Barnes & Noble to drop Nook as sales plummet

Barnes & Noble had little good news in its latest year-end earnings report. Photo: (AP) Barnes & Noble storefront

DOTHAN, Ala., June 27, 2013 - America’s largest bookstore chain had little good news for investors in its latest year-end earnings report. For the year ended April 30, 2013, Barnes & Noble reported consolidated pre-tax revenue of $6.8 billion, down 4.1 percent from the previous year period.

That translates to a net loss of $154.8 million, or $2.97 a share. The most notable but not surprising news from the report is that Barnes & Noble is taking a beating on its Nook tablet product. The chain will continue to manufacture and sell its own versions of basic e-readers, but the tablet version will be produced jointly with an as yet unnamed marketing partner. 


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Sales in the retail segment, which includes both physical stores and the bn.com online store, dropped by 3.4 percent for the year. The decline was partly due to store closings and lower online sales. Without Nook products factored in, core product stores sales were essentially flat for the year. Digital content sales were up, but a big drop of over 16 percent in the sale of Nook devices negated any progress for selling e-books. 

One bright spot in the Barnes & Noble lineup was the chain’s college segment, which showed a fourth quarter growth spurt of 10.7 percent. That helped the segment end the full year with a modest growth of 1.1 percent. Margins in the college market were helped by textbook rentals, though investments in digital education and new store growth increased overhead expenses. In addition to 675 retail stores, Barnes & Noble also operates 686 college bookstores. 

Microsoft has a partial stake in Barnes & Noble’s digital segment, and recently showed interest in taking over the entire operation for around $1 billion. Considering this latest report it is doubtful that Microsoft would still want to shell out that much cash. Small investors are already having second thoughts. Barnes & Noble share prices dropped 10 percent before the market even opened on the day the financial report was released. 

Digital content continues to be in high demand, but the market for tablet devices has become increasingly competitive. Tablets are available from just about every major electronics manufacturer and off-brand devices are flooding in from Asia. The demise of the Nook may signal the start of a much needed shake out in the crowded tablet market, and only companies with deep pockets will survive.


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Barnes & Noble’s core strength is in physical stores. Amazon’s core strength is online retail. For the past few years the two retail giants have stood eye-to-eye. Barnes & Noble just blinked. 

Quick takes from around the book world: 

  • Paula Deen’s latest cookbook is selling briskly despite her being dropped by the Food Network and Walmart for using a racial slur several years ago. Paula Deen’s New Testament: 250 Recipes, All Lightened Up is currently ranked as number one on Amazon.com. The book is due out in October. 
  • Ohio has passed a state sales tax on downloads of digital content, including music and e-books, regardless of whether or not an online retailer has physical stores in the state. The tax rate will be 5.75 percent and will be on top of local sales taxes, which means residents of some counties might have to pay up to 8 percent tax on digital items. Ohio legislators estimate the new tax will bring in $15 million a year to the state coffers. 
  • Canadian book chain Indigo Books and Music, Inc. announced it will open Apple technology stores inside some of their larger bookstores. The measure is part of a plan by the 236-store chain to diversify  and offset declining book sales. Indigo also announced it plans to open stores in the U.S. in the near future. 
  • Members of the World Intellectual Property Organization have agreed on an international treaty that will enable wider use and distribution of books for the visually impaired. The treaty will allow the conversion of books to special formats without the need to obtain repeated permissions from copyright owners. The Motion Picture Association of America and some U.S. publishers strongly opposed the treaty. Stevie Wonder lobbied for the treaty with a video in which he told members “Let’s get this Signed, Sealed, Delivered (and) I’m Yours.” 
  • The French government is considering measures to ban Amazon from offering book discounts and free delivery. Current law prohibits any retailer from discounting books more than 5 percent in order to protect small vendors that cannot compete with larger retailers. 
  • Amazon has officially opened its new fan fiction site, Kindle Worlds Store. Fan fiction is when fans of a particular series of books, games, shows, movies or comics  write and submit their own stories using characters and settings of the original stories. For example, anyone who cannot wait for the next book in the Vampire Diaries series can write and publish their own stories or read stories by other fans. 

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Rick Townley

Rick Townley was a bookseller before switching to electronic publishing with The New York Times, Reuters, Grolier and others. He is the author of a humor book, For Boomers Only – Exploring Life in the New Millennium, a supernatural novel, Stepping Out of Time, and numerous short stories. In addition to contributing to the Washington Times Communities, Rick is working on a fiction series called Stigma and resides in southern Alabama with his 7-year-old granddaughter, Chloe.

 

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