B&N to stop making Nook Tablets. Lessons for Kindle Fire HD, Amazon

B&N announced its Q4 results and there’s a lot to take in. The big decision is that B&N will stop making Nook Tablets itself, and move to a partner-centric model. This is similar to what Google does – Asus makes Nexus 7 Tablets and they go out with the ‘Google Nexus 7’ branding (Asus branding too, but that’s secondary).

Some of the key details, courtesy TechCrunch’s rather pessimistic coverage of Nook Tablets & B&N’s moves

  1. B&N reported $118.6 million losses on revenue of $1.3 billion in Q4, 2013.
  2. $6.8 billion in revenue for Fiscal 2013. Loss of $154.8 million for Fiscal 2013.
  3. Nook Media had just $108 million in quarterly revenue.
  4. For the fiscal year 2013, Nook Media had $778 million in revenue. This is down 16.8% from fiscal year 2012.
  5. Nook HD and Nook HD+ will be around until end of 2013. They will remain at their low $129 and $149 prices.
  6. B&N will keeping making eInk eReaders. That’s good news. Kindle needs the competition.
  7. B&N will open up to tablet makers and let them make ‘Nook’ branded Tablets. Not sure which companies would be interested. Probably Microsoft. Perhaps even Asus and Acer to see if they can tap into the 5 million to 10 million existing market of Nook Tablet owners.
  8. Nook division revenues dropped 34%.
  9. Nook content sales dropped 8.9%. That suggests that content sales would have actually increased if Tablet sales hadn’t fallen so much.

B&N’s Press Release has some details on losses and revenues and such. Also some interesting tables showing how fast the Nook division is falling.

What people are saying about B&N stopping Nook Tablets

Peter Kafka at All Things Digital says this about B&N stopping making Nook Tablets –

Just a few years ago, no one thought the bookseller had any business trying to produce its own e-reader. And then, for a brief period, they looked like they were going to prove the doubters wrong, and showed that an old-line retailer could compete with the world’s most sophisticated consumer electronics companies.

Nice run while it lasted.

My thoughts exactly. There’s nothing wrong with giving it your best shot and failing. It’s hard to compete against Apple and Google and Samsung and Amazon. It’s interesting that the big slump in Nook sales started around the time the iPad Mini and the Kindle Fire HD were launched. Wonder which one out of the two had more impact on Nook.

MemeBurn points out B&N’s strategy, as outlined in its press release, and it’s quite interesting –

“Going forward, the company intends to continue to design eReading devices and reading platforms, while creating a partnership model for manufacturing in the competitive color tablet market. Thus, the widely popular lines of Simple Touch™ and Glowlight™ products will continue to be developed in-house, and the company’s tablet line will be co-branded with yet to be announced third-party manufacturers of consumer electronics products.

Paid Content has a good overall article, discussing lots of facets of B&N’s Nook Business and its future plans.

What does this mean for Amazon?

Well, it’s somewhat good news.

  1. Nook Tablets might not be selling much but at least some of those sales will shift to Kindle Fire HD now.
  2. This increases the chances that Nook eReaders will die out in the next few years. That would be a big win for Kindle.
  3. This makes Nook Reading Apps less attractive. Since there’s no ‘Reading Tablet’ from Nook. People will choose Kindle Reading Apps instead, usually.
  4. Companies that manufacture ‘Nook’ Tablets will probably not promote Nook Reading Apps as strongly as B&N did.
  5. This might even weaken B&N itself and lead to its demise in 10-15 years. That would mean more book sales and more ebook sales for Amazon.

Basically, it strengthens Amazon as the #1 eReader and eBook seller. It also increases the chances that Kindle Fire HD can be the #2 or #3 Tablet in the Tablet Market.

In the long-term, it might strengthen Amazon as the #1 book and ebook seller greatly – especially if B&N dies.

Lessons for Amazon

Quite a few, actually.

  1. If Kindle Fire HD 2 isn’t very good, then it might suffer the same fate as Nook HD. Even if Kindle Fire HD 2 is very good, it might get killed if iPad Mini 2 and the new Windows 8 Tablets are superb.
  2. It’s good to stick to your core competency. If you venture outside your core competency, there’s a higher chance than usual of failing. As Amazon goes into Kindle Phone and Kindle Watch and other products, it should be careful not to spread itself out too thin. Most importantly, it needs to figure out what its core competencies are, and stick to those.
  3. Kindle Fire HD needs a better app store. Amazon decided to build its own app store. However, it’s still a long way behind Apple’s App Store and also quite a bit behind Google’s App Store. Two of the major reasons B&N’s rather well made Nook tablets died were – lack of marketing, lack of apps. Amazon doesn’t have the first problem (at least not in the US) but it certainly has a problem on the app store front. Amazon already failed to make an app store work once (with the Kindle App Store). It’s fixing some of its mistakes (like its crazy stipulation that it wanted pricing control over apps) with the Kindle Fire App Store. However, it’s not Amazon’s core competency and it’s a long way behind.
  4. The #4 player in a market will usually get crushed. Kindle Fire HD is currently at #2 or #3 after Apple and perhaps Samsung. If Windows 8 Tablets and/or Nexus 7 push ahead of Amazon, or if Apple and Samsung improve their tablets greatly, then Amazon might be left behind as a weak #3 or a weaker #4. Then it’d be curtains for the Kindle Fire HD within a year or two.
  5. Profits and Assets are important. Amazon has been making the mistake of not building up profit streams, just cash flow streams. It’s also been slow in building up assets. What does that mean? A few bad quarters in something like Kindle Fire HD or Kindle Phone and it would be forced to kill those businesses. A lot of Amazon’s business model is based on taking current losses for future profits and/or future revenue streams. That works best if you have some existing profit streams you can offset those losses against.

It should actually be a very sobering lesson for Amazon of what is at stake. If Amazon doesn’t deliver a very strong Kindle Fire HD 2, then it would be the end of Kindle Fire HD and Amazon’s Tablet business. A lot is at stake with the next Kindle and the next Kindle Fire HD. Will Amazon deliver?

Curtains for Nook HD? Nook HD Fire Sale extended

We’ve talked about the crazy Nook HD sale and reasons why Nook HD might be on sale in the recent past.

Now, B&N has ‘extended’ it beyond Father’s Day – conclusively proving it’s a fire sale to clear out stock, and not some ‘super special Father’s Day sale’.

B&N’s Press Release about the Nook HD Fire Sale is pretty interesting, especially this paragraph –

“With the fantastic success of our Father’s Day promotion, we decided to extend the great prices on NOOK HD and NOOK HD+ to help our customers gear up for a great summer reading season,” said Jamie Iannone, President of NOOK Media. “In our stores and online, customers have embraced these beautifully designed, lightweight devices with stunning displays that offer great reading and entertainment content.  We’re thrilled to keep in place our best prices ever and deliver great value to make reading more affordable.”

Well, good for them if they are seeing a great reaction. It certainly helps them clear out all the unsold stock they presumably had from their disastrous Holiday 2012 season.

It’s painfully obvious now that B&N is ending Nook HD (and perhaps replacing it with something else? perhaps not)

There were two possibilities we discussed –

  1. B&N is ending Nook HD Tablets completely and leaving the Tablet space.
  2. B&N is switching over to Windows 8 Tablets and clearing out stock of Android based Nook HDs.

The former seems likelier. However, one of the two is definitely happening, based on the extension of the crazy Father’s Day fire sale on Nook HD and Nook HD+.

At Paid Content, Laura Owen has this to say about the Nook HD fire sale extension

combine the price cuts with the multiplerumors that Barnes & Noble plans to phase out the Nook tablet line by the end of fiscal year 2014 (which would be a year from now) and it starts to look as if B&N is trying to clear out stock. (The company has already phased out the lower-end Nook Tablet and Nook Color.) We may get more answers from the company’s next earnings report, which comes out June 25.

Well, yes, it was apparent that B&N was clearing stock once it started doing weekly sales on Nook HD and Nook HD+. This pretty much confirms it.

WebProNews thinks B&N should see how Nook HD and Nook HD+ sell at the new lower prices before deciding to leave the hardware market. I would agree. B&N needs to figure out the exact reasons its comparably good hardware lost so badly to iPad Mini and Kindle Fire HD. If it can fix those issues (Google Play is a good first step), then it should consider staying and fighting in the Tablet Space.

Another possible reason for Nook HD not selling well is that Apple and Amazon have huge customer bases and huge marketing budgets. B&N hardly advertised the Nook HD and Nook HD+. When it did, it focused too much on the Julie prototype – a mother with two young kids and a husband. That sounds good in theory. In actual practice, we probably have a lot more single mothers and unwed people and teenagers and older couples and boomers interested in tablets than the fairy tale ‘perfect couple in their 30s’ with two young kids. I wouldn’t be surprised if the percentage of prospective Tablet owners that fit the ‘Julie’ prototype is less than 20%. B&N was alienating 80% of its market by focusing so strongly on kids’ books and kids’ apps and ads focused on perfect little 2+2 families.

Here’s what B&N is sending out in emails –

Great news! Due to popular demand, we will be extending our amazing offer for our NOOK HD Tablets.

NOOK HD+ Tablet Only $149 – savings of $120 off regular price!
NOOK HD Tablet Only $129 – Savings of up to $80 off regular price!

Got to love it. Nook HD at $129 indefinitely. Perhaps it forces Amazon to drop prices on the Kindle Fire HD.

Is Nook leaving PC and Mac to Kindle?

Courtesy of The Digital Reader (also covered by TechCrunch), we get the surprising news that B&N has stopped supporting its Nook for PC and Nook for Mac Reading Apps.

  1. B&N has ended support for Nook for PC and instead expects users to use Nook for Windows 8 and Nook for Web.
  2. B&N has ended support for Nook for Mac and instead expects users to use iPhone and iPad Apps and Nook for Web.

There are a few problems with this approach.

Nook for Windows 8 doesn’t cover Nook for PC, neither does Nook for Web

Windows 8 penetration is in single digits. The overwhelming majority of PC users are on Windows 7, Windows Vista, and Windows XP. All those Windows 8 licenses sold are mostly just that – licenses. They aren’t yet actual machines running Windows 8.

This means that B&N has told the 90% or so of PC users using Windows 7, Windows Vista, and Windows XP to forget Nook.

What about Nook for Web?

Well, Nook for Web doesn’t support all books. It doesn’t even support most books. This means that users who are on Windows 7, Vista, or XP simply can’t read their books any more – unless they have a Nook device or have a smart phone that has a Nook reading app.

What are all these users going to do?

Switch to Kindle. Perhaps stop buying books from Nook. Perhaps go to Kobo.

Nook for Web doesn’t cover for Nook for Mac, nor do the iPhone Apps

B&N’s decision to end support for Nook for Mac is similarly strange.

Nook for Web doesn’t support a lot of books – so Nook for Mac users can’t just switch to that.

Mac users who don’t have, or don’t want to read on, an iPhone or iPad are stuck.

Again, all these users will switch to Kindle or Kobo.

Is B&N giving up?

That’s the first thing that comes to mind.

Combine all the signs –

  1. Heavy losses from Nook devices for B&N last quarter.
  2. Massive fire sales for Nook HD and HD+ this year.
  3. Ending Nook for PC and Nook for Mac Reading Apps.

It seems that B&N is giving up.

Well, there is one other possibility.

Is B&N cutting off poor performing Apps & Devices?

Perhaps B&N decided to focus on the devices and reading apps that are doing well.

  1. Perhaps that means focusing on Nook for iPhone and Nook for Android and Nook Study. And to cut off Nook for PC and Nook for Mac.
  2. Perhaps it means focusing on Nook eInk eReaders or the next generation of Nook Tablets (perhaps built using Windows 8). Which would mean clearing out stock of Nook HD and Nook HD+.

That is a possibility. It’s certainly better than the alternative i.e. B&N leaving the ebook space completely, or perhaps just giving up.

Strange that B&N is ending Nook for PC and Nook for Mac

There were strong rumors earlier this year that B&N was ending Nook Tablets and would focus on reading apps instead. Those rumors seemed to be validated by the fire sales going on for Nook HD and Nook HD+.

However, the end of the Nook for PC and Nook for Mac reading apps puts us in a quandary.

If B&N is ending Tablets and focusing on reading apps, then why is it ending Nook for PC and Nook for Mac?

  1. Were these performing badly?
  2. Were users on these not buying books?
  3. Were these leading to piracy?
  4. Are there not enough resources to run these well?
  5. Is B&N just leaving ebooks entirely?

It’s hard to say what the reality is.

Why is Nook leaving PC and Mac to Kindle?

The crux is that B&N is leaving all these users to Kindle and Kobo.

Perhaps it’s just 5% or 10% of the market. However, it’s very strange to not even contest it.

Perhaps it’s just 1% or 2% of the market. Perhaps people just don’t read books on desktops and laptops. In that case, it’s understandable.

Would love to know the actual figures for both Kindle for PC/Mac and Nook for PC/Mac. Is it that there just isn’t a market there? Or is B&N running out of resources and/or the will to fight?