The E-Reader Revolution
A Bookless Library
In Case You Missed It
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Every day on my lunch break, I push away from the computer and crack open a book. It’s one of my favorite parts of the day because I get to travel to another time and place without ever leaving my office.
(To date, I’ve traveled to William Faulker’s Yoknapatawpha County, Jane Austen’s England and aboard Herman Melville’s Pequod, among many others.)
As you can probably tell, I love books. My grandmother once described me as a voracious reader and as I was very young at the time, I misunderstood her characterization and thought she called me a ferocious reader. I think that term applies as well.
So I was excited to learn last spring that Boston was hosting a book festival. My friend had the job of designing and developing the organization’s Web site and I eagerly watched as it came to life.
The actual festival took place on October 24, a rainy fall day that was not able to dampen the spirits of the book lovers in attendance. I was fortunate enough to attend a pre-festival party at the Boston Public Library where I mingled with authors and other members of he literary elite. But the real highlight of the weekend was the next day when the actual discussion sessions began.
(Interesting fact: Opened to the public in 1854, the Boston Public Library is the oldest free public city library supported by taxation in the world and the first to allow its patrons to borrow books and other materials.)
The Boston Book Festival played host to such diverse authors as John Hodgman (better known as the PC in the Mac commercials), Nobel Laureate Orhan Pamuk, “Clueless” actress Alicia Silverstone, Princeton professor Cornel West, Nicholas Negroponte (founder of MIT’s Media Lab, “Wired” magazine and One Laptop Per Child), documentarian Ken Burns and the New York Times’ David Pogue, among others.
According to the news release that the Boston Book Festival put out after the event, “12,000 people took part in the panel discussions, readings, music performances and street fair, most of which were free. The event featured 90 authors and presenters, including some of the biggest names in the literary world, 40 outdoor exhibitors, 30 indoor events, children’s activities and live music.”
Besides the more traditional topics that you’d expect to find at a book festival, a major topic of the weekend was the future of reading. No matter how much I (or anyone else) may love the printed word, there’s no denying that big changes are afoot in the publishing world.
You only need to look at the deterioration of the newspaper industry to see the effects that digital and online media have had on print-based industries. Fortunately, it seems that book lovers are trying to adapt to the changes instead of fighting them--a good strategy if they want to find a profitable and functional way to survive this revolution.
And a discussion on the future of reading would not be complete without a few words on the Kindle, Amazon.com’s (AMZN) electronic-reader.
The Kindle allows readers to purchase books from the comfort of their homes and read them instantly on this small, lightweight handheld device. It can hold over 200 titles and access several newspapers and popular blogs. The Kindle doesn’t use WiFi, but instead uses the same high-speed data network as advanced cell phones, so you never have to locate a hotspot to pick up the signal.
Editor Timothy Lutts wrote about Amazon in Cabot Wealth Advisory on October 26, saying this:
“Last Friday, for example, brought an awesome 27% jump in Amazon.com (AMZN), the result of a crackerjack earnings report. In short, Amazon.com is selling an enormous (but secret) number of Kindle e-book readers, and they’re very profitable.
“What gets my attention is this number, $11 billion. That’s the amount of value that Amazon.com’s stock gained in the market on Friday, thanks to the buying of major investors. At the market close on Thursday, AMZN was judged to be worth $40 billion. Twenty-four hours later, the market said it was worth $51 billion!
“This big number tells me that some very serious investors, are projecting some terrific earnings power for Amazon.com, through both its main retail operation and its proprietary Kindle unit. Both are revolutionary. The Amazon.com Web site has already changed the world and is still increasing in its influence. And the era of the Kindle is just beginning. With newspapers and magazines shrinking and dying, Amazon.com has an enormous opportunity to become a preferred information/entertainment medium.”
And that week, Editor Michael Cintolo added Amazon to the Cabot Market Letter Model Portfolio. He recently wrote this about the company:
“In 10 years, how many people do you think will be reading some of their books, newspapers, magazines and even textbooks electronically? The answer is probably in the millions or even more, and that makes Amazon’s Kindle e-reader a potential blockbuster product. Plus, management has deftly positioned the company as the Walmart of the Internet, and all of this has led to accelerating growth--revenues rose 28% in the third quarter, earnings boomed 67% and, most importantly, the stock exploded 27% to new all-time highs on eight times its average volume. You don’t see many earnings gaps this powerful from institutional-quality stocks, and we think it’s a sign of higher prices to come.”
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Locally, we’ve had a taste of what could happen if e-readers really do take off: a bookless library.
Readers of the Boston Globe may remember a story from two months ago about Cushing Academy, a picturesque private school located here in Massachusetts. After decades of collecting thousands of books, the school decided to go paperless.
In lieu of a library, Cushing will now have a learning center complete with cappuccino machines, giant televisions and 18 e-readers made by Amazon and Sony.
James Tracy, headmaster of Cushing and chief promoter of the bookless campus, was quoted by the Boston Globe as saying, “When I look at books, I see an outdated technology, like scrolls before books. ... This isn’t ‘Fahrenheit 451' [the 1953 Ray Bradbury novel in which books are banned]. We’re not discouraging students from reading. We see this as a natural way to shape emerging trends and optimize technology.’'
While the plan had many detractors, their arguments couldn’t match this fact: School officials said when they checked library records one day last spring only 48 books had been checked out, and 30 of those were children’s books.
I personally love books and visit my local library all the time, but I also applaud the school for trying to better meet its students’ needs. Perhaps this will even become a model for schools around the country if it is successful. In the meantime, Amazon seems sure to benefit from the move away from paper and toward digital media.
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In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, I have links below to each issue.
Cabot Wealth Advisory 11/2/09 - Cold Beer at Akron
On Monday, Timothy Lutts wrote about the movie “Harvey” and what it can teach us about finding peace of mind in life ... and investing. Tim also discussed the importance of educating yourself as an investor. Tim finished by writing about an India-based stock with high potential. Featured stock: Dr. Reddy’s Laboratories.
http://www.cabot.net/Issues/CWA/Archives/2009/11/Indian-Growth-Stock.aspx
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Cabot Wealth Advisory 11/5/09 - A Tale of Two Chinese Game Stocks
On Thursday, Paul Goodwin wrote about Baby Boomers and how unprepared they are for retirement. He also discussed two Chinese game stocks; one that got hit after some bad news from the Chinese government and another that is a hot IPO. Featured stocks: NetEase.com (NTES) and Shanda Games (GAME).
http://www.cabot.net/Issues/CWA/Archives/2009/11/Two-Chinese-Game-Stocks.aspx
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Until next time,
Elyse Andrews
Editor of Cabot Wealth Advisory
Editor’s Note: From the market’s bottom in March 2003 to the recent low in March 2009, the S&P 500 lost 18% in total and the Nasdaq lost 3.5%. Cabot Market Letter, however, left them in the dust: Advancing a total of 94% during the past six years (nearly 12% per year). Cabot Market Letter has called every bull market since 1970. And this time is no different. In fact, the Letter was just ranked one of Timer Digest’s top market timers. Click here now for more.
http://www.cabot.net/info/cml/cmljb03.aspx?source=wc01
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