The Nook is now the e-reader to beat, but analysts say Amazon won't relinquish the Kindle's market share easily.

Antone Gonsalves, Contributor

October 21, 2009

3 Min Read

Barnes & Noble Nook eBook Reader

Barnes & Noble Nook eBook Reader

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Barnes & Noble Nook eBook Reader

Barnes & Noble's Nook e-book reader has the potential to change the market's landscape, so it's unlikely B&N's biggest rival, Amazon, will let its competitor bask in the limelight for long.

At least in the short term, the Nook, introduced Tuesday, is the e-reader to beat, leapfrogging Amazon's Kindle with integrated Wi-Fi and the ability to lend e-books to others who have B&N's e-reader software on a smartphone, PC, or Mac. In addition, the Nook supports epub, a major open e-book standard, and PDF, which enables users to upload documents from a computer.

"The Nook is a game changer for the current market and one that will force Amazon's hand," Gartner analyst Allen Weiner said in his blog.

Indeed, Amazon's response to the Nook will be watched closely because the online retailer is the company to beat in the e-reader market. Forrester Research pegs Amazon's share of the market today at 60%, with the Sony Reader a distant second. On the fringes are companies like Plastic Logic, Spring Design, and IREX, which have yet to have much of an impact.

For now, the Nook is attracting lots of attention because of B&N's clout as a book publisher and seller. The company has more than 700 retail outlets, and an online store that will soon have more than 1 million e-books for sale, a much larger digital inventory than Amazon's.

In addition, because B&N is supporting epub, Nook users will have access to 500,000 free, non-copyrighted library books available through Google Books. Such books aren't available on the Kindle, because Amazon uses its own proprietary format, .azw.

While both Amazon and B&N use digital rights management technology to prevent e-book piracy, B&N has introduced sharing within its protected house. Nook users can lend an e-book to others for up to 14 days. Just like lending a paperback, the lender will not have access to the e-book while its being borrowed. Features that allow people to share e-books are considered an important step toward moving e-readers from mostly avid readers and business travelers and into the hands of mainstream consumers.

Though limited, the Wi-Fi capabilities in the Nook are another advantage over the Kindle. B&N is hoping the wireless feature will get Nook users into its store, where they can use free Wi-Fi to browse available books while being fed discounts and other promotions.

The Nook's Wi-Fi and 3G wireless capabilities, both provided by AT&T, will only be able to access B&N's online properties. Amazon provides a 3G connection on the Kindle to buy books only from Amazon.

Neither the Nook nor the Kindle is likely to reach mainstream buyers because at $259 the devices are still considered too expensive. A recent study by Forrester Research found that the devices would have to be priced at $50 to reach the widest range of consumers. Such a low price wouldn't cover the price of the screen.

Nevertheless, the popularity of e-readers among book lovers is driving a growing market. Forrester recently upped its projection for e-reader sales this year to 3 million units from 2 million, with 30% of the purchases occurring during the holiday season. E-reader sales next year could exceed 6 million units, according to Forrester.

With so much potential profit dangling before it, Amazon is likely to respond to B&N's market assault sooner, rather than later.

"The next move in the e-reader space belongs to Amazon," Weiner said. "That sound you heard was the air being let out of the Kindle’s tires."

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