* Kobo to come pre-installed on PlayBook, Galaxy
* Analysts bullish on Kobo app packaged with devices
By Solarina Ho
TORONTO, Oct 1 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.
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
(Reporting by Solarina Ho; editing by Peter Galloway)
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