Barnes & Noble Beefs Up Streaming Capabilities of $199 Nook Color

A day after the New York Times ran a blistering assessment of the Kindle Fire -- comparing it as a possible brand failure akin to the Ford Edsel and New Coke -- Barnes & Noble announced Monday that it is upgrading the Nook Color with the “largest-ever software update to the device."

The Nook Color, introduced in fall 2010, is priced at $199, the same price as the Kindle Fire, and $50 less than the Barnes & Noble Tablet introduced in November. Barnes & Noble said the Nook Color update delivers 100 feature enhancements, access to “top video and music services” including Netflix and Flixster, apps, comics and more. Barnes & Noble also offered consumers a “today only” $25 gift card to shoppers who bought a Nook device online using MasterCard.

Barnes & Noble had its own demons to overcome several weeks ago when a Times reviewer, among others (CED Nov 8 p1), took issue with Barnes & Noble’s claim that its $249 Tablet had an HD display despite specs of 1,024 x 600. The company had to qualify the claim, noting that the Tablet could display HD content, although the screen wasn’t high-definition. While the Kindle Fire and Nook Tablet offer similar display resolution, some prominent reviewers -- including the Times, PC World and CNET -- have judged the quality of Nook Tablet’s display as superior to that of its less-expensive Kindle rival.

Without issuing numbers, Amazon has said the Fire is its biggest selling product ever in its brief two-month stint on the market, and it has been widely reported that the company is losing money on the hardware, selling it below total manufacturing cost (CED Nov 21 p7). In addressing the criticisms of the Fire, an Amazon representative told the Times that the company would issue an update for the Fire “in less than 2 weeks.” There was no reference to the update on the Amazon website, and the company didn’t return our request for comments.

The onslaught of Kindle Fire sales have come at the expense of Android tablets and the iPad, said Rob Enderle, principal analyst for The Enderle Group. The iPad is the product that has the most to lose from a competitor “several hundred dollars cheaper that does 80-90 percent of what it does,” Enderle said. Android tablets are also being cannibalized, but the iPad had “the biggest market share to lose,” he said.

Holiday sales of Kindle Fire have Apple “scared half to death,” something that Apple should have anticipated “because it’s gift-giving season and people are budget constrained,” Enderle said. Given the choice between a $500 and $200 tablet, consumers “didn’t need to see things remotely equivalent to jump to the lower cost offering to maintain budget,” he said. He said that’s especially true of a product a consumer is buying for someone else as a gift.

Amazon will have to learn how to defend against the kind of disparaging comments brought up in the Times article if it will compete successfully with Apple, Enderle said. “You have to be prepared to respond, and Amazon hasn’t yet created a mechanism to effectively respond to this kind of criticism,” he said. At the same time, he downplayed the problems reported in the Times article -- including a poorly placed power switch, long load time for Web pages, lack of privacy and “balky touchscreen” -- as being “mostly trivial.” Specifically addressing the issue of children being able to access inappropriate Amazon content, Enderle said that the Fire is a portable extension of the Amazon website and monitoring of content should be the responsibility of a parent, not Amazon. “That’s a sticky wicket whether you're talking about the iPad or the Kindle, he said.

While Amazon has the resources and ability to monetize the tablet through its vast product offerings, Barnes & Noble “only has books,” Enderle said. “Barnes & Noble’s problem is they're overmatched with Amazon,” he said. “If the Fire failed, Amazon would still do just fine,” he said. “If the Nook fails and we go to digital books, Barnes & Noble’s done,” he said. Barnes & Noble can’t afford to compete with Amazon on hardware spending, so it will be critical for Barnes & Noble to find companies to partner with “to match the revenue opportunity that Amazon has,” he said. “Otherwise, they'll be phased out."

In its announcement Monday promoting audio and video services for Nook Color enabled by the imminent update, Barnes & Noble said Nook Color customers will be able to download Netflix to watch movies and TV shows, and Flixster, which allows consumers to access their digital movies and TV shows on the go via the UltraViolet standard. More services are “coming soon,” Barnes & Noble said. The company also touted music services available through Nook Color including Pandora, Rhapsody, Grooveshark and MOG.

One company that’s benefiting from the sales of all three tablet makers is LG Display. The supplier of tablet displays to Apple, Amazon and Barnes & Noble owned 51 percent of global unit shipments in Q2 2011, according to IHS iSuppli. Apple, Amazon, and Barnes & Noble have different offerings in the media tablet market — “but they all depend on LG Display because of its advanced in-plane switching (IPS) display technology,” said Vinita Jakhanwal, senior manager of small and medium displays at IHS. Jakhanwal said LG Display’s amorphous silicon IPS LCD panels offer “faster response speeds, wide viewing angles up to 179 degrees, and no after image -- all while consuming 30 percent less power than conventional LCDs.” She added that LG Display’s “generous capacity” gives it economy of scale for a competitive advantage.