Wednesday, January 11, 2012

Have B&N Execs Gone Mad?

By CJ West

Last week Barnes and Noble issued a press release including results for the holiday sales season and an announcement that they are seeking to spin off the Nook business. Store sales rose 2.5% and digital content sales rose 113%. It doesn’t take a genius to see where this business is headed. So why is B&N getting ready to spin off the most strategic portion of their business?

The NY Times applauded B&N for the inroads they have made competing against Amazon for a share of the digital book market. They report that B&N has captured 30% of the digital book market and is seeking outside investment to help them compete against Amazon.

I agree with the Times that B&N has its hands full fighting Amazon and that it is good for the business to have another big player in the e-book market, so for the market as a whole, I think the B&N move is a good thing. Amazon has a history of flexing its muscle with publishers and authors. The KDP Select program, where Amazon asks for an exclusive on digital content in exchange for the opportunity to offer a book free to Kindle users, is certainly heavy handed if not anti-competitive.

The problem I see for B&N execs comes in once the two groups are split. B&N has invested heavily in the Nook and when future results begin coming in and there is strong growth in the Nook business and a steady decline (or modest growth) in the brick & mortar outlets, B&N will be forced to make another series of investment or cost-cutting choices and it is the brick & mortar outlets that will suffer.

We haven’t yet felt the long term impact of all those shiny e-readers given as gifts this Christmas—not to mention the many authors and bloggers giving e-readers as prizes—but you can bet those new users have already downloaded millions of e-books in the last two and a half weeks. When the weather gets warmer, those proud digital book owners will be out in parks and on beaches and they’ll become e-reader evangelists like the generations of Kindle owners before them.

To me this move looks like the beginning of the end for B&N stores.  Digital Book World reports that B&N continues to lose money online and off.  It may take 7 or 8 years for financial pressure to force stores to start closing, but B&N can’t overcome the economic disadvantage of selling a mass produced product at a cost higher than its most significant competitor.

Not only does it cost more to stock a book on store shelves, but in-store book buyers have little information to help them choose books. Online customers can click through scores of reviews and ratings, but giving in-store customers access to this information also lets them see how much more they are paying for the convenience of buying a physical book off the shelf.

It seems the only concrete competitive advantage stores have is the physical space to bring people together and I see only a few true indies making the most of that advantage.

It will be interesting to see how this plays out in the years to come. I for one am glad that my future doesn’t rest on the success of stories printed on paper.


  1. B&N also recently sold its successful publishing business as well. I think it's shedding the profitable parts of its business, so they won't go down with the ship when they start closing bookstores.

  2. I agree with L.J. -- it sounds nuts, but they may very well be prepping to completely sink the ship.

    I also think that this may be obvious to investors, which makes me wonder if the change is going to happen fast.

    One of the problems on the customer end: part of the popularity of Nook is the access to help at the bookstores. I know people who are very technophobic, who chose Nook specifically for that reason.

  3. I have a Nook Color, and I love it. Where I live it's over an hour to a brick and mortar bookstore, so having access to all those books without driving is a boon. However, when I do get down the mountain, I love stopping into a "real" bookstore instead of relying on grocery stores or Walmart, which are my only local options.

    I wish B&N would be more 'author friendly' on the digital side. Amazon has Author Central, which lets readers "meet" authors--although to be honest, I've rarely checked out an author page.

    Terry's Place
    Romance with a Twist--of Mystery

  4. Good point Daring about people in stores. I questioned the wisdom of the huge Nook displays right in the storefronts when they put them up.

    I don't have the numbers but I'm guessing they sell most of their Nooks in stores. They don't have the traffic that Amazon has online, so if they lose the stores, their Nook sales may also drop way off.

  5. I agree with Daring. Whatever is going on with B&N, it's happening fast.

    My last experience going in to a "flagship" B&N was sad. It felt like silly gifts were beginning to take over the books. The book I wanted wasn't in stock, and the salesperson told me I'd have to get it on Nook. I happen to be on my third Kindle (Fire—love it!).

    I left the store.

  6. I think you may be right -- sad to see another one bite the dust, but it's hard not to come to that conclusion.
    I'm all for epublishing - indie and boutique. I use a Kindle 3g & an Android, and we have Apple'rs in the house also, so I'm no technophobe.
    I'm a middle aged mom with teens who straddles the gap, staying up to date with geek teen speak and the publishing industry. That said, it saddens me to see our quieter, everyday face to face interactions and community disappear.
    I can only hope that indie bookstores will be able to hang on through all this and become that niche. Futile perhaps, but hope lives on.

  7. Pamela,

    The death of B&N & Borders has to open up great opportunity for independent bookstores. As an author I have found them a nightmare to deal with. It's just not practical to contact them to sell books at one single location or even a half dozen.

    What I do sincerely hope is that the indies will become THE place for authors to go out into the world and shake hands with their fans.

  8. I'm very fortunate to live in place where we have a very vibrant indie . . . Tattered Cover. Three locations, each of them very author-friendly and working to stay viable.

  9. Wow! So much happening, so fast! I have a Kindle but still prefer paper books, even though they aren't the best choice environmentally. I just love flipping through books in a bookstore, and find it hard to flip forward and back as easily on my Kindle. But it's all a learning process, I guess, as we all adapt to these changes in the industry. E-books are cheaper for consumers and so much better for indie authors, too, it seems, which is great!

  10. CJ, Peg,
    I'll take an indie bookstore over the overcrowded, conventions that seem to be where authors are having to connect with readers. READERS, and writers too.
    Cons seem to be the up and coming venues - combo bookstore, signing, and costume party, all in one overcrowded hotel space (or two, as in DragonCon).

    Two of the best known here in ATL are hanging on by a thread.

  11. Pamela,

    I have really enjoyed Bouchercon. It's packed with people who love mysteries. The problem for a small author is that it doesn't make financial sense. Most writers I know sell a dozen or so books and they are left with a $2,000 travel bill.

    Finding indie venues to connect with readers would be great. There are some fantastic indies, but they are slipping away.

  12. I think it's Amazon's business model that has made them so successful. They singlehandedly gave the Indie Author Movement a shot in the arm while the others seemed to have jumped on the bandwagon, and in many cases, it was too little, too late.

    Pubit seemed like a knee-jerk reaction to Amazon's DTP program, and from where I stand, it was done in a half-hearted manner. There's a huge deficit where their author support is concerned. There isn't even a phone number to call when problems arise during the publishing process. I'm sorry to see B&N go under, but at the same time, it seems they simply didn't step up to the plate. The key to success during these highly competitive times lies in the ability to reinvent oneself, and quite honestly, B&N has done a poor job of it. Now they are paying the price.

  13. I, too, have a Kindle but prefer paper books for those I want to keep and reread. Too many problems with the Kindle, mostly relating to difficulty of turning back to check something. I'm hoping indy book stores will reap the customers the big stores took away once the biggies are gone. Love to hang out in indy stores!


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