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The only ways that dedicated readers could go away in the next 3 to 5 years, based on the technology we know about,are:
1. Pixel Qi is successful and adopted on a wide range of tablets.
2 E-ink gets color and capable of sufficient frames per second to make full motion video viewable.
3. Tablet devices that cost about the same as the dedicated device.
In addition to one of the above, the devices in question would have to run a minimum of 10 to 12 hours of use on a charge and be a good form factor for a portable reading device (5 to 8 inch screen depending on who you talk to).
If any one of the above scenarios comes to pass, e-readers are in trouble. If number 3 comes to pass with either 1 or 2 then they will likely be dead.
As an example, any device with a screen the same size as an iPad that people might have gotten for reading PDF's costs the same amount as the cheapest iPad or more. I have not seen very many people interested in those devices any more. There is still some interest in devices that are bigger than the iPad since the iPad still does not display an A4 PDF at the proper size since the screen is not big enough to do so.
A friend of mine made a couple of good points to me yesterday when we were talking about whether or not dedicated ereading devices would survive. Someone who knows how to use a slide rule well can solve problems than pretty much anyone using a calculator but calculators became so popular, due to ease of use and convenience, that no one sells slide rules any more. He also noted that fewer and fewer people have watches as more people get cell phones since there is a clock on their phone.
So as long as there is a significant reason to use an ereader over some converged device they will survive, but as soon as there is no significant reason (some people will still have reasons but they will not be compelling enough for the majority of people, including avid readers) their days will be numbered.
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