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Summary:

E-reading company Kobo plans to launch a $399 tablet. Has it learned nothing from Barnes & Noble’s experience?

kobo arc HD

Last September, Barnes & Noble launched two new tablets. The Nook HD and HD+, ranging in price from $199 to $299, were designed to be reader-centric devices. They included features like children’s accounts and curated “channels” to help readers discover new books.

These features, Barnes & Noble hoped, would be enough to attract buyers — but they weren’t kidding themselves that users would be persuaded to buy a Nook instead of an iPad. “You have an iPad, I have one,” a company exec said at a briefing at the time, seemingly acknowledging that the Nook HD wouldn’t be anybody’s first choice. Rather, Barnes & Noble clearly hoped that the Nook tablets’ prices and features might be enough to entice users away from other lower-priced tablets like the Kindle Fire and Nexus 7.

It didn’t work. Fast-forward a year and Barnes & Noble’s Nook business is in serious trouble. This summer, the company acknowledged that the tablets are dragging the Nook division down and said that it would stop manufacturing them in-house (before flip-flopping this month after the CEO resigned and insisting the devices are still a big part of its strategy).

You’d think that Canadian e-reader company Kobo, whose share of the U.S. ebook market is far below Barnes & Noble’s, might have learned something from this. Apparently, it hasn’t.

$399 in a sea of competition: “That’s a great price”

At an event in New York Tuesday night, Kobo announced that it is launching three new tablets this fall. “Up until now, no one has really designed a tablet for readers first,” CEO Michael Serbinis said. Amazon and Barnes & Noble would probably disagree with that.

The most expensive of Kobo’s new tablets is a 10-inch model called the Arc 10HD. At a whopping $399 for Wi-Fi only and 16 GB of storage, the 10HD is $130 more expensive than the 8.9-inch Kindle Fire HD with ads and matches the price of the 8.9-inch Kindle Fire HD with 4G LTE, 32 GB of storage and no ads. It’s $70 more expensive than the 16-GB iPad Mini with Wi-Fi, and it matches the price of the 16-GB iPad 2.

Plus, Apple may release a new iPad in this fall. At that point, the company will likely drop the prices of the iPad 2 and iPad 3. Thus in just a few months, there will probably be an even broader range of iPads that either match or beat the Kobo Arc 10HD’s price.

“We don’t comment on our competitors’ offerings,” Kobo spokesman Cerys Goodall told me. “The new Kobo Arc lineup is designed for readers first, and at $399 with an HD screen and un-compromised performance — that’s a great price.”

Okay, so let’s say you have $400 to spend on a new tablet this fall or holiday shopping season. Why would you buy it from Kobo, a company whose products you’ve likely never used and a company that doesn’t have its own content ecosystem (it offers access to Google Play) when you could just get an iPad instead? And if $400 is more than you want to spend, you have a wide range of lower-priced options, including several models of the Kindle Fire, Google’s Nexus 7 and the iPad Mini. You also, of course, could choose a lower-priced tablet from Kobo, but if customers didn’t buy the sub-$300 Nook HDs it’s unclear why they’d buy sub-$300 Kobo Arcs.

Where’s the strategy?

Kobo hasn’t released much information on how well its tablets have sold. The company has stressed how well its e-ink readers are performing, announcing in May that e-reader sales for the first quarter of 2013 were up 145 percent over 2012. And Kobo CEO Michael Serbinis reiterated at Tuesday night’s event that e-readers aren’t dead. But the company has not justified why it’s making a big bet on tablets. An earlier version of the Kobo Arc – which sold for $199.99 — got pretty good reviews based on specs and design, but all of those reviews noted there wasn’t a compelling reason to buy it over the competition.

Kobo, which is owned by the Japanese e-commerce company Rakuten, touts its international reach and partnerships with local bookstores worldwide as its strategy for success. It’s true that Barnes & Noble has been slow to expand internationally, but it doesn’t follow that a lack of international availability was the reason for the Nook tablets’ failure. At any rate, international customers in developed countries are still probably more likely to choose tablets from big names — Apple, Amazon, Google — over tablets from Kobo. Customers in developing countries probably can’t afford a $399 tablet.

If the failure of Barnes & Noble’s Nook HD shows one thing, it is that customers will not buy an untested tablet simply because it includes reader-friendly features. Kobo thinks it can succeed where Barnes & Noble has failed, but it hasn’t offered a compelling reason why.

  1. You’re assuming they will sell most of them through the store, while I suspect their strategy is to sell them through the independent booksellers. That might work for a steady income stream as I don’t think they are aiming to overthrow Apple or Amazon, but have a different niche to themselves.

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    1. It is definitely Kobo’s strategy in part to sell devices through independent bookstores. I don’t think it can successfully sell many $399 tablets through independent bookstores. Barnes & Noble, too, sells Nook tablets in its stores.

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      1. Thierry Wasserman Monday, September 2, 2013

        Their market is not the US… at all. In the countries where Kobos are more common there is a very fragmented ebook market, and Amazon and B&N haven’t tried or managed to gain a strong foothold. Fnac, the largest French bookstore chain sells their ebooks using a “Kobo by Fnac” system. B&N does not sell in this market at all and people still like their local bookstores a lot more than in the US so that Amazon is not that successful. The fact that the French have a law that prevents the discounting of books at all is partially responsible.

        So your choice for ebook reader is to either pay more (iPad 4, Nexus 10) and get a tablet that can read anything, or the same price for a lower quality screen (iPad 2 or mini, Nexus 7). The Kobo is a sensible choice in this case.

        I’m not French, but read books in both French and English and the situation is extremely fractured internationally. I can either switch my Kindle back and forth between two separate stores temporarily losing the books loaded in the other languages each time, or use different apps for different languages on an iPad or Kobo.

        Your analysis is extremely US-centric and I believe that the Kobo’s market is mainly international and with a small minority of people that hate Amazon and B&N for other reasons. B&N’s Nooks and Amazon’s Kindles are not an option at all in most people’s cases.

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  2. the online kobo store that is (just to clarify)

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  3. I am sorry but you seem to be very confused.
    You do realize that it has a 2,560×1,600 screen and Tegra 4 and you really can’t find that kind of high end specs even at 400$ so they are kinda 100$ bellow market as it is.
    Sure It would be better at 350$ ,they could sell millions. No microSD is a bad idea on any device and i have no clue why they skipped on the back cam makes no sense on a high end tablet.
    And in no way can you compare the Tegra 4 with the Kindles and Mini, those are dual A9 cores and outdated as hell, even the low end is better than that now while Tegra 4 is just about as fast as it gets.
    To make matters worse you fail to notice that they released two more tablets.
    Kobo Arc 7HD with Tegra 3 , 1920×1200, 1GB of RAM at 200$ and a cheaper one at 150$.

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    1. Hey realjjj, thanks for the comment.

      I’m not arguing that the Kobo tablet has impressive tech specs. The point of the piece, though, is that’s not enough. Barnes & Noble, too, boasted about the specs on its Nook HD tablets, which have performed really badly. Furthermore, Kobo is an e-reading company. It is marketing these tablets as devices for readers, and it is stressing that its core audience is readers. Barnes & Noble’s experience has shown that does not guarantee success for a tablet.

      I did not fail to notice that Kobo released other tablets. I mention them both in this piece and also in the news post I published yesterday.

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      1. They released a line of tablets,one is higher end, you chose to bash the 400$ one for some reason and compare it with low end tablets.You took it out of context , like this was the only product they had.Saying that you mention the other 2 tablets is a bit of an exaggeration , you do but not in a substantial way.
        You are obviously and Apple user and i am trying to avoid going there and making a list of reasons why buying Apple is just wrong but maybe you should try to be more objective about Apple.
        The first Nook actually did well enough, it was hackable,cheap and without much competition, B&N was already an established player and had an opportunity to grow but the next gen wasn’t good enough and failed to do all that great for many reasons. One is that if had no Play access, Kobo is not making that mistake and that makes it a device for anyone. The Nook also had to compete with better devices,like the Nexus 7. Amazon isn’t doing all that great either with it’s tablets because of Nexus 7 and the many other sub 200$ tablets . They are doing far better than B&N but Amazon has a much higher profile ,it’s far easier to push products.
        Half of the article and the headline are about the 400$ tablet not about the strategy and that’s the part i objected to. About the other half… i would rather not go into it and make this post way longer.

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  4. Barnes and Noble’s problem was not *”nobody* bought it – the fact is, they sold millions of nook tablets.

    The problem was that they were hoping *everyone* would buy one. And the lack of margin on the individual sales left no room for overestimation.

    Marketing an overpriced luxury product, provided Kobo is severely restricting supply as well, actually solves this problem.

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  5. The strategy is completely different from the Nook. The Nook ran proprietary software. These Kobo tablets are essentially running Android with their own platform tacked on.
    You have access to the Google Play store and from what I have seen so far if you swipe out of their platform you are sitting in what appears to be a stock Android platform. It’s a reasonably recent Android 4.2 I think as well.
    Nook only provided Play store access after things went bad. And you still aren’t dealing with anything like a stock Android experience in use of the tablet.
    Too new for reviews but off hand the tablet you are complaining about is a high res 10″ tablet with a Tegra 4 chipset. $400 is not really a hefty price for that. It’s not low enough to be disruptive or anything. But it’s not crazy either and cheaper than anything comparable at the moment I think. At least given the benefit of the doubt that the specs pan out to actual decent quality in use.
    The curious thing will be to see how quickly they upgrade to Android 4.3. And of course actual reviews – both as to actual hardware quality and if the stock Android experience is penalized in any way.

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  6. The 1.5 ghrtz 32 gb nook hd + with 1080 p screen is now 179 and the same product with only 16 gigs of memory is 149 the best bang for your buck now that its opened to google play and their sales have skyrocketed since lowering the price since mothers day they went from selling one or two per day in stores to selling sometimes 30 in a day

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  7. The writer had me thinking the $399 was bad. My first thought in reading this was that even Microsoft dropped the Surface RT to $349, so $399 seems high for a Kobo.

    Maybe it isn’t as out of line as I was thinking. After reading all the comments, it is interesting to see that my perspective has changed from where the writer had tried to take me. It looks like there might actually be a good strategy behind Kobo’s pricing.

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  8. Kobo who? Kobo has little, if any, name recognition. I don’t picture a lot of people paying $400 + tax for something from a compnay they’ve never heard of.

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  9. I find some of these comments curious. The specs look good, I guess, but what does this tablet have or do that obviously differentiates it from and above tablets from Apple, Amazon, or Google?

    Most tablet buyers don’t really care about processor specs and only marginally care about screen resolution. What they care about is what, and how well, they can do with the tablet. Without an obvious, compelling use case the only differentiator for a tablet is price and $399 seems like an odd place to plant that flag.

    Moreover, where are consumers going to be able to even try the product? Independent bookstores? How much volume can they generate? Is Kobo looking to only sell a small number of these as some kind of Indy-bespoke tablet alternative?

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  10. Hi Laura

    I think you’ve got a great point. As I pointed out in a couple of blog articles a while ago (http://bit.ly/XR1ihZ and http://bit.ly/Ws8IpV), I feel that the Kobo offering is pretty damned poor. They received all that money from Rakuten and then proceeded to do nothing with it. If you ever go into WH Smiths, the Kobo stands are deserts. They spend alot of money on advertising but don’t back it up with a great product in my opinion.

    How on earth they think they are going to sell a $400 tablet is beyond me.

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