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B&N is now offering Nook HD for $125 and Nook HD+ for $145. These are coupons mailed to B&N Members.
Have Kindle Fire HD and iPad Mini hurt Nook HD so badly that, even after adding Google Play Store, B&N still has to sell Nook HD for $125?
For reference, $125 is about the same as the Kindle Paperwhite with Ads ($119).
Is Nook HD really just $125?
Yes, B&N is sending out coupons to B&N members advertising Nook HD at $125 – that’s $74 less than the launch price of $199. It is also offering Nook HD+ at $145 – a massive $124 less than the launch price of $269.
For reference -
Additionally, B&N has already added Google Play Store to the Nook HD and Nook HD+.
It’s pretty much a Fire Sale now.
Why has B&N been forced to drop Nook HD to $125?
Nook Color and Nook Tablet, the two predecessors to Nook HD, were sold for $199 for the first few years after release. The price never even approached $125.
Nook HD is at $125 just 7 months after release.
B&N has already added Google Play Store to Nook HD. That should have led to a boost in sales. However, this latest move i.e. dropping the prices of the Nook HD and Nook HD+ massively, suggests that B&N is either not selling many Nook HDs OR that B&N sees some reason to do a massive stock clear-out.
Let’s consider the possibilities -
It would be really interesting to get some insight into exactly why B&N has dropped the Nook HD to a ridiculously low $125.
Why is Nook HD facing such hard times?
Perhaps I’m missing something. I don’t understand how we have -
Is Amazon selling a lot of Kindle Fire HDs? Why is it not running any sales? Did Amazon do a much better job of anticipating sales correctly?
Did B&N make some fundamental mistakes that stalled sales?
It’s not clear why two comparable devices would diverge so wildly in success.
It would be interesting to know what you think the reasons are for Nook HD being on a fire sale while Kindle Fire HD seems to be on fire.
What impact will a $125 Nook HD have on Kindle Fire HD?
It’s hard to say.
Obviously, addition of the Google Play Store doesn’t seem to have done enough for Nook HD sales.
What impact did Nook HD adding Google Play Store have on Kindle Fire HD Sales? It must have slowed sales at least a bit.
What impact will the new $125 Nook HD have on Kindle Fire HD sales? Surely, a $125 Nook HD with Google Play seems more attractive than a $199 Kindle Fire HD with no Google Play?
Are we missing something here? Why is B&N dropping prices so massively?
There’s a very interesting discussion going on regarding Android vs Apple market share and profit share. Perhaps the most balanced and insightful post is this Android vs Apple Marketshare post by Benedict Evans.
Kindle Fire HD and Amazon can learn a lot from the ideas presented.
What is Kindle Fire HD aiming for?
If we look at the Tablet Market a few things are clear -
There are a few very clear strategies. Lots of the smaller players seem to be making Tablets in the hopes of figuring out a strategy later. Perhaps they are hoping to duplicate Apple and Samsung’s success. However, Apple and Google and Samsung have the most well thought-out strategies.
Where does Kindle Fire HD fit in?
Well, this is where things get interesting.
Kindle Fire HD is looking for long-term customers. In particular, it is looking for customers who either already are, or will become, long-term Amazon customers who generate consistent recurring revenue for Amazon.
Amazon doesn’t want $200 profit from a device sale, it wants $200 to $500 profit a year from sales of digital products and physical products.
Kindle Fire HD, therefore, is a unique mix -
It’s almost as if Kindle Fire HD is slowly developing a Dr. Jekyll and Mr. Hyde personality.
Up front, you see the low price and the promise of free books and free apps (App a Day Promotion that Amazon runs) and jump in.
Inside you realize it’s a closed ecosystem where the aim is to make money on a recurring basis.
Note: Dr. Jekyll could be either. We love capitalism, after all.
Two Fundamental Flaws with Amazon’s strategy
If you think about it, you quickly arrive at two flaws in Amazon’s Kindle Fire HD strategy.
With the Kindle Fire HD 8.9″ LTE, Amazon tried to address customers with more money looking for a high-end Tablet. However, it was a token gesture. It wasn’t – How do we build the perfect Kindle Fire Tablet for people who have money?
It was – We’ve built Kindle Fire HD to attract users based on value for money. Can we tag on a few features and try to sell it to users with high disposable income?
Amazon has the right idea.
But the Kindle Fire HD 8.9″ LTE is absolutely not the right device. Even more so if you consider that the Kindle Fire HD is almost identical and is just $199.
Will Amazon and Kindle Fire HD get lost in the gap between Apple/Samsung and Android?
Kindle Fire HD finds itself in a unique spot -
The problem is quite obvious. Kindle Fire HD is neither perfect for frugal customers who want everything cheap, nor is it perfect for high-end customers who don’t mind paying for quality and/or prestige and/or services.
In the US this problem is masked by the fact that Amazon has a very strong brand and very loyal customers and lots of them. For them, the connection to Amazon’s ecosystem makes it a natural buy. What will happen outside the US?
Amazon’s first priority should be carving out a unique position for itself.
If it positions Kindle Fire HD as ‘the best Tablet … at any price’, then it has to deliver. Perhaps in Kindle Fire HD 2 it will.
If it positions Kindle Fire HD as ‘an Android Tablet at a low price … with a great, curated ecosystem’, then it has to figure out how to beat Apple and Samsung using this approach. It also has to figure out how to make money from these users, especially outside the US.
Kindle Fire HD is a lot like In-App Purchases and Software As A Service and Smartphone Data Plans
The most profitable way to make money from software is turning out to be Software As A Service and In App Purchases.
That, in a nutshell, is EXACTLY what Kindle Fire HD is. A Tablet that is a Trojan horse that plugs you into the Amazon ecosystem and Amazon.com.
It’s cheap to get in. Then Amazon hopes to find the subset of Kindle Fire HD owners that are willing to generate hundreds of dollars in profit a year for Amazon.
You can’t fight human nature. You could explain to a person that he’ll pay $2,000 extra over 2 years to get $400 off the Phone. He’ll still buy the Phone+Data Plan combination because most of us are incapable of correctly weighing $400 saved now Versus $2,000 saved over 2 years.
In the long-term, the Kindle Fire HD strategy might be the strongest
In many ways, Kindle Fire HD is a very long-term bet.
Apple is focused on the high-end. Apple is willing to cede market share and future earnings potential from everyone outside the high-end. It did this with iPhone, and despite its attempts with the iPad Mini, it is doing the same with Tablets.
Google is focused on search and advertising revenue and customer data acquisition. Therefore it cares about market share. Keep in mind that search and customer data both require leading market share to stay on top.
Samsung is focused on high-end customers and mid-end customers and low-end customers. However, its long-term monetization plans for customers aren’t clear. It does have a very good chance of cloning Apple’s strategy and out doing Apple at it outside the US.
Amazon is coming in with a very focused strategy. In the long-term it’s unbeatable.
It’s almost unbeatable in the long-term.
The problem is that if it doesn’t sell fast enough in the short-term then Kindle Fire HD will get left behind iPad and Samsung Tablets. They already have better app stores. They will also develop much better economies of scale (iPad and iPad Mini already have this). They will also get a lot more mind share.
Kindle Fire HD might not survive till 2017. If it does, and if Amazon can keep refining its recurring monetization methods for Kindle Fire HD owners, then Amazon might end up with the most profitable Tablet. Far less profitable than other Tablets at the point of device sale, but far more profitable every single year afterwards.
Kindle Fire HD is going international. Kindle Fire HD is available for pre-order in a massive 170 countries.
Amazon expanding to 170 countries is very impressive. Kindle Fire HD was only available in US, UK, Germany, France, Japan, Spain, and Italy. Going international to 170 countries should do a lot for Kindle Fire HD sales and should increase the chance Amazon can keep competing with iPad and with Android Tablets.
TechCrunch had the news on Kindle Fire HD International. The key details are -
You can buy Kindle Fire HD at Amazon.
You can see all the details in the Kindle Fire HD International Press Release.
Why Kindle Fire HD International Expansion is critical to Amazon’s Hopes
Amazon is in a tough spot.
Kindle Fire HD isn’t just a Tablet, and winning the Tablet Wars for Amazon isn’t just about being the best-selling Tablet. Kindle Fire HD is Amazon’s storefront of the future. If Amazon loses the Tablet Wars, it’ll eventually lose the ‘selling digital content’ wars.
How will Kindle Fire HD International do?
Amazon’s move is interesting and the pricing is even more interesting.
I honestly don’t know how Kindle Fire HD will do. I wasn’t expecting it to be the #2 Tablet in Holiday Season 2012. It might very well end up being the #2 Tablet after iPad Mini worldwide. The only thing is, worldwide is a different kettle of fish. In the US, Amazon has a huge share of online retail sales. During Holiday Season it can really leverage its traffic and push Kindle Fire sales. It also has so many customers in the US – customers that trust it. Worldwide, Amazon doesn’t have the same advantages.
It’ll be really good if Kindle Fire HD International takes off. It’s the scrappy little fighters like Nook Color that start off trends. If Kindle Fire HD International takes off, then it pushes Apple and Google and Samsung to improve their Tablets. Additionally, Amazon’s policy of ‘price low, make money from services’ forces other Tablet makers to price their own tablets lower. Let’s hope Kindle Fire HD International is a hit, and it allows Amazon to scale up and continue to chase iPad Mini and Samsung Tab and Google Nexus 7. That’ll force the entire Tablet Market to improve and innovate. Better for all of us.
With the advent of the Kindle, Nook, the Kindle Fire, and the iPad we’ve seen an explosion in ebooks. In 2012, eBooks accounted for 25% of Publishers’ revenues. 25% of revenues suggests actual unit sales for ebooks might have been 30% to 40% of book sales.
What’s interesting to me is the sheer number of people who want cheap kindle books and free kindle books. Strangely, there doesn’t seem to be any way of finding the opposite type of customers – those who don’t care about price and/or are willing to pay for a good book.
If we assume there are 5 major groups of readers -
Well, there is ample evidence of the existence of the latter two groups. Go to any website or forum and you’ll find people looking for free kindle books, looking for and sharing deals, and generally focusing on finding the lowest book prices.
There is also a large group of readers who are OK with what they would consider ‘reasonably priced books’. $9.99 or less for new titles, and prices lower than $7 for older titles. They’d like ebooks to always be the same price or cheaper than the corresponding paperbacks.
The first two groups aren’t easy to locate. In fact, it’s downright hard to find more than a scattering of readers belonging to the first two groups.
The natural question that arises is - Do these two groups actually exist?
Is there a price-insensitive market in Books?
Yes, there obviously is. We wouldn’t have hardcovers if there weren’t. People were paying $15 to $25 for hardcovers, and still are. The market obviously exists.
It’s a fair assumption that there are a non-trivial number of readers who are well-off. It’s also safe to assume that there are lots of readers for whom reading isn’t measured in terms of money. Another reasonable assumption is that there is a group of readers who simply can’t wait and must get a book instantly. Yet another safe assumption is that there is a group of readers who value their time a lot more than money and don’t mind paying a high price for a very good book that’s worth their time.
If we consider these readers and other ‘not sensitive to the price of the book’ readers, there should, in theory, be a large group of readers that are price-insensitive. Perhaps even 5 to 10 million such readers in America.
Well, these price-insensitive readers exist with physical books. Where are all these readers when it comes to eBooks?
What happened to the price-insensitive readers when we shifted from Books to eBooks?
We have two groups of readers that comprise the ’Price Insensitive’ Readers.
With physical books they were snapping up Hardcovers and spending freely.
What happened with eBooks? Where are the high-end customers?
Well, there are a few possibilities -
At this point, it’s worth looking at why certain readers don’t mind spending money on a high quality book.
Time vs Money
We’re swamped by authors offering free books as marketing. We are swamped by bargain hunters who want free kindle books and cheap kindle books.
This creates an environment where it’s easy to forget what a book means to people, and what the book reading experience is for people.
Different people value Money and Time differently. Mostly because they have different amounts of them and different ways of viewing them and spending them.
Let’s consider some example readers with different personal circumstances -
If you consider these readers, we can easily see why some of them would gravitate towards free and cheap kindle books, while others would focus on the ‘safest’ and ‘best reviewed’ books.
We can also see the price factor. Some readers simply don’t have much money for books. Some readers won’t spend money on untested authors. On the other hand, there are readers for whom either money isn’t a concern, or the time spent is far more important.
Jonathan might feel that $13.99 spent on a book he enjoys is worth 100 times more than getting a cheap $1 book that is a waste of his time. Worse, now he has to wait until next week to get his reading high.
Nancy, on the other hand, might think of her 1 new author a month as ‘experiment time’. Since she is already getting guaranteed good reading from her regular authors, and since she’s spending most of her reading budget on them, she doesn’t mind taking a gamble on a cheap or free book occasionally.
Jonathan and Nancy, when searching for a new book to read, will go in diagrammatically opposite directions. That’s OK. That’s the whole point of having books and ebooks and Publishers and Indie Authors. To provide readers whatever they want.
The Question becomes – Where do we find the Jonathans and Trevors and Tinas of the Reading World?
Where can we find the ‘Time is worth more than Money’ Price-Insensitive Readers?
This is the $25 billion a year Question.
The Books Industry in the US is approximately $25 billion a year in revenues. Replace it with whatever figure you prefer – it’s just meant to illustrate the point.
If the shift from Books to Books+EBooks leads to a mostly price-sensitive market, then we’ll fall to $10 billion to $15 billion a year in revenues. This will have repercussions and might lead to a decline in quality of ebooks (MIGHT).
If, however, we can find and retain the price-insensitive customers. Retain = Keep them as price-insensitive customers. Then we can ensure the market stays at or above $20 billion a year.
Finding these price-insensitive customers, and giving them a path to being price-insensitive ebook customers, is absolutely critical.
Because all the price-sensitive customers are getting addicted to free and cheap. They are going from bargain hunters to extreme bargain hunters.
Regardless of what your personal preference for book prices might be, it’s safe to say that -
If Authors can’t make a decent living from books, and chances are they won’t be able to if we end up in a world of $0 and $1 books, then the amount of time they can devote to writing books, perfecting their craft, and polishing their books decreases. As a result both the number of great books they produce and the quality of such books diminishes.
This is an Assumption. It might happen that hunger drives authors to more beautiful work.
For now, let’s assume that we need some basic reasonable book prices (perhaps $3 to $7) to keep authors going strong - writing great books and writing lots of them.
Price-Insensitive Customers drive the behavior of Price-Sensitive Customers (and vice versa)
Imagine you’re a price-sensitive customer. That book you really want is for $13.99. Yet, thanks to price-insensitive customers, it’s at #2 in the Charts. You give in and buy it for $13.99 – because you can’t wait another 7 months.
That leads to a sale from a price-sensitive customer at a very high price.
Now imagine you’re a price-insensitive customer. You notice that price-sensitive customers have driven a $1 book all the way to #5. The reviews seem good. You take a gamble and are rewarded. That author has 7 more titles. You read them one by one. You decide to take a few more gambles on new indie authors.
Now the price-sensitive customers have turned you from spending $13.99 per book to $1 per book.
Please Note: This trend of price-sensitive customers influencing price-sensitive customers – This is perhaps the reason Amazon tries so hard to keep $1 Indie Authors out of the charts.
Finding Price-Insensitive Customers and catering to them might determine the long-term viability of the Publishing Industry and Platforms
At one end of the spectrum is a world where there’s no money left in books in 20 years. At the other end of the spectrum is a world where Publishing and Books are generating a lot of money in 20 years – even more than they generate now.
For the latter to happen, three key things need to happen -
Currently, Platforms and Publishers are messing up the first, they are doing decently on the second, and they are messing up the third.
It’s simple. If Price-Insensitive customers get really high quality ebooks, get them conveniently, and get them perfectly tailored to their tastes, then they will spend their money freely. They will feel it’s worth their money and time to spend on ebooks and they will remain price-insensitive readers.
If not, then Price-Insensitive customers will either cut down on their reading or they will turn into price-sensitive readers looking for $3 and $1 books.
A mixed bag of Kindle Fire and Kindle items today.
Qualcomm showing off 2560 by 1440 Mirasol Display (reflects ambient light)
Qualcomm’s Mirasol Display was supposed to be used in a Color Kindle way back in 2011. Well, there was no Color Kindle so there was no Mirasol color eReader eInk. The last we heard was that Mirasol had gotten a $2 billion investment to set up a manufacturing facility. No news after that.
Now, it seems Qualcomm is trying other things. Engadget covers Qualcomm Mirasol 2,560 by 1,440 displays demoed at SID Display Week (They have a video).
Eletronista also has some coverage and Qualcomm Mirasol photos.
Kindle Worlds – Amazon starts a Fan Fiction initiative
Amazon has stumbled upon what is either a brilliant idea or a disastrous one – let people make money from fan fiction, officially.
Geekwire has some details on Amazon’s Kindle Worlds initiative. You can write fan fiction about established books and series. You get a cut. The royalty owner gets a cut. Amazon gets a cut.
Some Warner Brothers properties like Pretty Little Liars are already available to fan fictionize.
Here’s what Amazon says -
You will own the copyright to the original, copyrightable elements (such as characters, scenes, and events) that you create and include in your work, and the World Licensor will retain the copyright to all the original elements of the World. When you submit your story in a World, you are granting Amazon Publishing an exclusive license to the story and all the original elements you include in that story. This means that your story and all the new elements must stay within the applicable World. We will allow Kindle Worlds authors to build on each other’s ideas and elements. We will also give the World Licensor a license to use your new elements and incorporate them into other works without further compensation to you.
If I’m reading this correctly, it would have meant that Stepahnie Meyer could start writing 50 Shades of Grey titles without having to pay the 50 Shades of Grey author anything.
Amazon says it will pay a royalty of 35 percent of revenue for accepted fan fiction of at least 10,000 words. Shorter pieces (5,000 to 10,000 words) will receive a 20 percent royalty. The company says it expects most of the “Kindle Worlds” fan fiction titles to sell for 99 cents to $3.99.
As it’s Amazon, an ‘exclusivity’ clause is also included.
Jealous, overprotective girlfriend/boyfriend on steroids.
Did we forget controlling?
Amazon Publishing will set the price.
Overall, it’s a very interesting move.
Amazon seems very focused on a few elements when it comes to books and content - creating new content sources that it owns, maintaining control over pricing, creating exclusive agreements.
It’s interesting. It’s almost as if Amazon thinks it can control a market into existence. A perfect market where customers behave perfectly and everything goes according to plan. You know what they say about plans – If you want God to laugh, show him your plans.
Penguin Pays Up $75 million for Agency Model Case, Only Apple left standing now
Penguin’s settlement with the DOJ means Penguin has to pay $75 million. This leaves Apple as the last company standing out of the Agency Model Cartel.
It’s quite interesting that -
Apple is also under fire for its elaborate tax avoidance schemes (avoidance = legal; evasion = illegal). This includes gems like – paying less in taxes than it reports as ‘Taxes’ in its annual reports, a cash routing scheme so elaborate that economists are calling it ‘unbelievable chutzpah’, no one being sure of how Apple pays just 2% tax in Ireland when the official rate is an already low 13%.
At some level, it seems Apple has become so big and successful that everyone is going after it. Whether it’s Microsoft in the past or Apple now, you have to wonder – Are they being punished for their actual misdeeds, or just because they got too good and too successful.
The Tax Avoidance case is just avoidance and completely legal. The only cost will be some amount of PR. Until the law changes companies like Apple and Google and pretty much every big company will keep on ‘avoiding’ taxes.
The Agency Model case would perhaps be a few hundred million dollars. That’s less than Apple makes in profits in a day.
Amazon stops selling Kindle Keyboard
Thanks to a blog reader for pointing this out. I forget who (remind me if you’d like a mention).
Kindle Paperwhite and Kindle WiFi (just Kindle) are the only eInk Kindles available to buy now.
Kindle 3 was the favorite Kindle for a lot of people. Hopefully it’s only been removed to be replaced by something else.
Kindle 3 really was the best eReader ever made. It’s sad to see it gone.