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.

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.

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.