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Ebook reader market to kindle a fire in US: Yankee Group

Yankee Group forecasts that the already hot United States ebook reader market is about to catch fire, sparking from $1.3 billion in revenue in 2010 to $2.5 billion by 2013.

Mobile Commerce Daily’s Chris Harnick interviewed Dmitriy Molchanov, an analyst at Yankee Group, regarding the research firm’s new study, “Yankee Group’s US EBook Reader Forecast: Kindling a Fire,” Here is what he said:

What’s the key finding of the research and why?
Yankee Group forecasts sales of eReader devices to rise from 6 million units in 2010 to a little over 19 million units sold in 2013.

Revenue from the sale of these devices will similarly catch fire, sparking from $1.3 billion in revenue in 2010 to $2.5 billion by 2013.

Additionally, by 2013 the U.S. ebook reader sales will reach 19.2 million, a CAGR of 34 percent, with 6 million ebook readers sold in 2010 alone.

The U.S. installed base of ebook readers will hit over 36 million, up from an installed base of 9 million by 2011.

Half of all consumers who indicate interest in buying an ebook reader will have bought one already, so device makers should act quickly.

Our forecast is built around a model that factors in the effects of price elasticity, network effects and adoption risk and is loosely based on product diffusion models developed by Everett Rogers and Frank Bass.
What is the most surprising finding and why?
To determine the Total Addressable Market for eReaders (the total percentage of the population that would ever purchase the device) we used YG data to determine the percentage of U.S. consumers who are heavy readers and consumers of digital content.

We estimate that only 26 percent of the U.S. population would ever have an interest in purchasing an eReader. According to our forecast, roughly half of the individuals we identify as potential buyers of ebook readers will buy one by 2013.

What trends are you predicting for the coming year?
Unlike the iPod, which hooked serious music buyers in addition to a raft of casual listeners, ebook reader adoption will be limited to heavy readers only—at least until prices come down.

But we see the average price of ebook readers declining by roughly 15 percent per year for the next five years, resulting in 55 percent increase in adoption rate year over year.
What can consumers and marketers look out for in the space in 2010?
Innovation in the display space. Consumers are likely to see color displays that support video and consume little power hit the market by late 2010. Qualcomm’s Mirasol display and Pixel’s Qi display will be two new contenders in this space.

Publishers will have the capability to introduce “enhanced” ebooks, that stream video content to enhance the reading experience. This will be particularly crucial for magazine publishers that are looking to revive their business.

Will Apple’s rumored tablet be a game changer?
Apple’s iSlate will not kill the e-book reader. Consumers have consistently demonstrated that they prefer a dedicated device that does one thing very well.

That said, ebook reader manufacturers should not concentrate on adding additional features like MP3 players to their devices.

Markets for multipurpose devices are already saturated and e-book readers with many functions will seem overpriced next to tablet PCs. Manufacturers should focus on a simple device that appeals to book lovers.
What will increase consumer demand in this market?
Lower prices, a single industry standard for ebook formats (most manufacturers think this will be the ePub format), and expanded social networking functions on eReaders like book sharing.

Certain functions like annotation will certainly propel growth among the student segment.