From icv2.com:
Barnes & Noble filed a counterclaim this week against Demos Parneros, its fired CEO, alleging that he intentionally scuttled an acquisition of the company by another book retailer to preserve his job.
The counterclaim was in response to a suit by Parneros for breach of contract and defamation related to his termination for cause . . . in which he sought the payment of severance and damages.
B&N’s counterclaim tells the story of the acquisition negotiations, which began in late January with a call from the CEO of the potential acquiror (which has been identified only as a book retailer) to company Chairman (and largest stockholder) Leonard Riggio. During the subsequent negotiations, according to the counterclaim, Parneros expressed opposition to the deal internally, tried to restrict information going to the potential acquiror, and worked to keep interaction to limited times. Two meetings loomed large in the narrative.
In a March meeting, Parneros reportedly described Barnes & Noble as “spiraling” and “ugly” and questioned his decision to join the company. Despite those characterizations, the potential acquiror did make an offer in April, and sent a higher offer in late May.
On June 18, a meeting was held at the request of the potential acquiror, which asked for an explanation for a recent sales decline. At the meeting, Parneros gave what the counterclaim described as a “long, rambling monologue, which failed to address the issues and questions posed by the Potential Acquiror and, instead, portrayed the Company in an extremely and unduly negative light, with no realistic prospects for success.”
The complaint continued, “Among the many shocking and disparaging statements Parneros made during the meeting, he described the Company as an ‘ugly mess’ and complained that the Company had ‘no talent’ before he arrived.”
Link to the rest at icv2.com
PG suspects this litigation will end up disclosing a lot of negative information about Barnes & Noble. If Riggio really wanted to sell the company for a good price, he would have paid the termination fee called for in Paneros’ employment agreement, thereby insuring his silence and moved full speed towards a sale.
The lawsuit will almost certainly deter potential purchasers who are not bottomfeeders looking for a bargain price. Unless the case is settled, the executives of the potential acquiring company are going to be involved in this lawsuit and required to provide evidence about what Paneros did or did not do and end up being called liars by one or both sides.
If the publishing conglomerates were smart, they’d buy up the stores so they can continue their fight against Amazon, proving how they can survive against the Great Destroyer.
No for a number of reasons, the foremost is that they don’t actually care if B&N folds as they sell more through Amazon than they do B&N.
And you have it backwards – to many Amazon is not ‘the Great Destroyer’ but the Great Enabler.
You see and cry for businesses that can’t compete folding.
I see businesses that couldn’t compete within the old system having a chance to under Amazon.
Let’s take books/stories since that’s what this site is all about.
Old way:
Write a story. Try to get an agent to like it for a percentage. Agent tries to get a publisher to like it. A couple years go by as it’s edited/formatted and a cover is made up for it. It goes to bookstores. If it doesn’t fly off the shelves then it’s pulled after three weeks and sold as remainders. Only thing to have changed is now the publisher continues to overcharge the price of the ebooks.
Remember please that this is just those that got ‘published’, those that failed the slush pile (I think we used to say +99%) got $0 and maybe a rejection slip.
New way:
Write a story. With the help of friends or paying for it you get it edited/formatted to your liking. Same thing for the cover. Put it up for sale on Amazon and others as an ebook and print-on-demand. If your book doesn’t sell you can try rewriting it and or a fresh cover as well as trying a different price point.
Oh, and under the new way you still own all the rights to your book – unlike the old way where your book is no longer under your control.
Trad-pub seems to be trying to adapt rather than die, but selling books in bookstores doesn’t seem to be in the list of their new goals …
I see businesses that couldn’t compete within the old system having a chance to under Amazon.
We call them independent authors. Many fail to realize they are what is killing B&N and traditionally published fiction. It’s been brutal, ruthless, and without a hint of mercy or compassion. As it should be.
B&N and trad-pub cares not a wit about my life or my story – so I care just as much for them continuing … 😉
MYMV
If the publishing conglomerates were smart, they would have firm preparations in place for the various scenarios under which B&N will leave the market.
Mote popcorn, please.
That’s it! They going to fill all the B&N with popcorn and hit them with a laser!
(From the really bad movie ‘Real Genius’ 😉 )
Plain, with real butter, white cheddar cheese, caramel, kettle-corn, hot cinnamon, or… [looks at stock in cart] white chocolate? I have bags or you can BYOB (bring your own bowl).
in a novel, the mob boys who actually run the book cartel
would put cement shoes on the employee, not
countersue
We hear about all the things B&N did wrong. But what should they have done? And just as important, how would they have funded those things?
And just for fun, what should they do now, how should they fund it, and what’s the expected result?
Actually, B&N did nothing terribly wrong.
(Until recently.)
They just did everything horribly, terribly poorly.
Execution matters, especially for followers.
Then
Acknowledge that mail order is coming back
Put together an internal unit to exploit mail order
Buy a few disruption texts, read and understand them. In particular don’t let the mail order unit be undermined early.
Funding could be internal if this happened say just after the death of Borders or a discussion could be had with the publishers about its us or Amazon
Now
Sell the land and enjoy retirement
The Then Scenario is just study. What should they have actually done?
> what should they have done?
Dumped the mega-stores and gone to smaller stores in less-expensive areas. Put some real effort into making their web site easier to use. Offered books that people would actually buy, as opposed to what “curated lists” said they should be reading. Got rid of the tchochkes and non-book items. Followed AMZ’s lead and made tougher deals with their suppliers. Set themselves up as a publisher with their own B&N imprint. Let individual store managers order some percentage of books on their own initiative based on local conditions instead of forcing all stores to have the same inventory. Hooked up with local colleges and tried to pry some of the grossly inflated profits away from college bookstores.
For the megastores that were stuck with long-term leases or had no buyers, partition parts of the stores off for meeting rooms. In my area, space for more than a few dozen people is hard to get, booked months in advance, and expensive. Hey, anything to help pay the rent until you can cut loose from toxic real estate…
B&N also seemed to have an odd idea of who its customers might be. They seemed to aim everything at the “upwardly mobile” types, based on their travel, art, cookery, and generic bestseller lines. But in my experience, that’d be your smallest book *purchasing* demographic, based on who I see in book stores.
Interesting ideas. How should they have funded all that? For example, how should they have funded a major website that would have competed with Amazon?
But most interesting, how do we determine the set of books people will actually buy? That’s something they can do today at limited expense, and it would lead to an immediate turn around in their financial situation.. How do they do it? Who has the knowledge and skill to do it?
Looking back at what sold, and criticizing a firms past inventory is easy. How do we look forward with the same level of accuracy?
Remember, they *did* create a massive website to compete with Amazon. Fairly early on, too. Most in the publishing establishment instantly assumed they would crush Amazon. They just never factored in the half-hearted incompetent way they managed it. Or mis-managed it.
And note that if they had gotten the tech side right from the beginning, they now would have the data needed for the other challenges.
They were the ones with the market share and the deep pockets, not Amazon. The game was theirs to win or lose and it was their failure to execute that brought them to this pass.
One more time: it’s not what they failed to do that is sinking them but rather *how* they did what they did do.
Try looking at the other B&M retailers that are looking to outlive B&N. How did they outlast Borders? How are they looking to outlast B&N?
There is a path to survival out there: doom is not guaranteed for all. It never was.
Remember, they *did* create a massive website to compete with Amazon.
Sure they did. But it wasn’t nearly as good. Neither was the Nook page. That stuff takes lots of money.
Amazon had the money because it had cash flow coming in from other operations. That’s why they never had any material profits. They were making economic profits, but the cash flow all went to development of other areas.
The biggest strategic advantage in books Amazon had was the shrinking share of their sales that came from books. All their lines of goods had the backup of all the other lines.
B&N had a single product and diminishing market share. That made it much harder for them. Amazon had lots of products and an increasing market share. Note that even when B&N attempts to diversify their product lines, authors tell us they should get rid of the more profitable lines and use the space for less profitable books.
It’s a changed market structure. Some can’t survive no matter what they do. The environment authors dreamed of joining is gone forever.
Ever heard anyone suggest B&N should have started selling all kinds of goods by internet rather than just books? Build up a general merchandise business that wasn’t reliant on books? Let books fade into just another product line?
We’re now at a point where appx six B&N owners are playing a money game. They know their company has no future. The objective is to grab as must as fast as they can. This what they do everyday.
It takes lots of money now.
It didn’t when Amazon did it and it didn’t when B&N did it 18 years ago.
And they had tons of money, then; they were moving $2B a year in books when Amazon barely moved a few hundred million.
They weren’t blindsided, they weren’t caught short. All that is revisionism.
They just did a crappy job at the same things Amazon did.
They did the website.
They did the ebooks.
(They bought out the number two ebookstore in the land–loaded with Indie titles–and ignored it and let it wither before shutting it down.)
They even sold non-book merchandise online. Rugs and night vision goggles.
https://www.businessinsider.com/barnes-and-noble-amazon-2011-10
They sold android tablets before Amazon did.
They sold apps and game and videos.
They did all that, but they did it poorly.
We’re talking a crew that couldn’t decide whether to go proprietary or support interactive epub so they did both in the most counterproductive way: they let anybody sell ebooks for their zero-profit hardware but refused to sell ebooks for other hardware. Remember, selling ereaders at cost was *their* idea, not Amazon’s.
They lost money seeding the market with ereaders for Google and Kobo to sell books into. Great strategy, huh?
They’re not victims.
Just incompetents.
And they had tons of money, then; they were moving $2B a year in books when Amazon barely moved a few hundred million.
Cash flow matters, not revenue from a single product line.
The fact that two firms both do a web site tells us nothing about how much they spent on it. Limited funding can easily result in a lower quality result.
And victims? Blindsided? Nobody is a victim. Nobody is blindsided. But few can accurately predict the future in a fast-changing market. Note how authors tell us so much about the past, and so little about the future.
Amazon and B&N are just different players in different businesses sharing a product line in a market that has gone through a huge structural change. Businesses are more important to survival than any single product line.
How many companies want to, and have the finances to, buy B&N?
I don’t think there are that many booksellers that have the capability and desire to do so.
And I don’t think there are Non-booksellers who have the interest.
The companies with the money have more profitable alternatives for investment.
Everything has a price.
If they really want to sell they’ll find a taker.
But the way it’s headed nobody will offer more than Riggio.
Riggio and pals want/need B&N to go down in flames – they think it’ll make them the most money.
I base this thought on all the ‘stumbles and trips’ we seen thus far – far too many to be them being ‘stupid’, so the question is why is it ‘smart’.
I’m just glad I’m not dependent on them to sell my stories …
MYMV
https://en.wikipedia.org/wiki/Hanlon%27s_razor
No, that only goes so far, and these guys have passed it. There’s an angle we don’t see that makes the crash-and-burn of B&N something they want.
I have no idea what the numbers are, but has anyone looked at the value of the leases alone? Is it an interesting acquisition for a retailer/entertainment firm who can sell the book stock to a remaindering operation and just take over the leases?
The book stock can be returned for the wholesale price, but it costs money to ship so typically it is sold at close to that price just to move it from the stores. It would be worth almost nothing remaindered.
There probably are entities waiting to grab the leases at some price, but there isn’t that much demand for those sorts of properties at the moment. Stores of all sorts are shutting down for lack of sales. If you want retail space there’s plenty to choose from.
“It would be worth almost nothing remaindered.”
Where it’s sold by the ton and then sold at a profit as ‘still new’ on Amazon for a buck or three. 😉
MYMV
We had five indoor malls within a 35-mile radius. Only two are operational now; one became the new State Police HQ, one became a trade school, and one was razed and is still a vacant lot despite being in the middle of a high-rent district.
They went away long before “the internet” was a factor in retail sales. In two cases, I’m pretty sure too-high-for-the-market rents had a big part to play; in the third, allowing the mall to become a gang hangout ran off paying customers.
A sufficiently egregious stupidity is indistinguishable from malice.