iPad's Cooler Than Kindle, But Don't Count Amazon Out Yet

The launch of the iPad has caused a flurry of forecasts about Amazon's share of the e-book market plummeting. But even if Apple wins the market for e-book readers, Amazon remains a player to be reckoned with when it comes to sales of e-books themselves. If Nostradamus were alive today, he'd likely be making predictions about technology -- and possibly failing, at least occasionally, as badly as the rest of us. Articles that fall under the category of what I call "Digital Nostradamus" are lots of fun to parse, and are especially amusing to revisit years later, when some of those predictions prove to be spectacularly wrong.

Consider Forrester Research's now infamous 2001 piece which postulated that in 2006, e-books would make up about 50% of the total book market. It's now 2010 and while that market is clearly exploding, thanks to Amazon's (AMZN) Kindle and the Apple (AAPL) iPad -- which has reputedly reached 500,000 in sales since its April 3 launch -- we're not even close to the 10% mark.

Wall Street Remains Optimistic

But that isn't dampening Wall Street's optimism. Goldman Sachs analysts predict that by 2015, total book sales will rise 5.8 percent to $24.5 billion from $23.9 billion this year, even though traditional (read: print) sales will drop 4.9% to $21.7 billion, according to Bloomberg and its sister magazine, Bloomberg BusinessWeek.

The reason for the expected rise? You guessed it: e-books. Goldman Sachs' James Mitchell expects sales to quadruple over the next five years to $3.19 billion, largely because of a projected surge for Apple. Between 2012 and 2015, Mitchell sees Apple's market share climbing from 10% to 33%, while Amazon's drops from 50% to 28% and Barnes & Noble (BKS) holds steady at 15%.

Forecasting Apple's market shares also means putting on the soothsayer hat with respect to the Kindle. Now that the iPad is here and selling well, analysts are telling Bloomberg BusinessWeek they are a lot less excited about Kindle sales over the course of 2010.

iPad Makes Kindle Less Exciting

Needham & Company senior analyst Charlie Wolf cut his sales forecast from 3.6 million Kindles to between 2.5 million and 3 million. "It's not a compelling product," he told BusinessWeek.

Meanwhile, Piper Jaffray analyst Gene Munster slashed his 2010 forecast for Kindle sales by 400,000 units to 3.45 million. The only way for Amazon to keep prospective sales up is to cut Kindle's price by $100. "If they lower the Kindle's price, it'll survive," Munster reportedly said. "If they don't, it won't."

Even if Amazon cuts the price, adds touchscreen functions or spruces up the Kindle, that won't diminish iPad's appeal -- it wins by offering multiple functions and color. But it may not matter so much if Amazon "loses" a competition with Apple for its e-reader, because the online retailer has also developed e-reading applications for the very devices they compete with.

Amazon Still Huge in E-BooksMarket

In other words -- and yes, now I'm playing digital Nostradamus here -- Amazon will still be a very robust player in the e-reading market as long as its strategy involves putting its applications on every device, maintaining its one-click shopping and having the biggest e-bookstore. After all, Kindle has more than 400,000 books, compared to a mere 60,000 or so in Apple's iBookstore.

So it can stand to be a "smaller fish in a bigger pond." And if that theory holds true, everyone wins -- well, everyone except for those prediction-happy analysts forecasting Amazon's fall.
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