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The story of the Barnes & Noble (NYSE: BKS ) e-book reader has reached a gloomy chapter. On one hand, it faces the rampant onslaught of rivals like the Kindle, while on the other hand, it has to weather the potential obsolescence of dedicated e-readers as tablet PCs flood the market. Plus, there’s that little thing about brick-and-mortar book stores disappearing off the face of the Earth.
The plot thickens
In order to put up a decent fight with Amazon.com’s (Nasdaq: AMZN ) Kindle, B&N equipped the Nook color with what it feels could be crowd-swaying features such as email, in-page videos in books, and games like Angry Birds.
In the middle of 2010, B&N released an Android app for the Nook reader for use on Google’s (Nasdaq: GOOG ) platform, and also offers its apps for Apple’s (Nasdaq: AAPL ) iPhone and iPad. Nook users can also “read in store,” allowing you to browse through a book while in a B&N bookstore. When you leave the store, the book disappears, which is a pretty cool feature, too. This was all part of a larger effort to compel the avid and recreational reader over into the B&N camp.
But how useful are all these gimmicks when it comes to the bottom line?
While trying to load up the Nook with all of the state-of-the art features and invest in its online operations, B&N’s net income suffered in the third quarter. At the same time, competition has not been standing still. Online retailers like Amazon, Apple, and Wal-Mart (NYSE: WMT ) have been making a big push to seize control of digital reading. Plus, competition among devices has become much fiercer thanks to wide adoption of smartphones and tablets and increased accessibility of the Internet, which all act as a raw substitute for products like the Nook (and those heavy things I used to buy called books).
For consumers, the landscape is pretty rosy. It has become easier for consumers to compare prices from various stores before buying products. And we’re looking at a wider selection of more widely nuanced products. This has certainly not helped anyone on the business end of the spectrum -- and certainly not investors of B&N, either.
It is evident that Barnes & Noble means business when it comes to stabilizing its position in the e-reader market. It is willing to take a fall in net income to get a footing in the battle of book retailers. This aggressive strategy seems to make sense, especially as the physical component of the business becomes less attractive.
In a world where the consumer is on a constant lookout for better shopping and consumption experiences, launching a full frontal attack with better services will probably get results. The only problem here is that with falling earnings, investors are probably going to be apprehensive about B&N’s stock. But if the company can turn the tide, there might just be good profits on the way. But be careful: first, a lot of things have to go right.