Joe Wikert's DisruptorFest

B&N Desperately Needs To Become a Technology Company

Competition is always a good thing, right? In today's marketplace B&N is the company best positioned  to compete with Amazon for #1 in ebook sales. The problem is B&N still operates like a brick-and-mortar retailer while Amazon is a technology company to the very core.

Some have suggested that Microsoft's investment in B&N will help them make the transition to becoming a technology company. If spinning off the Nook business is what it takes for B&N to start thinking more like Apple, Google and Amazon then let's hope they do it soon.

As the owner of a Nook with GlowLight it's painfully obvious that B&N has a long way to go to catch up with Amazon. I like the Nook but sometimes it's quite clear it wasn't created by a technology company. Here are a few reasons why:

Highlights -- This one amazes me. Highlighting some text in an ebook should be as simple as touching the screen at the start of the highlight and dragging to the end of it. That's exactly how it works on the Kindle Touch, for example. Good luck trying to highlight text on the Nook. Dragging across the screen confuses the Nook. You have to just touch in one spot and wait for that word to be selected. You'll see vertical bars marking the beginning and end of that word but I dare you to move those and select a sentence. I can move the end marker but when I try to slide the beginning marker it moves the end one as well. It's a maddening experience and something B&N should have fixed long ago. This is simple highlighting after all...we're talking basic ebook app functionality!

Sideloading -- At least Amazon acknowledges they're not the only source of content for their customers. That's why they make it so easy to put your own mobi or PDF files on a Kindle device. For example, your Kindle has its own email address so you can quickly send files to it without physically connecting it to a computer. Then there's the handy Send to Kindle app, another nifty wireless way to move content. B&N doesn't offer either of these two options so you're stuck grabbing the USB cable and dragging files the old fashioned way.

Speed of Android app -- It always feels like an eternity the first time I launch the Nook app on my Android tablet. I just timed it and it took 12 seconds to load. That's ridiculous. The Kindle app loads much faster than that. In fact, all the typical operations in the Nook app take longer than they do in the Kindle one (e.g., going to the bookstore, doing a search, etc.) The Kindle app feels much more polished and optimized than the Nook one.

Samples -- This isn't a technology issue but one I couldn't ignore, especially if B&N wants to be a leader. It's not unusual to find a Nook book on B&N's site with no sample content. Nine times out of ten if I'm thinking of buying an ebook I grab the free sample first to make sure I like it. I've had two separate situations where there was no sample material for the Nook edition but Amazon offered a sample for the Kindle version. That should never happen.

B&N has contributed significantly to the commoditization of eInk readers. There's really nothing to distinguish one from the others these days. Yes, I like having the light built into my Nook but Amazon and others will undoubtedly offer the same feature soon too.

B&N CEO William Lynch needs to focus on answering this one important question: Why would someone want to buy a Nook over a Kindle? If their answer is "because we have GlowLight" he might as well just fold up his tent and go home now.

IMHO, that question is best answered by a technology-focused company, not one with deep roots in the brick-and-mortar world. Innovation opportunities are out there and they're not dependent on eInk devices. Companies like ReadSocial, BookShout and Inkling come to mind, to name a few.

B&N needs to consider the entire ecosystem they're operating in and develop a vision for what it could look like in 2-3 years. It wouldn't hurt to think a bit like Steve Jobs. He didn't want to make a slightly better MP3 player. His vision was to create an entirely new digital music platform. Apple is a technology company though and B&N isn't...yet.

Why Advertising Could Become Amazon's Knockout Punch

It all started harmlessly enough with Amazon's Kindle with Special Offers. That's the cheaper Kindle that displays ads when the device is in sleep mode or at the bottom of the screen when paging through the owner's catalog of books. It is very unobtrusive and, since it lowered the price of the device, has made that Kindle an extremely popular device.

Now there are rumors that Amazon is selling ad space on the Kindle Fire's welcome screen. That sounds pretty reasonable too as it's a simple way for Amazon to drive a bit of additional income that's pure profit for them.

Given that Amazon's goal is to offer customers the lowest prices on everything, what's the next logical step? How about even lower prices on ebooks where Amazon starts making money on in-book ads? Think Google AdWords, built right into the book. Of course Amazon won't want to use Google's platform. They'll use their own so they keep 100% of the revenue.

The changes the DoJ is requiring for the agency model means a retailer can't sell ebooks at a loss but they can still sell them for no profit, or breakeven. IOW, the 30% the retailer would keep on an agency ebook sale can be passed along to the customer as a 30% discount on the list price, but that's as deep a discount as that retailer can offer.

The rules are different with the wholesale model. Amazon already loses money on sales of many wholesale model ebooks. Let's talk about a hypothetical wholesale model title with a digital list price of $25. Amazon is required to pay the publisher roughly half that price, or about $12.50 for every copy sold, but that ebook might be one of the many that are listed at $9.99 for the Kindle. So every time Amazon sells a copy they lose $2.51 ($12.50 minus $9.99). Amazon has deep enough pockets to continue doing this though, so they're quite comfortable losing money and building market share.

So what's preventing Amazon from taking an even bigger loss and selling that ebook for $4.99 or 99-cents instead? In the wholesale model world, the answer to that question is "nothing is preventing them from doing that." And if selling ebooks at a loss for $9.99 makes sense, especially when it comes to building market share, why doesn't it also make sense to sell them at $4.99, 99-cents or even zero for some period of time? It probably depends on how much pain Amazon wants to inflict on other retailers and how much attention they're willing to call to themselves for predatory pricing.

Make no mistake about the fact that Amazon would love to see ebook pricing approach zero. That's right. Zero. That might seem outlandish but isn't that exactly what they're doing with their Kindle Owner's Lending Library program? Now you can read ebooks for free as part of your Prime membership. The cost of Prime didn't go up, so they've essentially made the consumer price of those ebooks zero.

Why wouldn't they take the same approach with in-book advertising?

At some point in the not too distant future I believe we'll see ebooks on Amazon at fire sale prices. I'm not just talking about self-published titles or books nobody wants. I'll bet this happens with some bestsellers and midlist titles too. Amazon will make a big deal out of it and note how these cheaper prices are only available thru Amazon's in-book advertising program. Maybe they'll still offer the ad-free editions at the higher price, but you can bet they'll make the ad-subsidized editions irresistable.

Remember that they can only do this for books in the wholesale model. But quite a few publishers use the wholesale model, so the list opportunities are enormous. And as Amazon builds momentum with this they'll also build a very strong advertising platform. One that could conceivably compete with Google AdWords outside of ebooks too.

As long as Amazon still has to pay the full wholesale discount price publishers and authors won't suffer. Other ebook retailers will though. Imgaine B&N trying to compete if a large portion of Amazon's ebook list drops from $9.99 to $4.99 or less. Even with Microsoft's cash injection B&N simply doesn't have deep enough pockets to compete on losses like this, at least not for very long.

At the same time Amazon will likely tell publishers they only way they can compete is by significantly lowering their ebook list prices. They'll have the data to show how sales went up dramatically when consumer prices dropped to $4.99 or less. I wouldn't be surprised if Amazon would give preferential treatment to publishers who agree to lower their list prices (e.g., more promotions, better visibility, etc.)

By the time all that happens Amazon probably has more than 90% of the ebook market and a nice chunk of their ebook list that no longer has to be sold at a loss. And oh, let's not forget about the wonderful in-book advertising platform they'll have built buy then. That's an advertising revenue stream that Amazon would not have to share with publishers or authors, btw, and that might be the most important point of all.

What do you think? Why wouldn't Amazon follow this strategy, especially since it helps eliminate competitors, leads to market dominance and fixes the loss leader problem they currently have with many ebook sales?

Another Missed Opportunity for Rich Content

I recently finished reading a terrific ebook. It's about the 1975 World Series between the Reds and the Red Sox and the title is Game Six. Even though I thoroughly enjoyed reading Game Six there was something missing. I remember watching that series, just like I watched every postseason baseball game growing up. The image of Carlton Fisk willing his game winning drive to stay fair is iconic. I can almost see Luis Tiant's herky-jerky windup and Bernie Carbo hitting that earlier homerun to tie the game up.

I say "almost" though, because 1975 was a long time ago and my memory is far from perfect. Game Six was fun to read but the author and publisher missed a huge opportunity to make it a much richer experience for their customers.

Why doesn't this book have a ton of links built in that point to related video clips and interviews? They're all over YouTube and many other sites but they're not curated in any manner. Search for "1975 world series game six" or "bernie carbo 1975 homerun" and you get all sorts of interesting results but there's no one guiding you to be sure and watch this one but don't bother with that one or watch this one before you watch that one. I would have gladly paid more for a richer edition of this book with all those links curated by the author included.

I should note that I read Game Six on my Kindle Touch. It's the last one I'll be reading on that device as I've moved on to the new Nook with GlowLight. The video links I'm talking about would have been useless on either device, but if they were integrated with the ebook I would have gladly read it with the Kindle app on my tablet. And just to repeat: The publisher could charge me more for this web-enabled version.

Notice I didn't say anything about selling or embedding these videos with the ebook. All I'm talking about is adding links to the videos that are all over the web, so there are no rights issues to worry about. This enhancement doesn't work for every book either, btw. Game Six is just begging for this enhancement though.

Publishers often complain about the prohibitive cost of creating apps out of books. Rather than going that far and spending a fortune, why not start with the inexpensive option of simply enhancing the ebook by curating everything related to it that already exists on the web?

B&N's Nook with GlowLight: Why I Still Use an eInk eReader

My new eInk reader, B&N's Nook with GlowLight, arrived last Thursday. I'm winding down my use of a Kindle Touch and wanted to move to another ebook retailer's platform going forward. This, of course, is a major headache since I've already bought dozens of DRM-protected ebooks from Amazon. I figure I'll read the last couple I bought on my Kindle and all future purchases will be from B&N...until some other device catches my eye. :-)

So what do I think of the Nook with GlowLight? It's just like my Kindle Touch, but with a built-in light. That pretty much sums it up. eInk eReaders have quickly become a commodity. Sure, B&N was the first to build a light source into their device but I'm sure Amazon and others will be close behind. When you're buying one of these devices it's less about the device and more about which retailer you want to commit to. That's an unfortunate byproduct of DRM.

I'm happy with the Nook so far but it's not wowing me. Then again, I didn't really expect it to. The benefit I see for the GlowLight isn't for reading in bed but for reading on a plane. About half the time I press that overhead light button on a plane nothing happens. The bulb is either burned out or the fixture is broken. I guess that's another sign of the times as airlines continue cutting back on their services. Let's just hope they spend more time making sure the engines are in better working order than the overhead lights.

Two years ago I didn't think I'd be using an eInk reader at all. I had just bought a first-gen iPad and was putting my Kindle in storage. That worked for about a year. I then saw a third-gen Kindle and decided it was thin and lightweight enough to carry with my iPad. In fact, the iPad case I was using had a handy pocket that the Kindle fit perfectly into.

I ditched my iPad a few months ago for an Android tablet and now I'll be taking that plus my Nook with me on the road. Even though I could easily read all my books on that Android tablet I still prefer to do all my long-form reading on an eInk device. Why?

It's not really about the display and how great it is in the sun as I rarely find myself reading outdoors. My eyes never had any problem reading for an hour or two at a time on the iPad display either. For some reason I never ran into the eye fatigue I get with my laptop's display. The reason I'm hooked on eInk displays has to do with battery life and device weight. If I'm reading for more than 20 minutes or so I'd much rather hold a feather-light eInk reader than any tablet out there. I also love it that I can go weeks without recharing an eInk device. It seems like my iPad and now my Android tablet's battery rapidly loses juice when using a reader app on it...much more so than when I'm just watching a video on the device. I end up having to recharge that Android tablet at least every couple of days. That doesn't sound like a big deal but it makes me much more miserly when I'm on a plane for several hours with no power source available.

There's talk of hybrid display devices coming out soon. Think of a tablet with the ability to switch to an eInk-like display that's (supposedly) easier on the eyes and offers a much longer window between charges. It sounds like it will still need a pretty large battery so it lasts long enought between charges in tablet mode. Unless battery technology changes radically between now and then I doubt I'd buy one since it will still probably be a fairly heavy device.

Thankfully these eInk readers are pretty inexpensive and incredibly lightweight. I might be in the minority but I see myself carrying both an eInk reader and a tablet for the forseeable future. And for now, at least, that eInk reader is B&N's Nook.