iPad musings - How big is the market for this anyway?

Back in my college days, I worked with a fellow at an auto parts warehouse. He asked me “Man, how many books do you read in a year?” I gave a number in the dozens. That produced a scoff from my co-worker and the following comment “I haven’t read a book since I left high school!” He was, incidentally, a man in his 40’s and he was dead serious.

I kept thinking about that comment as I read my daily dose of fawning comments about the iPad. Everyone out there seems to unquestionably think this device is a great thing. If they have any criticism it’s usually the name of the product.

I think everyone’s giving Apple too much of a blanket attaboy on this. I may be wrong but I wish more people were looking at this device with a more dispassionate eye.

Let’s consider that:

1) There’s a finite market for tablet format e-book reading devices.

2) That market is smaller than the market for PCs, laptops, netbooks and PDAs. How do I know this? I see very young kids with cell phones. I see all kinds of families, children, etc. using home PCs and notebooks. I don’t ever think I’ll see casual readers plunk down big bucks for this device. Will trendy, early adopters get one? Sure! Will most folks? I don’t think so. If there are 300 million US citizens, how many will buy an iPad? Not that many I’m afraid.

3) There are already millions of Amazon Kindles already out there according to Jeff Bezos. How many people will abandon a Kindle to buy an iPad? Sure, some people will but the high switching cost will mean that Kindle switches may take years to materialize. And don’t forget the Sony Reader. By December of 2008, Sony reported they had sold 300,000 units of their device. That number has most certainly gone up since then. That prior install base of Sony and Amazon products may have already snagged a lot of the early adopter market. The real question is how many more buyers are left?

4) At $499, one could buy a lot of books. Seriously, how many people do you know that spend anywhere that much on books in a year? In two years? In five years? Ever? The fellow I used to work with wouldn’t spend that in a lifetime. I looked up the size of the book industry. The current market estimates fall between $26 -40 billion annually depending on whose stats you review. That works out to a maximum of $133/US citizen. I think the iPad would have to price out at something like $99 to get really competitive with books.

5) The iPad is a discretionary purchase. It is not a business requirement. It is a convenience for those who like to read. More specifically, for those who like to read a lot. Sadly, I’m not convinced that this describes a lot people. No, we’ve got generations of citizens who get their political knowledge from Jon Stewart’s comedy show and their current events from TMZ.

I know what you’ll say “But Brian, the iPad can do more than present book content!!!!” And, you’re right. But recognize that’s how the product is positioned for now: an electronic book reading device. Yes, I know that someday many of us will be able to pick up our Kindle/Sony Reader/iPad/et.al. device in the morning and see it has all of today’s news, comics, movies, television shows AND books pre-loaded for our convenience. Yes, I get it – it’ll be like TIVO for all kinds of media except the display device is part of the solution.

But, not everyone is ready for that yet. Some of us may never be ready. Some of us still like to pick up a real book, a real newspaper, do the crossword and the Suduko on paper, etc. I know I do. I like that a book doesn’t need a wi-fi connection or a power cord to recharge it. I like that I can read a book in any light – even bright outdoor sunlight. I still can’t do that with my cell phone. I guess I don’t find these devices to be all that amazing or indispensable yet. And, they’re expensive.

Last week, I sat next to a fellow on an American Airlines flight. He was a 7 million miler (I’m just a 3 million miler myself) and he had a Kindle. He was reading the NY Times on it. He particularly loved how he could load lots of books on it before flying out to Asia for weeks on end. For him, an e-book is a great technology. But how many of us live his lifestyle? Not many.

I’m keeping an open mind but I’m not saving my spare change to buy one of these either. I need a better value proposition for the iPad for now.

On the plus side, I am pleased that Apple continues to innovate and step outside its comfort zone. That's something that's something too few tech firms will or can do. Maybe I'll get more rabid when their next breakout product rolls out.