Barnes and Noble's Nook May Not Ring Death Knell for Amazon's Kindle

This morning I awoke to the blogosphere overrun with chants of “Kindle Killer.” Have these people heard the phrase, “That’s why we play the hand”?

I agree Barnes & Noble’s (NYSE: BKS) new eBook the Nook is gorgeous (in pictures). I also agree it will find a market within B&N’s customer base. Back in our April Premium Newsletter I also warned Amazon (Nasdaq: AMZN) shareholders to closely watch for a real threat to the Kindle. However, here are a few key reasons not to prematurely release too much excitement:

1. All “iPod Killers” never made it past the front lines: I won’t waste time listing them here — there are a graveyard’s worth. Microsoft’s (Nasdaq: MSFT) Zune is the best example. It’s beautiful and highly functional, yet Apple’s (Nasdaq: AAPL) iPod continues to dominate the space. Just as iTunes is a critical reason for the continued success of iPod/iPhone, I would argue Amazon’s wicked product reach will create a preference for continuing to get books from Amazon rather than migrate to B&N for only books. Convenience matters.
2. Amazon has one of the strongest brands in the world: Ask most people whether they’d rather have a Zune or an iPod. That is branding power. In this case, Amazon’s brand is still cooler and more powerful than B&N.
3. ESPN had a groundbreaking football video game in 2003, and Madden regained the crown the following year: In 2003, I bought Take-Two Interactive’s (Nasdaq: TTWO) ESPN football video game for my Xbox. The game had groundbreaking graphics and features such as a first-person view mode (i.e., when controlling your player, you were looking through that player’s helmet as opposed to a third-person overhead view of all the players). That year every major video game magazine warned Electronic Arts’ (Nasdaq: ERTS) John Madden Football franchise had finally met its match. The following year, everyone switched back to Madden. The team at EA worked overtime to regain their crown. I am sure Jeff Bezos and crew are doing the same as you read this.

I am not a gadget guru, so this is not an exhaustive analysis of the Nook and Kindle. However, I know hype — and at the moment that’s all Nook has …

Comments

[rlp122:]

You are comparing apples to oranges. Kindle is not in the same category as an IPOD. It's not an "everyman/woman" device. The IPOD is. The Kindle has a faithful following, but it's hardly in the same league as an IPOD. Millions of customers haven't dropped their hardcover books and flocked to it like people did with CD's to the IPOD.

Myself I have been looking at eBook readers for several years. With prices too high and DRM so prevalent I have abstained. Now that Nook promises to allow me to access content that I already have it looks to be the bright player in a dim market.

Oct 22 09:32 AM

[Storm Cat:]

What a poorly supported column. The kindle's following and loyalty are not even in the same universe as that of the ipod. You even admit you're not a "gadget guy" further eroding the credibility.

I travel a lot for work and own a kindle. It is functional but has many shortcomings (eg, no backlight, poor wireless reception, slow, pricey). As soon as a better alternative comes out I will stop using the kindle. I will look closely at the nook but probably wait for Apple's response.

Sorry guys, you are incorrect here. Kindle is functional but severely lacking for the price.

Oct 22 10:54 AM

[ScroogeMcduck:]

"Barnes and Noble's Nook May Not Ring Death Knell for Amazon's Kindle"

Maybe not but when Apple comes out with their e-book kiss the Kindle goodbye.

Oct 22 12:04 PM

[tripleblack:]

Nook's key marketing advantage is the ability to "share" books, vs the Kindle which does not allow this.

This reminds me of the attempt to "rent/sell" DVDs that could not be copied or viewed more than once. That program was a flop when competing plans entered the market that allowed for greater freedom.

Oct 22 12:11 PM

[rrtzmd:]

...has anyone looked CLOSELY at the "nook?...it's basically NOTHING but a kindle with a tiny color screen attached...the most intelligent question to ask is WHY put that stupid little screen on it?...a QWERTY keyboard on a 3.5" wide screen?...what WERE they thinking?...oh, wait, I know...they were thinking we need a gimmick -- even if it is a really stupid one -- to try to blow smoke in consumers' eyes so they won't see that we really don't have anything better than what Amazon already offers...they TRY to pump the "lending feature...but, in reality, how often does anyone lend their books to someone else for a couple of weeks...Kindle fans -- like myself -- love Kindle for what it is -- a bookreader...a GREAT bookreader -- it does EVERYTHING I want it to do at a reasonable cost...and regarding cost, I would point out that I spend more in a week on groceries for a family of four than what a Kindle 2 costs...hardly an outrageous sum relatively speaking given the return on investment...regardless, BKS is an arthritic monkey with brick and mortar tied around its neck trying to wrestle an 800 pound gorilla floating in a cloud...

Oct 22 12:16 PM

[rrtzmd:]

...Apple "e-book"???...oh, you mean the "I-pad"?...the one that's been rumored for the past 5-6 YEARS!...don't hold your breath....


On Oct 22 12:04 PM ScroogeMcduck wrote:

> "Barnes and Noble's Nook May Not Ring Death Knell for Amazon's Kindle"
>
>
> Maybe not but when Apple comes out with their e-book kiss the Kindle
> goodbye.

Oct 22 12:18 PM

[Tuan:]

I think the iPad is not meant to be an ereader. The screen will probably be conventional LCD, not eInk so the battery life will be horrible and not easy on the eyes. I think the Nook could be a huge contender if they dropped the price down to $199 before Thanksgiving.

Oct 22 12:45 PM

[User 413503:]

The main things that set the Kindle ahead of its competitors were its wireless connectivity and the size/price of books available for downloading. For example, the Sony Reader models up until the new 3G have not been wireless, and the Sony digital library hasn't been able to compete with Amazon's selection. The Google Editions e-retail store could be a major game-changer in leveling the digital selection playing field... if publishers decide to play along. But as appealing as media without propitiatory hardware-specific DRM restrictions is for end-users, it's hard to imagine that publishers who have fought long and hard against unrestricted formats will all throw in the towel by Google's "mid-2010" launch date. Of course, what iTunes did for music, perhaps Google Editions will do for books.

That being said, I think the biggest challenge facing the Kindle is not the emergence of other hardware platforms like the Nook but rather the potential flattening of digital content availability -- if Google Editions can become the largest one-stop source of e-book content, then Amazon will lose much of the edge it's held up to now simply in terms of the stuff you can load onto the Kindle vs. what's available to put on other readers -- Yes, most readers will support PDF, MobiPocket, and other open formats, but it requires more effort than one-click shopping in Amazon's Kindle store.

Interestingly, it looks as though Google Editions books will be available through "partner" sites including perhaps Amazon and Sony's e-book stores. So while Amazon has been able to get away with somewhat mediocre design aesthetics (first edition Kindle) and disappointing updates (no touch screen on the second edition Kindle), perhaps the leveling of the content field will spur the company to focus more on some of the hardware niceties it's been able to neglect so far.

Oct 22 12:58 PM

[BerkeleyBob:]

I think we are in the early innings of a revolution in delivery of media content. The Nook has some features which represent an advance, some which don't interest. The ideal e-reader will be capable of color, larger screen than present, and allow delivery of newspapers and magazines on a subscription basis. We aren't there yet. It is probably a mistake to compare Kindle, Sony, and Nook to IPod and its competitors. I am long AMZN and considering taking a nibble or two on BKS at present price levels.

Oct 22 02:09 PM

[Ciros:]

I resonated with everything Berkeley Bob commented above.
BKS lows today were too tempting for me and I went for it. I am betting on the nook being a game changer in bringing the ereader to everyone.
I am interested in a kindle, but have never seen one in action. The main detractor, having to buy one site unseen prevents me from being able to think about buying one. I believe other people are like me, and while we are interested in these gadgets and their innovative new display technologies, we won't bite until we get to check them out. That is the problem with the cloud and with amazon's distribution of the kindle. I want to hold it in my hands and put it through its paces before I will commit and buy it. The Nook has the clear advantage here, if it fairs well in professional reviews and I like what I will see, I will buy.

Oct 30 03:19 PM

[A.C.:]

The nook technically looks way cooler and easier to use than the Kindle. However, as a Kindle user, I prefer Amazon.com's customer service over Barnes. I dropped my kindle 2 and amazon replaced it, then I complained about the ink not being dark enough, and they were going to send me another one, but I figured out how to fix it.

Also I was able to return kindle books that were way past the 7 day mark without question.

However, I could not even return a brand new book at Barnes and Noble without a receipt! So I would rather stick with Amazon's excellent customer service and liberal return/replacement policy than with Barnes and Noble nearly nonexistent return policy.

Too bad the Kindle doesn't have the color screen, but I'm hoping that Amazon will come out with the DX (large screen) with a color screen like the Nook. Also it would be helpful if Kindle also allows more platforms like mobi, etc.

Nov 27 12:51 AM