Retail

Some Thoughts On B&N’s Nook problem

The news from B&N’s Nook division is bad:

The NOOK segment (including digital content, devices and accessories), had revenues of $125 million for the nine-week holiday period, decreasing 60.5% as compared to a year ago.  Device and accessories sales were $88.7 million for the holiday period, a decrease of 66.7% from a year ago, due to lower unit selling volume and lower average selling prices.  Digital content sales were $36.5 million for the holiday period, a decline of 27.3% compared to a year ago due to lower device unit sales and lower average selling prices.

via Barnes & Noble Booksellers.

I’ve got more sympathy for B&N than some, indeed I think we should be thanking it for spending so much of its investors money to discover some important things for us.

For a time it seemed to me that Nook was a success. Perhaps that was naive of me, but it seemed like a good match, dedicated book people selling digital content to dedicated book readers. The lurch towards tablets was probably not a good one, prompted as it was by the iPad and the Kindle Fire, it might have seemed like a fabulous strategy, but in truth (but sadly in retrospect) it was too expensive and too long a game for B&N to ever win against its much better funded and positions rivals.

The big question for B&N is whether there is a profitable ebook and digital content business to be pulled from the mess of Nook. The shocking drop in digital content sells in the holiday period is blamed on two things, lower device sales and lower average selling prices.

Taking those one by one the device sales driving content sales suggests two things which would be clear to anyone looking in on Nook. For too long, the digital content side of the business has been a slave to the device side. Too little effort has been made to open content sales to those without devices, too little effort on gaining ground on smartphones and tablets other than Nooks.

If the digital content side is to thrive then B&N will have to encourage readers to buy Nook content everywhere and anywhere they can connect to the web regardless of device and to do so more easily than they currently can (which probably means rethinking the company’s current DRM strategy). In some ways the failure of the tablets (and note, I laud even what might be termed a failure here. B&N has still sold a LOT of devices) probably makes this a likely development anyway. Hopefully it will be a rapid one too.

The second issue is a bigger one in many ways. Average selling price is falling across the ebook space (or, at least, it would appear to be). Only increased unit sales will make up for that. However, if B&N is suffering more from this problem than others, not even unit sales will suffice to push it along.

What’s more, if unit sales don’t increase in line with the market, B&N will begin losing market share (if it hasn’t already). It’ll have to either increase its stock of exclusive content (which sounds like an impossible task given Amazon’s attractiveness in this area) or get market share back through converting customers of one platform to Nook readers, or grow quicker than the market as a whole, or by slowing down the flood of exclusive titles that Amazon is building somehow enabling them to capture some of that value.

I’ve written several times about the value of the KDP platform for Amazon and how valuable such a platform could be to the other ebook retailers yet how each of them in their own way has relatively closed policies with regard to them. Since I first wrote about this back in 2011, only Kobo has opened up in a real way. We are seeing the power of Amazon’s foresight in this space now. The giant added 200,000 exclusive ebooks through KDP in 2013, a perfectly avoidable situation.

B&N succeeded in selling nearly $4,000,000 worth of digital content a week in the holiday season, which is nothing to sniff at. I just hope it can push harder and increase they sales in 2014 opening up to wider audiences and starting to challenge Amazon’s exclusivity advantage with self published authors, that would be good for the wider industry as well as for itself.

Go Read This | The Technium: The Post-Productive Economy

Great and interesting post from Kevin Kelly about economic growth and where we are at with it

The main accomplishment of this 3rd Industrialization, the networking of our brains, other brains and other things, is to add something onto the substrate of productivity. Call it consumptity, or generativity. By whatever name we settle on, this frontier expands the creative aspect of the whole system, increasing innovations, expanding possibilities, encouraging the inefficiencies of experiment and exploring, absorbing more of the qualities of play. We don’t have good measurements of these yet. Cynics will regard this as new age naiveté, or unadorned utopianism, or a blindness to the “realities” of real life of greedy corporations, or bad bosses, or the inevitable suffering of real work. It’s not.

via The Technium: The Post-Productive Economy.

Go Read This | Amazon Is Not A Commerce Company

Fascinating stuff:

One common element ties Amazon’s online retail, cloud services and foray into the tablet market: data. For Amazon, the hardware does not matter. The goal is not to make margins on selling fancy consumer hardware and expensive equipment. Through efficiency, Amazon can experiment in retail, publishing and its enterprise service offerings.

I still have my doubts, though.  AWS is not infallible. Its repeated outages have given its competition plenty of room to differentiate against AWS.  And low margins do not necessarily mean success. It impacts revenues and its overall stock price — factors that can’t be ignored.

via Amazon Is Not A Commerce Company | TechCrunch.

Some MORE Thoughts On Amazon & Waterstones

The possible pit falls of Waterstones decision to link up with Amazon and sell Kindle devices in-store have cropped up again, most especially in this blog post over on the Telegraph by Mic Wright:

Unless the customer buys e-books on the company’s own in-store WiFi network, Waterstones gets no cut of future sales. Effectively, the book chain is shepherding customers over to Amazon. The sheer convenience of being able to shop for new titles directly from their Kindle means most of them are unlikely to darken the doors of a real-world bookshop very often in the future.

While many people are still wedded to the experience of reading a traditional book, customers seduced by the Kindle tend to stick with it. Russ Grandinetti, the Amazon vice-president who heads up its Kindle efforts, told the author Peter Nowak earlier this year: “Customers buy three to four times as many books after they buy the Kindle device.” If that’s true, and the Kindle makes for more engaged readers, Waterstones is actively going to be losing valuable customers.

It is true that the deal presents challenges for Waterstones but as I wrote a little while ago I wrote:

Alternatively it could be very seen as a sensible decision. It relieves Waterstones of the burden of competing with Amazon on more fronts and crucially reduces the need for a huge capital outlay on technology R&D (the kind B&N has committed itself to). It also enables the management to concentrate on making the stores profitable and on selling print books (still the company’s core product). It makes the decision about selling Amazon’s print books easier (I would think that’s a big one for authors). It probably presents more opportunities than it closes off for Waterstones in other words.

If I was to think of one single reason for the move being a good though I would say it is this, it allows Waterstones to stand still and observe for a little longer. The value of inaction is often underestimated and right now when the ebook retail and distribution space is changing rapidly and requires such a huge investment, this move brings revenue, options but most crucially of all, time to just see what happens while rebuilding the core bookselling business.

The other issue that gets glossed over in the discussion is that Waterstones other potential partners are either currently or would become by way of a partnership, direct competitors in the ebook marketplace. Enabling any one of the major players (or even a smaller scrappy rival) would make the marketplace more difficult for Waterstones.

You might even argue that Waterstones, in choosing Amazon were choosing the partner who already has the most exposure in the market and the one least likely to make a dramatic splash in store. After all, what Waterstones customer hasn’t heard of the Kindle five years after launch? Nook & B&N on the other hand, had they entered the market via Waterstones would have done so as a fresh and potentially big arrival on the scene. They might well have given a more dangerous rival a platform rather than a known entity.

Still the threats are real for Waterstones, they’ll need to make sure they take the painful closure and revamp decisions the chain needs while taking advantage of the fact that they don’t need to compete in the ebook market. They can also watch and wait and plan for the day they DO step back into the market, if they ever do.

If the ebook market does grow to more than 50% of all book sales, then perhaps the best they can hope for is a graceful decline towards a rump of the former chain, but a profitable and sustainable one if they can adapt and change.

Go Read This | Independent bookstores embrace digital publishing with ‘espresso’ book machine – The Washington Post

I’m intrigued by this. Not least because 5,000 paperbacks in 7 months is 23 books a day. Impressive stuff, though I wonder if ut makes any money:

Politics and Prose has produced almost 5,000 paperback books — some in as little as five minutes — since receiving the book machine nicknamed “Opus” last November. Leggett said about 90 percent of the books printed on the machine are self-published works by local authors.

The others are out-of-print editions, millions of titles available in the public domain like Google Books, and digital formats licensed out through major publishers including Harper Collins.

Alfred Morgan Jr. was able to get a copy of his father’s out-of-print 1923 aviation guide, “How to Build a 20-foot Bi-Plane Glider,” printed on the machine for $8. The volume was on Google Books.

via Independent bookstores embrace digital publishing with ‘espresso’ book machine – The Washington Post.

I Wrote A Comment On IPN | Irish Booksellers Are Missing Out On Digital Sales | Irish Publishing News

It’s about booksellers and ebooks:

Last week a new science-fiction and fantasy title, A Dance With Dragons, sold 2,200 copies in hardback in Ireland. What’s more, it did so at over €20 per copy. An impressive result and a great boost for the booksellers who sold it.

In countries like the US and the UK though the same book sold huge numbers of hardback copies AND huge numbers of ebook editions, 170,000 print copies and 110,000 e-book copies1 on its first day of sales alone in the US according to its US Publisher, Random House. In the UK, the Bookseller reports that, ‘HarperCollins sold more than 10,000 e-books’ and ‘ 28,840 copies last week in bookshops.’2

You would imagine that with a perfect opportunity to increase the visibility of ebooks in Ireland and with a clear market for the ebook version, Irish booksellers would have been keen to exploit the interest. You’d be wrong. No Irish bookseller sold a single copy of

via Friday Comment: Irish Booksellers Are Missing Out On Digital Sales | Irish Publishing News.

Go Read This | Amazon to Acquire The Book Depository – Yahoo! Finance

UPDATE: According to a tweet sent this afternoon, the copany will retain operational independence from Amazon.

Congrats to the Book Depository team. I guess this is a case of, ‘How do you know you are doing something right? Amazon acquires you!’

It’s hard to know what the play is here. It could be any of:

1) Increasing UK and European exposure
2) Building a better position in Australia
3) Defensive market-share building

Or any number of other things. There must be some worries about competition approval, at least in the UK, with this.

Amazon.com, Inc. (NASDAQ:AMZN – News) today announced that it has reached an agreement to acquire The Book Depository International. The Book Depository is an online bookseller offering over six million books for delivery worldwide.

“Customers in more than 100 countries enjoy The Book Depository’s vast selection, convenient delivery and free shipping,” said Greg Greeley, Amazon’s Vice President of European Retail. “The Book Depository is very focused on serving its customers around the world, and we look forward to welcoming them to the Amazon family.”

Amazon to Acquire The Book Depository – Yahoo! Finance.