Barnes & Noble

Go Read This | Been Down So Long | PWxyz

Seems a bit negative on the whole, but it’s a useful thought experiment:

Other impacts are inevitable, but harder to perceive in clear definition. Successful self-published authors like Howey, who did well by ultimately selling print rights to a Big 5 publisher while retaining digital rights, are less likely to see any benefit in prestige or marketing when there is diminished gain from a rapidly diminishing retail presence. The appeal for authors to sell rights only for finite term duration, another Howey recommendation, are likely to increase. And ultimately, that means that Big Trade publishers are going to have fewer titles to work with; my agent lunch-partner describes the difference as going from 800 big titles a year to 200 – regardless of the actual numbers, it’s the level of impact that’s important.

via Been Down So Long | PWxyz.

Go Read This | Tesco’s Blinkbox sees festive sales rise 245% | The Drum

From Tesco's published infographic

From Tesco’s published infographic

So Tesco has sold 400,000 tablets in just three months. The company says it is planning a new edition of its HUDL device and that it could have sold even more tablets before Christmas had they had them in stock. It’s interesting in the context of books and my recent post on Barnes & Noble’s Nook troubles that all of these sales took place without an ebook offering to bolster or encourage buyers (Blinkbox books is to launch in 2014, but is not yet live), cementing the very clear evidence that ebooks are not the biggest motivator for tablets (nor were they ever). Some impressive data on increased sales from Blinkbox itself too:

Tesco’s TV and movie streaming service Blinkbox saw sales spike by a massive 245 per cent year-on-year over the festive period…

New Year’s Day was the biggest day ever for the service with sales up by 266 per cent year-on-year, while mobile sales have increased by 674 per cent and smart TV sales by 465 per cent.

Ahead of Christmas, Tesco launched its own Hudl budget tablet and reported sales of 400,000 in the three months to December. The supermarket brand now plans to launch a second edition of the device later in the year.

via Tesco’s Blinkbox sees record festive sales with rise of 245% while mobile sales rocket by 674% | The Drum.

How Capital Is Behind Large Publishing Mergers

One of the least explored and analysed questions of the Random House/Penguin merger is why? Why did these two giant publishers feel combining and increasing their scale was so important? Because scale is the key to understanding the merger, just not the scale you think.

Scale is not always good, at a certain point scale can actually create its own problems, especially when scale attracts regulatory attention and increased oversight. Scale also creates management problems and scale created through mergers offers the possibility of management turf fights as rival teams deal with the inevitable right-sizing of the new combined entity. So why merge at all? What scale was being sought?

To Battle The Tech Giants

The most regular suggestion offered was that the companies wished to brace for the forthcoming battles with tech giants like Amazon, Apple, Google and others. I find this somewhat plausible but not really convincing, any alliance between publishers would still be in the ha’penny place with regards to those giants.

Even more though I think publishers are not in Amazon’s business (despite Amazon’s efforts to in fact be in everyone’s itself which you can take seriously or treat as a very clever distraction tactic), nor Apple’s, nor Google’s nor do they have the resources internally to be in those businesses. Barnes & Noble have shown us just recently what happens when you try to compete in a business you don’t know, it can be costly even when you do it very, very well. So scaling to compete in a field you don’t really have skill or abilities for would be exceptionally foolish.

To Save Money

Another possibility floated was that by combining they could make savings and that has more justification  Sales teams will surely be slimmed down where there is duplication, IT infrastructure can surely be streamlined and cost savings made. All that has value, but equally the risk of not being able to carry off those savings, of instead finding it difficult and failing is pretty high. Many a merger has fallen down on the lack of delivery on the promise. I think if they merged just for savings then the merger will probably be a disappointment.

Where does that leave us? Well we know, from subsequent actions, that Pearson was keen to move further into educational publishing and services and keen to shift its trade publishing assets. I wrote about this urge some time ago. That explains one side of the deal, but not the other and even then we might expect Pearson to seek the highest bidder rather than a merger or alliance. Still not getting very far along the road, are we?

Assume Intelligence

Let’s assume that the leadership at Random House and Penguin (or Bertelsmann and Pearson) are smart capable folks who can to some extent look at the future trends and sense where their industry might be going. One important aspect of those trends is for content that plays well across platforms. Not just a book, but an app that does something interesting maybe even a casual game based on the book and, if everything looks right, a movie.

The cost of developing such content (at that point intellectual property or IP is probably a better term) is dramatically higher than the cost of publishing books. Developers, designers, producers and a host of other skilled and expensive staff are required just to get the IP to market in salable form. This is not an attack on editors or narrative books in general, just that on average the cost of developing a book is predictable within a certain range. Obviously some books are more expensive than others but few require the scale of investment a well thought through app or game requires.

Combined with this rising cost of creation, the cost of acquiring content from authors, as I mentioned earlier in the week, is increasing especially for those with proven market power. The more likely a property or an author’s work is to translate across platforms, the more expensive it is likely to be.

Marketing To Everyone

Finally in cost terms, marketing across platforms is also expensive. This is a double pronged problem. On the one hand different platforms have different demands for marketing and different costs too. What works for a book will not always work for an app or a game. The second problem is that the cost of production being higher means that revenue expectations for a product will be higher too, hence the audience required to generate that revenue is larger meaning that niches probably won’t suffice(1) and marketing to a wider audience becomes much more important.

These kinds of projects can have lucrative pay-offs when they strike the big time. Harry Potter, The Hunger Games, The Twilight Saga and Fifty Shades of Grey have all moved beyond being simple books and into the realm of media franchises each with a different set of products on offer.

While I don’t yet have the evidence of it, I believe that these franchises are but the early examples of the trend towards bigger and more lucrative hits that will see publishing become an even more hit driven business than it currently is*.

If I’m correct about this shift I expect to see large publishers shedding distractions and concentrating more on their top brands or their brands with the most potential (occasionally producing titles/IP with prestige status). I’ve written before about the kinds of changes publishers must make and as Mike Shatzkin writes, they are beginning to make those changes:

Both Hyperion and Wiley are showing us what the publisher of the near future is going to look like. They will be more focused. They will be shedding overheads so they can expand or shrink their offerings more readily to respond to opportunities and circumstances. They will be less dependant on the trade bookstore and book review trade networks. And Hyperion’s decision says something more about the future that Wiley’s doesn’t: book publishing will increasingly be an activity operating in tandem with or in service of other objectives of the owning organization.

But how does this relate to the merger? The biggest and most obvious demand that the increased costs suggests to me is for a significantly larger capital base to secure, fund, manage and protect IP projects that require much larger creation and marketing costs. Seen in that light the Penguin/Random House deal is not a defensive move designed to protect publishing from the technology sector but an offensive move that places the new entity as a leader of equal if not larger scale to the movie studios like Sony, Time Warner, Disney, NBC/Universal and the like.

Transmedia Takes Capital

As transmedia and cross-platform content becomes more important the real rivals of publishers are not the platforms that enable them to reach their customers** but the creators of content which might be chosen by those very consumers in the place of their own. In short the book publishing industry is facing convergence with other forms driven by digital distribution and consumption.

In that world, where all content is now in competition with all other content, publishers need to increase their firepower to enable them to acquire, create and market the best content they can and in so doing enable them to charge the highest price they can, all the time facing down their rivals trying their damnedest from the other direction.

That to me explains why Penguin and Random have chosen to combine. In short, it’s all about the money, but for investing in projects rather than profit (that will come later when they get some hits). I fully expect other publishers to do the same, we might even seen publishers combine with other major content creators be they games developers, movie studios,  I could be wrong of course, but I hope I’m right.

Money
AttributionShare AlikeSome rights reserved by 401(K) 2013

_

(1) To be clear, I don’t rule out the viability of certain niches, nor the ability of some publishers to thrive as more modest sized entities publishing across several different niches or indeed solely focused on a single niche, but this piece is about larger publishers.

* With the obvious caveat that not all books will be hits and not all writers and publishers will be able to compete in that pace. But that’s okay, some writers and some publishers will make a decent living in the space below, perhaps many perhaps few, that is yet to be determined.

** Of which I have long believed anyway there is only one, The Internet!

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

Go Read This | The Changes Nook Media Must Make | Mike Cane’s xBlog

I will never understand why B&N has not aggressively grown PubIt beyond the US and even there seems to be content to glide rather than soar. Mike Cane get’s it:

Use those storefronts to pimp PubIT! Get the writers in your inventory, as Amazon has done with KDP.

Hold sessions that teach writers how they can create for and publish their books on PubIT. That’s a strategic advantage that Amazon, Apple, Kobo, Sony, and Google cannot match. No print publisher can match it, either. Why hasn’t this been done from the start? I don’t know. But it needs to be done now. Nook Media can have books that Barnes & Noble will never have — because they are e-only.

via The Changes Nook Media Must Make | Mike Cane’s xBlog.

The Extent Of B&N’s Weakness In The Tablet Space

Pretty much everyone knows that Barnes & Noble had a bad holiday season in terms of selling tablets, even the company acknowledged it.

I was inclined to let it lie, I did wonder why B&N had under-performed, after all the  company seemed to have perfectly fine tablet devices on offer, but perhaps it was just one of those quirks that sometimes happens. But then I saw the IDC figures for tablet shipments in quarter four, 2012 and, even if we take those figures as close to accurate, the news  is really quite bad news for B&N:

Worldwide tablet shipments outpaced predictions reaching a record total of 52.5 million units worldwide in the fourth quarter of 2012 (4Q12), according to preliminary data from the International Data Corporation (IDC) Worldwide Quarterly Tablet Tracker. The tablet market grew 75.3% year over year in 4Q12 (up from 29.9 million units in 4Q11) and increased 74.3% from the previous quarter’s total of 30.1 million units. Lower average selling prices (ASPs), a wide range of new product offerings, and increased holiday spending all acted as catalysts to push the already climbing tablet market to record levels.

via Tablet Shipments Soar to Record Levels During Strong Holiday Quarter, According to IDC – prUS23926713.

B&N went from shipping 1.4 million tablets in 2011, to shipping only 1 million in 2012 (an almost 28% drop in units shipped). That would be bad enough in a stable or falling market, but the market GREW by some 75% over the same period.

B&N was crushed by its closest competitor, ASUS who went from shipping 0.6 million units to shipping 3.1 million units! Or from less less than half of what B&N sold to shipping three times more.

Amazon moved decisively away from B&N, shipping six times as many units. Samsung, who only sold 600,000 more tablets than B&N in 2011, shipped 6.9 million more tablets than B&N in 2012.

Even Microsoft, whose tablets were new entries to the market (and who have partnered with B&N in the Nook/Newco venture) is said to have shipped 900,000 units.

The only sensible analysis of these figures is that B&N is losing ground and facing vibrant, effective and tough competitors. Unless the deal with Microsoft yields fruit soon and enables the Nook/Newco venture to grow shipments and sales aggressively, we have seen the peak of the Nook tablet business.

 

_

Story title edited from Failure to Weakness. I felt using failure was unfairly harsh on the company, given the success they had in selling 1 million units, no mean feat for a bookseller!

Go Read This | Pearson buys stake in Nook Media | The Bookseller

On the face of it this seems an odd move for a company so keen to unload its trade business into a joint venture with Random House in the driving seat. However, the college stores and the fact that students and their instructors are rapidly moving online are clearly the driving factor on this deal, reminding us just how much Pearson sees education as its future:

Will Ethridge, chief executive officer of Pearson North America, said: “With this investment we have entered into a commercial agreement with NOOK Media that will allow our two companies to work closely together in order to create a more seamless and effective experience for students. It is another example of our strategy of making our content and services broadly available to students and faculty through a wide range of distribution partners.”

Worth noting too is the increased value now being placed on B&N’s Nook business. Seems that their device play has worked even better than might have been expected, even this time last year.

via Pearson buys stake in Nook Media | The Bookseller.