E-readers could push growth in e-textbook market, analysts say

With more e-readers hitting the U.S. market, analysts predict a big uptick in device sales in late 2010 with a strong surge in the popularity of electronic textbooks used in high schools and colleges in time for school in the fall of 2011.

The market for e-textbooks is considered a rich one, but is also governed by many factors, including the cost of e-readers. They can run about $400—the price of the new Irex DR800SG announced this week—putting them out of the reach of many students.

How fast and large the e-textbook market grows depend on a diverse array of more than 20 textbook publishers in the U.S., many of whom are weighing the use of proprietary or standard e-publishing technology and evaluating whether students will rely on e-readers to purchase expensive textbooks and other books, analysts said.

“It’s a two-year window for e-textbooks before there’s significant market traction,” said Gartner Inc. analyst Allen Weiner in an interview. “But it’s a fertile market.”

Weiner predicted that a number of major vendors, including Google and Apple could enter the market with devices and marketing plans that involve textbook publishers and, possibly, college bookstores.

Apple has long been rumored to be working on a tablet computer , perhaps with a 9-inch screen, for debut in February. That hardware could be targeted at college students accustomed to dropping $100 or more for traditional hardback texts, Weiner said.

“An Apple tablet could be the sweetest college textbook reader you’ve ever seen,” Weiner said. “Apple is letting the e-reader market simmer and will come into it when the market’s ready to boil.”

The market in the U.S. now includes the Irex device, which has an 8.1-inch screen and goes on sale at Best Buy stores in October. It will use the Verizon Wireless network for downloading books and newspapers. Sony Reader devices are being sold at Best Buy to work with AT&T’s wireless network. And Amazon.com has produced several Kindle e-readers with wireless connections via Sprint Nextel Inc.

“While we’ve just seen three vendors in the U.S., there will be a lot of activity in the next year,” said Vinita Jakhanwal, an analyst at iSuppli. Plastic Logic is planning to introduce an e-reader in the U.S., while Asian manufacturers are expected to launch products—though not necessarily in the U.S., she said. “There’s also a lot of speculation about whether Barnes & Noble will launch their own e-reader or use existing ones,” she said.

While the cost of components inside e-readers is dropping, lowering the overall cost of an e-reader, Jakhanwal predicted it could be three years before e-readers hit the magic $99 price point coveted by many consumer electronics manufacturers to attract a large audience. Globally, iSuppli estimates about 5 million e-readers will be sold in 2009, a number expected to climb to between 13 million and 14 million in 2010.

Weiner said that textbook publishers differ over the use of the open ePub standard or a proprietary approach like that used by the Kindle. A publisher might not want to sell books only to a one platform, he noted.

Publishers are also weighing whether e-textbooks should be rented, and if they are sold, whether buyers can re-sell them afterwards. “There’s a lot to be worked out,” Weiner said.

A potentially lucrative area for publishers is “value-added” technology that can be included with e-books, Weiner said. For example, a user might click on a button in text to see a video of a lecture by the author of the text, or to click for an updated interactive quiz on the material, delivered via a fast wireless network.

“It’s important for textbook publishers to give more value and charge more, with an ability to update material so a user would want it for being current,” Weiner said. Some colleges are also testing e-readers to be used as mobile clients that connect to a college’s server for access to course work, professors’ notes and other materials.

“The possibilities are endless,” Weiner said, noting that some textbook publishers are experimenting with hybrid models that combine e-book technology with print-on-demand books, so that a publisher only prints the portions of text or the number of textbooks that it needs.

Weiner said it is too early to determine how much an e-textbook might save over the cost of tradition textbooks, adding that college-owned bookstores will have a say in the price of e-books. “You have to figure you can’t [leave out] the bookstore, since that’s a large revenue stream for a school,” he added. “It’s basically a question of whether you empower them to to become online bookstores, as is happening in some cases.”

Some publishers might use the ability to attract life-long e-book readers by first luring them with lower-priced e-textbooks. “One motivation for publishers, as they’ve told me, is if you get students in the habit of using e-books and get e-readers devices in their hands, then it might be easier to get them to buy other e-books,” Weiner said.

While there is clearly a market opportunity with e-readers and e-books, including e-textbooks, there seems to be a general consensus that e-readers will encourage reading and promote education , analysts, some educators and even librarians have said.

Having e-textbooks and e-readers “could stimulate reading, and that improves education,” Weiner said. “Anything to get people to read more, particularly young people, is big.”

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