Amazon to Lose 60% of Market Share?

Will Amazon.com's (Nasdaq: AMZN  ) Kindle go from a thick 90% slice of the e-book market to a more pedestrian 35% cut?

Credit Suisse analyst Spencer Wang seems to think so. He suggests that the arrival of Apple's (Nasdaq: AAPL  ) iPad next month, coupled with Google's (Nasdaq: GOOG  ) controversial push into digital reads, will splinter the market into three popular clearinghouses for e-books. Publishers' push toward an agency pricing model will also level the playing field.

I get the logic, but has a situation like this ever played out that way?

Apple owns digital music. It doesn't matter that Amazon.com, Microsoft (Nasdaq: MSFT  ) , and RealNetworks' (Nasdaq: RNWK  ) Rhapsody are pushing digital downloads or subscriptions. Apple has this space locked down.

The picture gets a little cloudier when it comes to digital video. Apple and Amazon are trying to sell piecemeal downloads and rentals. However, Netflix (Nasdaq: NFLX  ) -- which offers digital streaming at no additional cost to its subscribers -- seems to be leading the way in that niche.

I'm not suggesting that Amazon won't be challenged. Despite its glare and battery-life concerns, the iPad will eat into Amazon's e-book business as a jack-of-all-trades device. The iPad may even be more successful with newspapers and magazines, which can take advantage of the iPad's rich colors and pander to an audience suited for short-form journalism. Google may seem like a dark horse, but one should never underestimate Big G's breadth and conviction if it deems this an important market.

It's still hard to fathom e-book readers as a fractured market where three powerful players walk away with thirds -- at best.

Ad where is Barnes & Noble (NYSE: BKS  ) in all of this? Even before the recent Nook debut, the company was making inroads in digital delivery. Should we assume that the leading superstore chain will ignore -- or be completely irrelevant during -- the digital migration?

This is still Amazon's war to lose, and I don't think it will be easy to topple from its digital-book dominance. There are at least 2 million Kindles out there. Even dot-com darlings need to earn the right to a slice of phantom market share.

Who will champion the inevitable digital book revolution? Share your thoughts in the comment box below.

Microsoft is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers selection. Apple, Amazon.com, and Netflix are Motley Fool Stock Advisor recommendations. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletter services, free for 30 days.  

Longtime Fool contributor Rick Munarriz has been a Kindle owner since 2008. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. He does not own shares in any of the companies in this story, except for Netflix. The Fool has a disclosure policy.


Read/Post Comments (6) | Recommend This Article (5)

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  • Report this Comment On February 17, 2010, at 3:11 PM, GeoffHasler wrote:

    Will not happen. Amazon is miles ahead of you. Kindle is better than competitors & will continue to get better, their CS is legendary. Everybody has been discounting this stock since the infamous Barrons headline - Amazon.Bomb. And see how wrong Barrons was.

  • Report this Comment On February 17, 2010, at 3:46 PM, Melaschasm wrote:

    I suspect that Amazon will lose significant market share in the ebook industry. However, the bigger concern is what share of all book sales Amazon can retain.

  • Report this Comment On February 17, 2010, at 3:54 PM, N00bsauce wrote:

    Barnes and Noble will take a big chunk of Amazons dominance with the recent release of the Nook. It does everything the kindle does and more, making it a solid next step in e-readers.

  • Report this Comment On February 17, 2010, at 8:55 PM, robsideaswork wrote:

    Kindle is only 5% of Amazon's growing earnings.

    Amazon is in a phase where the gamers are jsut trying to beat the price down... soon enough, the price will suddenly jump and the green lights will be on again. The same people that are dissing AMZN now will be buying it.

    It's all a casino and you just have to go with the game.

  • Report this Comment On February 17, 2010, at 10:30 PM, hahathisisfunny wrote:

    I agree with robsideaswork. The focus is the ebook thing and it is such a small part of what Amazon is. I am long in Amazon and happy to be so. This company has solid in roads with multiple technologies and business lines. Focusing on ebooks is a "news maker" that is good read for the Nook and iPad people who hope they can latch on to something. This company is going to continue to produce strong results despite the "competitive" ebook market. All I know is 90% of the people I work with and talk to shop Amazon first for online shopping. Have fun with the ebook thing, I don't care who wins that one. I have already won.

  • Report this Comment On February 18, 2010, at 5:25 PM, code4fun wrote:

    It depends on what Apple can provide in its ebook store. I don't expect it to make a big impact initially, but there are a lot of users that own iPods. If only a small chunk of that gets an iPad, that would certainly dwarf the Kindle user base.

    There is also the issue that Kindle uses Amazon proprietary file format and the iPad uses the more open ePub format. This means you'll need a special application to be able to view the Kindle document.

    Personally, I prefer the iPad if I can use it to view PDF documents. I read a lot of technical data sheets that has lots of images/diagrams. The Kindle is weak in this area. For periodicals/magazines, I expect it to look just like the printed version. I want colors and greyscale is not going to cut it. Would also love to see magazine publishers add multimedia content in their digital versions.

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