eBook Retailers: Imminent Demise?

So if you're the CEO of BooksOnBoard, eReader, or eBooks, what are you asking yourself about the arrival of the Kindle? Clearly you can't base a business model on the hope that Amazon will invest enormous financial and intellectual capital to sell electronic books on their own gizmo but completely ignore today's reading platforms (PDAs, Sony's Reader, and the iPhone) as well as all the others that are on the horizon to be the device the Kindle should have been. Mobipocket is already an Amazon.com company, so it's equally unclear why it won't just be rolled into Amazon's electronic book category.

Back in my econ days, we learned about natural monopolies. Before the Internet, the thought was that industries like utilities, postal service, etc. made the most sense - for all parties - when there was only one player. Since then, iTunes, eBay, and Google (really) have proved the same thing for their respective service categories. It strikes me that selling electronic books is another natural monopoly.

Take apart the cost structure of the electronic book sale: a website catalog, customer service, data storage and delivery, brand awareness and marketing, electronic commerce processing, and most importantly - and challengingly - consummating the business relationships with the publishers to provide content. Having purchased from all the other electronic book retailers - or just take your own quickie glance - it's abundantly clear that none of them is playing in the same league with Amazon. So where do they go?

The Book Sense shops have gone the route of becoming clubhouses as much as stores. That's a decent route. It doesn't scale, but these will remain nice lifestyle businesses with few, ardent fans. They've inverted the equation, going from places that put on readings to sell books to selling books to support author readings. And there are plenty of people that see buying the book as the admission ticket for an enjoyable lecture. It works.

To end with the beginning, the other current players in the electronic book world better find their "author readings" offering ASAP. The minute that Amazon - or iTunes that knows something about electronic content delivery - decides to move away from Kindle-only sales, these guys are doomed.