Barnes & Noble (NYSE: BKS ) isn't backing down now.
The meandering bookseller is beefing up its Nook line, lowering prices of its e-readers now and hitting the market with the Nook Tablet next week.
The retailer is hoping that customers will value spec sheets over price. Its new tablet will feature double the RAM and initial storage capacity of the Kindle Fire. Nook Tablet will also have access to a ton of third-party apps and come pre-loaded with programs to stream Netflix (Nasdaq: NFLX ) , Hulu Plus, and Pandora (NYSE: P ) .
The $249 price point would've been a steal before Amazon's Kindle Fire splash. Tablet makers have had a difficult time taking on Apple's (Nasdaq: AAPL ) iPad on specs, so coming in at half of the iPad price -- even if this is a much smaller gadget that obviously lacks Apple's rich ecosystem -- will turn heads. The real battle here, though, will be with Amazon for the low end of this market.
Will $50 be a deal breaker for cheap tablet buyers? The more pressing question, given B&N's ugly financials: Can it turn a profit with Nook at $99, Nook Color at $199, and the new Nook Tablet at $250? Superior specs mean higher costs for the tablet, and Amazon already issued a bleak outlook for its holiday quarter, warning that it may even post an operating loss for the period. So if the Kindle Fire and traditional e-readers for as little as $79 find Amazon on the brink of a blue Christmas, how red will B&N's holiday cheer be?
The bookseller doesn't really have much of a choice. Its brick-and-mortar business is dying. Its latest quarter was a mess. Sales actually fell by 11% at its superstores and college bookstores if you back out the gains for its Nook and digital downloads. In other words, it has to keep pushing deeper into e-readers and tablets if it wants to avoid going Borders on its investors.
B&N would have probably loved the luxury of higher price points, but Amazon is there to keep prices down. Amazon isn't hungry in the same way that B&N is starving. B&N's financial future now rests on the Nook. Amazon simply wants to dictate the digital migration experience to back up its well-rounded ecosystem of digital books, video, games, and music.
The holidays just got a bit more interesting.