Kindle vs Nook if B&N ends Nook eReaders and Tablets – It loses 50% of the most important 20% readers

B&N opened up its Nook HD & Nook HD+ Tablets to Google Play Store recently. It also did a massive $50 off and $90 off Sale for Mother’s Day.

This forced Amazon to introduce a temporary $20 discount on the Kindle Fire HD.

Soon after there were reports that B&N was considering selling its Nook unit to Microsoft for $1 billion.

TechCrunch had some additional details and two of these were very interesting (only if true) -

  1. B&N plans to end Nook Tablets by April 2014. This would suggest the Nook HD and Nook HD+ are its last tablets. Which basically means an end to the Kindle Fire HD vs Nook HD competition – the battle of the tiny closed ecosystems.
  2. B&N plans to let eReaders die out naturally – as users transition to Tablets. This doesn’t suggest an end date. However, it does suggest that B&N doesn’t plan to fight. Perhaps it ends Nook eReaders in 2014 or 2015. That would mean the end of Kindle vs Nook.

Both of these are very impactful things.

Kindle vs Nook – A Quick look back

Kindle vs Nook has had many twists and turns -

  1. Amazon introduced the Kindle eInk Reader in November 2007. Everyone (except people who actually read) pretty much wrote it off. However, by mid 2009 it began to seem that the Kindle had a good chance of becoming a hit.
  2. B&N introduced the Nook eInk Reader (with a tiny LCD panel at the bottom for navigation) in October 2009. After this, Amazon and B&N have gone head to head in the eReader market ever since. They have been #1 and #2 for most of that period.
  3. Apple introduced the iPad in March 2010. This threw things off for eReaders as people tended to prefer a multi-purpose Tablet over single purpose Ereaders, especially casual readers. Strange that companies focused on selling books would care about people who don’t want to buy devices dedicated for reading. However, that’s the path Amazon and B&N chose.
  4. B&N introduced the Nook Color. This was a reading Tablet, priced at $200, and focused on reading and reading related functions. The Nook Color took off in a major way – Illustrating that there was huge demand for a low-priced Tablet. At the time, iPad was $499.
  5. Amazon introduced the Kindle Fire in end 2011. B&N introduced the Nook Tablet, an improved version of the Nook Color, around the same time. Thanks to Amazon’s huge customer base, and to strong marketing, Amazon was able to get the lead in ‘Small Tablet’ sales over the Nook Tablet. By lead we mean a 3:1 or 2:1 lead.
  6. 2012 was eventful as we got the iPad Mini and the Nexus 7. Amazon introduced the Kindle Fire HD and the Kindle Fire HD 8.9″. B&N introduced the Nook HD and the Nook HD+ (9″).
  7. Two things happened. Firstly, Amazon and B&N’s attempt to target the iPad failed – mostly because the iPad Mini was a huge hit and beat them to the ‘let’s kill the iPad’ game. Secondly, Kindle Fire HD sold decently but B&N’s Nook HD sold poorly.
  8. Meanwhile, all through 2012 we saw more and more sales go to Tablets and 7″ Tablets and less to eReaders. eReaders were still selling 10 million+ units a year. However, they were no longer growing markets and the long-term future became unclear. We don’t know whether the lack of evolution of eReaders led to poor sales, or whether it was Tablets. However, eReader growth seems to have stalled.

This leaves us in a very interesting position.

  1. In eReaders, we have Kindle at #1, Nook at a strong but distant #2, and Kobo at #3. After that, we have a lot of smaller competitors and Sony. Kindle vs Nook is still very important. B&N routinely advances the state of the art in eReaders and drives innovation.
  2. In 9″ and 10″ Tablets, we have Kindle Fire HD 8.9″ and Nook HD+ as almost non-factors. So Kindle Fire HD 8.9″ vs Nook HD+ is mostly an academic comparison. Most people seem to prefer iPad Mini. Basically, 7″ Tablets and iPad Mini have begun to kill off the 10″ Tablet market.
  3. In 7″ and 8″ Tablets, we have iPad Mini vs Nexus 7 vs Kindle Fire HD (vs Nook HD). Kindle Fire HD vs Nook HD isn’t that important any more – Mostly because Nook HD has lost mind share. With the addition of Google Play Store it’s winning that back. So, perhaps, by mid 2013, Kindle Fire HD vs Nook HD will be meaningful again.

When you consider all this context, it’s going to be a bit sad if B&N leaves the Tablet space in April 2014 and the eReader space in early 2015. Kindle vs Nook will just be an old memory.

What happens if B&N leaves the Tablet space?

Not very much for the general Tablet space.

The best-selling Tablets are – Apple, Samsung, Google and Amazon. Depending on what month you check, one out of Google or Amazon has the #3 spot. By Google we mean the Asus manufactured Google Nexus 7.

Nook was perhaps 5th or 6th. The 5th or 6th player leaving a space doesn’t do much.

The one place it creates an impact is in the space of ‘Reading Tablets’ – a nebulous space catering to people who primarily want a Tablet for reading.

For readers, it made more sense to get a Tablet from Amazon or B&N. If B&N exits the space, then Amazon becomes the clear and obvious choice. This would mean a clear boost for Amazon and Kindle Fire HD sales. Which in turn would greatly strengthen Amazon’s lead in ebooks.

B&N’s supposed 2014 and 2015 strategy  of ending device sales and focusing on Reading Apps runs into a roadblock – Kindle Fire HD does not have a Nook reading App. If most serious readers looking for a Tablet start picking Kindle Fire HD, B&N loses these readers.

Fundamentally, B&N’s strategy is flawed. The 20% of Readers that account for 80% of book sales tend to pick either a dedicated eInk Reader or physical books or a Reading Tablet. By leaving the Reading Tablet space, B&N leaves all these users to Amazon.

These 20% ‘Best’ Customers are the stars of the rest of this post. Their importance grows as we look at Kindle vs Nook in the dedicated eReader Market.

What happens if B&N leaves the eReader Space?

We could partition out serious readers (‘Best’ Customers for Books) as readers who will buy one or more of -

  1. Paper Books.
  2. A dedicated reading device i.e. an eInk Reader.
  3. A Reading Tablet.
  4. A general purpose Tablet.
  5. A mix of one or more of the above.

By leaving the Reading Tablet space, B&N would hand over ‘serious readers’ (the ‘Best’ customers) who want a Reading Tablet to Amazon.

If B&N also leaves the dedicated reading device space (eInk based eReaders), then it also hands over the ‘Best’ Customers who want to buy a device optimized for reading to Amazon.

This creates a huge problem.

  1. Firstly, at least 25%, and perhaps as many as 50%, of the most important readers (those who buy 80% of books) will choose an eInk Reader and/or a Reading Tablet. By leaving these two areas, B&N is giving Amazon the best book buying customers.
  2. Secondly, as Amazon has stated before, people buy MORE books when they get Kindles. 2.7 times more. So these very good customers become great customers after they own an eInk Reader. Perhaps there’s a similar, though not quite as strong, effect when people buy a Reading Tablet.
  3. Thirdly, that 2.7 times figure includes paper books. It makes sense that a person who owns a Kindle and/or a Kindle Fire HD would buy their paper books from Amazon more often. If nothing else, convenience and the relationship/trust means that Amazon is likely to become the #1 choice for paper books too.

Somewhere between 25% to 50% of the ‘Best’ Readers switch over to Amazon.

Of course, this doesn’t factor in that Amazon and B&N have a rough 60% and 30% share of the ‘Best’ readers who have already switched over to eReaders and Reading Tablets. Amazon goes from strong to ridiculously strong. B&N goes from decently strong to very weak – Because the 30% share it already has will move to other devices if B&N stops making eReaders and Reading Tablets.

The Concept of the ‘Best’ Readers

In this age of political correctness, where a customer who spends $1 a year wants to be considered equivalent to a customer who spends $1,000 a year, it is perhaps unacceptable to point out that, in any market, 20% of customers are the ‘Best’ customers. The ones who basically keep the market going. It exists for every market -

  1. In movies, these are the people who watch movies in the theater and buy DVDs and digital movies. Lots of them.
  2. In video games, these are the people buying $60 games and $300 consoles and $2,000 PCs.
  3. In books, these are the people buying hardcovers and lots of books and lots of ebooks.

Whether it meets the political correctness threshold or not, the truth is that the people contributing 80% of the revenues are the ones who are keeping the industry going.

For example: On Pandora, artists get a few pennies per 1,000 songs streamed. A user might listen to Band X 50,000 times and might generate 50 cents for Band X. However, the customer who buys a concert ticket for $50 is 100 times more important. The customer who buys the CD for $10 is 20 times more important.

This is a critical distinction and this also applies to books, whether the Lives in Switzerland, Recycles 5 times a Day, Warrior Chief of Political Correctness likes it or not.

We have the ‘Best’ Readers that are perhaps just 10% to 20% of the customer base – However, these customers generate 60% to 80% of the revenue. They are, in effect, keeping the books industry alive.

There are two distributions that are generally accepted -

  1. 20% of the customers are the ‘Best’ customers. They generate 80% of the revenue.
  2. 10% of the customers are the ‘Best’ customers. They generate 60% of the revenue. 30% of the customers are ‘Good’ customers. They generate 30% of the revenue.

In either case, it’s the Good and Best customers that matter. The remaining customers don’t really matter. Of course, woe to anyone who reminds them of it.

It’s a big assumption to make. However, the facts will bear this out. Facts that only Amazon and B&N have. Which makes B&N’s decision to shift to Reading Apps even stranger.

By ending Reading Tablets and eReaders, B&N would lose the Best Customers and the Good Customers

Firstly, it’s pretty safe to say that the Best customers and the Good customers will end up with a reading Tablet and/or a dedicated reading device (if they go with ebooks). If you’re the exception that proves the rule, you’re exactly that – an exception who reads 53 books a year on your Device X which is not focused on or optimized for reading.

If B&N leaves both spaces, then it leaves behind the 20% to 30% of customers that account for 80% to 90% of book sales.

What does that leave? The remaining huge numbers (70% to 80%). Wow – that’s a lot of users. The only problem – they contribute just 10% to 20% of book sales.

Please keep in mind that this is for ebooks. B&N isn’t walking away from the Best Customers and the Good Customers in Physical Books. However, it is making them Amazon customers (via eReaders and Reading Tablets) and making them likelier to shift.

B&N might be walking away from the core audience it needs to survive

If B&N were to analyze all the data it has on reading patterns and purchase patterns, it would find the following -

  1. 30% to 50% of its ebook sales come from eReader owners.
  2. 25% to 40% of its ebook Sales come from Nook Tablet owners.
  3. The rest of its ebook sales comes from other reading apps. This might be as low as 10% or as high as 45%.

It might also find that Nook and Nook Tablet owners account for as much as 25% to 35% of paper book sales from B&N stores.

I would be willing to bet serious money that B&N never took the step of analyzing this data, especially the ebook sales & paper book sales inter-relationship. For that matter, it never even properly tried to build a connection between ebook sales and physical book sales.

By walking away from dedicated eReaders and reading tablets (and this is still an IF, based on rumors and hearsay), B&N is giving up the customers that are accounting for 65% or more of its ebook sales and 25% or more of its paper book sales.

Those users aren’t going to switch back to 100% paper books. They are going to switch to other devices that are optimized for ebooks and reading. Those, rather inconveniently, happen to be from Amazon.

If B&N ends the Nook eReader line and the Nook Reading Tablet line, it would be handing over 50% or more of its Best Customers and its Good Customers (for ebook sales) to other companies, mostly Amazon. If B&N tries to replace dedicated Nook eReaders and Nook Reading Tablets with reading apps for iPad and Android devices and Windows 8 devices, it would be switching from the Best Customers and the Good Customers to the ‘Not so Dedicated’ Readers who account for just 10% to 20% of book sales.

It’s the absolute worst strategy decision B&N could make. We wouldn’t see Kindle vs Nook replaced by Kindle vs B&N Reading Apps, we would see it replaced by Kindle vs Kobo and by Kindle vs Don’t Read. There’s no room for B&N in eBooks if it doesn’t have both a reading focused eInk eReader and a reading focused Reading Tablet.

Nook HD Review

Nook HD is a natural competitor to the Kindle Fire HD. Reviewing the Nook HD will set things up nicely for a future Kindle Fire HD review.

Context for this Nook HD Review:

  1. Ownership since Day 5 after launch. So, approximately 7 months of ownership and regular use.
  2. Other Devices (to ensure a reasonable comparison basis): Kindle Fire HD, Kindle Fire 1, Kindle Fire 2, Nook Color, Nook Tablet, Google Nexus 7, Surface RT Tablet from Microsoft, Kindle Fire HD 8.9″, Nook HD+. And, in the past, iPad 2.
  3. Lots and lots of usage. Some book reading. Regular Apps and Games. Occasional web browsing. Lots of Netflix. Some general stuff like arranging things and setting things up.

Let’s start this Nook HD Review by understanding what the Nook HD is.

Nook HD Review – Nook HD is a Reading Tablet evolving into a Fuller Tablet

Nook HD represents a morphing from the Nook Color (a Reading Tablet that took off accidentally as a ‘cheap, all purpose Tablet’) to the Nook Tablet (a Reading Tablet inching towards being a full tablet) to the latest generation Nook Tablets (Nook HD, Nook HD+) that go ever closer to being ‘Full’ Tablets.

Last week B&N added Google Play Store to Nook HD. That brings it very close to being a Full Tablet. However, it is still 25% Reading Tablet and 75% Tablet.

This first part is absolutely critical. Nook HD is NOT an iPad or a Full Tablet. At its current sale price of $149 it’s less than half the price of an iPad Mini ($329). It’s 30% of the price of iPad ($499). So, please adjust your expectations accordingly. You’ll get an insane value for your $149. However, you will NOT get an iPad and you will NOT get an iPad Mini.

Nook HD Review – What the Nook HD is, What it’s Good for

What the Nook HD is -

  1. A Tablet that is built on a Reading Tablet base, with the addition of Google Play Store and Nook Video Store and B&N App Store. This turns it into a fuller Tablet. Important: It is NOT yet a full tablet.
  2. A Tablet that is built on top of Android and has Google Play Store and Google Apps. Important: It’s not ‘pure’ Android. Google Play is just an app within the Device. You don’t get a fully open Tablet and you don’t get the latest Android versions the minute they are released (perhaps never).
  3. A very well made hardware Tablet with buggy software. The hardware is the best out of the 7″ Tablets (though not as good as iPad Mini). The software has been improved since launch and yet it’s still buggy.
  4. A $149 Tablet that is worth more. A lot more if you consider the hardware quality and the addition of the Google Play Store.
  5. A Tablet that is family oriented. In particular, it’s aimed at mothers with young kids. The rest of this Nook HD Review will give you a good idea of whether it meets your needs or not. However, please keep in mind that any future software improvements (if they happen) will be tailored to this target demographic. The B&N App Store focuses on family friendly apps and kids apps. You will have to rely on Google Play for everything else.

Here are the Things Nook HD is Particularly Good for

An Important Caveat: If you have weak eyesight then you really should consider Nook HD+. It’s on sale for just $179 (a mere $30 more than Nook HD) and offers a 9″ screen.

  1. Reading Books. Nook HD is great for reading books.
  2. Watching Movies. Nook HD supports 720p videos and is great for movies and TV shows. It’s also great for Netflix although there are a few cases of Netflix not working. Now that there’s Google Play Store this issue should be fixed. However, check your device in the store you buy it from before leaving.
  3. Games & Apps. There’s a fast processor, enough RAM, a brilliant screen, and a light, easy to hold device. Games and Apps work well. You get Google Play and you get B&N’s smaller but well-curated store. Please Note: You will not get Apple iPad Apps and the Apps will not be as good as Apple iPad Apps. Amazon’s App Store and its Free App of the Day are also not available.
  4. Comics. Nook HD is great for comics. The high screen resolution and wide range of apps (thanks to Google Play) allows for a good comic reading experience. Nook Store has lots of comics and graphic novels and manga. Please Note: The 7″ screen means you can’t fit comics in page by page. You’ll have to read panel by panel.
  5. Google Apps. Now all the Google Apps like Gmail and Google Maps and YouTube are included.
  6. EMail – I’m not sure since Google Play is still new. The Nook HD EMail program was decent but not super. Now it’ll have Google Mail so if you’re on Google Mail then it should be very good. For other providers it works fine. However, there are sometimes problems with Yahoo Mail and with some of the smaller regional providers. On the whole, the in-built EMail works well, but not super well.
  7. Facebook – Not sure. Users seem to run into lots of problems when using Facebook via the browser. Now with Google Play there will be, I’m assuming, the Android Facebook App.
  8. Web Surfing. Nook HD is very good for web surfing. A large range of browsers. Higher screen resolution means you can see more of the webpage. Please Note: As stated earlier, if you have weak vision, the 7″ screen won’t work well. Get the Nook HD+ for $179 instead.
  9. What Else? Let me know what other use cases you’re considering and I can add details.

Nook HD is not a full-fledged ‘can be used for anything’ Tablet. However, it does do quite a few things very well.

Nook HD Review – What the Nook HD isn’t, what it’s not good for

What the Nook HD isn’t -

  1. It’s not an iPad. You can’t access iPad Apps. You can’t access Apple Store content.
  2. It’s not a ‘pure’ Google Device. What does that mean? It means you won’t get new versions of Android the minute they are launched. In fact, the OS might never be updated beyond the current Android 4.0.
  3. It’s not an ‘Amazon device’. Yes, you can get Kindle for Android (via the Google Play Store) and read Kindle Books. However, to support Amazon Instant Videos you’ll have to buy a $3 Browser (Puffin) and that support might end if Puffin stops supporting Amazon Instant Videos. You won’t get the same benefits as you would from buying a Kindle Fire.
  4. It’s not a large screen reading Tablet. This might come as a surprise to you – 10″ screens are MUCH better for reading PDFs, Magazines, Newspapers, and Web Surfing. Doubly true if you have weak eyesight.
  5. It’s not super smooth and free of errors. The software is a weakness, perhaps the only major one. The software is a real weakness.

What the Nook HD isn’t Particularly Suited for

Translation: Don’t buy it for any of these purposes. It won’t work and you’ll just be frustrated. Plus there will not be a Magical Fix in the future that’ll solve these issues.

  1. Consuming things you bought from Apple. Just won’t work.
  2. Consuming things you bought from Amazon. Won’t work well. Lots of hoops to jump through to get things to work.
  3. ‘Open Everything’ and ‘Load Anything’. This isn’t open Android. It’s a closed ecosystem that allows Google Play Store and Google Apps.
  4. Free Books. Kindle is best for that. Amazon gets exclusive contracts with authors in return for letting them give away books for free. B&N gets perhaps 20-50 free books a week from Publishers and Indie Authors and Smaller Publishers. Amazon gets hundreds a day.
  5. PDFs. Just don’t work well.

I’ll have to think more about this. There are quite a few other things Nook HD isn’t suited for. The biggest mistake prospective Nook HD owners make is assuming Nook HD is ‘iPad for $149′ or a Windows PC in Tablet Size. It’s neither of those things.

Nook HD Review – Top 10 Pros for Nook HD

Here are the Top 10 Strengths of the Nook HD -

  1. Very well made Hardware. Solid. Beautiful. Light. Compact. Highest resolution screen of any 7″ Tablet. I’ve had a Nook Color for 2+ years and it’s almost as good as new. Nook HD has a similar ‘well made hardware that will last’ feel to it.
  2. Google Play + B&N Ecosystem. Want lots of free apps? You have Google Play. Want a curated app store with safe apps? You have Nook App Store. Want books from Kindle, Kobo, Google? You have Google Play Store. Want books from Nook? You have B&N Store. You get both the ‘Free and Open and Advertising Focused’ Google Play Store and the ‘Paid and Curation Focused’ B&N Store.
  3. Incredible Price. Incredible Value for Money. Nook HD at $149 is a must-buy if A) You’re in the market for a Tablet, and B) Your needs are met by what Nook HD provides, and C) You don’t have a strong connection to another ecosystem like Amazon or Apple. Nook HD is not only the best 7″ Android Tablet, it’s also one of the cheapest. You get a lot for your money.
  4. Brilliant Screen. Nook HD’s screen has 1440 by 900 screen resolution and can handle 720p Video. It has 243 pixels per inch pixel density – that’s almost iPad Retina Screen level quality. It’s the best 7″ Tablet for watching movies, displaying photos and reading magazines.
  5. B&N Stores & Store Staff. Nook Store Support is great with great Staff. If you have a B&N store nearby you’re in luck. Great Support. Special BOGO offers on ebooks if you go into store (started 2 weeks ago). The ability to browse any ebook for 1 hour (1 hour maximum in a 24 hour period) if you go into a B&N Store.
  6. Light, Compact, Portable, Pretty. Nook HD is more compact (7.65″ by 5″ by 0.43″), lighter (11.1 ounces), and better looking than most other 7″ Tablets (including Kindle Fire HD). It’s easy to fit into a purse or bag and easy to carry around.
  7. Profiles Feature in Nook HD. You can set user profiles and set an age for each profile – only content rated for that age will be shown. You can enable/disable different features and apps and content for each profile. Profiles are a very useful feature, especially if you have kids or family you want to share your Nook HD with. Please Note: It’s not fully baked. However, it should cover 90% of your use cases.
  8. Google Apps are included. If you’re invested in the Google ecosystem (Gmail, Google Maps, YouTube), then Nook HD becomes a great choice.
  9. SD Card. This is a big advantage over most other 7″ Tablets like Kindle Fire. With the SD Card you can greatly expand storage capacity.
  10. Lots of great features for Kids. If you’re a parent then Nook HD (especially at the current $149 sale price) is a great choice. You can set up Child Profiles, there are ‘Read to Me’ books, there are lots of Apps for Kids in the Nook Store.
  11. Bonus: No Annoying Ads. Also, the Recommended Books feature is less intrusive than on Kindle Fire HD.

A few more strengths -

  1. Scrapbooking Feature & Catalogs. Scrapbooking doesn’t work on all magazines. However, for the magazines it works with, it’s a very fun feature to have. Catalogs are nice to have too.
  2. HDMI out (cable sold separately) lets you watch movies bought from Nook Videos Store or from Google Play on your HDTV.
  3. Power Adapter is included. B&N won’t Nickel & Dime you.
  4. Very comfortable in your hand. Nook Tablets are all very comfortable to hold. Nook HD, due to its compactness and lightness, is perhaps the most comfortable Tablet to hold. Also, no large, ugly bezel around the device like Kindle Fire HD has.
  5. Lots of options for browsers. There’s Chrome by default but you can switch to any browser available in Google Play Store or Nook App Store.
  6. Two Stores. Want Ad-supported Apps? Use Google Play. Want Ad-free Apps? Get the App from Nook App Store.
  7. Two color choices for Nook HD hardware – Snow (White) or Smoke (Charcoal Grey/Black).

From these lists it should be clear that Nook HD is a very strong, very capable little Tablet. If you ensure Nook HD covers your main 3 to 5 Tablet use cases (what you need and/or want to use a Tablet for), you’ll be happy with it.

Nook HD Review – Top 10 Cons for Nook HD

Here are the Top 10 Weaknesses of the Nook HD -

  1. Software Issues Part 1. The Android Skin B&N has added on top of Android 4.0 is buggy. While it adds some good features like User Profiles, it also has lots of bugs.
  2. Software Issues Part 2. The combination of Google Play Store and Google Apps running alongside Nook Apps doesn’t work perfectly all the time. There are lots of small niggling things.
  3. Software Issues Part 3. You might be stuck on Android 4.0. B&N is rumored to leave the Tablet Space around April 2014. Its move of dropping prices massively and adding Google Play supports this rumor. The problem is that you will not get software updates beyond that point. Perhaps they’ll stop earlier. So, to be on the safe side, assume that Android 4.0 is the Android version you’ll be on forever. Forever = for the life of your Nook HD. Might not be an issue now. What about in 1 year? Furthermore, B&N tends to break things when it does updates.
  4. If B&N sells Nook Media to Microsoft or someone else, you might be lost in terms of finding support. The whole ‘great B&N Store support’ might be gone. Support in general might be reduced greatly.
  5. Phone Support and Live Chat Support are bad. Nook Store support is amazing. However, by all accounts, the phone support is terrible. If you don’t have a B&N store within driving distance, you might have a hard time solving issues you have with your Nook.
  6. Nook HD Speakers are not as good as Kindle Fire HD speakers. Kindle Fire HD has the best speakers of ANY Tablet. Nook HD speakers aren’t as good and are not very loud.
  7. Nook HD is built on Android but it’s not Android. What that means is – If you love Android Openness you’ll go nuts on the Nook HD. Just trust me on this. If you are an ‘Android’ person, don’t get it. It’s B&N’s Closed Nook ecosystem + Google Play Store. That’s it. It’s not an ‘open Android Tablet’ you can tinker with.

Truthfully, there aren’t really 10 big cons against the Nook HD. You could even take the first 3 Cons and distill them into 2 Cons (buggy software, might be stuck on Android 4.0). Nook HD is a very good device. Software is its only real Achilles heel.

Additional concerns -

  1. WiFi support is spotty. WiFi doesn’t work well with 802.11 n. WiFi doesn’t work well with dual bands.
  2. Speakers are good but not best in class (Kindle Fire HD has better speakers). If you’re an audiophile then get a Kindle Fire HD – the difference is clear. If you don’t need audio to be super great, then Nook HD is great.
  3. Proprietary Charging Cable.
  4. No easy way to get Amazon’s Kindle Fire App Store on Nook HD.
  5. Sideloading is disabled. You can sideload via ADB or you can root. However, you can’t just simply sideload an App.

While there are not that many cons, the ones that do exist are very definite problems. If you can’t handle software that is buggy and sometimes sluggish, or if you are wedded to one of the other ecosystems (Amazon, Apple), or if you are in love with openness and tinkering and software freedoms, then Nook HD is most definitely not the right choice for you.

Nook HD Review – How does it stack up against Kindle Fire HD?

I’ll do a separate detailed Kindle Fire HD vs Nook HD post. The short version is that you should NOT get Nook HD (instead get Kindle Fire HD) if one or more of the following are true -

  1. You’re wedded to the Amazon ecosystem.
  2. You’re an Amazon customer and trust them a lot.
  3. You aren’t willing to go into a store for support. Remember, phone support for Nook is spotty.
  4. You need to have the best speakers.
  5. You want a company that is going to stick around in Tablets for longer than the next one year.
  6. You don’t care about Google Play Store and lots of apps and just want an easy to use Tablet. Note: If you don’t need Google Play Store, then having it just introduces complications such as all the Google Apps running all the time and eating up battery life.

Nook HD was the better Tablet. With the addition of Google Play it’s no longer a close contest. However, your best option might be Kindle Fire HD. Just go over the cons of the Nook HD and consider the above list.

To beat Nook HD, Kindle Fire HD’s price would have to drop to $139 to $149.

Nook HD Review – How does it stack up against iPad Mini?

I don’t own an iPad Mini, so this section isn’t worth much. The following thoughts are based on iPad Mini articles and specifications.

The short version of Nook HD vs iPad Mini is -

  1. If you can afford the iPad Mini, get it.
  2. If you can’t afford the iPad Mini, then stop expecting that Nook HD or Kindle Fire HD will give you the same experience. They won’t. Better to be realistic now than to be disappointed after you’ve already invested money in an Android Tablet.

Just to be precise – iPad Mini beats the other Tablets in nearly every criteria that matters. iPad Mini is far superior on hardware quality, software quality, quality of apps, ease of use, range of tablet optimized apps, and smoothness. The few areas Nook HD and Kindle Fire HD beat iPad Mini include – price, better screen, better audio (Kindle Fire HD), more compact (Nook HD), user profiles.

If you care about hard to measure things like ‘openness’ and ‘saving baby pandas’, then you could come up with a lot of reasons to claim some other tablet is better. However, the truth is that iPad and iPad Mini are the best tablets. If you can’t afford them then you can’t get that same high quality experience.

The one exception: If you’re looking for a Tablet for Creators (and not Consumers). Then a keyboard equipped tablet like Surface Pro is better than iPad.

Nook HD Review – How does it stack up against Google Nexus 7?

Nook HD vs Nexus 7 will also be a separate post. The short version is -

  1. Nexus 7 was the weakest out of Kindle Fire HD, Nook HD, and Nexus 7.
  2. If you’re a ‘Google’ person then, for some strange reason, you can’t see this. Then Nexus 7 is best for you.
  3. If you’re not a ‘Google’ person, then it’s a no-brainer. Get Kindle Fire HD if you don’t care about Google Play Store. Get Nook HD if you care about Google Play Store.

Google’s Nexus 7 is just a tablet made by Asus and branded ‘Google’. So it doesn’t even make sense to assume it’s some special Google Tablet. It’s also pretty old. Far older than Kindle Fire HD and Nook HD. Makes no sense to buy a Tablet that is 6-7 months older than the competition. That’s half a generation.

Nook HD Review – How does it stack up against eInk Readers like Kindle Paperwhite and Nook GlowLight?

Firstly, if you’re comparing Nook HD against Kindle and Nook, you’re making a mistake. These are VERY different devices. The former is a Tablet that happens to be optimized somewhat for reading. It’s like a truck you drive to work because your car is in the garage. The latter are dedicated reading devices.

The short version of Nook HD vs Kindle Paperwhite vs Nook Glowlight -

  1. If you read a lot of books, just get a dedicated reading device. It’s not close when it comes to reading. eInk Readers are the best devices for reading. Strange as it might sound, a device optimized in every way for reading does happen to be better for reading than one that isn’t.
  2. If you are going to read 80% of the time on your Tablet, then get an eReader instead (or in addition to) of a Tablet.
  3. If you are not going to read much, or if you want a device that ‘also lets you read’ (versus a device that ‘focuses on reading’), then a Tablet is the better choice.

Prices of dedicated eReaders are really low now. If you love to read, you owe it to yourself to get a dedicated reading device like the Kindle Paperwhite and actually read.

Nook HD Review – What about the new Tablets? What about iPad Mini Retina Display?

Expected Release Dates are -

  1. June or July – cheaper Nexus 7. May or may not be a newer model.
  2. July to September – New iPad Mini. May or may not be Retina iPad Mini.
  3. October to November – Kindle Fire HD 2.
  4. Nook HD 2? Perhaps Not.
  5. 7″ Windows 8 Tablets – July to September time range.
  6. B&N Windows 8 Tablet – Perhaps. Perhaps in September or October.

I’m really not sure if and when these tablets will arrive. Quite frankly, it might make sense to wait and see what the Windows 8 Tablets are like. For the rest – No. Because then you will just end up waiting another 3 months and another 6 months. Before you know it you’ll be 121 years old and wondering whether the Microsoft Teleporter Tablet 2.0 is better than the Amazon Gratification Delaying Tablet 3.1.

Nook HD Review – The Conclusion

Nook HD is, without a doubt, the absolute best value for money in the 7″ Tablet market. At $199 it was a steal. At $149 Nook HD is a no-brainer PROVIDED it is what you’re looking for in a Tablet.

In my opinion, Nook HD is better than – Kindle Fire HD, Surface RT (yes), and Nexus 7 PROVIDED you are looking for a Tablet that does well what the Nook HD does well (reading books, watching movies, displaying photos, web surfing, email, Netflix, comics, apps, games).

  1. Nook HD is a very good Tablet for reading books and surfing the Internet and for mobility and portability.
  2. Nook HD is not a good Tablet for PDFs and Magazines (screen size is too small).
  3. Nook HD is not a good Tablet if you want the Apple experience or the Kindle/Amazon experience. This is important. You can get the Kindle Reading App on it and you can use Puffin Browser to watch Amazon Instant Videos. However, large parts of the Amazon experience will be missing.
  4. With the addition of Google Play Store, Nook HD is excellent for games and apps. Nook App Store also has some good games.

Quite simply, Nook HD is the Best 7″ Tablet around. It also happens to be one of the cheapest 7″ Tablets around. So, if you’re thinking about it, the Nook HD Mother’s Day sale price of $149 is well worth considering.

Microsoft to buy Nook for $1 Billion? Microsoft vs Amazon in eBooks?

We get the rather interesting news from TechCrunch that Microsoft might buy Nook for $1 billion from Barnes & Noble. What is very refreshing is that TechCrunch seems to have gotten its hands on some internal documents. It includes a lot of reasonable sounding figures including Nook device sales figures.

If this ‘Microsoft buys Nook, takes on Amazon’ thing ends up being a rumor, it’s at least an intelligently conceived one.

  1. Key: Microsoft is offering $1 Billion for Nook Media LLC. Nook Media LLC is the B&N spin-off that encompasses Nook Tablets, Nook eReaders, and Nook eBook Sales.
  2. Key: Nook Media plans to discontinue its Nook Android Tablets at the end of its 2014 Fiscal year. That would be April 30th, 2014 – just 1 year away.
  3. Nook Media will focus on selling Nook content through apps on ‘3rd party devices’. What these ‘3rd party devices’ are, isn’t specified. However, these 3rd party tablets are due to get introduced in 2014. My Guess: Either Nook will sell through Windows 8 Tablets and iPads OR Nook is handing off device manufacture to someone else (like Google has handed off Nexus 7 tablet manufacture to Asus).
  4. Nook eInk Readers will continue. Supposedly until every person in the world has left eInk for LCD.
  5. For Context: Microsoft already owns 17% or 18% of Nook Media. It had invested $300 million and had promised $300 million more in return for this 18%. Pearson has also invested in Nook Media.
  6. TechCrunch claims Microsoft promised an additional $180 million to B&N in return for B&N developing content for its Windows 8 devices. This seems rather strange given that B&N would perhaps want to make Nook Apps for Windows 8 for free. Unless they are crazy and don’t want to sell ebooks to Windows 8 owners. Why promise $180 million?

All of this seems in-line with the recent behavior of B&N i.e. opening up Nook HD and HD+ to Google Play; offering $50 off Nook HD and $90 off Nook HD+.

B&N seems set to put the Nook HD and HD+ and the entire Nook Tablet line to death.

Is Nook really 10 million devices sold and $1.215 billion in revenue?

There are some very interesting claims about the Nook business itself -

  1. 10 million Nook Tablets and eReaders sold. That’s what TechCrunch claims.
  2. 10 million seems a bit low. That suggests perhaps 5.5 million Tablets and 4.5 million eReaders. Which might mean B&N has a smaller share of the eReader market than is generally assumed (people assume 20% to 25%). OR It might mean that Amazon’s Kindle sales aren’t as high as everyone thinks (15 million to 20 million or more).
  3. TechCrunch says it has an internal document which shows B&N’s Nook unit brought in $1.215 billion in revenue in fiscal year 2012 (B&N’s fiscal year ends April 30th).
  4. The internal document says B&N expects $1.091 billion in fiscal year 2013 and expects Tablets to be phased out.
  5. B&N’s future projections are interesting. It thinks Nook will earn $1.976 billion in revenue in fiscal year 2017. This is despite ending Tablet sales and having only Reading Apps. Talk about being optimistic.

Basically, B&N has a billion dollar a year business and, within that business, the Hardware Tablets are failing in a big way. The rumor/data from TechCrunch certainly matches my read of B&N’s behavior over the last year and a half. B&N has a good ebook business but is floundering with the Nook HD and HD+.

Why Microsoft wants to buy Nook. Should B&N sell Nook?

For Microsoft this makes a ton of sense -

  1. It gets to add another $1 billion dollar a year business to its lineup. It can leverage Windows and Outlook and Skype and Bing Search and Office. It can strengthen Nook ebook sales considerably. It can add sales of business books and textbooks. It can really do some damage.
  2. It’s buying low. It is, in effect, buying 15% to 20% of the US eBook market. $1 billion for what might turn into a $1 to $2 billion revenue a year business for decades. That’s a really good deal.
  3. eBooks are a very high margin business. The costs to host and send out ebooks are really low. People are paying $5 to $10 for ebooks and much more for business books and textbooks.

Should B&N sell?

Reasons not to sell -

  1. They have all these customers who’re buying ebooks from them for pretty high prices. If you’re selling a $5 to $10 ebook there are very high margins. No stores to run. No shipping. No returns.
  2. They are expanding to selling movies. Another high margin business.
  3. They can focus on making really, really good Reading Apps and expand market share via that.
  4. They can buy up some well done Reading Apps and Reading related Apps like Pocket and Read It Later and Instapaper and get more customers.
  5. They haven’t really given ‘making the absolute best reading app on every platform’ a shot. Can you imagine the quality of software if they focused all their Nook Tablet efforts on software (albeit with developers who are really really good).

This isn’t a good strategy in the long term. Because the ecosystem owners will tax their profits. However, it’s good for the mid-term and will help them increase their valuation from $1 billion to the $3 to $5 billion range.

Reasons B&N should sell -

  1. $1 billion is $1 billion. Think of it this way – B&N losses last year were $69 million. A $1 billion cash infusion and the cutting away of a business that lost $200 million+ last year means B&N would get another 10-15 years to sort out its bookstore and college bookstore businesses. 10 to 15 years might be enough for B&N to strength and reinvent itself.
  2. Nook division might do worse. Windows 8 Tablets and Android Tablets and the newer iPad Mini might greatly reduce sales of Kindle Fires and Nook Tablets. There might be some amazing new reading app that steals away users. Amazon could kill Nook on ebook prices.
  3. Microsoft would be a strong, strong competitor for Amazon. That would mean Amazon has less time to focus on B&N. B&N can focus on its stores in relative peace. Let’s be honest – A Business with no real competitor (physical book stores) is better than one where you have Amazon, Google, Apple fighting you.

Overall, I think B&N should either sell Nook and cut itself away totally from Nook hardware and apps. Or it should hold on for 1 year and see if it can get to 30% to 35% market share in eBooks in the US.

The more I think about it the more the option of selling seems like a splendid idea. $1 billion would give B&N 10 years (perhaps even 15) to sort out its stores.

If Microsoft buys Nook, Microsoft vs Amazon will be Fun to watch

Microsoft and Amazon are already competing in the Cloud Space. Amazon’s AWS is the runaway leader with a rumored $2.4 billion a year in revenues. Microsoft’s Azure is rumored to be a $1 billion a year business already and there doesn’t seem to be any other Cloud based company that’s close (perhaps VMWare and RackSpace). That might mean Amazon is #1 and Microsoft is #2 in Cloud Computing.

Microsoft buys Nook and suddenly we get Amazon #1 and Microsoft #2 in eBooks.

The big difference between ‘Microsoft at #2′ and ‘B&N at #2′ is that Microsoft has $2 billion a month in profits (mostly from Office, Windows, Server Tools divisions) which it can use to really compete. It also has an incredible amount of money ($121.2 billion in net assets).

eBooks are a very malleable and flexible business. It’s even more in the ether than Cloud Computing. Cloud Computing there are actual servers being sold (as a service). eBooks are just words – bits floating around in the clouds. Microsoft might be one of the best companies in the world in terms of making money from software and digital products. It can bring international into play. It can bring a lot of weapons into play if it enters the eBook Wars.

Microsoft also benefits in that it will enrich its ecosystem by adding Nook eBooks. Microsoft’s ecosystem, in turn, can really enhance Nook ebook sales.

If B&N doesn’t sell. If B&N switches to eBooks and Apps only – What then?

This is a little hard to conceive.

B&N wants out. It wants to stop selling hardware.

Does it really want to just be an eReading App maker? That’s so far away from its roots of having stores and selling books. At least with devices it was making something physical and the devices were like little B&N Stores.

Becoming an eReader App maker would be like B&N renting a stall within WalMart and selling ebooks. No control. No glory. No long-term future.

B&N might stick to selling Nook eBooks. It might ship out Nook Reading Apps and try and grab and keep a decent share of the ebook market. If it does, then my guess would be that it fails quite quickly.

Without devices you don’t have any captive audience. Furthermore, B&N can’t really compete on software. B&N has shown it can make beautiful hardware. However, its software has always been poor and rushed to market. Dropping what it can do well (hardware), and focusing on what has been its main weakness (software) and perhaps the reason Nook hardware failed, would be a strange and suicidal move.

B&N is perhaps good at – Selling Books and Things in Stores. Making Beautiful Hardware. Selling in the US. Selling to its existing customers.

It seems to be miserable at – Making Software. International Expansion. eReader Apps.

If it’s going to end Nook devices, then perhaps it should shift back to its core competencies – Stores, Existing Customers, the US.

In that case, it can hand off the parts that it does not do well (software, international) to Microsoft. Rather conveniently, those happen to be part of Microsoft’s core competency. Software, Software Distribution, International, Marketing are all Microsoft strengths.

If ‘Amazon vs B&N for the future of books’ morphs into ‘Amazon vs Microsoft for the future of books’, we might see some really incredible and exciting eBook Wars. Strategies and Scale that recapture the spirit of the Robber Barons from the Gilded Age. Amazon, a company always dying to lose money from its future profits, taking on Microsoft, a company always dying to lose money out of its ongoing profits. The prize would be a rich profit stream from ebook and etextbook sales. A profit stream that might end up being $5 billion to $20 billion a year worldwide. How many companies really have the resources to even fight for such a huge profit stream? Just Apple, Microsoft, Amazon, and Google.

Amazon vs Microsoft in the eBook Wars – Things are about to get very exciting.

Why did Nook HD & HD+ get Google Play AND $50 & $90 discounts?

Nook HD and HD+ were $199 and $269 at launch. They came with B&N’s closed ecosystem.

Today, approximately 6.5 months later, Nook HD and HD+ are $149 and $179 (a week-long Mother’s Day discount). They now have Google Play in addition to Nook’s Video Store and Book Store and App Store.

The magnitude of the change is stunning -

  1. Nook HD price drop is a massive 25%. $199 was already a very competitive price. $149 is just highway robbery for a 7″ Tablet with 1440 by 900 screen resolution. Nook HD is arguably better than Kindle Fire HD (now that Nook HD has Google Play Store). That’s why Amazon’s been forced to offer a $20 discount on Kindle Fire HD (making it $179).
  2. Nook HD+ price drop is an even more massive 33.46%. $179 for a 9″ Tablet with 1920 by 1280 display (256 pixels per inch pixel density) is slightly crazy. I have the Nook HD+ (and the Nook HD too) and I can assure you $179 is an INCREDIBLE price for this device. Even without Google Play Store it would be incredible. Google Nexus 10 is $399. Kindle Fire HD 8.9″ is $299.
  3. Nook HD+ is now the same price as the recently discounted Kindle Fire HD. A 9″ Tablet for the same price as a 7″ one? B&N is not just undercutting iPad, it’s now even massively undercutting Kindle Fire HD 8.9″.
  4. Google Play means you can get Kindle for Android and buy books from Kindle Store … on a Nook. Same for Kobo Store and Google Books. B&N is literally giving away its ebook revenues from Nook HD and HD+ sales.
  5. Google Play means you can get movies and apps from Google Play. Again, B&N is giving away all the revenues it could earn from movies and apps.
  6. Given that Nook HD at $199 and Nook HD+ at $269 were presumably (and this is an assumption) not much higher than cost, the new prices might be (another assumption) LOWER than what it costs B&N to make and deliver them to customers (there’s free shipping too).

There must be some BIG reason that B&N has suddenly gone crazy with its prices and completely opened up its Walled Garden.

Why did Nook HD and HD+ get Google Play AND also get $50 & $90 discounts?

To understand this we have to look back at what happened with Nook Color and Nook Tablet.

  1. B&N introduced the Nook Color when the iPad was riding high. Nook Color, inadvertently, helped create a BIG market for 7″ Tablets. The Nook Color wasn’t even aiming to be a Tablet. It was just aiming to be a Reading Tablet. However, people pounced on the opportunity to get a reasonably functional Tablet for $199 to $249.
  2. This led to really crazy sales for Nook Color. As high as 700,000 Nook Colors a month were being sold during Holiday Season of 2010. Analyst estimates (these are the only data points we have apart from the 700,000 a month figure) suggest that 5 million Nook Colors have been sold so far. My guesstimate would put the range at 3 million to 5 million.
  3. Nook Tablet arrived a year later. It wasn’t able to do as well because there was loads of competition by then, including Kindle Fire. However, it is estimated by analysts to have sold 5 million units. My guesstimate would be a range of 2.5 to 4.5 million units.
  4. That would suggest total Nook Tablet Device sales of 5.5 to 9.5 million units. That’s quite an achievement for a bookseller transitioning into Tablets and Electronic Devices. It’s also 5.5 to 9.5 million devices added on to Nook eReader Sales.
  5. With that sales history, and given how good the Nook HD and HD+ hardware is, it’s not hard to believe that B&N ordered 3 million Nook HDs and 2 million Nook HD+s for Holiday Season 2012 and early 2013.

The conclusion we’re arriving at is that B&N assumed that Nook HD and HD+ would be hits like Nook Color. It assumed that Nook HD and HD+ would at least sell decently (like Nook Tablet did). Thus, B&N ended up with 5 million Nook HD and HD+ devices.

There were a few things that B&N hadn’t anticipated or accounted for.

What derailed B&N’s Nook HD and HD+ Sales?

Well, lots of things -

  1. iPad Mini came in at $329 and really hurt Android Tablets.
  2. Kindle Fire came in with aggressively priced, aggressively marketed, well-made Tablets and took a large chunk of Android Tablet sales in Holiday Quarter 2012.
  3. Nexus 7 was a solid option and since it is ‘pure Android’ (regardless of how aesthetically unappealing that might be), it sold well.
  4. B&N was left with very little of the market. And, it compounded its misery by shipping Alpha level software.
  5. Nook HD and HD+ software was buggy and sluggish. This led to a huge drop in word of mouth marketing and general gifting. So, even among core B&N customers, very few had compelling reasons to upgrade.
  6. Nook Color and Nook Tablet are very, very solid devices. They aren’t really devices that need to be updated every year or even every two years. A lot of existing B&N customers had no reason to upgrade devices.
  7. B&N switched to Android 4.0 and added a new skin and new features. This sounds good in practice. In reality it meant that B&N replaced a well-tested OS skin (polished over 2 years) with a brand new skin that didn’t work and was sluggish. Android 4.0 has its own problems.

Basically, B&N made devices for the 2010 Winter, 2011 Spring market and launched them in Winter 2012. I don’t mean the devices were bad. Just that the devices were made and sold assuming the competitive environment of 1.75 to 2 years ago.

Additionally, no one (not even Apple) was prepared for just how much people would prefer an iPad Mini over other Tablets.

What could B&N do with its 5 million Nook HDs and Nook HD+s?

B&N perhaps sold half a million Nook HDs and HD+s in the past 6.5 months. Perhaps as few as 350,000. Perhaps as many as 1 million.

That means it’s left with 4 to 4.5 million Nook HDs and Nook HD+s. That’s between $1 billion and $1.5 billion of unsold hardware.

This year we’ll be seeing a new iPad Mini, perhaps even an iPad Mini Retina. There are rumors of $100 and $150 Nexus 7s. Amazon is expanding worldwide and will have economies of scale and that almost certainly means a drop in Kindle Fire prices. There will be new Android Tablets. There will be new Windows 8 Tablets.

B&N is in a MASSIVE bind. Stuck in a nook with no way out.

It only has two options -

  1. Figure out some magical way to sell 4 to 4.5 million Nook HDs and Nook HD+s in the next 3 to 6 months. Sell them before all the new Tablets arrive.
  2. Take a loss of $700 million to $1 billion on unsold and/or heavily discounted Nook HDs and Nook HD+s.

B&N perhaps decided on the former and is trying to work magic by doing two things -

  1. Opening up the Nook HD and Nook HD+ to Google Play and thus making it more appealing as an ‘Android’ Tablet. This is working. Lots of tech blogs are now calling Nook HD and Nook HD+ the best Android Tablets.
  2. Offering Discounts that are large enough to make the devices very appealing, while still keeping losses low. I’d assume B&N’s cost to make the devices is $149 for Nook HD and $199 for Nook HD+.

Basically, B&N is saying -

  1. Rather than take a loss of $700 million to $1 billion on unsold and/or massively discounted Nook HDs and Nook HD+s.
  2. Rather than hoping that content sales will offset that somehow, over the next 3-4 years.
  3. Let’s just add Google Play and offer big discounts (but not discounts so big that there are huge losses). Perhaps we lose $200 million and lose 50% of future content sales. However, at least we won’t lose $1 billion and blow up the Nook Media spin-off.

It really is about keeping Nook Media alive.

Are Things Really that Bad?

Here’s what I can tell you based on sales and discounts Amazon and B&N have offered so far. This is all ‘guesstimates’ and reading the tea leaves, so take it with a ton of salt.

  1. iPad Mini is just annihilating Kindle Fire HD 8.9″ and Nook HD+ sales. The latter two Tablets have sales every few weeks (in the case of Nook HD+, every week).
  2. Kindle Fire HD seems to be selling decently. The Mother’s Day discount suggests Amazon is, and rightly so, wary of the Nook HD $50 discount.
  3. Nook HD seems to not be selling well. Lots of discounts and offers (every 3-4 weeks). It seems to be selling better than Nook HD+, but not well.
  4. iPad Mini seems to be affecting iPad sales too. Apple’s Profit Margins clearly hint at this.
  5. Nook HD and Nook HD+ need some massive sales boost. Else, B&N will be left with 3 to 3.5 million devices that will have to be written off, or will have to be sold at $100 each. In fact, my prediction would be that Nook HD and HD+ will be selling for $100 each by end of 2013. Why? Because there might still be 1 million or more of them left – even after this massive dual sales promotion of adding Google Play Store and cutting prices by $50 and $90.

The moves we see B&N make, are smart ones given the terrible bind they’re in. Wonder what they were thinking when they placed hardware orders for Nook HD and HD+. Perhaps they assumed that beautiful hardware would be enough. That really badly written software wouldn’t cause problems. Perhaps they didn’t plan for iPad Mini. Perhaps they didn’t expect that Kindle Fire, which had been running neck to neck in sales with Nook Tablet, would sprint so far ahead.

B&N just made a bad bet. And now it’s stuck and looking for a way out.

Is there hope for Nook Media? For B&N?

Yes.

B&N’s Nook Media spin-off can do one or more of the following -

  1. Focus on providing the best reading apps. This is a weak strategy in the long-term but decent in the short-term.
  2. Focus on Windows 8 based Tablets. This is weak in the short-term but strong in the long-term.
  3. Focus on making ‘pure’ Android Tablets. This is counter-intuitive. However, making better hardware than Google is an easy challenge. Take on iPad in the Closed Ecosystem Market? Take on Google in the Open Ecosystem market? The latter is a far easier battle to win.

Keep in mind that Nook Media is still making money from ebook sales. It still has between 5.5 and 9.5 million Nook Tablet and Nook Color users. It still has between 3 and 6 million Nook eInk Reader users. It still has apps for iPad. It still has apps for Windows and Mac.

B&N and Nook Media are in a much stronger position than people assume. Yes, their team struck out all three batters in the 3rd innings. Yet, there are still 6 innings left to play and their team is only down by 2 runs.

Nook HD & HD+ get Google Play – How will Amazon respond?

In a pretty shocking move, Barnes and Noble have embraced Google and Google Play. Nook HD and Nook HD+ will get Google Play on Friday.

That includes -

  1. 700,000 Apps. Although just a fraction are optimized for tablets.
  2. Google Apps.
  3. Google Books.
  4. Google Movie Store.
  5. All the other Google stuff like Google Maps and Google Mail.

This is a pretty big, pretty crazy move.

Why B&N letting Google Play into its closed ecosystem is a Big Deal

It’s a big deal for a few reasons -

  1. B&N had resisted adding Google Play for a long, long time. This is understandable since sales through Google Books, Google Movies etc. are sales lost by B&N. Now, perhaps motivated by rapidly declining Nook HD and Nook HD+ sales, it’s opened up Google Play for these devices to boost device sales.
  2. B&N had built its own app store and had 10,000 Apps optimized for Nook devices. There was a constant cry from Nook owners for Google Play access but B&N had refused, until now, to respond. Why the sudden change?
  3. This gives B&N’s Nook HD and HD+ some very important advantages over Kindle Fire – Now Kindle App works on B&N’s Nook, now B&N has its own 10,000 app Store plus the Google Play store’s 700,000 apps (which dwarfs Amazon App Store’s 50,000 to 60,000 apps), users get more choice and might prefer B&N’s devices for this reason, B&N gets Google Apps like GMail and Google Maps.
  4. This seems pretty much like suicide by B&N – it’s going to lose a LOT of book and movie sales to Google Play and to Amazon’s Kindle for Android App. It’s effectively opening up its closed ecosystem to all competitors.
  5. This adds a very well made set of Tablets to the Android ecosystem. Nook HD and HD+ had their own closed ecosystem. With the addition of Google Play the ecosystem is now suddenly wide open – making these Tablets effectively Android Tablets. It wouldn’t be an exaggeration to claim that Nook HD and HD+ become the best Android Tablets overnight.

In one fell swoop, B&N has made its ecosystem open, and gained a big advantage over Kindle Fire. It has also, in effect, signed off a portion of future book and movie sales.

How will Amazon respond?

Amazon has a few options -

  1. Ignore the move and keep building up its ecosystem and devices. This is what makes the most sense in the long term.
  2. Add Google Play itself. This would be a totally crazy move. Doubt Amazon would do this.
  3. Use price drops or other strategies to counter this move. This makes some sense in the short term but it isn’t a sustainable strategy.

The main problem for Amazon is that B&N has beautiful, cheap hardware. It now adds the Google Play store and gets a vast range of Android Apps. It also adds choice – users can get Amazon and Kobo and Google Books in addition to B&N books. There’s also the bonus of getting all the Google Apps like Maps and GMail.

Very interesting times.

How desperate is B&N to sell Nook HD and Nook HD+?

The most shocking thing is that B&N has just taken its carefully built up Walled Garden and torn away the walls. It obviously feels it can make more money from an open ecosystem with robust hardware sales than from a closed ecosystem with flagging hardware sales.

Perhaps it has a huge amount of unsold devices and is desperate to generate sales.

Nook HD and HD+ are definitely as good as Kindle Fire HD and HD 8.9″ in hardware terms (apart from sound). The addition of Google Play makes the devices more compelling to several sets of users.

This move smacks of either desperation or some very high-level planning and strategy.

Will this move pay off for B&N? How much will it hurt Amazon?

Over the long-term this move should pay off for B&N. If it sells 10 million Nook HD+s and Nook HDs in 2013 instead of 1 million – then it just has to get book sales and movie sales from 10% or more of those Nook device owners to make the same amount of money that it would have made from 1 million owners.

If we assume that Nook devices are selling at break even, this should be a reasonable compromise.

B&N might end up selling books and movies to 25% to 50% of Nook device owners. Google Books isn’t exactly very good. Kindle App will take lots of users but is unlikely to capture more than 20%. Most B&N users might stick with B&N. If we assume 50% of book sales go to B&N then B&N would see book sales from 5 million+ devices instead of 1 million devices.

It also saves B&N from the incredible pain of having 2-3 million unsold Nook HDs and Nook HD+s.

In terms of impact on Amazon, this might be a terrible blow. Perhaps that also played into B&N making such a bold move.

Kindle Fire was selling at approximately 3 times the rate of B&N’s Nook. At least that’s my rough understanding.

If Nook HD and HD+ have Google Play store (and thus Kindle Store access and Kobo Store access), then Nook HD and HD+ become very, very compelling devices. They also become good devices for existing Kindle owners to switch to (since Kindle for Android means Kindle owners can still read their books).

This move by B&N could cut Kindle Fire sales by 25% to 35%. Perhaps even more.

Closing Thoughts – B&N is going for broke and it might take Amazon with it

My assumption would be that this is going to lead to one of two scenarios -

  1. This greatly impacts Nook HD and HD+ sales (doubles or triples). It hurts Amazon sales significantly. Amazon faces a dilemma – either open up its closed ecosystem OR lose sales to the newly open Nook HD and HD+.
  2. This has some impact on Nook HD and HD+ sales, but not much. Perhaps just a 25% bump in sales. It doesn’t hurt Amazon much. Perhaps just a 15% drop in sales.

I suspect the former is more likely than the latter.

This also makes one wonder about the B&N and Microsoft connection. Whatever happened to the rumors that B&N was making 7″ Microsoft Windows 8 Tablets. Perhaps we’re in for a real double whammy – B&N focusing on Nook Android and Nook Windows 8 Tablets and B&N dropping its ecosystem entirely. So B&N would become a hardware maker and a digital products seller and would ride the dual ecosystems of Windows 8 and Android.

Of course, this might also mean that Nook HD and HD+ are the last two Nook Tablets that B&N makes. Will this hurt Kindle Fire sales enough to bring Kindle Fire down too. Let’s hope not.

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