The Kindle and Nook e-reading devices may be selling just fine, but theres no
escaping the fact that their makers, Amazon (NASDAQ: AMZN ) and Barnes & Noble
(NYSE: BKS ), respectively, need to move forward or watch their business become
an unusual footnote in the history of e-commerce. From one perspective, both
book retailers have already started to make the same move finding safe haven
for the Nook and Kindle brands in the arms of Googles (NASDAQ: GOOG ) Android
operating system. A Thursday report at All Things Digital said that Barnes &
Noble is finalizing plans to introduce Android apps to its Nook store. Later
this spring, Android developers will be able to host their free and paid apps on
the Nook, with the same revenue-sharing model as in Android and Apple (NASDAQ:
AAPL ) app store. With 70% of each sale going to the developer and 30% going to
Barnes & Noble (not to mention a significantly smaller user base than whats
offered by Android smartphones), the Nook doesnt represent a dramatic new
opportunity for developers. It is, first and foremost, a move that will keep
Barnes & Nobles device relevant to consumers that have quickly grown accustomed
to having a wealth of entertainment options on their handhelds. Unlike Barnes &
Noble, Amazon is adopting Android in reverse. The company opened its own devoted
app storefront on the Android operating system. Although the Kindle brand and
bookstore remain separate from Amazons own app store, it seems unlikely that
Amazon would allow its next updated Kindle to hit the market without its own app
store present. But do these moves portend that the Kindle and Nook will
naturally evolve into tablet PCs? And is that a wise move? E-readers are, of
course, much cheaper to produce than tablets. iSupply has put the production
cost of an iPad 2 at $325.60. The Kindle, meanwhile, cost about $185 to make
last year, a price thats undoubtedly gone down since. Provided that production
costs stay low, both Amazon and Barnes & Noble can afford to introduce the next
generation of their e-reader without a need to offer full tablet functionality
and still maintain sales. Its hard to imagine either company competing full bore
in the struggling Android tablet market. Samsungs Galaxy Tab and Motorolas
(NYSE: MMI ) Xoom (which has sold a measly 100,000 tablets since its February
release) have failed to make any inroads against the iPad. With their
e-bookstores already on available tablets, it simply doesnt make sense for
either company to get into the tablet game, even as their devices come to
increasingly support Android. A scenario does exist, however, that could
indefinitely prolong the life of the e-reader. Based on declining Kindle
prices, Wired co-founder Kevin Kelly has predicted that Amazon will make its
e-reader free by November 2011 , possibly as part of its Amazon Prime membership
service. If it does, Barnes & Noble would likely follow suit, making Nook a free
part of its Barnes & Noble Rewards program. Free Android-powered, e-readers that
fuel digital book sales? Thats one way to survive the iPad. As of this writing,
Anthony John Agnello did not own a position in any of the stocks named here.
Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace
on Facebook.
No comments:
Post a Comment