Sony (NYSE:SNE) may have missed the boat in the digital music player craze, but it's going to try to regain any lost credibility with its coming Sony Reader product. The Sony Reader sounds like a compelling product in a market that hasn't been cracked yet -- digital books.
The Wall Street Journal reported on the device Thursday, but gadget fans already knew about it from January's Consumer Electronics Show. The WSJ article points out the obvious idea that Sony may have ceded the digital music player market to Apple (NASDAQ:AAPL) but that maybe it can make headway in the digital-book market, which is, arguably, very much untapped. (E-books currently represent only $10 million of the $24 billion publishing industry.)
The Sony Reader is not the first device of its kind. Sony has already launched a product called Sony Librie, sold exclusively in Japan. But a little techie know-how allowed some people here in the U.S. to get their hands on some Libries and make them English-friendly. A friend of mine recently did just that and had a mostly positive review of the device. The Sony Reader will be lighter and thinner than the Librie, and it won't include the tiny QWERTY keyboard that allowed Librie readers to mark up margins -- the way many of us do to regular books. One battery charge allows readers to make 7,500 "page turns" that occur at the push of a button, and the devices are about the size of paperbacks.
Critics, of course, may say that people will never abandon the tactile and visual pleasure of reading a book. In an emailed discussion about my friend's Sony Librie, another friend asked, "Can your Librie separate into three sections held together by Scotch tape, with page 60 missing?" Books' fragility may be a practical nuisance, but a beat-up, dog-eared book is also a symbol of how much we enjoyed it.
On the other hand, when digital music was in its infancy, many people thought consumers were enamored with the collectible element of the physical format. That was obviously an overblown concern.
Apparently, publishing houses are eagerly signing on with Sony Connect. However, digital-rights-management issues will have to be contended with; the fact that there are free e-books in the public domain is an interesting aside. And of course, Sony has been heavy-handed dealing with DRM issues in the past. (In fact, the Librie only allowed people to "rent" content for a limited period of time, not own it.) The company has also made many missteps, including the recent rootkit controversy. I wonder whether Sony's products will have a bad rap with many consumers who were led to distrust the company after that affair.
One can only imagine that physical books won't go away, but this could certainly be an interesting new channel. Consider Amazon.com's (NASDAQ:AMZN) Digital Locker. How cool would it be if you could order a physical book from Amazon and also get a digital copy placed in your Digital Locker? (It already offers a similar deal on some CDs.) Such a complementary relationship among books, e-books, and reading devices would make a whole lot of sense for, say, those who travel a lot and don't necessarily want to lug the physical copies around. That idea sounds even more interesting in light of today's word that Amazon plans what it hopes will be an iPod-killer. In my opinion, an MP3 player/book reader would have been a much more interesting product from Amazon, seeing how its roots are in music and books, and that would truly differentiate it from the competition.
I've been pretty bearish on Sony, and I can't think of it as a growth stock when it's missed more than a few shots at regaining its former glory as a cutting-edge consumer-products peddler and has loads of formidable competition for many of its products. (A forward P/E of 73 most certainly brings the phrase "growth stock" to mind.) However, I have to say the Sony Reader sounds like an interesting device, and Sony's investors should appreciate it that Sony's trying to carve out a niche, not emulate one.
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Alyce Lomax does not own shares of any of the companies mentioned.
