5 Ways Barnes and Noble's Nook Could Overcome Amazon.com's Kindle

Barnes & Noble's Nook e-reader faces substantial competition as it attempts to take market share away from Amazon.com's popular Kindle line, but it could conceivably triumph thanks to a combination of new technology, Google Android, brick-and-mortar stores, and other e-readers such as Plastic Logic's QUE. The introduction of the long-rumored Apple tablet PC could also have a seismic effect on the e-reader market, as well as Amazon.com's and Barnes & Noble's ability to compete in the space.

Barnes & Noble's Nook e-reader will go head-to-head with Amazon.com's Kindle this holiday season. While the Kindle cornered much of the public's attention throughout 2009, thanks in part to extraordinarily high-profile launches of its latest models, it now faces substantial competition from companies that have dissected its business model.

Two or three quarters from now, will Barnes & Noble's Nook have managed to eat away at the Kindle's market lead? Or will Amazon.com succeed in its goal of making "Kindle" synonymous with "e-reader"? And what will either outcome mean for the e-reader market overall?

Barnes & Noble could succeed in the battle thanks to the following factors:

Other Players in the E-Reader Ecosystem: On Oct. 28, Barnes & Noble announced that it would sell Plastic Logic's QUE e-reader through both its online storefront and in its brick-and-mortar locations. While such a move might seem akin to Microsoft selling the PlayStation 3 alongside the Xbox in its new Microsoft stores, Barnes & Noble evidently sees its own e-reader and the QUE as appealing to different segments: the Nook to the consumer market, and the QUE to business users.

Amazon.com has touted its 9.7-inch-screen Kindle DX as both a business and consumer device; during the May 6 rollout event, CEO Jeff Bezos demonstrated how the DX could display everything from legal documents to ship navigation charts.

By aggressively promoting the QUE-which has been touted front-and-center as a device for workers who want to access Word, PowerPoint and other documents-Barnes & Noble may believe that it can neutralize Amazon.com's appeal to the business community, while the Nook takes on the consumer market. Amazon.com would be fighting on two fronts.

Google Android: Barnes & Noble chose Google Android for the Nook's operating system because the latter was optimized for running on small screens, such as phones. If the company opens the Nook to application development, the resulting versatility could open an enormous advantage over Amazon.com's proprietary software platform. Another advantage in this scenario would be the Nook's iPhone-style multitouch screen, which would give developers more of a playground in addition to the device's e-ink display.

Technology: In May, Jeff Bezos suggested that a color version of the Kindle was "multiple years away," and that color displays developed in Amazon.com's laboratories were "not ready for prime time."

Barnes & Noble, and doubtlessly other future e-readers, have solved this issue with a two-screen format: the aforementioned iPhone-style screen paired with the e-ink display. That adds functionality to the Barnes & Noble device-such as the ability to navigate through book catalogs-that Amazon.com may feel compelled to match. The Nook also has other features, such as its "LendMe" technology that lets volumes be shared Nook-to-Nook for 14 days, which help differentiate it.

Brick-and-Mortar Stores: Barnes & Noble demonstrated during its launch presentation that it intended to heavily promote the Nook in its stores. While physical storefronts have been perceived in certain quarters as a liability due to their overhead, the right leveraging of its retail space could give Barnes & Noble a broad venue through which to push its product-particularly if they allow features such as in-store Wi-Fi browsing of text. Unless Amazon.com signs a deal with a big-box store such as Best Buy, it's restricted to online.

Google, Again: Amazon.com's Kindle site claims a library of 360,000 books. Barnes & Noble, meanwhile, claims its online eBookstore offers some 700,000 volumes-on top of 500,000 free public-domain volumes from Google. For the majority of users, the actual presence of any books beyond the latest New York Times bestsellers or certain popular volumes may be academic; but the perception that Barnes & Noble can technically offer more content may help move units in the newcomer's favor.

Jeff Bezos has made public comments that suggest he views Google's digital book initiatives as a threat. During the Wired Business Conference in New York City in June, he said that the settlement between the search-engine giant and book publishers over digital rights needed to be "revisited," adding: "It doesn't seem right that you should do something, kind of get a prize for violating a large series of copyrights."

Whichever side gains market share, though, the increased level of competition could ultimately be good for the e-reader market as a whole. Although that market remains small overall, with Forrester Research predicting sales of around 3 million units in 2009, higher prices for e-readers have slowed their rate of market penetration.

"The cost of the display component is high and sales volumes are still modest, yet consumers demand and expect ever-lower prices," Sarah Rotman Epps, an analyst with Forrester, wrote in a Sept. 1 research report. "E-reader product strategists will have to educate consumers and innovate to bring prices down."

Following Barnes & Noble's announcement that the Nook would go on sale in November at a price-point of $259, Amazon.com slashed the price of the original Kindle device to $259, down from $279 only a few weeks before. (Because no viable competitors exist yet on the actual market, the Kindle DX continues to sell at $489.) Other e-readers rolling out in 2010 may attempt to match or even dip below the big companies' price points, which in turn may lead to another spate of cuts.

Barnes & Noble's focus on creating an ecosystem, as opposed to centering its e-reader push on a single proprietary device, has also seemingly had an effect on Amazon.com's efforts. During the Oct. 20 launch, Barnes & Noble executives touted how, in addition to the Nook, users would be able to read their e-books on smartphones, the iPhone and the iPod Touch.

While it already had a Kindle App for iPhone and iPod Touch, Amazon.com jointly announced with Microsoft during the latter's Oct. 22 Windows 7 launch that a new "Kindle for PC" application would make its debut with the operating system. The program would allow users to not only download e-books from the Kindle store, but also display those volumes on desktops and laptops.

Despite the efforts of all these companies, the e-reader landscape could also be radically altered if Apple makes good on outsiders' rumors that it will release a tablet PC sometime in 2010.

Rumors of such a device received added fuel over the weekend, when New York Times Executive Editor Bill Keller referred to "the impending Apple slate" in an Oct. 16 closed-door speech.

Whether he was referring to an actual "slate" device, or merely Apple's upcoming "slate" of products, a multi-touch PC with text content downloaded via iTunes would provide substantial competition to both Amazon.com and Barnes & Noble, particularly since a tablet PC would present other functionalities that would conceivably make it a better value proposition despite a presumably higher price.

However the market eventually turns, though, competition between Amazon.com, Barnes & Noble and maybe-Apple would present benefits for the periodicals industry, which has been urgently seeking a technological solution to falling ad revenues and readership. E-print could offer them a new paradigm for survival.