Death and destruction amongst eReaders and eReader companies

While the Kindle and the Nook Color continue to do well, there are lots of problems in eReader Land -

  1. Smaller eReader makers are dying out.
  2. Both Amazon and B&N are getting hammered by Wall Street for their investment in eReaders. B&N more so than Amazon.
  3. Apple seems ready to cut off the oxygen supply to eReader apps on the iPlatform.

Let’s take a quick look at each of these.

Kno and Alex are dying

Kno eReader is being phased out and the company is going to focus on making software. It’s a bit ridiculous – that a company making a dual screen tablet is considering selling off its hardware business and moving to making software for other people’s tablets. What a capitulation.

All Things D has a report on No-Kno -

Sources said Kno execs have recently decided that the quicker-than-expected uptake in tablet production by a multitude of powerful device makers had made its efforts to package a seamless offering less critical.

Instead, the company will focus on its robust software and services to offer students on the Apple iPad, …

BoomTown could not determine which two companies Kno was in serious discussions with about unloading its hardware business …

Made its efforts to package a seamless offering less critical?

They ought to be honest – They got destroyed in the Tablet market.

Almost in parallel, the Alex eReader is being phased out. It’s not clear whether the ‘phase-out’ is to introduce a new model or whether Alex is about to join Kno in the Beautiful eReader Graveyard.

B&N stock gets punished for B&N’s focus on the future, i.e. eReaders

Amazon’s stock got hammered after its last earnings release – Wall Street didn’t like Amazon’s focus on the future, i.e. eReaders. The same happened with Barnes and Noble today. Thanks to Roger Knights for the link to Bloomberg’s article on B&N and eReaders.

It’s some sort of joke where Wall Street isn’t willing to look beyond the next 6 months.

Barnes & Noble Inc., the largest U.S. bookstore chain, declined as much as 15 percent after suspending its dividend to conserve cash and invest in electronic books

What alternative does B&N have – Should it forget about ebooks and eReaders and go bankrupt like Borders?

You should be handing B&N a prize. What other company can compete with a giant like Amazon, survive a huge transition in its business, and come up with decent products that speed the democratization of Publishing.

B&N has the best Android tablet released so far. It has it for $249. It has around 20% of the market in both eReaders and eBooks – a larger share than it had in physical books. It should be getting an award for Most Adaptable Company of 2010.

Instead the stock is down 15% as Wall Street worries about its annual bonuses.

The problem is that for both Amazon and B&N this negativity from Wall Street has consequences. Amazon and B&N have to plan out 10 to 40 years into the future but they are hobbled by the geckos of Wall Street and the geckos’ focus on the next 6 months.

The threat of Platforms reneging on their (implicit) promises

So B&N and Amazon made a smart calculation -

  1. If we make eReader apps we reach all these casual readers.

It seems to have worked because, supposedly, 40% of ebook sales on iPad are via Kindle for iPad, and another 20% are via Nook for iPad.

However, B&N and Amazon either disregarded or didn’t realize two other things -

  1. A not insignificant portion of people who wanted a reading device got an iPad because they could get a choice of stores and/or they could get their favored provider (Amazon or B&N) on the iPad. Those were lost Kindle sales and lost Nook sales. It might be just 5% or 10% of iPad sales – but it was sales that Amazon and B&N lost thanks to their own iPad apps.
  2. Apple controls the platform. It can kick out Amazon and B&N any time. It can impose a tax and take all the profits for itself anytime. Now, its trending in that direction.

Basically, Amazon and B&N ought to realize now, if they haven’t already, that they are strengthening the enemy. For two companies that are forward-thinking for the most part, this was an amazingly short-sighted move.

Every platform is the same – a risky gamble. Perhaps not the Web and not the PC. However, Android, Mac, iPhone, iPad, and other platforms are just a gamble.

Not only is the grand ‘reading apps for every platform’ strategy a long-term impossibility, it’s strengthening the enemy.

12 Responses

  1. “[Customers don't think this post adds to the discussion. Show post anyway. Show all unhelpful posts.] ”

    I have to disagree. Amazon is in the business to sell books and the Kindle was a means to that end, as are all of the apps.

    Since many people purchased iPads expressly for reading, and most ebooks sold for the iPad are Kindle books, if Apple pulls the rug out from under them they will do far more damage to themselves than to Amazon. I can hear their furious customers now, vowing never to purchase an Apple product again.

    All Amazon has to do is remove the link to their store from within the app. It may be annoying to some not to be able to shop from within the app, but not much of a barrier.

    I for one, has never purchased a single book directly from my Kindle. I always shop from my laptop, then sync my Kindle once a week or so. I’m sure many others do the same thing, there’s no reason iPad and iPhone owners can’t as well.

  2. The stock is down because B&N is eliminating its dividend, which was amounting to about a 5% yield… meaning investors would make 5% if the stock price went nowhere. The “and invest in electronic books” is not the reason; that was just poorly worded on the article’s part.

  3. The iPad is currently the most flexible reading device available. Kindle. Nook, iBook, and many others (o’reilly, baen, manning, etc) all work on this device. Turns out that I never actually purchase anything from B&N or Apple, but I could if I needed something from them. If Apple screws this up, and I rather expect them to, then I will absolutely ditch all five of my iOS devices (er, when the contract is up) and give the iPad to the kids once a suitable Android replacement is released (xoom is not it).

    On another front I wouldn’t be surprised to see amazon release an android tablet.

  4. Re: people getting iPad or other tablets because they could get their preferred store: If the consumers want an open platform (one that they can have multiple stores on), they need to use either an iOS or Android device. The dedicated e-readers wouldn’t have met the needs of these customers.

    I think what would be really great for consumers would be a basic Android e-ink device, so you could run the Kindle app, the B&N app, and all other Android reading apps. Unlikely though.

  5. “Basically, Amazon and B&N ought to realize now, if they haven’t already, that they are strengthening the enemy. For two companies that are forward-thinking for the most part, this was an amazingly short-sighted move.”

    But what choice did they have? If they’d both steered clear of the iPad they’d have handed millions of customers over to Apple’s store. They had to scotch the threat of that store growing to rival theirs.

    If only one of them had avoided the iPad, it would have lost customers (mostly permanently) to its two rivals.

    Apple now realizes its iBookstore can’t compete, so it’s falling back on another strategy to make money on books. I don’t think its demand for 30% is serious—it’s a bargaining ploy to gain leverage, IMO. It would cause Amazon and/or B&H to stop selling books on the iPad, creating a lot of bad PR & PO’d customers. It has to take that into account, so I think it’s bluffing.

    This must be quite a poker game for the parties involved. Who’s bluffing? What’s the downside? How should I play my hand? Etc.

    • You’re right. One of them would have jumped, and then the other would have had to jump.

      It’s a difficult decision. If a Kindle Tablet arrives in the next 5 months then Amazon’s decision is understandable. If it doesn’t then Amazon made a big mistake.

      • Put this at another website but I think it’s relevant to the discussion.

        ‘Unpacking the logic in ebooks might go something like this. The main reason iBooks is such an underachiever is its lack of content. A large part of this is the absence of Random House. That publisher will never be enticed while iBook sales are pitiful. They will remain pitiful in the absense of Random House.

        It’s Catch-22. With superior ebook stores offered on your own device you’re on your way to nowhere. To get any traction these need to be hobbled, or better yet be gone. Predict they will all be before too long.

        From a business point of view it makes sense. We have already seen in the ereader wars how those who control device plus platform are in the ascendancy against the hardware only manufacturers. Very likely the same will happen in tablets. ‘

      • That’s worth mulling over. What Apple has going for it is that it has the best tablet by far. Nook Color is better value for money but it isn’t exactly a tablet.

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