Kindle, Nook Find Safe Haven in Google’s Android

The Kindle and Nook e-reading devices may be selling just fine, but there’s no escaping the fact that their makers, Amazon (NASDAQ:AMZN) and Barnes & Noble (NYSE:BKS), respectively, need to move forward or watch their business become an unusual footnote in the history of e-commerce.

From one perspective, both book retailers have already started to make the same move — finding safe haven for the Nook and Kindle brands in the arms of Google’s (NASDAQ:GOOG) Android operating system.

A Thursday report at All Things Digital said that Barnes & Noble is finalizing plans to introduce Android apps to its Nook store. Later this spring, Android developers will be able to host their free and paid apps on the Nook, with the same revenue-sharing model as in Android and Apple (NASDAQ:AAPL) app store.

With 70% of each sale going to the developer and 30% going to Barnes & Noble (not to mention a significantly smaller user base than what’s offered by Android smartphones), the Nook doesn’t represent a dramatic new opportunity for developers. It is, first and foremost, a move that will keep Barnes & Noble’s device relevant to consumers that have quickly grown accustomed to having a wealth of entertainment options on their handhelds.

Unlike Barnes & Noble, Amazon is adopting Android in reverse. The company opened its own devoted app storefront on the Android operating system. Although the Kindle brand and bookstore remain separate from Amazon’s own app store, it seems unlikely that Amazon would allow its next updated Kindle to hit the market without its own app store present.

But do these moves portend that the Kindle and Nook will naturally evolve into tablet PCs? And is that a wise move?

E-readers are, of course, much cheaper to produce than tablets. iSupply has put the production cost of an iPad 2 at $325.60. The Kindle, meanwhile, cost about $185 to make last year, a price that’s undoubtedly gone down since.

Provided that production costs stay low, both Amazon and Barnes & Noble can afford to introduce the next generation of their e-reader without a need to offer full tablet functionality and still maintain sales.

It’s hard to imagine either company competing full bore in the struggling Android tablet market. Samsung’s Galaxy Tab and Motorola’s (NYSE:MMI) Xoom (which has sold a measly 100,000 tablets since its February release) have failed to make any inroads against the iPad.

With their e-bookstores already on available tablets, it simply doesn’t make sense for either company to get into the tablet game, even as their devices come to increasingly support Android.

A scenario does exist, however, that could indefinitely prolong the life of the e-reader.  Based on declining Kindle prices, Wired co-founder Kevin Kelly has predicted that Amazon will make its e-reader free by November 2011, possibly as part of its Amazon Prime membership service. If it does, Barnes & Noble would likely follow suit, making Nook a free part of its Barnes & Noble Rewards program.

Free Android-powered, e-readers that fuel digital book sales? That’s one way to survive the iPad.

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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