Market Insight

Nook Media and Samsung partner to launch the Galaxy Tab 4 Nook

August 22, 2014


Want to learn more?
Have an expert contact you.

Nook Media, a Barnes and Noble subsidiary, and Samsung teamed up to develop a co-branded 7-inch Android tablet on Samsung’s hardware with a customized version of Barnes and Noble’s proprietary Nook software running on top of the Android operating system.

The Galaxy Tab 4 Nook is built on Samsung’s Galaxy Tab 4 7.0 model and includes a 7-inch, 1280 x 800 pixel touchscreen, a 3 megapixel rear camera and a 1.3 megapixel front-facing camera. The tablet is WiFi only with 8GB of internal memory and includes a microSD slot, allowing users to add up to 32GB of additional storage.

Nook’s customized software operates along with Google’s Android 4.4. Some features of the Nook software include:

  • A widget on the home screen providing access to all Nook library content,
  • A “Reading Now” button that directs users to content most recently read
  • Several home screen shortcuts making it easier to discover and purchase new content

Barnes and Noble is adding free content nominally worth $200 with each purchase, including:

  • Best sellers: “Freakonomics,” “The Wanderer,” and “I Am Number Four” ,
  • A maximum of four, two-week trial subscriptions to any of 12 magazines including: Us Weekly, Sports Illustrated and Cosmopolitan,
  • One episode each of “Hannibal,” “Orphan Black,“ and “Veep,”
  • $5 credit to the Nook Store.

The new Nook is available to purchase for $179.

Our analysis      

Barnes and Noble was an early mover in tablets but has seen softer demand in recent quarters as the North American market has both become more competitive and increasingly saturated. In February, Barnes and Noble laid off its Nook hardware engineers preceding an announcement in June that the company would no longer develop its own hardware. The company would instead purchase one million Galaxy Tab 4s from Samsung over the next 15 months. In an effort to cut costs, minimize risk, and refocus its strategy, Barnes and Noble is concentrating on software and content and contracting with Samsung to develop the hardware for its Nook devices.

B&N’s response is a strategic shift away from the sort of vertical integration that characterizes the iPad, Kindle Fire and previous generations of the Nook tablet. Instead, the Nook company has adopted a tablet strategy that is similar to Tesco’s approach with the Hudl characterized by:

  1. third party hardware combined with in-house apps that highlight the company’s strengths.
  2. aggressive price promotion: Tesco offer the Hudl to Clubcard members for a heavily discounted price, B&N is offering a content bundle with a higher nominal value than the list price of the tablet

The approach has worked well for Tesco in the UK where the Hudl managed to outsell the Kindle Fire in Q4 2013.

This leaner strategy comes at the cost of reducing the level of control that Barnes and Noble has over its devices and reducing the ways it can differentiate itself. However, Amazon’s recent experiences suggest that competing on hardware at the high end of the tablet market can be challenging as it leads to direct comparisons with the market leading iPad; while the broader Android market has demonstrated itself time and again to be very price sensitive, rather than hardware sensitive. In this context, it could be argued that B&N is being very progressive in its approach to the realities of the Android tablet market by offering an aggressive promotional bundle that both makes the device look like a good value and encourages users to start using its content ecosystem. It is significant that this ecosystem is focused on ebooks and digital magazines which provide some of the better service provider margins in all of digital entertainment and which therefore have the potential to cross-subsidize the device and its aggressive content bundle in effect creating a subsidy model without an operator subscription.

There is a distinct upside for Samsung in the new arrangement. The company has struggled to expand its tablet sales in recent quarters, following several years of explosive shipment growth. The Nook partnership gives Samsung access to designated brick and mortar and online retail space where Samsung tablets have no competition, essentially giving Samsung exclusivity at those stores and on the Barnes and Noble website. 

 

Geography
North America USA
Share facebook Twitter Google Plus Linked In Add This Contact Us