Barnes and Noble's Nook Challenged by Kindle Firepower

Barnes & Noble will most likely announce the next step in its Nook e-reader franchise Nov. 7. It faces a strong, growing Amazon Kindle franchise.

Can Barnes & Noble's Nook hold its own against Amazon's Kindle franchise?

A big part of that question could be answered Nov. 7, when media and analysts expect Barnes & Noble to unveil its next Nook at a high-profile event in New York City.

Whatever the bookseller offers the public on that date, the device (or devices) in question faces some formidable competition: a little over a week later, Amazon will begin shipping the Kindle Fire, a full-color tablet capable of not only displaying ebooks, but also playing multimedia such as movies and music. The online retailer has also revamped its Kindle line with touch capability.

Neither Barnes & Noble nor Amazon releases sales numbers for their respective e-readers, although it's generally assumed that the Kindle maintains a healthy market share lead over the Nook. The latter's most recent version, by virtue of offering color, was seen as a strong competitor to the grayscale Kindle. The Kindle Fire, which retails for $199, will negate that as an advantage.

The Nook also lacks in comparison with the Kindle Fire in other ways. Amazon offers a wide variety of streaming content direct from its Website, while Nook users need to head to Websites like YouTube if they want to seek out video. That streamlined pipeline between Amazon's cloud and the Kindle Fire is a sizable advantage that Amazon has already worked feverishly to exploit in its advertising and promotional materials for the tablet, and will almost certainly become a sizable disadvantage for the color Nook in a head-to-head comparison between the devices.

The Kindle Fire also leverages Amazon's EC2 cloud for a faster Web-browser experience, undercutting the Nook's Web browser as a selling point.

If anything, the Kindle Fire's competition isn't so much the Nook as the iPad, something that Apple executives seemed to realize in recent discussions with Barclays Capital analyst Ben Reitzes.

"The more fragmentation, the better, says Apple, since that could drive more consumers to the stable Apple platform," Reitzes wrote, as quoted by Business Insider. "We believe that Apple will get more aggressive on price with the iPad eventually but not compromise the product quality and experience."

J.P. Morgan analyst Douglas Anmuth has estimated that, based on channel checks with supply-chain vendors, Amazon could sell as many as 5 million Kindle Fire units in the fourth quarter.

But other analysts feel that the Kindle Fire will have a fainter impact. "In our view, Kindle Fire's low price point speaks to how there is much lacking in the device," J.P. Morgan analyst Mark Moskowitz wrote in a Sept. 30 research note, pushing back against his colleague's rosy assertion. "At $199, we argue that the price point is not going to afford most users a tablet experience, which is a problem if Amazon wants to become a major tablet vendor."

Whether the Kindle Fire poses a threat to the iPad, it will almost certainly exert pressure on the Nook franchise. Barnes & Noble must realize this, and its Nov. 7 event will constitute at least part of the response. It could seek to buttress the Nook's Web and app capabilities, bringing the device more in line with a traditional tablet as opposed to an e-reader. Or it could dig in and emphasize the e-reading experience, ceding the multimedia battleground to Amazon.

In any case, a new phase of competition between the two companies is about to begin in earnest.

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