Barnes & Noble's Next Mistake?


As much as Barnes & Noble (NYS: BKS) may loathe e-tailing rival (NAS: AMZN) , it sure wants to be just like Jeff Bezos' baby.

The bookseller has now announced its new Nook Video service in a move intended to bolster its content ecosystem in much the same way Amazon has with its Instant Video service. B&N has already lined up a stable of content partners to serve up TV shows and movies, including HBO, Sony, Walt Disney (NYS: DIS) , and Viacom, among others.

The service will be available beyond just B&N's Nook devices, and TVs, smartphones, and tablets will all be able to access Nook Video. The company will be launching apps for other devices in the near future and will also integrate with physical media purchases through UltraViolet, the digital distribution platform put together by a slew of content providers.

By no means will this offering be a Netflix (NAS: NFLX) killer, though not for a lack of trying. Besides, Netflix has a free Nook app, while Amazon's Instant Video is obviously absent.

The news comes just as Barnes & Noble is expected to unveil an updated Nook Tablet later this fall ahead of the holiday shopping season. Leaks over the summer suggested this new 7-inch device would have some sort of "revolutionary screen technology" that was developed in-house, which sounds a bit odd for a company far removed for the display panel business, especially since this technology has allegedly never been seen in any other consumer product before.

Updated Nook hardware is a requisite, considering Amazon's new Kindle Fire HD lineup as well as Google's (NAS: GOOG) Nexus 7, so B&N will face stiff competition in the 7-inch tablet market.

Nook Tablet (left) vs. Kindle Fire HD (middle) vs. Nexus 7 (right). Sources: B&N, Amazon, and Google.

After strong growth in recent years, the growth of the Nook business is starting to slow. Last quarter, Nook sales grew just 0.3% to $192 million, and the segment remains unprofitable due to heavy investment.

While the motivation behind launching a video service is obvious in that it will build the ecosystem, it I think it will prove to be B&N's next mistake.

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Evan Niu, CFA owns shares of Walt Disney. The Motley Fool owns shares of, Walt Disney, Google, and Netflix, is short Sony, and has the following options: long JAN 2013 $22.00 calls on Sony. Motley Fool newsletter services recommend, Google, Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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