One of the main reasons why Forrester is correcting its forecast is the fact that prices have come down (and this report was actually written before the Amazon announcement). In addition, Forrester also sees increased consumer awareness thanks to the current media buzz around eReaders. While the Kindle was mentioned 8,680 times in news stories in 2008, it has been mentioned over 15,700 times in 2009 already (including the month of September). In addition, the fact that more content is now available and that manufacturers like iRex and Sony are backing the open ePub standard is also opening up the market to buyers who previously weren't interested in Amazon's closed Kindle ecosystem.

Outlook for 2010: Even Better

For next year, Forrester expects that Barnes & Noble will become serious competition for Amazon. With the iRex Digital Reader 800 and the forthcoming Plastic Logic reader, B&N will be able to offer its customers a lineup of eReaders that can easily challenge Amazon's Kindle - though not in the international market that Amazon just entered yesterday.

Forrester also expects that Apple's mythical tablet could become a major force in the eReader market, though for the time being, the Apple tablet is obviously nothing more than a rumor.

Clearly the eReader market is growing at a rapid pace. Just yesterday, when Amazon unveiled the reduced prices for its Kindle 2 and the launch of the AT&T-powered "U.S. & International Wireless" version of the Kindle 2, Amazon's CEO and founder Jeff Bezoz pointed out in an interview with the New York Times that whenever Amazon offers both a Kindle and paper version of a book, 48% of total sales now come from the digital Kindle edition. In May, this number was 35%. While Amazon doesn't release sales numbers for the Kindle, these numbers are only possible if Amazon has sold a lot more Kindles than most analysts previously thought.

For now, B&N only advertises its iPhone, BlackBerry, and PC/Mac software readers on its site, but the company doesn't offer any compatible hardware readers just yet. Since the launch of the eBook store, B&N has announced a partnership with iRex and we are still waiting for the mythical Plastic Logic eReader to appear.

A spike in interest right after the launch of a new product is obviously nothing unusual, but this data shows that B&N could challenge the Kindle in the long run. To do so, however, B&N needs to offer users a clear alternative to Amazon's Kindle. Sony, which offers numerous eReaders that are connected to its eBook store, is obviously also trying to make a major push in the eBook market and while its numbers are slowly trending up, Amazon and the Kindle remain in a clear lead. As Compete's McGovern points out, B&N has shown that it can easily drive its customers to its eBook store - thanks, in no small part, to a very successful email campaign - but it will need to offer a hardware eReader to really take on Amazon.

As Forrester analyst Sarah Rotman Epps point out, iRex has to overcome some challenges because its brand is relatively unknown in the US. According to the New York Times, iRex wanted to release a Barnes & Noble branded version of the DR800SG, but those negotiations apparently didn't go very far. At the same time, though, iRex also has some advantages, especially in Europe - a market that other vendors have mostly ignored for now.

At this point, however, it's not even really about the launch of yet another eReader anymore - with Amazon, Sony, Asus, iRex, Plastic Logic, Coolreaders, and a growing number of other contenders, the market is now wide open and competition is already bringing prices down. Prices now start at $149 for refurbished 1st generation Kindles and go up to $489 for the Kindle DX, with Amazon's competitors hitting every price point in between. For most consumers, any price over $99 is still too high for an eReader, but then, hardware prices always come down sooner or later and it is only a matter of time before somebody is going to release a decent $99 eReader.

At $399, the new iRex reader is obviously one of the more expensive readers on the market right now, though its price is in line with competing wireless eReaders like the Sony Reader Daily Edition. Sony, however, offers a real touchscreen on some of its high-end readers though, something iRex has disavowed for now because it reduces the contrast of the screen.

Getting eReaders Into the Marketplace

Another important aspect of this announcement is that Best Buy will now set apart some space in its stores to feature eReaders. Until now, Best Buy only sold eReader on its website. Even though public interest in eReaders is high, only a relatively small number of people have actually held one of these devices in their hands.

$99 Is the New $199

In an earlier report, Rotman Epps argued that breaking the $199-barrier would be a major breakthrough for the eReader market and would allow these devices to become mainstream. Now it looks like $99 might actually be the point where eReader would become an impulse buy for the majority of consumers.

The good news for eReader manufacturers, however, is that those who intend to buy an eReader within the next six months are willing to pay up to $159 and those who actually already own one are even willing to pay over $250. A bargain price for eReaders for both of these groups would around $100, though.

Price Inevitably Comes Down

When it comes to consumer electronics, prices always come down in the long run, and we will surely see a similar trend for eReaders. For now, manufacturing costs for eReaders are still relatively high, but publishers could subsidize eReaders through a subscription model, for example.

It is clear, though, as Rotman Epps points out, that most consumers don't put a lot of value on these devices yet and that prices will have to come down substantially. Even then, Rotman Epps argues, eReaders will never be as popular as MP3 players because the majority of consumers "don't care enough about reading or technology to invest in this type of single-purpose device at anything close to realistic prices."

Everybody Now Offers Wireless Syncing

While wireless syncing and book delivery may not be that important to every potential eReader user, it did give Amazon a major leg up in marketing its Kindle and Kindle DX. In a month or two, this advantage will be gone. Amazon's competitors also offer more stylish devices, and some of the upcoming new eReaders will also offer touch screens - another feature that Amazon's Kindle doesn't currently offer.

EBook Price is Now the Same Everywhere, But Sony Supports Downloads From Local Library

In terms of pricing, Sony will soon offer an eReader for $199, which will put a lot of pressure on Amazon - though Sony's cheapest device will not offer wireless capabilities. As for books, prices everywhere are converging around a reasonable $9.99, the price Amazon pioneered as the default price for bestsellers in its Kindle store.

What's even more exciting is that eReader users will soon be able to borrow eBooks from their local libraries. Sony just announced a partnership with OverDrive, which supplies eBook technology to over 9,000 libraries. Amazon doesn't offer a similar program (yet).

Amazon's Problem: The Kindle is Closed

What's giving Amazon's competitors a major advantage right now is that their devices are far more open than the Kindle. As Slate's Farhad Manjoo points out, Sony and company could still be far more open and do away with all copyright restrictions. But at least you will be able to move your books to different devices, even though Sony still uses the standard EPUB format with a DRM wrapper, for example. Amazon's proprietary format, on the other hand, doesn't allow you to move your Kindle eBook to your new Sony Reader, for example.

For now, most publishers are still wary about releasing books without copyright DRM. We can only assume that the book publishing industry will go through a similar cycle as the music industry, however, and that DRMed eBooks will also go the way of DRMed MP3s.

The eBook market is still young. For now, Amazon's only other advantage over its competitors is that it currently has a lot of momentum among early adopters. But, as Forrester Research's Sarah Rotman Epps argued in a recent report, as eBooks move into the mainstream, late adopters may not feel the same loyalty towards Amazon that early adopters had.

Of course, Amazon could still come out with a new eReader and a more open strategy. But for now, it doesn't look like Amazon is planning to change its strategy anytime soon, and we haven't heard any news (or even rumors) of a new Kindle for quite a while. If Amazon doesn't watch out, it could soon be left behind, because other eBook vendors and hardware manufacturers offer a more open and attractive platform for publishers and users.

Sony Gets a Wireless Reader, Too

As for the hardware devices, Sony's new Reader Daily Edition is obviously aimed at Amazon's Kindle and Kindle DX. It will be able to display 16 levels of grayscale and will be housed in an aluminum body with an integrated cover. Users will be able to read books, newspapers, and magazines in portrait and landscape orientation.

The wireless connectivity, courtesy of AT&T's 3G network, is the most exciting news here, though. Both Sony and B&N are following Amazon's lead, of course, but Amazon's success with the Kindle has also clearly shown that a lot of consumers now expect this kind of functionality at the high-end of the eReader market.

What's even more exciting, though, is that by the time the holiday season comes around this year, users will be able to choose between far more eReaders and eBook vendors than ever before, without having to compromise on the number of available books.

With its five-inch $199 Reader Pocket Edition, Sony will be able to offer the cheapest device on the market, while the seven-inch Reader Daily Edition at $399 is priced to fall between the cost of a Kindle ($299) and Kindle DX ($489).

In the press release about this partnership, B&N's president William J. Lynch and Irex's North American CEO Kevin Hamilton both stressed that the two companies "share a distinctive, open view of the eReader market."

3G Connectivity

Given that the Irex reader will feature a 3G wireless connection, B&N looks to be in a very good position to compete with the Kindle. While we confirmed with Irex that the new eReader that B&N will use will indeed have 3G wireless connectivity, neither Irex nor B&N were ready to confirm which wireless carrier in the US will power the wireless connectivity.

Currently, the ability to download and sync books wirelessly is one of the Kindle's real advantages over other readers. The mock-ups of the new Irex reader look very good, and B&N currently offers a wider variety of eBooks than Amazon at similar price points. Sony also just announced its new line-up of readers for the holidays and the company is set to announce yet another new product later this week (possibly a reader with wireless connectivity as well).

Amazon currently has the lead among early eBook adopters. Once eBooks become mainstream, however, Rotman Epps argues, this lead could easily dissipate. While Rotman Epps doesn't talk a lot about hardware devices in her report, the reality is that the Kindle isn't exactly a major step forward in the history of industrial design. Early adopters and 'tech optimists' (as Forrester likes to call them) are willing to look beyond this, but in the mainstream market, hardware design might play a major role in consumers' buying decisions.

The Next Wave of eBook Adopters

According to Forrester, the next wave of eBook adopters tends to read more books per months than early adopters and will probably consist of younger males who are less likely to be married and have children. The problem for eReader manufacturers, however, will be to get this group to buy dedicated devices. Rotman Epps argues that a large percentage of this group will probably read eBooks on devices they already own (like the iPhone), unless prices for eReaders come down significantly (under $100).

It's All About the Price

Forrester's Rotman Epps argues that the high price of eReaders is currently holding back mainstream adoption. A $99 device, Rotman Epps notes, would bring a lot of additional readers to eBooks and eReaders. Most importantly, though, the eBook and eReader market is still in flux. As the next generation of readers is likely to be very different from the previous generation, Amazon will have to work hard to keep its current lead.

Can Amazon Hold On to Its Lead?

Unlike Rotman Epps, however, we think that Amazon will likely be able to hold on to its current lead. After all, it has already forged strong - though sometimes contentious - relationships with most publishers and it currently offers the best integration between its store and its eReader. Barnes & Noble's new eBook store will be a strong contender here, though we have yet to see the Plastic Logic eReader device that B&N will use to compete with the Kindle. Sony, too, is making a major push in the eBook market again, though in terms of mindshare in the US, Amazon and the Kindle are currently the clear leaders (both in the mainstream and among early adopters).

While "Later Adopters May Not Be As Loyal To Amazon.com" makes for a good subtitle, the next generation of eBook adopters is just as likely to consider Amazon as the natural place to go to for eBooks, especially given that the company is already the #1 online retailer for regular books.

What About the B2B Market?

The Forrester report only focuses on consumers. We would argue, however, that there is also a large professional market for eReaders, where the current price isn't too big an issue. Just last week, for example, iRex, an eReader manufacturer that mostly aims for the B2B market, announced the launch of its electronic flight bag for pilots - which is basically an iRex eReader with Jeppesen's charts loaded on them.

What's the Killer Product for eReaders?

The Forrester report argues that once eReaders hit the $100 barrier, users will quickly start to adopt these devices. But is price really the only issue here? Are there any other "killer apps" or devices that could drive mainstream adoption even before $99 eReaders become a reality?

Our own Dana Oshiro just argued in our backchannel that a subscription book club (maybe run by Oprah) could bring a lot of new users to eReaders. And then, of course, there is still the mystical Apple tablet that might make for a great eReader - among other things - and which will surely cost more than $99.

Would You Buy an eReader?

What is holding you back from buying an eReader? The iPhone? The price of the current generation of eReaders? Or the well-designed reading solution called 'the book'?

Unlike other eReader vendors, iRex made the decision to focus almost exclusively on the B2B market early on and focused on this market instead of going directly after consumers. As Brons told us, part of the reason was that the price for first generation eReaders was simply to high for consumers, and in order to jumpstart the business, going after the B2B market was simply a strategic decision. IRex's eReaders, are, for example, often being used as Electronic Flight Bags by private pilots. Brons also stressed that there is a huge market for books for professionals, including manuals, guides, and similar texts.

Today, iRex is also looking into the textbook market and electronic newspapers, though for the time being, the company is still focusing more on the professional market than on the consumer market.

Taking Notes

We think iRex's top-of-the-line Digital Reader 1000 devices are especially interesting because they actually feature the ability to take notes directly on the screen (with a pen - no touchscreen yet, but the company is working on this). When we looked at the Kindle DX and its role in the textbook market, we noted that the absence of easy to use note-taking features made the Kindle less useful in a school setting than Amazon made it out to be.

One thing Hans Brons stressed during our interview was that iRex puts a premium on the brightness of its screens. Adding a touchscreen would mean adding an additional layer over the actual screen, which would reduce brightness.

Brons also told us that iRex has approached (and has been approached by) a number of newspaper companies that are looking to provide their readers with eReaders. iRex is not ready to announce any new deals in the U.S. just yet, though the company is working with a number of large European newspapers already, and the Washington Post and USA Today are also available through iRex.

Color

IRex made a bit of a splash a few weeks ago when it announced (PDF) that it was working on full color readers. Brons told us that iRex was getting ready to commercialize color readers, but that this was indeed a hard problem to solve as iRex doesn't want to sacrifice screen brightness for color, which isn't necessarily a feature that most users would need.

Services for Publishers, But no Store

Brons also told us that iRex is providing publishers with a full range services to get their books onto the iRex platform, though iRex itself is not looking into starting its own store.

We think there is a chance that iRex is missing some opportunities here, though. Publishers might be able to put their books up in an iRex powered store on their sites, but consumers don't go to publisher sites to buy a book. After all, who knows (and wants to know) whether their favorite book was published by a Random House imprint like Knopf or Crown, or by Penguin (itself a part of Pearson)?

Brons acknowledged that Amazon's size must have surely helped it to gather (force?) publishers around its eBook offering, and the integration between the store and the hardware device, bundled with the Kindle's wireless capabilities, surely helped the company to make eBooks and eReaders more palatable for consumers.

It is important to note, too, that the Kindle and Amazon's eBook store isn't currently available in Europe, where iRex has its headquarters and its strongest presence. If iRex could gather enough publishers around its platform and set up a large store, the company would definitely have the potential to challenge Amazon in this market when and if it decides to bring the Kindle to Europe.