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Barnes & Noble Takes on E-Book Market

Will Offer Twice as Many Books as Amazon, Readable on Numerous Devices

By Published on . 10

SAN FRANCISCO (AdAge.com) -- Barnes & Noble will have a lot of marketing to do if it hopes to own a sizable share of the small but growing e-book market, currently dominated by Amazon.

Barnes & Noble's e-books are readable across numerous devices.
Barnes & Noble's e-books are readable across numerous devices.
The New York-based book retailer said yesterday it is launching the world's largest selection of e-books, readable across numerous devices, including BlackBerry and iPhone smartphones and most personal computers. It also said it is partnering with Plastic Logic to exclusively sell the start-up's e-reader device.

Having bowed out of the e-book market more than five years ago, the bricks-and-mortar bookseller is giving it another try, this time raising the ante by offering 700,000 titles -- more than twice what Amazon offers -- and making them device-agnostic. (Amazon's e-books are readable only on the Kindle.) Barnes & Noble is also pricing its service in line with Amazon's, with new releases costing $9.99.

Curiously, the bookseller is launching its e-book service without a dedicated reader, and analysts say it's because it can't afford to wait.

"They need a strong presence in the e-book market," said Forrester analyst Sarah Rotman Epps. "Every day that it takes a backseat to Amazon, it's losing future potential e-book customers."

Good timing
Barnes & Noble's announcement comes at an opportune time, as Amazon tries to untangle its recent public-relations snafus, including a lawsuit over cracked Kindle screens and the uproar over its erasures of George Orwell books "1984" and "Animal Farm," which were for sale in the Kindle store by a vendor that did not have rights to them.

Amazon's PR misfortunes notwithstanding, Barnes & Noble faces an uphill climb in a nascent but increasingly competitive industry that's worth about $700 million, or just under 3% of total U.S. book sales, based on data from Bowker and the Association of American Publishers.

Barnes & Noble did not respond to an interview request before deadline.

Why Barnes & Noble selected unknown quantity Plastic Logic to be its partner is a mystery, when it might be better off white-labeling the device and putting its own name on it.

"The question is: Why didn't they just come out with their own reader? Why have they chosen a partner that doesn't have a product that exists yet?" Ms. Rotman Epps asked.

Ms. Rotman Epps said she had not heard from Plastic Logic "a convincing strategy for marketing and distributing their product. They may still be formulating a strategy, or they may just be unwilling to discuss it."

Right now, Barnes & Noble has no plans to leverage one of its greatest assets: It does not intend to integrate its popular loyalty program with its e-book service, at least not initially, Ms. Rotman Epps said.

"That's a huge missed opportunity for Barnes & Noble to tap into its most engaged customer base," she said.

The challenge ahead
Amazon, which has not mass-marketed the Kindle, has been able to sell an estimated 1 million devices since its debut about two years ago. The giant online bookseller has relied on word-of-mouth, Oprah's famous plug last year, a fanatical media following and 65 million unique monthly visitors who can't escape its home-page plug for the Kindle.

Barnes & Noble is unlikely to take Amazon's viral approach, as it's now playing catch-up and challenging an e-tailing brand that has more equity built up in digital books than anyone else.

"It's going to be a very big challenge for Barnes & Noble," said David Rothman, editor and publisher of the e-book blog TeleRead.org, adding that Amazon has a lot of stickiness on its side.

"People simply like the huge bank of book reviews from customers built up over the years, [and they] like to use Amazon to keep records of purchases," he said. "Barnes & Noble has customer comments on books and is otherwise trying to build up its community site. But it has a long way to go. It has not integrated the community aspects into its book pages as extensively as Amazon has."

Mr. Rothman pointed out, however, that Barnes & Noble can still do very well without beating Amazon.

For instance, the retailer could go where Amazon hasn't gone, and differentiate itself on the digital-rights-management front, encouraging publishers to avoid overlaying DRM technology in their books.

"Many shoppers correctly consider DRM to be a threat to genuine long-term ownership of books," Mr. Rothman said.

Finding wireless partners
Barnes & Noble may also want to consider striking distribution and marketing deals with wireless players.

"It has to out-distribute Amazon, and out-partner these guys in the field, whether it's [mobile] platform vendors like Android or wireless operators," said John Jackson, VP-research at CCS Insight. "It's about picking the ones that give you the quickest path to scale."

Mr. Jackson said if Barnes & Noble could afford the revenue splits and concede some profits to gain market share, it could find a significant audience for its offerings. It could even conceivably make up for any upfront subsidies by selling more books, to take a page out of the way wireless carriers lure customers by offering subsidized cellphones and then making the money on the back end by collecting the usage fees.

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