October 2010

Dear College Store Professional:

In this month’s issue of InCITE, we will take a look at the current e-reader and tablet market. Over the past several months, the market has changed continually with the introduction of new technologies. Each day there are many new reports about e-readers, tablets, and the pilots occurring at schools across the country and around the world. With the volume of media coverage, it can be difficult to understand where we are today and how these new technologies will affect our market. This issue of InCITE will attempt to cut through some of the clutter and help you understand the current landscape.

The Innovation Cycle
E-readers for trade book reading were a very popular item during the 2009 holiday season and dozens of e-readers were on display at the Consumer Electronics Show in January 2010. The show proved that there was a lot of interest in this technology and that many major consumer technology companies were working on devices. However, as the year progressed, some of the most anticipated devices were delayed or scrapped entirely. Potentially big players in this space withdrew from the market, including companies like iRex and Plastic Logic. By fall, only a handful of companies remained in the e-reader market, with Amazon’s Kindle, Sony’s Reader, and Barnes & Noble’s Nook being three of the dominant devices in the trade book e-reader category.

Throughout the year, we also began to see tablets emerge and in April the highly anticipated Apple iPad was released. Since then, several companies have announced their own plans for tablet devices. We anticipate that at the upcoming 2011 Consumer Electronics Show there will be a plethora of tablet devices in the market. Rumors suggest Google, among others, may soon enter this space. As with 2010, we expect that by fall of next year, many of the new players will withdraw from the market, leaving us with a small number of tablet competitors. Apple, who has mostly defined this space, is likely to be one.

This progress shows that e-readers and tablets are moving through the stages of innovation but the devices are at different places in the cycle. The first stage of innovation focuses on the product or the device. As devices mature, we begin to see the emergence of a dominate design or a model upon which all products in the category begin to compete as the basis. Once a dominant design emerges, then we typically see a narrowing of players and the second stage of innovation begins.

Currently, trade book-oriented e-readers are beginning to move into the second stage of innovation which focuses on business models and processes. In this stage the question becomes, “Given a dominant design for the product or service, how do we generate business models to drive revenue and profit?” Recognizing the shift to the second stage of innovation is important because that point in the innovation process almost always precedes the rapid adoption of a new technology. Tablets are a little bit farther behind e-readers and a dominant design has not yet emerged, although the iPad has established the initial point of competitive evaluation. Even so, as noted above, we expect that the widening and then narrowing of competition and the emergence of a clear dominant design for tablets will likely take place over the next 12 to 18 months.

As technology progresses, consumer interest is also growing. Recent data shows that e-readers and tablets are among the fastest growing segments of the electronics industry. Research firm, iSuppli, predicts that e-reader shipments worldwide will grow to 26.5 million units by 2014, up from just 5 million units in 2009. In regards to tablets, iSuppli predicts that Apple alone will sell 12.9 million iPads this year, 36.5 million in 2011, and 50.4 million in 2012. By 2020, media consultancy firm, mediaIDEAS, predicts that 1.1 billion e-readers and tablets will be in use around the world.

While consumer interest is on the rise, there is some discrepancy among studies about student interest and the likelihood that they will purchase a device. The latest research from OnCampus Research, NACS’ research division, shows that eight percent of college students currently own an e-reader or an Apple iPad. Of the 92 percent that do not own a device, five percent plan to make a purchase in the near future and another 36 percent are unsure if they will buy one. The primary reason that 42 percent of students gave for not wanting to purchase a device was that they prefer print books. An additional one-third of the students said that they were not sure how an e-reader device would benefit them and 18 percent said that the device was too expensive or they were waiting for prices to drop. These stats show that interest is growing but the majority of students still prefer print or do not yet see the need for a device. This is likely to change as the technology progresses, the prices come down, and the benefits are realized. In addition, the students in college today tend to have a lower preference for digital than the students a few years younger. As these students enter college in the next few years, we will likely see a significant change in preferences.

E-readers vs. Tablets
While both e-readers and tablets can be used for reading, there are several differences between the devices. In the following paragraphs we will discuss e-readers, hybrid e-readers, tablets, and how the devices can be used for education.

E-readers such as the Amazon Kindle and Sony Reader were designed primarily for the purpose of reading. The majority of e-readers include black and white e-paper screen technology from E Ink. This type of screen closely resembles printed paper and does not strain eyes. It can also be used in the daylight without a glare. E-readers also typically support e-books in multiple formats. A common format is a free open e-book standard called ePub which allows text to reflow so that the content is optimized for each device. While both E Ink and ePub are great for trade books they do not work as well for textbooks. E Ink can not display the color graphics and illustrations, and ePub lacks extensions to handle the more complex page layouts found in textbooks. Due to these reasons, e-readers are not an ideal solution for education at this time. However, there are some experiments and efforts to extend ePub and to make color versions of E Ink screens so an e-reader device may be a more viable option in the future.

A second type of device is the hybrid e-reader that combines the features of an e-reader and tablet, and includes both E Ink and LCD screens. The E Ink screen can be used for reading and taking notes while the color LCD screen can be used to access the Internet, display images from the text, or play videos. The Entourage Edge is an example of a hybrid e-reader. This fall, the devices can be found at 50 college stores. Publishers such as McGraw-Hill, Cengage Learning, and Elsevier have made digital content available on the device through the Entourage e-book store.

Tablets are multifunctional devices that feature LCD screens that can display textbooks, colorful graphics, videos, games, and the Internet. One tablet that is being piloted at three schools this fall is the Kno. The Kno device features two 14-inch screens and was designed specifically for textbooks. Students can take notes, draw, highlight text, and look up keywords within the textbook. The dual screen device and also a single screen version are expected to ship in time for the holidays.

The most popular tablet on the market today is the Apple iPad. The iPad is currently being piloted at many schools across the nation. The iPad is appealing because it can be used for many purposes and includes access to thousands of apps from the Apple app store. Several companies are creating apps that provide an interactive and enhanced learning experience for students. For example, a start-up company called Inkling is working with publishers to rethink textbooks. Inkling has created a textbook application with impressive features that include: figures and diagrams that can be freely rotated and resized, embedded videos and case studies, interactive quizzes, and real-time note sharing functionality. Inkling is also being piloted at three universities this fall.

Tablets can provide many advantages for students including: an interactive learning experience, increased collaboration with peers and faculty, lighter backpacks, and functions/tools that are not possible with a traditional book. However, there are also some downsides associated with the devices. One downside is that students may not want to do all of their reading on a LCD screen that uses backlighting and is not as easy on the eyes. Tablets can also cause distractions because of all the capabilities. In addition, publishers are still working to convert their content into an interactive digital format so the majority of textbook content is not yet available.

Conclusion
As tablets progress through the first stage of innovation and textbook publishers prepare the content, college stores need to be preparing for the second stage of innovation and a future that involves digital delivery. Device manufacturers are exploring content partnerships with publishers and could choose to do direct-to-device sales which will put the stores at risk. In addition, as the technology matures and the prices come down, the devices will become more accessible and student interest will rise. As a channel, college stores need to determine how to provide a platform which will deliver content to any device that students may have so that stores can continue to fulfill all content needs.

NMS is currently working on several initiatives to assist stores in the delivery of digital content. NMS has a partnership with Canadian Campus Retail Associates (CCRA) and Independent College Bookstore Association (ICBA) for a Digital Content Platform (DCP) that offers stores a low-tech, turnkey method to provide students with access to the free e-books that are frequently used in about 10,000 classes in North America. Over 90 stores in the U.S. and Canada are currently participating in the DCP. NMS also has a partnership with Zinio for the development of a Collegiate Digital Newsstand that will offer instant delivery of thousands of educational and international digital magazines from more than 30 countries. More details about this offering will be announced soon. In addition, NACS and NACSCORP have partnered with Baker & Taylor to offer stores a turnkey, store-branded e-commerce solution from My Books And More, and the Blio e-reader software solution.

We encourage all stores to begin experimenting with digital and determining digital content and device strategies. The business models for digital delivery will emerge over the next few years and stores need to prepare now if they want those future models to include traditional stores as part of the delivery channel.

To learn more about NMS, please visit our website: www.NACSMediaSolutions.com and The CITE blog: http://TheCITE.blogspot.com. You can also find us on Facebook: www.facebook.com/NACSMediaSolutions. If you would like to participate in the DCP or bring the Collegiate Digital Newsstand to your store, contact us at: info@nacsmediasolutions.com.

To learn more about NACS and NACSCORP’s program with Baker & Taylor visit:
www.nacscorp.com/ecommerce.