Let me begin be stating clearly what I am not saying.  I am not saying that e-readers are set to become extinct any time soon – extinct as in, can’t find them on the shelves anywhere.  I mean jeez…you can still buy film and typewriter ribbons though no one in their right mind would argue against the end result in those cases.  Choice is good, always.  But the existence of a choice doesn’t make something destined for success.

What I am saying is that the e-reader category will never amount to anything more than a niche when measured by any consumer mass market metric.  And that it will shrink over time – first relatively, then absolutely.

Unfortunately for lovers of e-ink and dedicated e-readers, this battle has effectively already been fought and lost.  The rosiest cumulative estimates for sales of Amazon’s Kindle, all models, for all time since introduction, is “a few million.”  Some analysts say 2, some 3, some 3+.  Let’s say 4 million to be generous.  Let’s also say that combined sales of all other e-readers from all other companies combined over all time also contribute another 4 million devices.  That’s a total of 8 million sold all time.

For the record, I don’t buy these figures: 4 million Kindles, 4 million ‘other’ nor 8 million total.  I think the accurate total is probably somewhere between 2/3 and 3/4 that amount.  But for the sake of argument, let’s go with 8 million.  (As a related aside, I believe Amazon would be breaking out device sales and trumpeting the numbers if they were ‘large’ in any meaningful way).

No matter how you slice it, 8 million devices, over 3+ years, is a tiny number.   It just is.  To put it in perspective, 100 million digital cameras are sold every year.  And most analysts predict Apple will sell between 2 million and 7 million iPads in Year 1 alone.

Now, everyone has their own definition of “success” and yours may in fact be 8 million over 3+ years.  Or you might say “if the business is profitable then it’s successful.”  My definition sets a higher bar though.  Success = mass market.  Success = changes the way most people do things (see: digital cameras vs film).

Next, let’s talk about consolidated, integrated devices.  The list of standalone devices getting swallowed whole by integrated devices is long and growing longer every day:

-Pagers, dumb phones, GPS devices, MP3 players, digital cameras (*), PDAs, etc.

History has shown time and time again that consumers will happily jettison a few ounces of weight and bulk if given the opportunity to add some functionality into an integrated device that they’re already carrying anyway.  There’s no reason to think the same won’t happen with e-readers.

(*Cameras: this is a usage as opposed to a sales argument.  People simple don’t carry digital cameras with them on a regular basis now that we have ‘decent’ cameras in our phones.  Check flickr and other photo sharing sites by uploads by device type to see what I mean.  It’s staggering.  Sure – for birthdays, holidays, and other special occasions, nothing beats the high quality afforded by standalone digital cameras.  But by any practical measure of usage, camera phones trump standalone cameras by a huge order of magnitude.)

What history has taught us – and this applies to cameras and therefore also to e-readers – is that a solution need not be ‘better’ to win.  It simply has to be ‘good enough.’  Once camera phones grew to 2+ MP, included basic flash, sometimes digital zoom, etc. we crossed into ‘good enough’ territory.

The same will apply to the reading experience on LED backlit LCDs.  It need not be better than e-ink – simply good enough.  I can already say – as an owner of both a Kindle2 and an iPhone – that the reading experience will be good enough on the iPad.  The only complaint I have about reading on the iPhone is size.  Problem solved.

Let’s also remember that e-ink is not perfect by a long shot.  I’ve hacked my Kindle2 with a sharper font which does not use anti-aliasing.  I’ve also skinned it with a black skin.  These improvements have led to increases in both real and perceived contrast.  However, I would still classify the contrast as no more than ‘passable’ and in general I usually set the font to a slightly larger size than I would with a higher-contrast display to make up for the weak contrast.  Add in slow refresh times, the limitations of black and white, and it’s clear that e-ink is at a considerable disadvantage.

Color e-ink?  Faster refresh times?  Switchable backlights with e-ink?  Sure – we’ve seen prototypes, and models will undoubtedly hit the shelves featuring these advances.  Those models will be better than what is available today.  Unfortunately, the ship is already sailing and will get further from shore every day.  These devices will only prolong the inevitable.

Then there’s the matter of price.  Larger form-factor e-readers are close to or comparably priced to the iPad.  Unless you’re an e-ink die hard, it’s tough to imagine any informed consumer choosing a standalone e-reader at anything close to a comparable price.

The good news for the Amazons, B&Ns, and Borders of the world is that they can turn to app software and book sales (a book store focused on book sales – what a revelation!) and let hardware companies focus on hardware.  Amazon and B&N have already announced or released apps across multiple hardware devices.  Shades of GPS on the iPhone.

If you have an e-reader and love it, good for you.  Enjoy it.  And enjoy what comes down the pike.  But as a consumer mass market category, they are toast.