Barnes & Noble Gives Amazon E-Book Competition
In March of this year, when Barnes & Noble acquired e-book retailer Fictionwise
and its 60,000 e-book catalog, many wondered what position the company would
take in the battle for e-book reader sales. Now, B&N’s strategy is much clearer
as the company announced it was opening a store with 700,000 titles (500,000
free through a deal for public domain books with Google) that would operate
on a wide range of smartphones, computers and other electronic readers, as
opposed to Amazon’s Kindle-only strategy.
“Our
goal at Barnes & Noble is to build a service that revolves around
the customer, enabling them to have access to hundreds of thousands of
titles and read on their smartphone, PC, and many other existing and
future devices. We want to make eBooks simple, accessible, affordable
and convenient for everyone.” said
William Lynch, president of Barnes & Noble, in a press release.
“Instead
of just betting that one device will win, they are betting on the whole
category of digital reading,” Sarah Rotman Epps, a media analyst for
Forrester Research, told The
Associated Press.
Forrester
estimates that e-books make up less than two percent of book sales in
the U.S.
While
some may see Barnes & Noble’s move as a means
to grab share from Amazon, Ms. Rotman
Epps sees it another way. "I don’t think they will be stealing market
share,” she told The New York
Times in a separate interview.
"If anything I think they are contributing to the growth of the whole
category of digital reading."
Barnes & Noble
is looking to have 1 million titles in its e-library within a year. New
titles retail for $9.99.
Discussion
Questions: How will the Barnes & Noble’s move into e-books affect
the category? What do you think will be Amazon’s next move?
Content is king. Barnes & Noble has made a very good move here. Eventually consumers will want to carry around one gizmo to handle all their personal business, shopping, interests, connectivity, learning, vices, etc.
The e-book wars have started. But the issue that we should be focusing on is not how will this affect Amazon, but instead we need to look at what is going to happen to the publishers. Amazon and B&N have both set their price at $9.99 for a book. The publishers are unhappy with this pricing, and they want to have the freedom to set their own pricing. It comes back to the age-old question; Who Owns the Customer? In this case, the retailers feel they do, and they want to drive the price point.
We also have to keep in mind that B&N owns Sterling Publishing, their own publishing house. When all of Sterling books are turned into digital content, it provides them with a competitive advantage over Amazon. While Amazon has a few private label published books, the numbers are small.
This is going to be interesting.
Barnes & Noble had to move into the e-book business or they stood the chance of become more irrelevant. Amazon already offers more books (to say nothing of the plethora of other products) than B&N, an easier user interface and checkout, and their own reader, Kindle. B&N’s entry into e-books does not dramatically alter the field. It is a logical progression as content moves to digital formats. As to how many people would want to read a book on a mobile phone, we’ll have to wait and see.
Barnes & Noble sells books; they have to be in this segment no matter how small. I don’t think their presence at this stage of the game will make an impact on e-book usage, that’s a question of consumer acceptance of the e-book itself. It does make it easier for those that have them to access more titles at a better price. At 9.99 they’re the cheapest.
I am less concerned about what it means for the category, than what it means for stores. While it may be true that Barnes & Noble’s entry into the eBook category is not so much about stealing market share from Amazon, as the eBook category grows that share has to come from somewhere. The bookstores I’ve been in lately have been miserable places. And eBooks haven’t come close to impacting their business. But they see the writing on the wall, thanks to the music portion of their business, and seem helpless to do anything about it–not to stop it, but to adapt to it.
I think more challenging on the e-side is the pricing–almost every consumer of eBooks has to realize that overall eBooks cost less to make, because there are no physical production costs (we won’t discuss the infrastructure required to serve up a bunch of eBooks). The pricing I’ve seen is less relative to hardbound books, but not softbound–in fact, eBooks tend to be more expensive!
But compare to the music industry–any time there is a change in format of how music is stored, there has been a “personal catalog update” benefit. People who had tapes bought CDs of albums they already owned in order to have it in the CD format. People who did not want to sit through the tedious task of ripping all their CDs could buy digital albums–for much less than CDs. The book industry needs to be careful about their pricing, or they will not be encouraging people to digitize their libraries. A big slice of a small pie is not worth as much as a smaller slice of a big pie, in this case.
There is an interesting analogy here.
Regular readers are probably familiar with my aggravation over the US wireless business model vs. the European. In the US, your service provider and phone are bundled together whereas in Europe a cell phone is like buying a PC and you contract independently for your service provider.
It seems here, that Amazon is trying to emulate the US model while B&N is embracing the European model. Kudos to B&N. I understand why businesses want to bundle as many things as possible, because it locks in the consumer who doesn’t want the hassle of changing everything just to lower their service costs (remember when you couldn’t switch your phone number between service providers). Service providers regularly disable hardware features in handheld devices to prevent customers from bypassing their fee based services. This is why you often can’t copy files directly between your computer and your cell phone or load music from your PC to your ring tones.
If B&N can offer content to various platforms without restrictions, I believe they will have a huge winner. The key to this will be to make it simple to use. Apple has been a success because the iPod and Apple Store are closely integrated. Amazon can do this with the Kindle because they control both the distribution network and the hardware. By definition, B&N will be more loosely coupled to the user hardware. This will make them dependent on many different user interfaces for delivering the content. As long as B&N can ensure a good user experience, I believe they will have a real winner.
I agree with my fellow panelists: I’m not sure whether this move gives B&N a chance to overtake Amazon’s lead but it certainly helps them remain relevant. Digital delivery of music and movies has changed the landscape of traditional retailing in these categories, and book retailing is headed in the same direction. As devices become smaller and more powerful (think about the trend toward netbooks), B&N has a chance to capitalize on the trend without being tied to one specific “machine” like the Kindle. Good move!
This is a form of evolution and a very smart move. In today’s environment and rapid changes if you don’t evolve you become extinct.
While it’s sad to think that traditional book stores may be dealt another blow by this, e-books now appear to be as inevitable as music downloading, so B&N is smart to give people what they want. Execution is, of course, key and I believe the Kindle will have the lead in terms of user experience for some time. Reading on the iPhone is pretty good for short pieces but you’re not going to want to curl up with your phone for a good novel. The Kindle, amazingly, has won converts in that area. So B&N, I’m sure, is anxiously awaiting good competitive hardware that will put its offerings on par with the Kindle.
One other quick observation on execution. I downloaded the B&N iPhone reader app (easy as pie via the App Store) but when trying to access my B&N account on their site to download an e-book I got a message that their system was down for maintenance…at 11 am on a Wednesday. Not too impressive, I’m afraid.
After reading rave reviews for the Kindle, and having multiple airline seat partners assure me that it is the best thing since sliced bread, I made the plunge and got one myself. My great hope was for reducing my carry-on book load. It just didn’t work for me, but my daughter was excited to inherit it immediately, and my grand-daughter commandeered it for several books last weekend.
But I have been seeing increasing commentary in the blogosphere about the fact that Amazon does not actually sell you the e-book on the Kindle, and the fine print gives them the right to delete or modify books on YOUR Kindle – which apparently is happening, depending on Amazon-publisher relations. This kerfuffle perhaps provides Barnes & Noble an additional and timely opening. And certainly, for the serious reader, Kindle will not be the last word on e-book hardware. Netbooks can address this from a nearby hardware space.
My interest in this discussion is heightened by my observation of the budding “Amazonification” of the bricks and mortar stores. I don’t believe Kindle is positioned for this yet, but it is likely to intersect with other
hand-held devices in the store, at some point in time.
This is one of those evolutionary changes driven by technology that challenges a company to clearly define the business they’re in. B&N clearly recognizes they’re no longer in the book retailing business, they’re in the content delivery business. As Joel points out, the challenge isn’t just in content delivery however, it’s also in content access and control.
B&N, like Kodak with digital photography a few years ago, is trying to stay in the game. In fact books of any kind from Amazon or Kindle are fighting for their relevance in these times. On a $250 iPod Touch one can read the B&N books–or Kindle (with pages synced between Kindle Reader and iPod), watch YouTUBE, listen to/watch tons of music or quality Open Course Ware and browse the web, answer, learn about anything anywhere, communicate with everybody, play games and fall asleep to white noise. You can do all this on your back, in bed or at the beach. Who needs to pay $10 for a book? B&N is going to turn into a coffee/social house and then disappear…like Kodak, Egghead and CompUSA. Faster than we old folks think.
The Consumer will lead the way in determining added bounce to e-book sales. The added competition will drive pricing down, and thus more Consumers will tip-toe (not rush) into the arena. Both Amazon and Barnes & Noble will grow their business on the topline. Remains to be seen if they can figure out how to translate that to black numbers on the bottom.
Economics 101 will rule the day.
This is the start of the online library, or at the very least a subscription library online. This model is a great premise to drive advertising, promotions and sales of the latest books, while making older books available for a flat monthly fee, or no fee at all (paid through advertising). There are so many ways to make this title access that B&N has work, that B&N has a virtual goldmine (and library) to success!