What The Nook Color Means For Amazon, Sony

Child Reading (Nook campaign)

Today, amid the kind of rumor and speculation that is more typical of a Silicon Valley announcement, Barnes & Noble (NYSE: BKS) unveiled its Nook Color, a second Nook to complement the barely one-year-old original. The Nook Color brings a 7″ color LCD touch tablet device to the reading market, filling a gap between today’s grayscale e-readers that use e-Ink technology and tablet PCs like the iPad.

This move puts B&N ahead of both Amazon (NSDQ: AMZN) and Sony (NYSE: SNE) — the longtime holders of the number 1 and number 2 slots in the e-reader business. Not ahead in terms of device sales, because this new Nook, priced at $249, will be likely to drive a few hundred thousand units before year-end. But ahead in terms of vision. Because one day, all e-readers will be tablets, just as all tablets are already e-readers.

There are three good reasons why tablet readers are the right thing for the industry to move toward:

Multitouch interfaces have become the new standard. Once consumers experience multitouch, they don’t really ever go back to thinking a mouse or button interface makes much sense. Doesn’t mean they never touch another button, it just means they prefer to interact in a more natural and intuitive way. That’s why Sony recently upgraded its reader line to include touch on even its cheapest model, the Pocket Edition.

Color is beautiful and necessary. True, you don’t need a color screen to read a Dan Brown novel. Or do you? Today’s Dan Brown novels don’t need color because they were written under the assumption that color wasn’t an option. But his next book won’t be. And the thousands of children’s books in print that already depend on color fit nicely on this device. Nook Color, for at least a short period of time, will have the distinction of being the only color reader that doesn’t cost $500 or more. Which helps explain B&N’s enthusiasm in announcing Nook kids, a storefront for digitally enhancing and distributing children’s books . Most of that content is made twice as interesting — to parents who buy devices and e-books — if it is in color.

Publishers want a color device to experiment with. Right now, publishers are trapped between grayscale books with limited or no interactivity and iPad apps they don’t have the money or time to develop. Nook Color will offer an opportunity to put books that are already sold in color — cookbooks, travel books, to name the most obvious — in an e-bookstore to find out how much people will pay for those, without having to get into the world of iPad app pricing and development.

That said, this shift won’t happen immediately. Amazon’s Kindle has about two-thirds of the US market for e-reader devices as well as e-books. The new, lower prices on the Kindles are drawing people into the market quickly. And once drawn in, it’s unlikely that they’ll skip over the cheaper market leader to go right for the $249 Nook Color. Instead, the new Nook is more likely to attract people already familiar with the market who are ready to move to a device that can satisfy deeper content longings.

Those content longings will go beyond books, however, to include music and video, two staples of the iPad experience. Suddenly B&N will find itself attracting a market of people who want to do more than read books from B&N. They’ll want to use the Android-based device to play games, check email, and surf the web, even if they primarily use it for consuming personal media.

But the apps needed to deliver those experience will only be available after developers learn how to develop for Nook Color. In other words, Android apps won’t automatically work on Nook Color, though it will be relatively easy for developers to port their apps to Nook, subject to B&N’s approval. (It should go without saying that one developer B&N will likely reject is Amazon should it try to develop a Kindle app for the Nook Color!)

While the device won’t unseat Amazon, it does throw down a gauntlet to Amazon and Sony both. Both of those companies could easily develop a tablet device focused on consumer media — and both have sufficient motivation to provide media beyond books.

But I’m starting to doubt whether Amazon will rise to that challenge. After all, Amazon may see itself as a software platform provider by this point — they make the Kindle platform available on as many devices as possible and they sit back and count the e-books they sell. Sony, on the other hand, could build a tablet that is part e-reader, part PSP, part video player, part VAIO computer — the options for Sony are endless. So consider B&N’s move as the first volley and sit back with me and see what else develops.


James McQuivey is an analyst at Forrester Research, where he serves Consumer Product Strategy professionals. James blogs here.

This article originally appeared in Forrester Research.

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