Barnes & Noble Strikes Back

To counter the threat of serious industry disruption, Barnes & Noble (NYSE: BKS  ) has announced big moves into the nascent e-books arena. But will the beleaguered book behemoth's electronic efforts make as big a difference as it hopes?

B&N announced the unveiling of its own digital bookstore, offering prices on bestsellers that will compete with those of rivals. The company will offer e-books for a variety of devices, including Apple's (Nasdaq: AAPL  ) iPhone and iPod Touch, Research In Motion's (Nasdaq: RIMM  ) Blackberry, and most PCs. In addition, the company signed a strategic partnership with Plastic Logic, making the bookseller the exclusive book provider for Plastic Logic's upcoming e-reader, due in early 2010.

So far, e-books have made the biggest splash with Amazon.com's (Nasdaq: AMZN  ) svelte Kindle reader. Sony (NYSE: SNE  ) has its own e-book reader, too, hawked in the stores of Barnes & Noble's bricks-and-mortar rival Borders (Nasdaq: BGP  ) . But unlike Amazon and Sony, B&N seems to be betting on the growing popularity of e-books in general, rather than trying to push its own hardware. Offering e-books for devices that consumers already have is a smart move, since many bibliophiles may not want a separate e-book reader to lug around.

Although Amazon doesn't reveal sales data for the Kindle, it has admitted that when a Kindle version of a book is available, a formidable 35% of its sales come from the e-book version. Its sleek device seems to have kindled interest in e-books in general.

The book industry has been struggling in this recessionary environment, but the sale of e-books soared 110% in March, and 131% for the year. Even though e-books still represent a small part of the total market, their popularity's clearly catching on.

Barnes & Noble plans to have 1 million e-books available within a year, a figure that includes the half-million or so books Google (Nasdaq: GOOG  ) has made available for free. That would put it far ahead of the estimated 325,000 titles for Kindle and 600,000 for the Sony Reader. But in an aggressive turn, Barnes & Noble's offerings will not be available for Kindle or Sony's e-reader.

It makes sense for Barnes & Noble to get into the competitive fray in order to drive incremental revenue, especially if it doesn't have to take on the effort and expense of developing its own electronic reader. E-books seem like the way of the future, and the publishing and bookselling industries need to position themselves for the same sort of digital-delivery deluge the music industry has long grappled with.

Still, nobody should underestimate Amazon's power; the Kindle will probably keep its firm grasp on book fans, and Amazon has shown tremendous adaptability over the years. Barnes & Noble has no choice but to try to wedge its way into this nascent but growing space. I'll be interested to see whether it can take some of the wind out of Amazon's sails.

Amazon.com and Apple are Motley Fool Stock Advisor picks. Google is a Rule Breakers recommendation.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.


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