eReaders in February 2011 – 10 random thoughts

Well, here they are.

1) It’s rather strange that Apple hasn’t announced iPad 2 yet. By this time last year the main news sites and big blogs were already writing obituaries for the Kindle and Nook. It seems less and less that iPad 2 will be reading focused and more and more that it will be Tablet focused.

It’s also not going to be the same – When Steve Jobs says ‘Look it even has wooden shelves’ it suddenly seems that wooden shelves are more important than having electronic ink or readability in sunlight. When Tim Cook says ‘It replicates leather-bound books and smells of rich mahogany’ everyone thinks Ron Burgundy should go back to being anchorman.

2) The previous 40 days might have been the most boring ever. There haven’t been any new releases or announcements. Even CES was a desert for eReaders.

3) About that wave of tablets that is going to fight iPad and destroy eReaders. Let’s see -

Xoom (with a name that bad you’d think it was an eReader) is going to be priced at $1,199.

The only good option is the Nook Color. So, a reading tablet is the best non-iPad Tablet right now and threatens to destroy eReaders. Except it’s a reading tablet.

Notion Ink Adam might be a decent option – only hitch is they sell their Tablet using the same distribution and shipping model that people making ancestral rugs in Burma use. You want to give the company $500 and they don’t have the product in stock, and when they will it’ll ship from somewhere in Asia and if something goes wrong you have to ship it to Timbuctoo and wait till the next harvest festival of the cockatoo.

4) Apple might be making a mini-iPhone, just like it might be making a mini-iPad.

The mainstream press is rejoicing. It can just recycle all its ‘iPhone will destroy Kindle’, ‘iPhone will destroy Baz Luhrmann’, and ‘iPhone as a signalling mechanism for primates’ articles from past years.

5) Guess what this is – 1, 10, 1, 13, 10, 5, 1, 5, 1, 4, 5, 10, 3, 3, 15, 5, 6, 5, 1.

That’s a list of the prices of the 20 best-selling items in the Kindle Store. A 13, a 15, 3 10s, and 15 books at prices Publishers probably can’t survive on.

6) Amazon really, really likes Kindle Singles.

Every single page of the Kindle Store has this sequence of links at the top – Kindle Store, Buy a Kindle, Kindle eBooks, Kindle Singles, … everything else.

So Singles get priority over Newspapers, Blogs, Magazines, Accessories, Discussions, and Support. Or to put it another way – Amazon only considers selling Kindles and selling Kindle Books more important than selling Singles. It must really believe Kindle Singles have a future.

7) It’s rather uncomfortable to think that this week Borders might announce its bankruptcy.

One of the blogs is claiming its due to the Internet. Blogs seem to love attributing everything to the Internet – Egypt, Iran, everything. It’s like some neanderthal village where the villagers all assume their shaman, the Internet, is responsible for everything.

8. Washington Post is writing about how Kindle is the only eReader to not offer library books.

Amazon added ebook lending in December 2010 and is adding page numbers now. Can we give the anti-Kindle articles a break for the next few months?

9) There are rumors that Apple has set an end of March deadline for the Kindle App. There’s also an article claiming that this rumor is utter nonsense.

However, you can feel a showdown between Amazon and Apple is imminent.

10) Kobo has a $20 off coupon on its Kobo eReader (Kobo20). That takes the price down from $139 to $119. Based on what people have written about the Kobo eReader and about Kobo’s customer service (or lack thereof) it’s still not worth it.

Bonus Thought

If B&N is making a loss on every Nook Color sold it’s in trouble.

  1. Thanks to using ‘open’ Android, the Nook Color is easily hacked and repurposed as an Android Tablet.
  2. Thanks to using ‘open’ ePub, the Nook Color can read books from just about any store selling ePub.
  3. Thanks to being hackable, and thanks to Kindle for Android, the Nook Color is a great reading tablet for people with a large Kindle book library.

The common thread – Book sales not going to B&N.

Nook Color is an absolutely beautiful reading tablet that 25% of people are hacking into a Tablet, 15% are using with other ePub-based ebook stores, and a further 15% are using with the Kindle Store.

B&N is probably left with 45% or so of Nook Color owners. If it’s assuming each Nook Color owner is going to buy enough books to offset a $100 subsidy, B&N is going to find itself in a ton of trouble very soon.

15 Responses

  1. “If it’s assuming each Nook Color owner is going to buy enough books to offset a $100 subsidy, B&N is going to find itself in a ton of trouble very soon.”

    What’s more, if B&N admits it’s subsidizing the Color Nook, the percentage of buyers who are getting it to hack into an Android tablet will rise from 25%, because it will become apparent that it is a screaming bargain that competitors can’t match on price, and that might not be available forever. So, to avoid even more unfruitful (non-bookster) sales, B&N will fight shy of letting that perception take hold by letting the cat out of the bag.

  2. According to iSuppli the cost of a Samsung Galaxy Tab is $205, while estimating a cost of $264.27 for the 16Gbyte 3G version of the iPad. see http://www.isuppli.com/Teardowns/News/Pages/Samsung-Galaxy-Tab-Carries-$205-Bill-of-Materials-iSuppli-Teardown-Reveals.aspx

    Given that it is highly unlikely that B&N is selling the Nook Color at cost even through resellers, much less at $100 subsidy. Is there any unique component in the Nook Color leading to your estimate of such a high cost?

    • That is the component cost, not the actual cost. You have to include R&D, marketing, distribution, etc.

      If the ipad and galaxy tax cost is less than 1/2 of the sale price, then you can see for the nook to really be breaking even, to making money it would have to have a component cost of around $125 to 150. But it is likely that the components cost around $150-175.

      • Well it has been an awfully long time since I’ve looked at an economic textbook so the following could be rubbish.

        As I understand it all that matters is the variable and not fixed costs. Selling price per unit minus variable costs must be positive for any breakeven point calculation. That calculation will then give the number of units you will have to sell to recover all expenses incurred.

        If it does not then the point is moot, fixed costs just adds to your ever increasing loss.

      • You are right eventually. But I am not sure the quantity of sales are reaching the point where they can sell at the marginal cost. I am sure kindle and ipad can. I just don’t know how many nook colors are selling.

        But if you have $5 million in up front fixed costs and then sell all the products at the marginal cost, you are not loosing additional money, you just have not made your fixed costs back. Not making the up front costs back will hurt you in the R & D for the next product.

        But component costs still are not enough to consider. Distribution and assembly has to be considered as part of the marginal cost. And I would guess that the distribution and assembly costs are at least $20 a nook. I would say the component costs will be less than a Galaxy Tab, but probably not a lot less.

        I really do think that competition is important. So I want B&N to have a good product that they are not selling at a loss so that they will have future good products.

    • I was factoring in things like R&D, software, customer support. iSuppli’s component costs aren’t really the same as what it’s costing B&N to get each Nook Color into the hands of readers.

  3. Oh I agree, they are almost certainly going to have to sell quite a lot of Nook Colors just to hit breakeven. Just don’t agree with the seeming widespread perception that at the actual point of sale price they are moving them at a loss. Given the low margins on ebooks that would be just suicidal.

    If they are they will not be able to hide it when presenting their holiday breakdown figures, guess we will see then.

    • I agree, I have not seen anything other than speculation to show B&N is selling them at a loss.

      We do know that sales are exceeding their expectations, so it would be more reasonable to assume they are meeting their financial goals than to assume they are in trouble.

      And I would also think that if they were really that concerned about people hacking it, they will lock it down a lot tighter in the next update OR they would have already done so. It’s not overly difficult to do so. That is also just speculation of course ;)

  4. I’m a bit surprised at your acidic comments on the tablet scene.

    Yes, Nookcolor has some cache due to it’s apparently subsidized pricing, coming in at it’s $250 pricepoint for a reasonable multipurpose reader/browser/email device.

    But, we’ve got *competition* aplenty. And that inevitably means lower prices for these plentiful tablets in varying sizes for the summer season. The Xoom’s rumor mill has already judged the released $1200 pricepoint to be a chimera placeholder — so that’s not to be regarded as anything permanent.
    The larger Galaxy Tablet is due out soon (10.1) as well as the 10″ HP TouchPad featuring the incredibly usable webOS that is just made for multipurpose uses of eReader/browsing/email/printing in the new HP envisioned ecosystem of devices that all talk to eachother — i can’t picture a better way to do research, keep notes on reading, snag relevant content to share, etc. than this masterful OS.
    And there are multiple other Android tabs due out that will apply the requisite price pressure in perfect synchronicity to all this.

    It’s not been quiet– quite the opposite. We’ve got plenty of rumblings of great things coming just over the horizon. and the excitement is building over here.

    Keep ARS Technica coming to you off your Calibre News and keep reading. ;-) There’s plenty of good news to follow.

    Mike

  5. This might be worth looking at, even thought it’s not a Retina Display-like NookColor experience.

    Samsung Galaxy S WiFi 5.0 hands-on (video)

    http://www.engadget.com/2011/02/14/samsung-galaxy-s-wifi-5-0-hands-on-video/

    Of course, price will be very important. But with this coming — I hope — I can’t see me wasting money on any eInk device even priced way less.

  6. Well, simply because some people on the internet like to claim that everything is due to the internet, does not mean that something *isn’t* due to the internet.

    Also, where are you getting these stats from: “Nook Color is an absolutely beautiful reading tablet that 25% of people are hacking into a Tablet, 15% are using with other ePub-based ebook stores, and a further 15% are using with the Kindle Store.” ?

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