E-readers seen as holiday hit, presage tablet PCs

By Gabriel Madway

SAN FRANCISCO (Reuters) - Electronic readers could be the hottest gift this holiday season as a new crop of portable media devices begins to join iPods and other music players as must-have tech accessories.

The number of readers bought will be closely watched by industry analysts in advance of the expected emergence of multimedia tablet PCs, which Apple and others are thought to be working on and which could alter the competitive landscape.

Falling prices and an ever-growing library of digital books are driving demand for e-readers like Amazon.com's Kindle and Sony Corp's Reader.

The light, thin devices now mainly appeal to book lovers, but many see them as the first iteration of a go-everywhere gadget that consumers will use to watch movies and surf the Web, as much as scan books and newspapers.

ISuppli expects global sales of e-readers to top 5 million this year from about 1 million last year. It remains to be seen whether the current crop of readers morph into something with richer features, or tablets swoop in to define the market.

"There is tremendous potential for these devices to become more multi-function," said Sarah Rotman Epps, an analyst with Forrester Research.

Holiday shoppers will be able to buy e-readers in stores owned by Wal-Mart and Best Buy. In May, Forrester predicted 2 million e-readers would be sold in the U.S. this year, but the research group now expects sales to far exceed that forecast.

However, the market is still small. Around 225 million portable music players are expected to ship this year, according to research firm In-Stat.