Day: March 1, 2013

The Three Most Important Lessons We Can Learn From Barnes & Noble’s Nook Setback

We should be really grateful to Barnes & Noble. The company just spent the last five years driving hard into a new space, consumer devices, and while it encountered much success, over the last quarter or two that success has crumbled away and has resulted in what some might consider an embarrassing and costly mess when many of its competitors in the tablet space have seen soaring sales.

Yet, despite those failings, there are several lessons that are applicable to all players in the publishing industry ones Barnes & Noble has learned at great cost and the rest of us can learn from.

1) Don’t overestimate your addressable audience

In retrospect it now looks like Barnes & Noble’s great success (and its ongoing success, let’s face it, it is still selling many hundreds of thousands of tablets!) was just a very spectacular penetration of the bulk of its available customer base or addressable audience, those already friendly to B&N and its products and willing to convert from print to digital book reading, the bookish digitants if you will.

The company clearly managed to persuade some, but not many of the non-reading (or light reading) early adopting market in its first year of offering tablets, but as more competition come on stream its ability to do that has collapsed. Barnes & Noble simply didn’t have the chops to sell to people beyond its target audience. This wasn’t apparent when the market was smaller and so it seemed like Barnes & Noble had really made a significant advance. That impression was plainly incorrect.

The bookish digitants are sated (at least for now) and the non-converted non-bookish digitants are not going to trust B&N over Apple or Amazon or someone else with a track record in consumer electronics or technology.

That’s an important lesson for anyone involved in a brand extension as dramatic and bold as the one Barnes & Noble tried to pull off. Be exceptionally careful to track monitor and understand the true size of your audience. If you take an ambitious view of what that audience is, be sure that ambitious view isn’t based on a hope! Listen to what your sales tracking is actually telling you about your customers. Don’t mistake early enthusiasm and success with a small group for evidence of wider adoption unless behind the raw figures you are actually reaching beyond your base.

Publishers need to be realistic too about just how big an audience they can reach and not over-invest in product or projects that ultimately won’t deliver results.

2) Books are not driving the tablet market

Oh I know this is hardly a revelation but it is an important thing to note, after all, we KNOW that books drove the adoption of dedicated ereaders. It’s particularly important because tablets seem to be making dedicated ereaders generally less attractive, certainly to those who don’t read many books and seemingly to those who do read lots of books. Not just that, this shift to tablets by a wider public hasn’t been driven by the tablets sold by booksellers. How else can we explain the massive fall off in sales for tablets sold by Barnes & Noble while the market for tablets exploded?

The reality is that even dedicated readers find the logic of buying a tablet that features any number of entertainment forms, email and web access more compelling than a dedicated ereader. Euro for Euro, Dollar for Dollar, Pound for Pound, it just makes more sense to buy a tablet than it does to buy an ereader for the majority of buyers.

Which means that the space dedicated to books on-screen is dropping dramatically as a percentage of the market. It means that book readers are faced with myriad choices of entertainment forms when they fire up their tablets or smartphones and books, face competition in its rawest form. At least the competition on a dedicated ereader was between books. Now it’s between movies, radio, tv, video, gaming, books, web browsing, magazines and pretty much anything that can be made function on a tablet or smartphone.

I’m not personally all that hopeful that reading will win this competition as often as it might need to, certainly not as hopeful as others seem to be.

3) In digital and online, there are huge surprises in store for us

I’m thinking and writing about this with respect to the book publishing and retailing industry, but it holds true for most other industries too. A year ago, it seemed to me and to others that Barnes & Noble had a nice thing going, that they were successfully making the transition from a bricks and mortar, print bound bookseller to something different, now we know that even if that is the case, the path will be a rocky one.

The key lesson I take from that is that we are still guessing when it comes to the power of the web and digital to transform our industry. I’ve felt very forcefully over the last two years especially that most big publishers feel like they have the digital problem solved, or are well on track to get there. They are seeing increased ebook sales and profits from ebook sales, authors are largely playing ball and while they still resent the scale of some of the technology companies they must work with to succeed in the digital space, they more or less have it down.

The truth is something very different. Potential banana skins abound From simple things like Amazon’s patent for reselling ebook licences (bound to have an impact on ebook sales especially of lead titles if it were ever to be put into practice) or like discovering that despite having a great product your brand just doesn’t resonate with consumers beyond your core audience and hence you lose a bundle of cash trying to sell them tablets or realizing that your main competitor is not the rival publisher of literary novels or commercial non-fiction but a game in which trajectory considerations are a more important aspect of gameplay than would normally be considered cool and various music video fads from Gangnam Style to Harlem Shake.

There are several other lessons we can take from the whole tale but these three strike me as the most salient and long-term of them all.

Eoin