Journal, didn't indicate how the reading habits of users on the different devices compared, or whether e-ink was more popular for reading. M&RR would not share the full results, and Sony didn't respond to a request for the results of the study.
One factor the study doesn't consider is how diverse the number of e-reader platforms will become. For example, Barnes & Noble has made a strong commitment to supporting e-books on computers, smartphones and tablets, as well as its Nook device. Many e-reader distributors follow a similar cross-platform strategy.
Amazon, the biggest seller of e-books, said people who buy its Kindle buy more than three times as many books, either print or digital, than other customers. In July, Amazon said sales of e-books for the Kindle had outpaced sales of hardcovers by ratio of 143:100 in the prior three months.
On a gross scale, industry experts believe e-books account for less than 3% of the total market for books, but the arrival of more and more new e-reader devices is accelerating the demand for e-books to levels that exceed projections made a year ago. In March, Kobo CEO Michael Serbinis said some major book publishers expect that one in four books sold in five years will be e-books.
A consolidating market
Serbinis estimated that there are 60 companies making and selling e-readers, although analysts predict a huge amount of consolidation and reshuffling in coming months.
True to that prediction, Rupert Murdoch's News Corp. in June bought Skiff LLC, maker of the Skiff e-reader and an e-reading platform. News Corp. described the purchase as one of the "building blocks in our strategy to transform the publishing industry."
Weiner, in his blog, wrote that News Corp. is bound to use the Skiff platform to distribute its newspaper content for use on "myriad devices."
In another symptom of the changing market, Plastic Logic earlier this month canceled the launch of its Que e-reader. The so-called e-reader for business professionals had been unveiled at the CES trade show in January, and Plastic Logic had planned to start selling the device in April. On Aug. 10, CEO Richard Archuleta said after product delays and a dramatic change in the market, "it no longer makes sense for us to move forward with our first-generation electronic reading product."
Archuleta said Plastic Logic will create a second-generation device, although analysts have warned that it will need to compete with the lower-priced e-readers designed for consumers. The cheapest Que -- a 4GB model that could hold 35,000 documents -- was expected to sell for $649.
Despite its plans for a second-generation device, Molchanov said Plastic Logic has essentially exited the U.S. market, along with e-reader companies Interead and iRex. Those companies couldn't keep up with advances in the technology or the lower prices offered at Amazon and Barnes & Noble.
Meanwhile, Molchanov noted that two other companies -- Samsung and Acer -- have announced plans to enter the e-reader market.
Given the failures and the start-ups, this fall is bound to be busy with more maneuvers by manufacturers and publishers. Beyond expected price drops for some e-readers to less than $50, the consensus of analyst predictions is pretty simple: The e-reader market is still young and fairly wild.
"This is certainly still a young market and it will take at least another two years for things to settle down," Molchanov said in an e-mail. Devices like e-readers and tablet computers that fit in between the laptop and smartphone form factors "have a lot of growing to do," he added. "I expect to see the two devices will begin to look very similar when products like the Mirasol display take off."
Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed. His e-mail address is email@example.com.