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iPhone Threatens Amazon Kindle

The e-books category has taken over the top spot from the games category in Apple's App Store.

The number of e-books available for Apple's iPhone and iPod Touch through the App Store surpassed the leading category, games, in September for the first time, an indication that the devices could grab market share from Amazon's market-leading Kindle reader, a research firm said.

Until September, more apps were released monthly to the App Store in the games category than any other since the launch of the online store in July 2008. However, publishers have been releasing e-books to the Apple store at record rates, and in October, one in five new apps released to the store were e-books, according to Flurry, a mobile application research firm.

Flurry estimated that in August, 1% of the entire U.S. population, or about 3 million people, was reading a book on the iPhone. "With books shipping in droves, we are seeing the supply-side explode," Flurry said in a research blog posted Sunday.

Flurry says its findings indicate that the iPhone and iPod Touch are in a position to start grabbing market share from the Kindle, which according to Forrester Research accounts for 70% of e-book readers sold. Such a market-grabbing trend wouldn't be new for the Apple devices. Last month, Nintendo cited iPhone competition against its DS portable game player as one of the reasons profits fell by more than half last quarter, compared to the same period a year ago.

Despite the smaller screens on the Apple devices, 3.5 inches diagonally versus six inches for the Kindle, they appear to be good enough for reading for many people. This is bad news for Amazon and other reader makers, including Sony and Barnes & Noble, given how many more people own iPhones and iPod Touches than e-book readers.

Forrester predicts that a total of 3 million readers will be sold this year, and sales next year could exceed 6 million units. That's far less than the tens of millions of iPhones and iPod Touches that have been sold by Apple.

Which isn't to say that booksellers Amazon and Barnes & Noble are not benefiting from the popularity of the Apple devices. Both companies offer book-buying applications on the App Store.

Nevertheless, with the price of e-book readers starting at $200, the devices are seen by Forrester as too expensive to become more than a niche product that appeals mostly to avid readers and business travelers. However, that could change if publishers decide to subsidize the price in return for a two-year subscription to magazines and/or newspapers, analysts say. Such an offer would be similar to how wireless carriers subsidize mobile phones in return for two-year service contracts.

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