KNOW THIS: Industry Players and the Future of E-Books: Barnes & Noble, Inc.
June 28, 2010
Other articles in this Know Something Project series:
Industry Players and the Future of E-Books: Scribd (May 2010)
Industry Players and the Future of E-Books: Apple, Inc. (June 2010)
Industry Players and the Future of E-Books: Amazon.com (June 2010)
One week ago, Barnes & Noble decreased the price of its AT&T 3G (with Wi-Fi) nook readers by $60 to $199 and launched a slightly lighter-weight Wi-Fi-only nook for $149. Both versions offer a highly rated web browser plus a “color touch screen for navigation and [an] E-Ink display, as well as the LendMe technology for sharing content with other Nook users.” As noted in our recent piece on Amazon’s impact on the e-books market, these Barnes & Noble announcements prompted Amazon to immediately cut the price of its wireless Kindle e-reader by $70 to $189.
What a difference a year has made for B&N’s ranking—and marketing muscle—in the e-books arena. A comprehensive Know Something Project article on the e-books landscape from last June hardly mentioned Barnes & Noble at all, referring to the company only in regard to the three on-line e-bookstores it owned: Ereader.com, Fictionwise.com, and Ebookwise.com.
And what a difference ten years can make. In a report from late 2000 that B&N had considered merging with Gemstar-TV Guide International Inc., a company “best known for its on-screen television guides,” The New York Times noted: “Gemstar also operates a patented system for publishing and reading electronic books, creating a potential rationale for a deal if reading books on the screen of a hand-held appliance ever becomes popular.” (For a look at the earliest e-readers that vied for acceptance at that time, including the Rocket eBook purchased by Gemstar in 2000, check out this Teleread piece.)
What the Analysts Say
Critics continue to reserve some skepticism for Barnes & Noble’s future in e-books. According to a BloggingStocks.com post from this morning, “Some analysts were unhappy about the recent but perhaps inevitable price cuts on the nook.” With a long-term earnings growth forecast of only 3.9%, B&N saw its shares fall “after the price-cut announcement and hit a new 52-week low of $15.40 last week. Shares have fallen about 28% in the past three months.”
Another analyst quoted by The Wall Street Journal after the pricing announcement simply identified what’s happening right now in the e-book business: “With these cuts, ebook readers from Barnes & Noble as well as Amazon now are priced at about the break-even level with their Bill of Materials...and manufacturing costs…. With zero profits on their hardware, both these companies now hope to make their money in this market through sale of books.”
The Barnes & Noble Advantage
Selling books in any form lies at the center of the Barnes & Noble mission. Founded as a printing business in 1897 with its first bookstore opening in 1917 in New York City, Barnes & Noble was acquired by Leonard Riggio, current chairman and brother of recently replaced CEO and current vice-chairman, Stephen Riggio, in 1971. The company has since become the country’s largest bookseller. In 1980 it began selling books on-line through other vendors; in 1997 the Barnes & Noble website went live.
In October of last year, B&N unveiled its nook electronic reader, which went on sale the following month. Though plagued at first with availability and functional issues, half a year and a handful of upgrades later, the nook reportedly is responsible for a significant portion of B&N sales. In a statement regarding Barnes & Noble’s fourth-quarter and full fiscal year-end results, released today for the fiscal year that ended May 1, 2010, Leonard Riggio states, “Barnes & Noble Members, our best customers, have increased their combined physical and digital spend with us by 17 percent since purchasing a NOOK(TM).” B&N CEO William Lynch added, “in just a brief 12 months since we launched the Barnes and Noble ebookstore, our share of the digital market already exceeds our share of the retail book market.”
The Barnes & Noble eBookstore was unveiled in July of last year, with some indications at that time the company would partner with PlasticLogic, creator of the high-end Que e-reader…which still has not been brought to market. B&N signed a contract a while back to be the “exclusive eBookstore Provider” on the PlasticLogic device.
Prior to launching its own e-reader late last year, B&N offered up free BN eReader apps to provide access to its new eBookstore to users of Windows PCs, Macs, iPhones, iPods, and BlackBerry devices. The app includes the notable “LendMe” feature, also available on the nook, that allows a user to loan an e-book to a friend or family member for up to two weeks…if the publisher of the particular e-book allows this. According to ReadWriteWeb.com, The BN eReader app also offers “multiple preset themes and library views, fully customizable pages, text sizes, typefaces, highlight and link colors, margins and spacing, and support for syncing between devices.” In May of this year, Barnes & Noble also released its eReader for iPad app. Use of the BN eReader app on any device launches an external browser that takes the user to the B&N eBookstore.
nook Nuts and Bolts
The nook has been reviewed by many, many sources since last fall, with each ultimately comparing the device to Amazon’s Kindle and sometimes to additional dedicated e-readers on the market such as those made by Sony. One glitch noted by some but not many other reviewers involves the inability of the nook’s 3G connection to work outside the U.S. Although the WiFi nook can be used wherever Wi-Fi is available, a nook user at this time cannot purchase new content outside the U.S.
One solid nook-versus-Kindle review—on the typically pro-Kindle site ireaderreview.com— concludes the two products are practically tied in the number of positive and negative features they possess. And in some ways they are simply very similar. While the Kindle is considered thinner, for example, “the nook is more compact”…less than eight by five inches total compared to the Kindle’s solid eight by five (.3) inches. The overall conclusion made in this and many other comparisons of the two products: What you want and need from a dedicated e-reader will determine whether you’ll prefer the Kindle or the nook.
The most comprehensive and up-to-date review of the B&N e-reader—by far—is provided by MobileTechReview.com, which goes from panning the awful nook release experience to stating, after the previously mentioned series of upgrades, that “the nook has moved from ‘no thank you’ to ‘yes, I’ll take one’ in our book.”
The B&N Impact
For those who like to “touch and feel” before buying, one obvious advantage for Barnes & Noble in selling its e-reader lies in the nook’s physical presence in certain Best Buy stores and B&N’s network of nearly 800 brick-and-mortar stores staffed by tens of thousands of full-time and part-time associates. Most of these associates are likely very happy to take time from stocking shelves to hand-sell one of the priciest and slickest products their employer may ever offer.
MobileTechReview agrees with our take, however, that the biggest differences between Barnes & Noble’s nook and Amazon’s Kindle lie in the format of the e-books that can be downloaded and read on each device (ePUB books on the nook, Kindle-only formatted books on the Kindle), and the ability for users to “borrow” e-books from libraries (via Overdrive) on either device (a big yes on the nook; a no-way, no-how on the Kindle).
Barnes & Noble’s current place in the forefront of the e-books market is widely recognized thanks especially to such access. Because the nook works with ePUB-format books, avid readers (in the U.S., at least) who need and want unlimited access to as many resources as possible—as many as can possibly be offered in our still-DRM-controlled world of digital documents, books, and publications, that is—will likely opt for the nook over its top competitor.
As the MobileTechReview reviewer who ultimately fell hard for the nook put it: “hello library books, Google free books, Sony Reader books and more.” If the impact of short-term hardware sales is indeed soon overcome by the importance of long-term, sustainable e-book sales, some in the industry are betting universal access ultimately will trump anything offered by a bookseller whose e-reading customers are limited to a single retailing resource, regardless of that source’s size, power, …or quick marketing reflexes.
—Karen DeGroot Carter
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