August 13, 2012, 2:24 PM

Barnes & Noble cuts the prices of its Nook tablet and e-reader

Experts say the price cuts are essential for the Nook to compete with other tablets.

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Barnes & Noble Inc. has cut the prices on its Nook e-readers and tablets.The retailer is now selling its eight-gigabyte Nook tablet for $179, its 16-gigabyte tablet for $199 and its Nook Color e-reader for $149. That’s a $20 drop for the Color and the eight-gigabyte tablet, and a $50 price cut for the 16-gigabyte Nook tablet.

Barnes & Noble announced the price cuts on Saturday, touting the new lower pricing as an incentive for consumers to pick up a Nook during back-to-school shopping trips. But several analysts say Barnes & Noble needed to drop its Nook prices to stay competitive in the tablet space.

“The price cut of the Nook tablet comes as no surprise, especially after the launch of Google's Nexus 7,” says Peter Han a consumer devices analyst at mobile hardware and telecommunications research and consulting firm Current Analysis Inc. “The Nook tablets had the same pricing structure as the Nexus 7, however, the Nexus 7 offers better specs, a better user experience, and more apps are available through the Google Play Store than Barnes & Noble. Also these devices are sold at or near cost and profits are made from digital content purchased through the device, so the price drop is not a big shock.” 

Han says the Nexus 7 has a higher-resolution display than the Nook tablet and a front-facing camera, which the Nook tablet lacks. It also runs the latest version of Android, whereas the Nook tablet runs an older version with a custom overlay, Han adds.

Google’s new Nexus 7 Android seven-inch tablet, is manufactured by Asus, sells for $199 and offers eight gigabytes of storage, while Barnes & Noble’s lower pricing now gives consumers 16 gigabytes of storage in its tablet for the same price tag. Both the Nook Color and Nook tablets, which also use the Android operating system, also offer 7-inch screens.

Despite two tablet newcomers: Google’s Nexus 7 and Microsoft’s new Surface—which were unveiled this summer—Amazon Inc.’s and Apple Inc.’s two tablets continue to dominate the tablet market. Amazon’s 7-inch Kindle Fire starts at $199 while Apple’s 9.5-inch iPad 2 starts at $399. And it’s rumored the two leaders will launch new versions of their tablets in the near future.

“The Nook tablets are more than a year old,” says Avi Greengart research director, consumer devices for Current Analysis. “I don’t know if Barnes & Noble is about to update them, but they are already seeing much stronger competition from Google and Asus’ Nexus 7, which is explicitly being marketed as a media consumption device. Then we move to the rumored competition yet to come, with Amazon—and  possibly Apple—potentially unveiling new 7-to 8-inch devices this fall. Given that competitive environment, a price reduction on Barnes & Noble’s older models is not only justified, it is imperative.”

Apple has sold tens of millions of iPad tablets and is by far the market leader; Amazon has sold perhaps six to 10 million Kindle Fire tablets, which is hot for a tablet that’s less than a year old, experts say. The companies have not released exact sales figures.

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