Barnes and Noble's Nook Faces Muscular Amazon Kindle Competition

Barnes & Noble could be prepping a new Nook for release, but it faces significant competition from both Amazon's Kindle Fire and a revamped line of Kindle e-readers.

Barnes & Noble could be readying a tablet response to Amazon's new Kindle Fire, a 7-inch device capable of playing video and music in addition to displaying e-text.

The bookseller's invitations to a Nov. 7 event, at its store in New York City's Union Square, are topped with a large "N" in the same typeface as the logo for its Nook e-reader.

Barnes & Noble and Amazon have battled for share of the increasingly lucrative ebook audience. Neither company releases sales numbers for their respective e-readers, although it's generally assumed that Amazon's Kindle maintains a healthy market share lead. Some analysts had viewed Barnes & Noble's latest Nook as a dark horse in the contest, with a full-color screen that gave it an edge over the Kindle's grayscale display.

However, Amazon changed the rules of the game on Sept. 28 with the unveiling of the long-anticipated Kindle Fire. The slate, which uses a custom version of Google's Android operating system, costs $199.99 and is expected to ship Nov. 15. That's an exceptionally low price for the tablet market, but even if Amazon ends up losing money on every Kindle Fire unit sold, the company can still use the full-color screen and built-in easy access to its online storefront as a way to more fully leverage its multimedia content and ebooks. 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 of 2011.

However, other analysts feel the Kindle Fire will have a softer impact on the market. "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."

He argued that the Kindle Fire's lack of camera and support for a 3G connection, along with 8GB of on-board storage, place it at a disadvantage to Apple's iPad, currently the dominant tablet on the market.

However, the Kindle Fire's features, and tight linkage with Amazon's massive libraries of ebook and multimedia content, could make it a most formidable direct competitor to Barnes & Noble's Nook. Amazon is also releasing a revamped line of Kindles, including the touch-sensitive Kindle Touch and Kindle Touch 3G.

That is the state of the competition as Barnes & Noble gears up for its Nov. 7 announcement.

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