Five Reasons Why Amazon's Kindle 2 Is (Already) Obsolete

Amazon has just released the Kindle 2 ebook reader and some have already hailed it as an iPod for ebooks after it apparently sold more than 500,000 units last year (and was out of stock online).

Many are also predicting that Amazon could convert the Kindle into a huge $1.2 billion business by 2010 (ed: that's next year) although we expect this number to be grossly exaggerated.

However, Amazon and the Kindle 2 could be in for a very challenging period which cement the e-book segment as a permanent niche market.

(1) Convergence

We believe that it will now be impossible for one mobile electronic device to be sold with only one purpose/feature. Take digital cameras, most of them have evolved to become digital video camcorders as well and vice versa (the Sanyo Xacti HD2 camcorder can take 7.4 megapixel photos for example). As an e-book, the Kindle is limited by its monochrome screen, which prevents it from having more uses which in turn would have allowed it to extend beyond its traditional reach. Convergence being the keyword, the Kindle is doomed from the start because it can perform only one thing.

(2) Price

The current Kindle 2 will cost around £250 (more like £350 if we stick to the "dollar parity" theory). Add anywhere between £2 and £8 for each book and suddenly the Kindle looks pretty expensive. Reading a paperback book does not need any "readers" as we all already have one built in for free. This is different in the audio market where readers (tape, CD) were always needed.

(3) Technology

In the audio market where the young generation had set the trend for an all digital format thanks to technologies like MP3 format, Napster and the iPod. Imagine if audio CDs were not compatible with CDROMs; straightfoward CD ripping would not have existed. The book market is much more difficult to crack open because it is still difficult to convert printed books into digital formats quickly and for free. This is why eReaders in general won't catch users' imagination, especially when they cost that much

(4) Proprietary Format

Amazon chose to sell books in a proprietary format in order to protect it from being pirated. The Digital Rights Management system deployed ressembles the one that existed previously on the digital audio market. But it is already obsolete as Apple and others chose to dump rights protection altogether. A proprietary format also means that Apple's platform is closed for the time being, which may make things more complicated when the e-tailing giant will have to license the technology to third parties.

(5) Competition

Earlier this year, there were rumours about a potential large iPod Touch from Apple and although we were not keen about such a product, if ever one was to be launched, we figure out that it would almost certainly be a worthy challenger to the Kindle. Google has already launched the mobile book search feature for the majority of mobile phones on the market (including the iPhone) and it is only a matter of time before a large screen product appears on the market. Then there's the netbooks which are more polyvalent than the Kindle and cost half as much. Expect touchscreen Netbooks to come to the market this year with Windows 7.