How Amazon will win (and lose) the eBook market

You win some, you lose some. Especially if you're the world's largest electronic book seller.

An eBook is two things. First, it's an abbreviation of eBook reader, which is a computer used for displaying electronic books. Second, an eBook is digital content -- an electronic file that contains the words and images that constitute a book. Amazon will lose the eBook reader market, and dominate the eBook book market. Here's why.

How Amazon will lose the eBook reader market

Remember PDAs? Before smart phones, people actually bought "personal digital assistants" that helped them manage their calendars, address books and notes. I owned quite a few of them, including a Sharp Wizard, Palm Pilot and several of its follow-on PDAs, a Psion and more. Like most other people who owned PDAs, I carried both a PDA and a cell phone, even after phones gained the ability to store contacts and calendars.

Those of us who carried both devices had good reasons. The PDAs had bigger and easier-to-use screens. They were easier to sync. There was lots of PDA-specific software applications we had invested in. And we probably had other great reasons I don't remember now.

Despite all our justifications, the smart phone market completely destroyed the PDA market, because nobody wanted to carry two gadgets, and because the convenience of having it all in one device was just too compelling to forgo and because the cell phones came to do all the tasks PDAs could do, plus a lot more.

This is exactly what's happening with eBook readers. The eBook reader fans -- and I count myself among them -- will come up with a lot of great reasons why dedicated eBooks are here to stay. But that won't stop them from being washed away by the coming touch-tablet tidal wave.

The touch tablet market, lead by Apple, will be several times larger by the end off the year than the eBook market. (Note that Apple accidentally confirmed the existence of its tablet today, in case you have doubts.)

These tablets will be highly usable and well-supported by application developers. While eBook readers do a few things, tablets will do thousands of things, from word processing to interactive maps to video conferencing to HD moving playing. They'll do eBooks, too.

Tablets will do all this, and they'll probably be cheaper, too.

Meanwhile, dedicated eBooks like the Amazon Kindle will only do two things better than touch tablets. The text will be easier on the eyes, and the battery life will be much better.

These advantages are identical to two of the advantages of PDAs, which are now long gone.

Apple may continue to sell Kindles for years, but not very many of them compared with the number of touch tablets sold.

How Amazon will win the eBook book market

Amazon's eBook hardware market will fade into irrelevance, while its dominance of the eBook market continues.

People will read most of their eBooks on tablets, cell phones and PCs -- and Kindle will support all these media. Kindle for PC and Kindle for iPhone will be joined by Kindle for tablets, Kindle for TVs, Kindle for... whatever.

It was revealed yesterday that Amazon already owns 90% of the eBook market. Wow! What does that mean? It means that of all the money being invested into an eBook format, nearly all of it is being invested in Amazon eBook collections. Once you've sunk money into a specific format, you're going to want to continue supporting that format. And that's what people will do.

Inevitably, Amazon's share of the market will draw down -- probably to somewhere between 50% and 80%. But while its share of the pie declines, the pie itself will grow by orders of magnitude.

A few years from now, I predict that Amazon will dominate and to a great extent control the eBook publishing scene, while its Kindle sales will be non-existent or very small.

And you know what? That's exactly what Amazon wants. The hardware business is for suckers. The eBook market involves almost no tech support, few "returns," fewer employees to support and its massively scalable.

Amazon is about to lose its Kindle hardware business, but gain something even better: Dominance over the new world of electronic book publishing.

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