Amazon's Kindle secure, for now, in e-reader wars

As one recent blog comment on www.gizmodo.com, which posted what it said were photos of the Barnes & Noble device, said: "The only thing I'm concerned about is the apparent splintering of the potential e-book market into many armed camps, none of whom will play well with another."

Sony Corp (6758.T)and others are pushing for a format called e-Pub that would do away with the digital rights management (DRM) issues found in closed systems like the Kindle's.

The threat to Amazon, according to NPD Group analyst Ross Rubin, "is driven not so much by any particular competitors as it is by having a fractured market or wider interoperability and having those standards take off."

As Coker explained: "That's a potential ticking time bomb for any DRM system tied to a specific device."

"When you're in a near-monopolistic position, it's advantageous to have a closed system," Coker said. "Amazon is in a very powerful position in the industry right now, but monopolies don't last forever."

The market will also see what Frost & Sullivan's Krishna called musical chairs, with rivals jockeying to be the first to add graphically richer displays.

Amazon needs to skillfully balance price and functionality as the Kindle is adopted on a mass scale to embrace new users without alienating its core readers, he said.

"Many who are trying to unseat the most visible incumbent will try to be as creative as possible, especially in pricing, to create a dent in Amazon market share," said Krishna.

Although Amazon should be able to enjoy the fruits of its proprietary system for the foreseeable future, given the still vastly untapped market and its strong relationship with publishers, it is likely to be quick to adapt when required.

"The day that consumers shout loudly enough, I'm sure Amazon will react quickly," said Coker.

(Reporting by Alexandria Sage; Editing by Michele Gershberg and Steve Orlofsky)