Nook and Agency Pricing

For those that don’t know, the Department of Justice and Apple just got done fighting a relatively short legal battle over price fixing in the publishing industry. The DOJ contended that publishers got together and agreed they would control prices instead of retailers, and Apple helped facilitate that. All the publishers settled but Apple decided to fight it. And they lost because it was a blatant example of price fixing.

That’s not the point, that was just to fill in those who didn’t know. If you disagree, fine, I’d like to see your comments on the matter.

Point is, I’ve been seeing several posts about whether or not agency pricing is what helped build the Nook and whether or not the DOJ’s case against Apple was what killed it. This has more than likely been driven by Barnes & Noble’s disastrous earnings meeting this week, where they basically told all their investors everything was fine and they need to stop worrying.

Which to me, says it all. The DOJ case has nothing to do with B&N’s future, or if it does it’s their own damn fault. In business, if you are relying on outside forces to ensure the success of your enterprise, you are vulnerable to them. Even if you disagree with whether or not there was an issue of price fixing, if you are a retailer relying on your vendor’s pricing model that influences the way your competitor’s do business, you are asking to get smacked down.

The Nook is an alright piece of hardware, but here’s the situation. It’s competing against excellent pieces of hardware in the form of iPad, the Galaxy, and other better tablets. The only advantage it has is price. Amazon plays that game too with the Kindle Fire, but they have the world’s best eccommerce engine backing it up. Barnes & Noble’s website is terrible, buying on the Nook is worse.

A quick lesson for Marketing 101. There are four pillars.

  • Price (What do you charge)
  • Promotion (How do you tell people about it)
  • Product (What it is)
  • Place (Where it is, or how do you get it to the customer)

This is an oversimplified model they teach in business school, but it holds up pretty well. Look at this example. The Nook is good, probably better than the Kindle Fire. It certainly was better when they just had the Kindle, but it has never, ever been as good as the iPad. They have the advantage of the price of the hardware, but not on content.

Here is where things diverge though, distribution. Amazon has made it as easy as possible to find what you want and get it. It makes getting a Kindle more attractive, which then increases their sales through people who just buy from Amazon using that platform. B&N never bothered to provide this type of backing. It was fine, but find didn’t cut it and that was more important than anything else. It still is. Ask Apple. They did the exact same thing with iTunes and the iPod. The hardware was great, better than anyone else’s, but it’s not what made it stick. It was a single place to download and organize music.

It wasn’t about price, and frankly, everyone has to deal with lower prices. That is business. It is one of the pillars of marketing for a reason. But B&N’s competitor beat them on price and distribution, while another beat them out on their product.

Personally, I think B&N will be fine, even with all this turbulence. It won’t be the Nook that does it though, not unless they drastically change the website (which they did promise in the earnings call). It is, however, a bad sign when they act like there’s no writing on the wall.

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About enathansisk

My name is Nathan Sisk, and I am a writer and aspiring author.
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