A Tale of Two Tablets: Kindle and Nook Battle for Christmas Sales

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Kindled fires, hand-sized tablets, and tiny nooks used to be the stuff of Dickens’ novels.

But we’re a far cry from A Christmas Carol when it comes to tales of Kindles and Nooks. Amazon and Barnes & Noble have each launched a tablet version of their flagship media consumption devices.

Amazon’s diminutive Tiny Tim version of the Kindle Fire — topping out at 7" diagonal — is attractive to the consumer for one main reason: price. At $199, it has the potential to be an “iPad killer” in terms of volume sales. This price attracted wide interest from two types of consumers: those who wanted a color Kindle, at just a few dollars more than the previous monochrome version, and those who wanted an inexpensive Android device.

Barnes & Noble’s Nook Tablet has the same small form and dual-core processor as the Kindle Fire, but its Tablet spreads more Christmas cheer than Scrooge’s nephew. The Nook sports double the storage for a nominal price increase: The 16GB Nook Tablet costs $249 compared with the 8GB Kindle Fire at $199.

In an attempt to gain market share, Amazon has taken the anti-Scrooge approach, pricing the Kindle Fire lower than it costs to make the unit. Various estimates have placed the loss-per-unit between $10 and $25. The 7" version is rumored to be joined soon by a larger sibling, matching the 10.9" size of the iPad. Pricing has yet to be set for the larger version, but it’s quite possible Amazon will also price the unit below its cost.

Why would Amazon choose to price the Kindle Fire below manufacturing cost? The company is taking the razors-versus-razor blades approach: Customers who purchase the Kindle Fire (the razor) and subscribe to Amazon Prime are able to stream movies from its Instant Video (the razor blades). The company is calculating this experiment with the precision of Bob Cratchit counting out Scrooge’s farthings.

Application lock — and potential purchasing habits — for the Kindle Fire will draw users to Amazon’s shopping and media consumption services. Already, one of those precise moves is taking place around the Amazon Instant Video library: While the Kindle book-reading application is available on the iPad, Amazon has chosen to forego this approach for its streaming video. Instant Video has a library of 2,100 titles for instant streaming, many of which differ from Netflix, which means a number of movies in its library are not available on the iPad. In addition, the Instant Video rental service is also available on the Kindle Fire, but not the iPad. This is a calculated move, as Amazon’s Instant Video is available on set-top boxes, as well as Mac and Windows computers.

The Nook Tablet, by contrast, does not require consumers to use only the Nook for media consumption. An iPad application exists for Nook book reading, and the Nook Tablet uses Netflix — the same as the iPad — as its preferred streaming movie and television service. In the Nook Tablet model, the season can be celebrated on the Nook or on many other competing devices.

Why does Barnes & Noble take this approach? The company is in the habit of selling books, and it doesn’t seem to mind selling books for consumption using other devices. It is possible, should Barnes & Noble plan to get into the licensing of video content, that it would restrict playback of that content to its own devices. Yet, this is unlikely, since Barnes & Noble sees itself in product sales, while Amazon sees itself split between product and service sales.

When all is said and done, though, questions remain. Will the Nook Tablet or Kindle Fire be priced low enough, with enough compelling services, to keep the iPad from showing up under the tree this holiday season? Or, is the propensity of the American consumer, like the invigorated Scrooge at the end of A Christmas Carol, to go for the biggest and best goose in the window, which in today’s terms still seems to be a top-of- the-line iPad? 

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