Will the iPhone Kill the Kindle?

By Josh Catone
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Good news today for Amazon: Citi analyst Mark Mahaney predicts that the Kindle ebook reader will hit $1 billion by 2010. Mahaney has revised upward his earlier predictions regarding the Kindle, and now thinks that by year’s end Amazon will have sold 378,000 of the $359 device and that it will account for 4% of the company’s sales next year. The Kindle, thinks Mahaney, will be Amazon’s iPod.

Mahaney is basing his estimates on the Kindle being a must-have gift his holiday and moving 150,000 units in Q4, a modest number considering holiday numbers of other hot consumer electronics devices in recent years. But as Silicon Alley Insider points out, the Kindle isn’t a 1:1 comparison to the iPod, since most people already had a library of music they could load onto their new MP3 player. With the Kindle, users must pay about $10 per book on top of the $359 price tag for the device itself. Even with game players, such as the Wii, PS3, and Xbox 360, which Mahaney also used in his comparison, many people had libraries of games from older game players that were compatible with the new version.

What Amazon should worry about more than the higher barrier for entry, though, is that the iPhone and a potential Apple tablet could really be the ultimate eBook reader.

The iPhone Apps Store has a couple of free eBook reader apps (eReader and Stanza) that are already relatively popular, as well as a paid app (BookShelf). These apps support a number of eBook formats, like PDF, txt, Plucker, and PalmDoc. Even though the iPhone comes with a monthly fee, it also comes with a phone, a full web browser, and is a viable computing platform for a ton of other types of applications including games, which could overcome the total overall cost for many people.

And let’s not forget that there’s also the iPod Touch, which sells for less than the Kindle (8GB version).

Prior to the launch of the app platform, a pair of iPhone eBook web applications were raking in members, and given the large libraries at sites like eBooks.com, which sell books in PDF format, theoretically the same content available on the Kindle is available on the iPhone. If Jobs and company launch a larger form factor tablet later this year and manage to keep costs down (say, under $1000), then the Kindle could be in trouble.

Which would you rather have, a $359 eBook reader that just reads books and gets news and blog feeds? Or a $1000 tablet that can do anything your computer can do? (Of course, a low-ish cost tablet from Apple is a big if, but the $299 8GB iPod Touch already trumps the Kindle in everything but form factor — which may be a matter of personal preference).

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