Transcript: E-Readers Dead Or Alive?

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Interview with Jeremy Greenfield, editorial director, Digital Book World

For podcast release Monday, September 8, 2014

KENNEALLY: An auspicious setting and the unveiling of a possibly revolutionary device – it could be a make or break moment in the company’s history.

No, we’re not speaking of tomorrow’s much anticipated announcement by Apple from the very same venue in Cupertino where Steve Jobs dramatically unwrapped the Macintosh exactly 30 years ago. Instead this was New York City, at the flagship store of Barnes & Noble.

Welcome to Copyright Clearance Center’s podcast series. I am Christopher Kenneally for Beyond the Book. In August, the nation’s last standing bookstore chain presented for the first time the latest edition of the Nook e-reader, its first new tablet in over a year.

B&N has committed to purchase one million of the e-readers from partner Samsung, but Jeremy Greenfield, editorial director for Digital Book World, wonders why anyone else would want to buy one. He joins me now from his Manhattan office. And welcome back to Beyond the Book, Jeremy Greenfield.

GREENFIELD: Thanks, Chris. Great to be here.

KENNEALLY: Well, we’re looking forward to chatting with you about this because there have been a number of recent announcements from the e-reader world. This one caught our eye, if for nothing other than its rather long four-barreled name. It’s the Nook Samsung Galaxy Tab 4. Tell us what this device is and what Barnes & Noble is hoping to accomplish with it.

GREENFIELD: It’s essentially a next generation Samsung Android tablet with a few extra features that supposedly enhances the reading experience for those who want to read e-books on it versus do other things tablet do.

And Samsung has been very successful with this strategy. It has mid-sized products called phablets, which are somewhere between a phone and a tablet. It has products that are geared specifically toward business. And now it has one that is geared specifically toward reading with Barnes & Noble.

The question that I have is how much is this going to move the needle for Barnes & Noble? This product doesn’t need to be a runaway success for Samsung to benefit from it. It just needs to find a small niche market. But for Barnes & Noble, which had at one point much larger ambitions in the tablet marketplace to be successful, I think it needs to find a wider acceptance.

KENNEALLY: Well, indeed, and there are a lot of questions here. And let’s remind our audience about what its ambitions were at Barnes & Noble just a few short years ago and what had changed.

GREENFIELD: So Barnes & Noble had its own tablet business. In fact Barnes & Noble was one of the original tablet makers, depending on what you consider a tablet, with the Nook Color. It was a color e-reader that a lot of people had jail-breaked, as it were. They sort of broke it open and used it in ways that were not intended by the original manufacturer to become a tablet. It could look at e-mail. It could be a Web browser.

And then Barnes & Noble went into producing the Nook tablet, which by all accounts was a massive failure. And the company shut down the program last year. Since then, it has partnered with Samsung on creating a new tablet program because it was unable to sustain the level of investment and competition that was necessary.

Really, the turning point for Barnes & Noble was about a year and a half ago over Christmas, when it sold fewer tablets than in the previous year, which really ran counter to everything that we had seen from all other tablet manufacturers. Samsung was booming. Apple was booming. Asus was booming. All the other players were selling more tablets, except for Barnes & Noble, which sold fewer. And the company, I think wisely, decided to exit that part of the business.

KENNEALLY: Right. But it’s not a business they can exit entirely. A bookstore chain like Barnes & Noble has to concede the fact that digital book reading is here to stay, and they want to be a part of that marketplace. And so what I’ve read they’re trying to do is to leverage what they consider to be the Barnes & Noble advantage. And what exactly is that?

GREENFIELD: So Barnes & Noble has what it calls the Barnes & Noble advantage, which is that you have your Samsung Barnes & Noble Nook tablet. And if you want help with the tablet, not just from a person sitting hundreds and hundreds or thousands of miles away or someone on the phone, but an actual real life person or you want book recommendations, Barnes & Noble invites you to go to one of its 700 or so stores and talk to a real live person.

And these booksellers that Barnes & Noble has in its stores have been trained, apparently, to deal with these kinds of requests – you know, helping with the technology itself and also with the kinds of book that you can read using the Nook platform, which – because it has such a huge catalog, just like all the other major players – is millions and millions of books.

KENNEALLY: Well, indeed. And the price point, I understand, for the Nook Samsung Galaxy Tab 4 is $179, which compares rather favorably to iPads. Of course they’re not equivalent devices, but an iPad is going to start you at about $299 and go up from there. And so it’s attractive that way. There’s a package of content that comes with it and some store credits and so forth. So we know that Barnes & Noble is putting a lot on this.

What about Samsung? You mentioned how they’ve been broadening their reach by going into niche marketplaces, and so this is just another niche to add to that quiver.

GREENFIELD: Absolutely. And Samsung could very well partner with an ESPN or Sports Illustrated on a sports focused tablet or with Conde Nast on a lifestyle or fashion focused tablet if it deemed necessary and easily create software around those different verticals, just like it has for reading and Barnes & Noble. That makes the experience a little bit better and sort of creates a new marketing and distribution channel for the Samsung hardware product.

So if Samsung sells a million of these tablets, that would be a nice little successful niche that the company develops through Barnes & Noble. Unfortunately, a million tablet sales for Barnes & Noble really probably won’t move the needle all that much for the company. It’s not a tremendous amount of revenue compared to the size of the company.

And it’s likely a loss leader. We don’t know what this tablet costs. We’ve contacted the company for the kinds of costs of the tablet – not to mention the content, as you mentioned, that Barnes & Noble is giving away with the tablet. So we don’t know how much money the company makes or loses every time it sells one of these, but it can’t be a tremendous amount. What it’s relying on is content sales down the road.

And that’s been the company’s stated strategy for many years – to sort of turn that corner of profitability. Over the past few years, the company has lost less money than it had in the years prior through selling less unprofitable hardware and trying to up its content sales – and really just cutting costs is really the main thing the company has done – but it hasn’t really worked yet in terms of growing its market in the U.S. It really hasn’t done much except for shrink the size of the Nook division.

KENNEALLY: Interesting. And we started by telling our listeners that this is a story about Barnes & Noble. But the more I listen to you, I’m thinking it’s a story about Samsung.

And another announcement from them just recently concerns a partnership with the Frankfurt Book Fair. They are the so-called innovation partner at the 2014 fair and are going to be showcasing a variety of their devices there to tell the story that they like to tell about embracing new forms of storytelling and evolving the reader experience. So clearly they are all in as far as being a part of the book-reading world.

GREENFIELD: Yeah. In 2013, Samsung showed up kind of unexpectedly at Book Expo America. It was sort of mysterious. And we poked around a little bit, and we found out that they were talking to publishers trying to figure out if the company wanted to develop its own content portal with e-books to compete with some of the other guys.

And so far Samsung has been a really credible competitor to Apple on the hardware side but really, in everything it’s tried to do, so far as I can tell, on the content side, it hasn’t really matched up with any of the other guys. But I think, with this partnership with Barnes & Noble combined with what it’s trying to do at the Frankfurt Book Fair coming up later this year – it goes to show that Samsung hasn’t quite given up on the e-book market just yet.

KENNEALLY: Well, indeed. And I’m glad you say that about their 2013 appearance at Book Expo, because I thought much the same thing, only I thought it to myself. There was a very large stand and a very prominent play they were making, but it was unclear just what they were there for. They are being clearer about what they’re trying to do at the Frankfurt Book Fair.

And I have to tell our listeners that – hopefully, there won’t be any confusion – they’re going to be giving a keynote to one of the conferences – the CONTEC conference on October 7th – and it’s called “Getting Beyond the Book” and that has nothing to do with us here at Beyond the Book. But clearly it’s an interesting play for them that they really want to be as close as they can be to that publishing environment.

We had another story on e-readers just recently as well, and that was from an interesting player – again very much a niche player, here in the U.S. at least, and that’s Kobo. And they have introduced a waterproof device. I think you called it in your report – or somebody at DBW did – the ATV or the SUV of the e-reader world. Tell us about the Kobo Aura H2O.

GREENFIELD: Yeah, unfortunately, I was on vacation last week and was unable to cover that, so someone else here handled that. But I have known about that development for a while. And, to me, this is the next generation of e-reader – of dedicated e-reader. And a lot of the business that these companies do – that Amazon and Kobo and Barnes & Noble do – when it comes to selling e-books, happens on these e-readers.

The people who use the e-readers as dedicated reading devices – these are the power readers who buy a lot of the books. They buy the more profitable backlist books and not just the front-list loss leaders – although they buy those as well. And so these are really important customers for the Kobos and Amazons of the world.

Kobo has had a short history of being fairly innovative in the e-reader space and being a little bit ahead of the game. It’s widely thought that the Kobo Aura HD is probably the next best e-reader after the Kindle Paperwhite, if not just as good as the Kindle Paperwhite.

And the Aura H20 or the Kobo H2O seems to be the next step in that process. You know, it’s the first fully waterproof high-end e-reader out in the market that we know of that really matches some of the other high-end ones out there.

We don’t know what Amazon has planned next for e-readers. There have been persistent rumors of a next-generation e-reader from Amazon, but we don’t know what’s going to happen next.

And Kobo has been, I think, fairly smart with its strategy here because, while Barnes & Noble had made this really disastrous bet with tablets and has had to retrench and figure out a new strategy and now is trying to go with apps and distributed apps throughout different other devices – other manufacturers’ devices – Kobo has really – and it’s stated as much – doubled down on this power reader – this person that wants this high-end reading experience.

They’re a very small percentage of the readers, but they buy a fairly high percentage of the books. And by delivering this sort of next-generation experience, Kobo might be able to capture the fascination of some of these folks who – you know, they may even have Amazon devices or other companies’ devices and say, well, I really also want to read in the bath or at the beach or by the pool – very common places to read – and not have to worry about my high-end device.

It costs about the same though as the new Nook tablet. So you could have a fully functioning tablet for the same price as a new Kobo e-reader. Of course it’s probably not waterproof.

KENNEALLY: Well, so this brings the question that everybody is asking, and that is about the future of dedicated e-readers in a world of tablets and smartphones. And give us your perspective, Jeremy Greenfield. How likely is it that, five years from now, we will continue to see these kinds of devices? Or do we think that they will be flooded over in a tsunami of tablets and smartphones?

GREENFIELD: I think we’re going to continue to see these devices. I don’t think that they’re going to be the exciting new segment that they were three or four or five years ago, because they do have utility above and beyond all of the newer devices. The prices continue to go down or remain steady, even as prices for other kinds of goods go up.

And they do offer a lot of utility. I don’t think we’re going to see a non-backlit waterproof tablet anytime soon. And the advantage that that offers for the reader is that you don’t have to recharge it for a month or so, depending on how much you read.

It doesn’t have all of your entire life on it, like your e-mail and all of your information. You have to closely guard it. It’ll be waterproof, as Kobo has shown that it can do right now. And it’ll be relatively less expensive, likely. We’ve been talking for years about free and cheap e-readers. And while we haven’t quite seen a free e-reader yet, we’ve seen very, very inexpensive ones.

So I think all of those things combined will mean that the e-reader will continue to be a niche product. But, you know, time will tell.

KENNEALLY: Well, it’s this category of the power reader that will keep the dedicated e-reader alive. They really enjoy having that supplemental device that is dedicated to their book-reading experience.

GREENFIELD: That’s true. And we’ve discussed that at length. But also you have to think about the companies that produce these E Ink screens, E Ink being the largest of them.

If it’s just going to be a niche device, a lot of these companies, which are investor backed or publicly owned in some ways, are not going to be able to survive. They need to be able to produce other kinds of displays that continue to grow and legitimize their business, especially as the price for these devices continues to go down.

So they are looking at doing things like at doing things like supermarket displays, other kinds of inexpensive displays that need to change quickly. But I wouldn’t rule out related uses, for instance in schools or in offices, where paper products need to be passed out and need to change frequently, to sort of reduce costs and reduce waste.

So we may even see growth in this sort of e-reader area outside of just the power readers, but I think that’s really going to be the sweet spot for the dedicated e-reading device.

KENNEALLY: Jeremy Greenfield, editorial director of Digital Book World, with the latest analysis on e-readers and their future. Thanks so much for joining us on Beyond the Book.

GREENFIELD: Thanks, Chris. Always a pleasure.

KENNEALLY: Beyond the Book is produced by Copyright Clearance Center, a global rights broker for the world’s most sought-after materials, including millions of books and e-books, journals, newspapers, magazines and blogs, as well as images, movies and television shows. You can follow Beyond the Book on Twitter, find us on Facebook and subscribe to the free podcast series on iTunes or at our Website,

Our engineer and co-producer is Jeremy Brieske of Burst Marketing. My name is Christopher Kenneally. For all of us at Copyright Clearance Center, thanks for listening to Beyond the Book.

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