Barnes & Noble Enters The Electronic Reader Business

Last Tuesday's Wall Street Journal reported on Barnes & Noble's entry into the electronic book market. In a direct challenge to Amazon and its Kindle e-reader, the bookstore chain is seeking to extend its business into providing e-books across a range of readers. And, the Journal report states, probably enter the e-reader market, as well, with its own proprietary device, to be developed by Plastic Logic.

I find this very exciting.

Up to now, Amazon has had a lock on this market, although nobody knows just how lucrative it has been. Whatever that profitability level has been, watch it shrink.

Credit Barnes & Noble, too, with not waiting around to be cannibalized by a potentially growing market in electronic readers and content.

The nearby, Yahoo-sourced price chart of Barnes & Noble and the S&P500 Index shows that the bookseller has held its own with the market over the past five years, but dipped lower during the turmoil of the past 18 months.

If you think about it, there's little about Amazon's book and e-reader business that B&N can't duplicate. It has a well-known brand, and its website ought to be able to hold its own, as well.

If this boils down to a battle of pricing and features of e-readers, Amazon could be in a lot of trouble. In fact, per classic marketing theory, Amazon could actually end up paying a price for being the 'first mover' in this new publishing area.

Often, early entrants into a new field eventually suffer by becoming the target of later, better-focused and technologically-superior competing products.

Given that neither Amazon, nor B&N are doing in-house development of e-readers, it could well come down to the delivery of content. On that basis, too, B&N should be able to remain competitive.

I wonder if Jeff Bezos is worried. My guess is he should be. Not because B&N could become the market share leader in e-readers and e-books, but because it could slow Amazon's own growth, dragging the online merchant back to parity among other competitors in this new publishing area.