Against the backdrop of Amazon Kindle Fire sales that may have exceeded 5 million units last quarter, Barnes & Noble made statements last week that implied they were seeking to spinoff the Nook division. All said, Barnes & Noble may not have the resources needed to grow the Nook business into a profitable competitor to the Kindle.
Ironically, many credit the Nook and eBook sales with helping Barnes & Noble avoid the fate that befell long time competitor Borders last year. It’s hard to see exactly how they would benefit from spinning off the Nook. It’s believed that both Amazon and Barnes & Noble sell their eReaders at a loss, intending to make up for that by profits on the content sold through that hardware. It makes sense that Barnes & Noble would want to escape the loss making part of the equation, but what partner would want to pick that up?
Much of the popularity of the Kindle Fire has been ascribed to its $199 price point. This low entry price is credited with a small decline in iPad sales in December. And it seems likely that despite some quality and usability issues, the Fire will take the number 2 tablet position behind the iPad. Again, one of the reasons Amazon can do this is that their profit comes from content sales on the Fire. A hardware only tablet maker has to make a profit on the hardware itself, which may not be possible at a $199 price point, or even the $249 of the Nook Tablet. If that is true, then Barnes & Noble will have a hard time finding a partner with the deep pockets needed to take that kind of risk.
Then what is the point of the announcement? Is this some tasty bait being dangled before the likes of Google perhaps? While Google already has an eReader tablet, it has not been a great success, nor has their eBooks store relative to Amazon and Barnes & Noble. The Nook Tablet is powered by Google’s Android operating system, and is arguably one of the best Android tablets on the market. A Google Barnes & Noble partnership could be profitable for both and give publishers a viable counter balance against Amazon. Still, it’s hard to see this happening. And in the absence of additional resources, the sun may be setting on the Nook far too soon.