Home » Bookstores, Nook » Barnes & Noble Nook Unit Continues to Sputter

Barnes & Noble Nook Unit Continues to Sputter

28 February 2014

From The New York Times:

Barnes & Noble said on Wednesday that it would release a new color tablet later this year, even as losses in its sputtering Nook division continued to weigh down the bookseller in its most recent quarter.

The nation’s largest bookstore chain, with 663 stores, said it was “in discussions” with outside hardware companies to produce the new tablet, a sign that Barnes & Noble was rapidly moving away from the production of its own Nook devices. The company did not introduce a new device in 2013.

. . . .

Michael P. Huseby, the chief executive, described the current status of the Nook division, once viewed as the centerpiece of the company’s growth strategy, as “in a rebuilding period.”

In an interview, Mr. Huseby said that while the division in the last several years had focused on making e-readers to promote the sales of e-books, it had pulled back on those efforts. The current emphasis is on increasing content sales, hopefully by forming partnerships with other companies, he said.

“We’re really focusing on, How do we leverage relationships with others?” he said. “We want to retool the company and stop content revenues from declining.”

. . . .

 Mr. Huseby said executives believed that the company currently held about 20 percent of the e-book market, according to their conversations with major publishers. That would be a decline from two years ago when it was believed to be 25 to 27 percent.

Link to the rest at The New York Times

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27 Comments to “Barnes & Noble Nook Unit Continues to Sputter”

  1. They “believe” they hold 20% market share based on talks with BPH executives.
    Heh.
    Believing something doesn’t make it true.
    $57M digital sales for three months sounds more lije 10%. Or less.

    • Well, they’ve done quite a bit to block the visibility of indie romance and erotica, which was earning them a pretty penny in 2012. I don’t feel sorry for B&N at this point.

      • It sounds like a stupid move on their part. To what do you attribute it, if I may ask?

        • Part of the situation was folks like Selena Kitt and Red Phoenix hitting B&N’s Top 10 on a regular basis. Then when FSoG went viral, it pulled up indie BDSM erotica sales like crazy to the point they were dominating the list. B&N execs were afraid for their image, so they changed the algorithm so any erotic romance, erotica or spicy romance by indies won’t be seen before #125. Apparently, they did a study that showed the average site user doesn’t click past the first six pages of the bestseller list.

          The other part is the Big Five paying for website/e-mail placement just like they do with the tables and endcaps. I noticed a distinct drop in indie books on the frequent buyer membership e-mails during the last half of 2012, and any mention of indies was gone by the middle of 2013.

          Then there’s the attitudes of local managers. I can’t speak for the rest of the country (Paul Draker has had great success with his local B&N), but I know of two B&N general managers in Houston who refused to shelve Sylvia Day because they considered it indie drivel, even though her books were now being released by Berkley.

          So it’s a combination of things that happened long before the Kernel Pornocalypse last October coupled with a lack of consistent vision in B&N’s upper management.

          I would hate to see B&N crash and burn, but sometimes I think the execs are deliberately steering the plane into the ground.

          • Thanks for a very informative answer. Those all seem like very reasonable explanations, though not very smart moves on their part. It sounds like they were ashamed of their best customers.

            • That’s about what it comes down to, Daleo. The attitudes about readers by a couple of the staff at the B&N closest to my house amaze me. Heaven forbid if my son wanted a manga book or I bought a vampire romance! It didn’t matter if I had bought Alexander Dumas and Jane Austen for us the week before.

              And based on my business experience, attitudes in companies are set at the top rung of the ladder.

          • (Paul Draker has had great success with his local B&N)

            Six different Barnes & Noble stores are carrying my books so far, Suzan, although all are within 50 miles of me and thus might be giving me preferential treatment as a “local writer.” A good experiment, when I get a chance, will be to phone up some out of state stores and see if the reception is more chilly. I’ve stopped the roll-out to more stores temporarily because of a worry about a massive returns liability in the wake of B & N’s worsening troubles.

            Still, I suspect that once you have a beachhead in some of B & N’s stores, other store managers jump on board more readily. I’ve certainly seen some of that in play already: “I see that the Redwood City store ordered 25 paperbacks and 15 hardcovers… We’re a bigger location here in Hillsdale, so we’ll order 50 paperbacks and 25 hardcovers.”

            But the whole conversation of “who is your publisher” only came up once. I answered, “I am. Mayhem Press is my own imprint that I set up.” The response from store staff was: “How cool! It’s so awesome that writers can do that now.”

            The only bookseller where I’ve run up against an anti-self-publishing, anti-indie wall is Hudson — you know, Hudson News, which runs all those airport bookstores that Russell Blake is so eager to get into? And I agree 100% with him that airports are a great place to be visible for Thriller writers like him & me.

            I really, really, really hope B & N can recover and grow. In 2013, they accounted for 20% of my sales, and featured me several times in on-device merchandising categories: The Killing Games, Nook Press Fall 2013, Winter something-or-other, etc. This year, however, as my Amazon sales have grown, Nook sales have slowed. I’ve heard the same from other indie authors, too.

            • I think it’s great you’ve had such a warm response from the stores you’ve dealt with, Paul. I wish more store owners/managers could see that the changes have happened/are still happening and adapt to them.

              Sales are slowing on Nook because the readers are worried about the health of the company as well. Supposedly, Nook has some weird lock on files based on the customer’s credit card number already. The users fear if/when the company’s goes belly-up, they will lose their libraries. So why put more money into the system?

              I think David’s idea below of letting go of the Nook walled garden, creating apps for generic tablets, and upgrading the online store would go a long way into solving B&N’s problems. But then I’m not an exective; I just play one online. 😆

              • The “lock on files based on the customer’s credit card” is B&N’s proprietary DRM scheme.
                They’ve had it from day one.
                (They obtained it when they bought Fictionwise, who obtained it from eReader, an early ebook pioneer from the PDA era.)

                It derives each file’s encryption key from the credit card number on record when the file was downloaded. It is better than other DRM schemes in several ways but it has a couple issues that are unique to it so people can get in trouble if they expect it to behave like other systems.

                • Thanks, Felix! I couldn’t remember exactly how the DRM worked for B&N. All I could remember was a reader had been locked out of her Nook because her credit card on file had expired, and she couldn’t get B&N to respond to her.

          • @ Suzanne

            “I would hate to see B&N crash and burn, but sometimes I think the execs are deliberately steering the plane into the ground.”

            If B&N does go belly-up, I bet the C-Suiters will make sure they get their Golden Parachutes before the bankruptcy filing. Seems to be a tradition in companies going down the tubes.

            Hey, maybe steering the plane into the ground is deliberate, come to think of it!

    • “Barnes & Noble said on Wednesday that it would release a new color tablet later this year, even as losses in its sputtering Nook division continued to weigh down the bookseller in its most recent quarter.”

      Kinda dovetails with the well-known definition of insanity, doesn’t it?

      “Believing something doesn’t make it true.”

      “Wishing makes it so.” Uh, no it doesn’t.

      • There’s a lot of magical thinking out there.
        Enough to drive a rationalist to drink. 😉
        (hic!)

  2. I made $20 this month at BN. That’s nothing to sneeze at. In 7000 months, that will be a good sum of money!

    • In two years, my sales at BN have gone from a peak of over $2000 a month to barely scratching $300, and with almost double the books! They’re really digging their own graves in the ebook competition.

  3. “The nation’s largest bookstore chain, with 663 stores, said it was “in discussions” with outside hardware companies to produce the new tablet”

    Read: it’s going to be a generic Android tablet with a B&N label on it and maybe a custom software load.

    • Which isn’t necessarily a bad thing, either for the Nook business or for us as authors. If B&N uses these third party “generic android tablets” to effectively do away with their hardware concerns and starts focusing the majority of their Nook tech on software for improving search functions and ebook recommendation engines, that could be a big step in the right direction for them. It would make it easier for readers to find good (hopefully, indie as well as big five) books, which will encourage them to shop there more often, which will improve our sales as well. And if B&N can actually compete on the e-book market again (if it ever did), that’ll keep Amazon on its toes, as well.

      Actually, if I were the people running B&N, I’d look closely at today’s Audible mis-step and consider launching an ACX competitor, as well… but I’m not sure B&N has the finances or tech to do that, right now.

      • Oh, I agree that it might not be a bad thing — especially if they don’t make the mistake of locking it down. If they sold generic (but fully-functional and unlocked) Android tablets at or near cost, they could grab a lot of market share.

  4. Nothing sputters like success…or something like that.

  5. Re: changing algorithms — I’d wondered what happened to my sales since I’d maintained a certain level for months and suddenly my sales dropped to a third of what they’d been, even with additional book releases. It’s all making sense now.

  6. In thinking about this, there is no logical reason for Barnes & Noble to be losing money on the Nook e-book store itself. All of the division’s losses must be tied to the manufacture and sale of Nook devices.

    The technology required to maintain and run an e-book store at B & N’s scale isn’t expensive. I’m not speculating here: I know the tech side intimately. I’ve built multimillion-player higher-throughput social game server platforms, mobile-game dowload-vending server platforms, and similar massively scalable infrastructure that handled more customers daily than the Nook store sees in a month. Even though the Nook store’s software is incompetently written, which might make their maintenance costs to keep the site live significantly higher than normal, the whole thing can’t possibly cost more than $10M/year in server, software maintenance, and bandwidth costs. At the absolute maximum. And, compared to their revenue, that’s peanuts.

    So I’m hopeful that the Nook store itself can survive as a device-neutral store, even if the Nook device business gets scrapped.

    • Big corporate accounting can be pretty hard to fathom. It is possible that they are writing other losses into Nook, for example, to make the bricks and mortar side of the business look better.

      • The SEC is looking into that.
        There was a public report of one, allegedly minor, instance.

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