No Room for the Little Guy in E-Reader Industry

By Gabriel Perna: Subscribe to Gabriel's RSS feed

August 12, 2010 11:31 AM EDT

At a $140 with more than 630,000 e-books on a small, easy-to-use device, the Amazon Kindle is blowing through much of its competition in the emerging e-reader segment.

Plastic Logic appears to be the first victim. The company is canceling its QUE Reader due to "a changing marketplace." However, many analysts say this is code for getting priced out by the Kindle. The company said in a press release it was working on a next-generation project, however a spokesperson would not offer any further details.

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The only contenders likely left to be standing are the similarly economical, user-friendly Barnes & Noble Nook and Borders' Kobo, which both offer expansive libraries. Add in all-in-one tablets like the iPad, which also feature e-book apps, and there is little room at the table for upstarts looking to make a dent in the industry or even stay in business.

"It just wasn't competitive," said Dmitiry Molchanov, e-reader analyst at The Yankee Group. "When they announced the $1,000 price tag in January at the Consumer Electronics Show, that price was uncompetitive. When the iPad came out a week or so later, it became even more uncompetitive."

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After the QUE's initial debut at the CES, Plastic Logic said it would release the device in the spring. However, the company ended up postponing the expected shipping date several times until it finally killed it once and for all. Molchanov says he doubts the company will ever come out with a competitive e-reader. "I think this is the last we've heard of them in e-readers," he said.

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One of the biggest problems with the QUE was its materials. Along with an all-plastic frame, the QUE had a flexible, large 10.7-inch display and an active matrix backplane. Furthermore, the software on it featured many bells and whistles that added to the price.

"The technology they put in it and the size they made it is the reason it was so expensive -- expensive because it was hard to build. It's difficult to build something like that and rush it out when there still might be a market for premium devices," said James McQuivey, analyst at Forrester.

Once the Apple came out with the iPad and the other e-readers slashed their prices, the QUE Reader was essentially doomed. For smaller e-reader manufacturers like Plastic Logic, price is not the only problem they face.

"Amazon has made it clear with its own pricing strategy that it intends to own this business, at any price, which has made it nearly impossible for any new entrants to matter here. It appears that the only way to sustain a device in this business is to have a connection to book buyers, as Amazon, Barnes & Noble, and possibly Kobo do. Other players like Copia and PlasticLogic should just plan never to amass significant share, even if they can meet or beat the low prices because it's not about the device anymore, it's now about the content," McQuivey said.

Michael Dowling, chief executive officer at research firm Interpret, agrees with McQuivey that content will play a big role in the success of future e-readers. He also said gender usage is one reason glitzy devices like the QUE Reader are bound for failure. Dowling said approximately half of the people buying e-readers are females, who prefer low-cost, easy-to-use devices like the Kindle.

"The female demographic does not require anything fancy on their device. They are also the most price sensitive. So those (the Kindle and Nook) are the devices they have bought thus far and those who haven't bought a device yet, find the current offering sufficient," Dowling said.

This article is copyrighted by International Business Times, the business news leader