by Anthony John Agnello | November 8, 2011 1:43 pm
Barnes & Noble‘s (NYSE:BKS) chorus of “Anything Amazon can do, I can do better!” got a little louder this week when the book retailer announced the latest version of its Nook portable e-reader. The new Nook isn’t just an e-reader, though. It is, unsurprisingly, an affordable tablet priced at $250. That’s just slightly more expensive than Amazon’s recently announced Kindle Fire tablet, which is expected to go on sale sometime this month at $199.
Price is the first of many things in which Barnes & Noble’s device is similar but just a little bit bigger. Just like Amazon‘s (NASDAQ:AMZN) device, the Nook Tablet has a 7-inch screen and WiFi connectivity, but Barnes & Noble’s device is a bit beefier when it comes to computing speed and memory. The Nook has a 1.2GHz processor and 16GB of flash memory that can be expanded to 32GB, while the Kindle Fire has a 1GHz processor and just 8GB of memory. Amazon’s device is connected to that company’s free cloud storage service, so the low storage is offset.
On the content side, Barnes & Noble has partnered with a number of other companies to match Amazon’s numerous company-run services. The Kindle Fire has streaming video through the $79 per year Amazon Prime service, but the Nook supports both Netflix (NASDAQ:NFLX) and Hulu.
Amazon currently controls 12% of the digital music market through MP3 sales and its Cloud Player service. But Barnes & Noble teamed up with Pandora (NYSE:P) to provide streaming Internet radio on the Nook Tablet. Barnes & Noble seemingly covered every single base to make itself a competitive alternative. It even signed a deal with Disney (NYSE:DIS) to bring Marvel Comics to the platform — a backhand slap aimed at both Amazon and Time Warner‘s (NYSE:TWX) DC Comics, which partnered up on Kindle.
Amazon is banking on its brand and its reach as a content provider to get the Kindle Fire in people’s hands. Barnes & Noble is relying on services with established audiences — Netflix’s roughly 21.5 million subscribers, Pandora’s 80 million users — to woo the masses. Content- and technology-wise, the two truly are on equal footing.
Here’s what Amazon has that Barnes & Noble doesn’t, though: Towering brand loyalty. Consumers love Amazon. According to brand research group Brand Keys, consumers love Amazon more than any other brand — including Apple (NASDAQ:AAPL) and Facebook. On Brand Keys’ Loyalty Leaders list, Amazon placed twice in the top 10, with the Kindle brand coming in at No. 8. Barnes & Noble itself didn’t place, but the Nook shows up at No. 52. In terms of sheer brand awareness, the Nook Tablet has a tremendous uphill battle compared to the Kindle Fire.
So Amazon has the advantage at release, but Barnes & Noble already has made itself a comfortable bed playing second fiddle to Amazon. The company’s Nook business and its online retail operations pulled in a collective $1.42 billion in the second quarter. Nook revenue grew 140% year-on-year, and BN.com revenue grew 37%. With a lock on the physical retail space for books, maybe it’s enough to stay steady in second.
Of course, this all assumes that consumers buy into the Kindle Fire or Nook Tablet at all. Amazon recently beefed up production of the Kindle Fire due to greater-than-expected pre-order demand. (Amazon CEO Jeff Bezos said the company is building “millions more than we’d already planned.”) To date, though, consumers have shown that while they’re willing to buy both e-readers and tablets, they’re typically going to opt for Apple’s iPad when it comes to the tablet. If Amazon takes second place in the tablet world, the question will be whether Barnes & Noble can be profitable in third.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.
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