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Nook’s death rattle

Published Aug 19th, 2013 9:25AM EDT
Nook Price Drop Analysis

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Barnes & Noble has finally slashed the price of its moribund Nook Simple Touch with Glowlight to $99. The entire eBook reader industry received a fatal blow when Amazon launched its Kindle Fire, a fairly impressive tablet at $199. All eBooks on the market were simply priced too high to prevent consumers from being seduced by slightly more expensive tablets with fancy color touchscreens and more expansive feature sets. Not even $79 was cheap enough to prevent buyers from bolting.

The eBook reader market cave-in has been particularly rough on Barnes & Noble, a struggling book store chain that seemed to gain a new lease on life with its Nook products a few years ago. It’s not clear why B&N kept the Glowlight device priced above $100 so long, as it has been obvious for a year that it cannot bear direct competition with $199 tablets at a triple-digit price level.

B&N was probably unwilling to sell its eBook readers at a substantial loss to put up a real fight with Amazon. As a result, it now faces the extinction of its entire eBook ecosystem.

Amazon is on the verge of launching a new range of appealing Kindle Fire tablets, which are likely to continue to its tablet market share winning streak in North America. B&N has already dropped out of the tablet arms race and is now limited to tinkering with its shrinking eReader business. The only real medicine here would be a radical price cut of the cheapest Nook to $40 and the Glowlight device to $60 or below. That just might be low enough to rekindle some consumer interest in eBook readers as an impulse buy, even with tablet prices drifting below $200. That in turn might spur eBook sales volumes.

But B&N is not the kind of company that experiments with radical pricing initiatives — it seems far more comfortable with the dignified approach of standing idly by as its entire eBook business slowly withers away.

The last hope for Nook fans like me is the forlorn wish that Microsoft might step in and start doing some heavy lifting on the hardware side. Even though there is extensive collaboration between B&N and Microsoft, the latter has a lot on its platter right now — the new Xbox One launch, the disastrous Windows tablet initiative, the dangerously wobbly Windows Phone project, and so on. Saving Nook’s bacon is probably pretty low on the list of priorities right now in Redmond.

After launching mobile game company SpringToys tragically early in 2000, Tero Kuittinen spent eight years doing equity research at firms including Alliance Capital and Opstock. He is currently an analyst and VP of North American sales at mobile diagnostics and expense management Alekstra, and has contributed to, Forbes and Business 2.0 Magazine in addition to BGR.