Why E-Readers Are Growing Faster Than Tablets, and Why That's Bad for Apple

Last Updated Jun 28, 2011 4:17 PM EDT

Think that tablets like the Apple (AAPL) iPad will take over the world, rendering other non-smartphone devices obsolete? Better check a new Pew Internet and American Life Project study: E-readers such as the Amazon (AMZN) Kindle and Barnes & Noble (BKS) Nook raced ahead of tablets during the last six months. Hispanics became the fastest adopters by far. This data has implications for device makers, app developers, and content producers.

Since November, the percentage of U.S. adults who own e-readers has gone from 6 percent of U.S. adults to 12 percent, as the graph below shows:

Not only is U.S. e-reader ownership growing faster than that of tablets, but it's larger in absolute terms, with tablet ownership having gone from 5 percent in November 2010 to 8 percent by May 2011. (That assumes all 2,277 people who participated in the survey accurately distinguished between e-readers and tablets.) Even taking some significant cross-category ownership into account, e-readers are still significantly ahead of tablets:

The ownership demographics are intriguing. Hispanics are far more likely to buy e-readers than whites, who are virtually tied with African Americans. Tablet ownership as a percentage of population puts whites last, with African Americans slightly ahead and Hispanics twice as likely to own the devices. By household income, those that make $75,000 or more a year are, at 24 percent, far more heavy purchasers of e-readers than tablets, at 17 percent (click to enlarge):

Perhaps the greater popularity of e-readers are due to pricing, as tablets have largely been in the $500 or more range, while e-readers are a fraction of the price. If so, it suggests that app developers and content producers might find their interests at odds with those of the device vendors.

The former groups will be happy to see thin margins and broad adoption, which provides a bigger pool of potential customers. Hardware vendors, on the other hand, would tend to opt for selling fewer devices at higher margins. Given the way developers and content producers have practically tipped over themselves chasing tablet audiences for the more expensive hardware, it might seem to give them little leverage.

The bad news for Apple
However, there's a significant split between the two device categories. If the schism continues, companies that produce content and software might rationally gravitate toward the bigger audiences, ultimately lessening the influence that Apple, firmly in the tablet market, has had.

Notice that because this is a survey, it doesn't make the over-counting mistake that often happens if you depend on vendor claims of total units shipped, which likely includes replacement devices. The survey methodology has its own potential flaws. Although it used random dialing of both landline and cell phone numbers, only 14.2 percent of people at working landline numbers dialed cooperated, while 11.6 percent of those at cell phones took the survey. So, to some degree, the group may have been self-selecting.

Still, numbers like these will bear attention over time. A Harris study in the fall suggested that 80 percent of consumers didn't plan on buying an e-reader. But then, surveys of what people think they will do in the future are never very reliable. And that study was before the Nook Color and the appearance of the e-reader as niche tablet. The only thing clear is that making the right business decisions in this market will be very, very hard.


Image: Barnes & Noble
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.