FORTUNE -- Ask Stephane Maes, Barnes and Noble VP of Product, why holiday sales of its Nook tablets were weaker than expected, and he'll tell you it wasn't due to lack of interest. When shoppers looked at the Nook HD, one of the first things they asked was whether apps bought for their Android phones would also work on the tablet. "When the answer was 'no,' we had people walk away," he tells Fortune.
Although Barnes & Noble (BKS) does not disclose how many Nook tablets and e-readers it has sold, the book chain has said sales have not met expectations. Overall revenues for the Nook segment during Barnes & Noble's most recent quarter were $316 million, a significant 26% plunge compared with the same period the year prior. Given the company's announcement last January that it would shutter roughly one-third of its retail stores, bringing the total number of locations to 500 or less, it's clear Barnes & Noble is still struggling to find its footing in its ongoing digital transition.
"The more consumption-based tablets like ourselves and Kindle had some challenges because of that," explains Maes. "People were looking for the more full, multipurpose tablet that had everything and has that ecosystem that's spread between phones and tablets."
Which is why this week, Barnes and Noble is rolling out a major software update that signals a major shift in strategy. Now, Nook tablets will have access to Google's (GOOG) online store, Google Play, which includes 700,000 apps, as well as digital books, movies, music, and magazines. To be clear, this means Nook tablet owners will be able to buy and read e-books from Google Play just as easily as they can buy books from Barnes & Noble itself.
In essence, that makes the Nook a truly full-fledged Android tablet, but it also introduces a possible challenge for Barnes & Noble, which is seeing continued growth in digital content sales, an area that includes e-books. If Nook owners can just as easily buy e-books via Google Play now, won't that hurt Barnes & Noble's bottom line even further?
"Will we lose some content sales? Of course," Maes admits. "But we also believe we will also gain a lot of content sales at the same time because we are world-class merchandisers and curators of content. There were a lot of people who didn't want to enter our ecosystem before ... Now, all that has changed."
If it wants to have any chance of succeeding, Barnes & Noble needs to build an ecosystem of services for its tablet — and quickly.
FORTUNE -- The idea of owning a thriving content ecosystem is nothing new where companies like Apple, Amazon and Google are concerned. But can a smaller company like Barnes and Noble (BKS) do the same?
Come late October, the bookseller will try when it starts shipping two MOREJP Mangalindan, Writer - Sep 26, 2012 6:51 AM ET
Sen. Chuck Schumer (Dem., NY) is the latest to suggest that Obama's DOJ got this one wrong
FORTUNE -- From the day it was filed there seemed something ill-conceived about the Justice Department's antitrust suit against Apple (AAPL) and five of the six major book publishers.
The optics, as political operatives like to say, were wrong. Here was the government helping Amazon (AMZN) regain monopoly control of the e-book market by attacking MOREPhilip Elmer-DeWitt - Jul 19, 2012 6:15 AM ET
Barnes & Noble won't confirm that its e-reader will run its new partner Microsoft's upcoming mobile operating system. But here's why it should.
FORTUNE -- When Barnes & Noble announced a strategic partnership with Microsoft earlier this week, they set tongues wagging. It wasn't only because the Redmond, Washington-based software giant will invest a whopping $605 million in the Nook business over the next five years. What technophiles frothed over was MOREJP Mangalindan, Writer - May 3, 2012 3:11 PM ET
William Lynch talks about the future of the Nook business -- including how the company's software could be used in Windows and the potential of NFC chips showing up soon.
FORTUNE -- The battle for e-book dollars became a lot more interesting earlier this week when Barnes & Noble (BKS) announced a strategic partnership with Microsoft (MSFT). Over the next five years, the Redmond, Washington-based software giant will invest at least $605 MOREJP Mangalindan, Writer - May 1, 2012 2:47 PM ET
Barnes & Noble is adding a brilliant light to its e-reader. Does it work? And, is it enough to goose sales?
FORTUNE -- Although black-and-white e-readers are generally lighter, cheaper, and snappier than they used to be, they still don't excel in low light. That's an area where tablets and their brightly lit color screens have a clear advantage. With its new $139 Nook, arriving this week, Barnes and Noble (BKS) MOREJP Mangalindan, Writer - Apr 24, 2012 11:11 AM ET
The latest version of the company's e-reader features some very bright features.
FORTUNE -- Ask a Nook or Kindle owner what they love about their readers, and they may rattle off several points: they're affordable, lightweight, and easy to read e-books indoors or outside. What Barnes & Noble believes users don't love is trying to read such devices in low light. In an era of such whiz-bang technology as touch screens and pervasive MOREJP Mangalindan, Writer - Apr 12, 2012 4:30 PM ET
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* Once the "brutal capitalist" of booksellers, Barnes & Noble (BKS) now finds itself the David to Amazon's Goliath. Can CEO William Lynch navigate the company and its well-received Nook readers to long-term success? The New York Times takes a look and also reveals that a new Nook is likely coming this spring. (The New MOREJP Mangalindan, Writer - Jan 30, 2012 3:43 AM ET
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* Barnes and Noble (BKS) may spin off its Nook e-reader business, news that came as a surprise to many. The company slashed its fiscal 2012 guidance and now expects sales of $7.1 billion instead of the $7.3 billion forecast. The reason? Lower-than-expected sales of its Nook Simple Touch. (CNNMoney)
* Over at MOREJP Mangalindan, Writer - Jan 6, 2012 12:11 PM ET
Likely to leave the field to Apple, Amazon and Barnes & Noble, according to DigiTimes
Taipei-based DigiTimes, which has been churning out rumors from Asian electronics parts suppliers as fast as its correspondents can type, reported Thursday that unnamed "sources from upstream supply chain" believe that PC makers such as Hewlett-Packard (HPC), Dell (DELL), Acer and Asustek will "gradually phase out" of the tablet market.
According to DigiTimes:
With Amazon offering its Kindle Fire at MOREPhilip Elmer-DeWitt - Nov 18, 2011 6:25 AM ET
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