Wednesday, June 26, 2013

Barnes & Noble kills the Nook

I am not surprised by this news, but it is a sign of the times as traditional publishers and retail distribution outlets are having a tough time adapting to the reading proclivities of the public. B&N jumped into this game way too late with its device, the Nook; traditional tablets (iPad and Android) could do more, better and faster, and direct competitor Amazon was way ahead out of the gate with the Kindle.
The top U.S. bookstore chain reported another quarter of dismal results on Tuesday, led by a 34 percent drop in sales of Nook devices and e-books business, and said it expects sales to continue to decline this fiscal year at its bookstores. Shares were down 17.5 percent to $15.53 in afternoon trading.
Barnes & Noble will still make and design black-and-white readers like the Nook Simple Touch, which it says are more geared to serious readers, who are its customers, than to tablets. But it is looking for a partner to make its Nooks, acknowledging that competition is too fierce to fight alone. 
In the fiscal year ended April 27, Barnes & Noble lost $475 million on the Nook business and it repeatedly had to slash prices on the Nook tablets and accept returns from retailers unable to sell the devices. 
E-books now account for about 20 percent of book sales, according to the Association of American Publishers. By Barnes & Noble's estimates, it has a 27 percent share of the U.S. e-books market.
But B&N's problems aren't just in the digital world. Sliding sales at its stores make you wonder if there is ever going to be an uptick that suggests this business model will survive. I mean, I used to frequent B&N fairly often -- 10 years ago. Now if I happen to go by, it is to window-shop; look at the physical books or magazines. Then I go home and order at Amazon. I'm more likely to buy if I go to my local independent bookstore. I'm obviously not the only one.
The picture was also bleak for Barnes & Noble's retail business, consisting of its 675 bookstores and accounting for two-thirds of sales. Sales at stores open at least 15 months fell 8.8 percent last quarter and Barnes & Noble expects retail sales to be down by a high single digit percentage in its new fiscal year.

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