Amazon's eBook Share Shrinking, But the Pie is Growing

According to a research report out this week from Credit Suisse analyst Spencer Wang this week, market leader Amazon (AMZN)'s dominant share of the exploding ebook market is about to go into free-fall.

Wang predicts that Amazon's current 90 percent market share will plummet to 35 percent over the coming five years, thanks in part to the arrival of Apple's iPad, plus an e-reader from Google that is apparently closer to launch than most observers thought.

"Near term, we suspect that the iPad and the new eBook agency pricing model, which requires that Amazon increase retail prices to be more consistent with Apple's pricing, will provide Kindle with the most market share headwind," wrote Wang. "Going forward, we can envision a scenario where Apple, Amazon, and Google eventually split the market."

Of course, this kind of forecast needs to be viewed in the context of the rapid growth of the overall market in eBooks, which according to Wang will bring Amazon more than triple the sales from $248 million to $775 million over the same five-year period.

Still, most analysts agree, Amazon appears to be facing a pivotal moment in its quest to dominate eBooks. As Joseph J. Esposito at Publishing Frontier, noted recently:

"When Amazon started out, we knew little of all the things Amazon subsequently taught us, things like the ease of e-commerce, the technology of user authentication and online processing of credit cards, the value of superb customer service, and that unique characteristic of the Web, the ability to create a storefront that could claim to hold truly comprehensive inventory in a particular domain.

While not all organizations do these things as well as Amazon today, and none do them better, the fact is that Amazon has taught us well: more and more of what Amazon does is now available to rivals. It is no longer necessary to build your own shopping cart, and if you are stumped by the risks involved in taking an order by credit card, there are vendors lined up to take this problem off your hands. The gap is closing, and for Amazon to stay ahead of the pack, it must continue to innovate at a breathtaking clip."

Much like its fellow Internet giants Yahoo, Microsoft and Google, Amazon faces a constantly shifting competitive environment that casts a potential shadow over all of its future prospects, not just eBooks.

Over the years, however, the folks at Amazon have established a pretty good track record in adapting to changing circumstances and staying in (relative) control of their own fate, so for now I'm betting they'll do better than the critics predict.
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E-Readers in 2010: DIY or Partner With Amazon, Sony, Plastic Logic, et. al.
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Amazon's Plan to Insert Ads into e-Books
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