Depending on your point of view, Tuesday was either the day the e-reader died or the day the technology was reborn. Just days after Liberty Media (NASDAQ:LCAPA) put in a bid to take over Barnes & Noble (NYSE:BKS), the book retailer unveiled its new Nook device.
The new offering is smaller than last fall’s Nook Color, and smaller than Amazon’s (NASDAQ:AMZN) popular Kindle. It also has a new touchscreen much like Apple’s (NASDAQ:AAPL) iPad tablet. The question now is, since the Nook is morphing from a reading device into a tablet, why will consumers buy it instead of an iPad?
One reason could be that it’s cheap. At $139, its price equals that of the basic Amazon Kindle (though slightly more expensive than Amazon’s advertising supported e-reader.) That lower price point comes at the cost of features prominent in the $250 Nook Color, which Barnes & Noble is now openly describing as a Google (NASDAQ:GOOG) Android tablet.
Barnes & Noble has maintained that the latest Nook wouldn’t support apps like the Nook Color, but considering that it also runs on the Android platform, it’s likely that at some point in the future it will. Barnes & Noble also is emphasizing the new machine’s simplicity, with its target audience being those consumers turned off by the complexity of tablets and even the Kindle’s keyboard.
Consumers have proven, however, that complexity isn’t such a big deal. Apple sold 4.5 million iPads in the first quarter of 2011 alone, and that’s with supply constraints holding back sales. Amazon claimed at the end of 2010 that the Kindle had become its “best-selling product of all time,” and while it’s still principally an e-reader, secondary apps like video games have sold particularly well on the device.
Simplicity, it seems, isn’t quite what consumers are looking for. They are looking for a sexy device that serves multiple purposes. Barnes & Noble should be concerned that even at a price point that’s less than a third of an iPad, consumers may very well spend the extra money looking for the complete package.
Barnes & Noble’s online segment, of which the Nook device and store are part, lost the company $57 million in its last quarter. This new Nook might help the division somewhat when it’s released in June, but it likely won’t substantially move the needle.
The e-reader is at a delicate point in its evolution. Rather than changing up the machines’ designs, both Barnes & Noble and Amazon need to make them even less expensive. Make a touchscreen e-reader that’s $50, and you’re likely onto something special that can survive in the iPad-obsessed market.
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.
