INTERVIEW-E-book provider Kobo bets on BlackBerry Playbook

Fri Oct 1, 2010 1:02pm EDT

* Kobo to come pre-installed on PlayBook, Galaxy

* Analysts bullish on Kobo app packaged with devices

By Solarina Ho

TORONTO, Oct 1 (Reuters) - Canadian e-reading service provider Kobo Inc hopes to find success riding on the back of the BlackBerry PlayBook and other tablet computers even as it continues to expand its own line up of e-readers.

Kobo, a nine-month-old spinoff of Canadian book retailer Indigo Books & Music (IDG.TO), is looking to leap ahead in the e-book market by trying to become the standard e-reading source on tablets and smartphones.

Kobo said it will come preloaded on the BlackBerry PlayBook, Research In Motion's RIM.TO entry into the growing tablet computer market, which was introduced earlier this week. It will also be pre-installed on Samsung's (005930.KS) new tablet, the Galaxy Tab.

"Our goal overall is to make it possible for a customer to get an e-book on any device," Kobo Chief Executive Mike Serbinis told Reuters in an interview.

"We believe the tablet category is a hot category and clearly Samsung, RIM are two of the leaders. The question is, who's left? You can't get preloaded on an iPad -- it's an Apple thing," he said.

Kobo declined to comment on the financial aspects of the RIM and Samsung deals and it has not released any sales figures, but Serbinis said millions of e-books have been downloaded through Kobo in the last nine months.

Cormark Securities analyst David McFadgen rated Indigo, which owns 57.7 percent of Kobo, a "top pick" and wrote in a research note: "We believe this is very positive for Indigo and Kobo given users are likely to use the pre-installed app."

Kobo will also be embedded into BlackBerry's popular messenger service, allowing users to share books and create live, book-driven social networking groups.

E-READER JUST A "BONUS"

Toronto-based Kobo is a tiny player in a crowded business, but it has ambition to become a top three player. [ID:nN09172842]

It operates a global e-reading service that offers 2.2 million e-books. Its online store supports multiple currencies, in multiple languages and it tailors its content to what's popular in a user's region.

Serbinis said the big focus of the industry is what percentage of books will be sold as e-books in five years. "I've heard as high as 50 percent," he said.

Kobo also sells e-readers through partners including Indigo, Borders BGP.N and Wal-Mart Stores (WMT.N). A wireless version of its Kobo e-reader was announced this week that will sell for C$149 in Canada and $139.99 in the United States.

Despite offering its own e-reader device -- among the cheapest in a crowded field -- a large part of Kobo's strategy is focused on selling content and being "device-neutral", meaning Kobo's e-books use open standards that can be read on any device, from an Android smartphone to a Sony Reader to the iPad. No Kobo app is required.

"You own your content, you can take it with you wherever you want, which is not the same with the closed platforms like Amazon," Serbinis said. "This business is scaling fast and we are making huge headway on the incumbents."

Amazon.com Inc's (AMZN.O) e-books are in a proprietary format that can only be read through its Kindle e-reader or Kindle app for other devices like the iPhone.

Earlier this year, Credit Suisse analyst Spencer Wang was widely cited for his report estimating Amazon's e-book market share would fall from 90 percent to 72 percent this year and down to 35 percent by 2015.

Octagon Capital Corp analyst Bob Gibson said Kobo's strategy will pay off.

"Think of it as a razor and a razor blade model. Kobo doesn't care how many readers they sell, they just want to sell books. So they're actually launching their service on other devices," he said.

"Their e-reader is sort of like a bonus. It's not as profitable, they just want to get more people using and reading that way."

($1=$1.02 Canadian)

(Reporting by Solarina Ho; editing by Peter Galloway)

((solarina.ho@thomsonreuters.com;+1 416 941 8067; Reuters Messaging: solarina.ho.thomsonreuters.com@reuters.net)) Keywords: KOBO/

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