Thursday, November 3, 2011

No Nook NIche?

So, here's another quote'o'mine making its way around the information infrastructure.  This time, it's on the Nook, the tablet sold by Barnes & Noble to compete with Amazon's Kindle.  It seems that Barnes & Noble is about to announce a new Nook, and there's all kinds of speculation on what features and price range it might represent.

So, Erika Morphy was working on the piece for the E-Commerce Times, an online publication, and it was published on November 1st under the title of, Can the Nook Color Find a Niche in the Tablet Market?  It was also published under the same title on TechNewsWorld, and a bunch of other places as well, strange how this all works, but that's besides the point.

So, anyway, under the headline is a little B&N graphic, to lend some graphic interest, so let's include that here as well:

There, that's better, right?  A little color, something easy on the eyes?   Anyway, after that there's a larger type, boldfaced, introductory teaser that goes like this:

Barnes & Noble wants to carve out a place for its Nook in the tablet competition, but it's not clear how the company is going to pull that off. "The Nook will prove to be an also-ran in both hardware and software, and unless Barnes & Noble has some miraculous breakthrough up their sleeves, say a virtual reality interface, they will not make much of a dent in the tablet market," predicted Lance Strate, a professor at Fordham.

Woohoo!  So, what's this all about, you might ask.  Well, we'll return to this quote a little later, but now the article starts in earnest, as Erika provides the context:

Barnes & Noble (NYSE: BKS) has sent out invitations to a press conference this week in New York City. The specific topic of the event, set for Nov. 7, is unclear -- but it's almost certain the spotlight will be on its Nook.

It is widely expected that B&N will unveil its answer to Amazon's (Nasdaq: AMZN) Kindle Fire -- that is, a 7-inch Nook Color tablet designed to compete with the Fire in price and functionality.
B&N did not respond to the E-Commerce Times' request to comment for this story. 

Now, they may be trying to generate suspense, but usually when there's no comment at all, not even something like, I can't tell you anything, but watch out, this will knock your socks off, well, that's not a good sign.  Anyway, the article continues with a heading and a new section:

Hugging the Low End

It would be surprising if B&N didn't unveil a Nook tablet in view of the suddenly changed competitive landscape. The big question is how it will price the new device.

The Kindle Fire has effectively carved out a place for itself at the low end of the tablet market, with its US$199 price point. The Nook could be a contender in this arena -- but only if comes down from the current $249 retail price for its Nook Color e-reader. Even if it does, however, it still has a high hurdle to compete with Amazon's wealth of content.

"What Amazon has done is finally identify a price point that is palatable for the average -- as opposed to high-end -- tablet consumer," James Brehm, senior strategist and consultant with Compass Intelligence, told the E-Commerce Times.

It's doubtful that B&N can drop down to $199, however, in Brehm's view. Best analyst guestimates have placed the cost of producing the Kindle Fire somewhat higher than the $199 retail price Amazon is asking for it.

Amazon will be making this up in content sales, Brehm said -- which is not something B&N can count on as heavily as Amazon can. 

So, okay, it's doubtful that B&N can price their tablet any cheaper than the Kindle, and it may well be more expensive.  And they don't have the content to offer that Amazon does, especially all of the streaming media that Amazon makes available to its Prime customers.  After all, Barnes & Noble is a bookstore, or rather a bookstore chain, representing the old media of print and place, now struggling to compete with the entrepreneurial online and algorithmic savvy of  And as tempting as it is to lament this sad state of affairs, I can also recall how, not too long ago, Barnes & Noble superstores helped to drive the vast majority of local, independent booksellers out of business--so, turnabout, fair play, and all that.  Anyway, back to the article, and my turn at bat:

Content Wars? Not Hardly

It would appear that B↦N doesn't stand much of a chance in the tablet wars unless it can come up with an effective niche strategy.

"Barnes & Noble cannot compete with either Apple (Nasdaq: AAPL) or Amazon, and are truly reduced to B-side/B-movie status," Lance Strate, professor of communications and media at Fordham University, told the E-Commerce Times.

Possibilities include providing more functionality in the device, or perhaps partnering with Microsoft (Nasdaq: MSFT) to tap into a more business-oriented market, Strate speculated.

"In the end, though, the Nook will prove to be an also-ran in both hardware and software, and unless Barnes & Noble has some miraculous breakthrough up their sleeves, say a virtual reality interface, they will not make much of a dent in the tablet market," Strate predicted.

One thing I didn't mention that might come up is that B&N may make the Nook a gaming device as well. But that does seem to be very much at odds with its primary role as an e-book, doesn't it?  Would it be anything less than a cheap sell out on B&N's part? 

The bottom line is, again, that Barnes & Noble is not a technology company, they don't have the resources to come up with the kinds of features that Amazon or Apple can, and their only hope is to partner with someone who does, and is not already tied up with the other tablet companies, like Microsoft, for example.  Otherwise, Apple has the high end of the tablet market, and Amazon the low end, and there's not much room for a third party that has neither the advantages of one nor the other.  Okay, let's get back to the article and the next section:

The Education Market

Another possible avenue for differentiation, Brehm suggested, is the education market.

"That has been a hot market for Apple but many school systems, including those in the state I am in -- Texas -- don't have the money for that kind of hardware," he said.

However, money could be had for a lower-cost tablet device, especially one that rolls out as part of a relationship with educational publishers and that is equipped with WiFi connectivity.

"Amazon has a bigger ecosystem for its content -- it is going to be hard for B&N to beat that even if it does manage to produce a $199 tablet," Brehm concluded. "It will need a specialized strategy."

That may be Barnes & Noble's last and best hope, education.  After all, there is a captive market for textbooks, it's the one thing you can always count on, and in fact I know of several academic publishers who have more or less stopped publishing regular books, and are limiting themselves to textbooks, and reference works (which have a built in market with libraries). 

Barnes & Noble does have an advantage with the textbook market, especially since a significant percentage of college bookstores in the US are run by B&N. And this alleviates the publishers' problem of used book sales cutting into their profits, while at the same time it can also can alleviate the overstuffed backpacks of school children and college students alike. 

After all, textbooks are not really loved, not known for their literary merit, plus going electronic allows for the texts to be automatically updated, not gratuitously updated simply to generate a new edition to cut into used book sales, but whenever needed, and only as needed (as opposed to just shuffling things around to make it different).  Yes indeed, textbooks, that's the ticket!  Now, on to the article's conclusion:

No Worries About Apple

One competitor B&N doesn't have to worry about is Apple. For all the hype over the $199 tablet, Brehm doesn't see Apple reaching to the lower end of the market to compete.

"Apple will always see itself as a premium product," he said, "and they will never come down in price to get a larger market share."

I find this a bit funny.  Wouldn't it make more sense to say that one competitor Apple doesn't have to worry about is B&N? 

Maybe what Barnes & Noble should do is get out of the hardware game, which they're not really suited for anyway, and partner with Apple to make the Nook a software feature on the iPad.  Both companies have a good relationship with schools and educators, it could be a match made in heaven!  And, if not a marriage, then maybe it would be an occasion for a little bit of Nookie?


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