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E-Book Market Heats Up as Barnes & Noble Plans Its Reader

Friday, 9 Oct 2009 | 10:05 AM ET
Kindle 2
Source: Amazon.com
Kindle 2

It looks like this will be the holiday shopping season of the e-reader; we'll finally see some serious competition and affordable prices, which means the niche could finally take off.

Word's out that Barnes & Noble, the nation's biggest book seller, plans to announce its own e-reader brandwithin a month or so, just in time to compete with Amazon.com's Kindle reader during the crucial holiday shopping season.

Because of Barnes & Noble's market share, its focus on books and its physical stores, it's well positioned to market the device, perhaps better than Amazon, whose Kindle currently controls about 60 percent US market share or than Sony, which has about 35 percent of the market. Plus, the device will reportedly have a touch screen and a virtual keyboard, so it could look more like the sleek Apple iPhone than the Kindle, which has a little keyboard at the bottom of the screen. Barnes & Noble already has a hand in this market, offering e-books to be read on the Blackberry or iPhone and it's made deals to sell its e-books to Plastic Logic and Irex's e-readers.

It's been a busy week for the e-reader business.

The news of Barnes & Noble's pending news comes on the heels of Amazon announcing it's cutting $40 off the priceof its Kindle to $259. Amazon's alsogoing globalwith the device for the first time, saying that later this month it'll begin shipping a slightly more expensive new "US & International" version that will enable users to tap into wireless access and download books in 100 countries. This new option will allow the Kindle to face off with international alternatives like the "Cooler" reader, which a company called Interead sells in the UK. Legal issues still make the international business different: here in the US consumers can pick from over 350,000 books, while overseas the library is 200,000 strong.

Sony is also looking to step up its game, making a push to gain market share this holiday season with three e-reader models starting at $199, which has traditionally been the crucial price that pushes mainstream consumer adoption - take a look at the sales pattern of DVD players. It's unclear how Barnes & Noble will price its gadget, but the lower the price, the more likely we are to see the market hit a tipping point. Before the news of Barnes & Noble's entry into the game, Forrester Research projected three million e-readers will be sold in the US this year with nearly a third of that number sold during the holiday season. An affordable option from Barnes & Noble could push that number even higher.

Now the next big e-reader news I'm watching for is how ads will be incorporated into the devices - that'll be increasingly important as more magazines and newspapers offer their content in this format, looking to generate a new revenue stream. Amazon has two patents filed that outline its strategy for targeting ads into on-demand content. Imagine if a reader wanted to upload just the tennis coverage from Time Warner's Sports Illustrated - that lends itself perfectly to targeted advertising, using info about the reader's location based on wireless use. As magazine publishers await full-color screens that will make the e-format more appealing for their content, they'd certainly like to have the dual revenue stream. In the meantime book publishers certainly could use the extra revenue from digital downloads - as of now sources atop some top publishing companies tell me there's little concern that e-book uploads will cannibalize traditional book sales.

I'm still an old-fashioned book buyer myself, both on Amazon and at my local Barnes & Noble. Though some of the most avid readers I know swear by their devices and always keep them very close at hand, I haven't made the transition to an e-book, despite the fact that it may be more convenient with the amount of travel I do. I figure I spend enough hours reading on a screen and I might as well wait until the new offerings are too impressive to pass up. Every time I get on an airplane I'm struck by the number of business travelers with a Kindle under their arms and in Hollywood the newer large-format Kindle has become the ultimate device for reading screenplays.

We'll see what industry goes crazy for it next. This is still an incredibly young business, it's changing very fast and the offerings will only get more exciting as the business grows.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.