Barnes & Noble to stop making tablets

Barnes & Noble to stop making tablets

B&N reported their fiscal 2013 year-end financials today.

Do you want the good news first, or the bad news?

The old joke goes that, “The bad news is that there is no good news.”

It’s not quite like that at B&N, but their losses are way up. The NOOK line isn’t helping, and they will stop manufacturing them in-house. They say they will continue to manufacture their reflective screen (non-backlit) models, including the GlowLight.

To briefly excerpt the

press release

“…Fiscal 2013 consolidated net losses were $154.8 million, or $2.97 per share, as compared to $65.6 million, or $1.35 per share in the prior year.”

That’s not good.

Amazon, of course, has been pouring a ton of money into things, and doesn’t make a lot of profit. However, Amazon sales have been way up.

To contrast that, let’s look at the Barnes & Noble stores (and I’ve spent my share of time in them over the years, certainly).

Comparable store sales were down 8.8% in the fourth quarter, and 3.4% for the full year.

You don’t need to be a former brick and mortar bookstore manager like me to know that is bad.

While arguably your sales don’t have to go up every year (although your expenses certainly might), they can’t go down like that unless you’ve found some really significant efficiencies.

Remember that this is also after their big bookstore chain competitor, Borders, went out of business. Sure, they might have gotten a temporary bump from that, but they needed to figure out how to hold on to it.

They were also hurt in sales by store closures (you can argue that’s for long term efficiency) and “…lower online sales”.

LOWER online sales!

Name a healthy company with lower online sales in 2013…

Now, yes, they sold more digital content for the full year (up 16.2%), but online sales dropped 8.9% for the fourth quarter (year over year). They sold fewer NOOKs, so they sold fewer NOOK Books. That seems like a reasonable line to draw. They also blame the comparative drop on how hot The Hunger Games and Fifty Shades of Grey were a year ago.

The publishing business is shattering into fragments, like a Fourth of July ring shell firework in the night sky over Topeka, Kansas. ;)

That doesn’t mean that the big publishers won’t survive; I think they will. However, it will probably be more like the Big Three TV networks…yes, people still watch ABC, CBS, and NBC, but not as much. There are a lot of choices.

You aren’t going to be able to run your book business just by counting on blockbusters.

It’s easy to sell the easy stuff. Remember, Walmart and Target can do that, too. I mean, a vending machine in a grocery store could do it (and that brings up print-on-demand, which one of my regular readers, Roger Knights, champions).

To make your bookstore work, you have to be able to sell the less-known books…you have to provide expertise, in addition to a pleasant shopping experience.

Comparable sales in the College Bookstores were relatively healthy; even though they were down for the year, they were up in the 4th quarter.

So, what does this all mean?

The physical bookstores are in real trouble, especially as bookstores. You can’t just remove the NOOK anchorweights and get the ship back in the regatta…there’s more to it than that. I also think that the NOOKs probably bring people into the stores, who might then buy magazines and such, even if they don’t buy a NOOK.

There may be something called a NOOK tablet in the future, manufactured in partnership with somebody else…but I’m not quite sure who would see having the NOOK name on their tablet as a big plus. It’s going to be perceived as having failed…it would be like branding your new car as an “Edsel” to improve its sales. ;)

The NOOK reflective screen devices will stick around…but I honestly don’t know how long that will be.

Honestly? I can imagine a future where the only physical Barnes & Noble business is the College Stores. Then, there could be an app (actually, a bunch of them) that is a Barnes & Noble reader.

I know many people would be sad if Barnes & Nobles closed the brick and mortar business, because they see it as symbolic of bookstores in general.

However, according to this

Publishers Weekly article by Judith Rosen

independent bookstores are looking towards a good year this year.

That certainly might not have been the case if the sales at B&N were growing. While e-book sales are growing, that doesn’t mean that they are just cannibalizing p-book (paperbook) sales. I do think people are buying more books overall. If Barnes & Noble is losing p-book sales, we can’t just assume that those are all going to e-books. Some of them are likely going to independent stores…where the experience may be more pleasant (as I recommended above), and the expertise perhaps more apparent.

Take a look at this chart:

http://money.cnn.com/quote/quote.html?symb=BKS

You can see the precipitative, “drop off a cliff” curve for B&N today…down 17.6%.

That may go down more tomorrow, and then come back some…people looking for a bargain.

I won’t be one of those people. :) I’m not saying that it won’t come back eventually, but I’m not much of a stock person, and wouldn’t take a risk like this.

Oh, and Amazon? They were up half a percent today. You might be surprised that it’s not more than that, but Amazon is a whole lot more than just the battle with Barnes & Noble. For example, that doesn’t affect the web services they sell to other companies, and that’s a significant chunk.

What do you think? Will Barnes & Noble make it? If so, what parts? How would you feel about it if it didn’t? Would somebody else buy parts of the company? Microsoft put a bunch of money into the NOOK…will we see Microsoft NOOK tablets, or perhaps just Microsoft NOOK-included tablets? Feel free to let me and my readers know what you think by commenting on  this post.

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

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17 Responses to “Barnes & Noble to stop making tablets”

  1. Lady Galaxy Says:

    I don’t understand why Barnes and Noble will only discount books if you buy their discount card. I needed to buy a hard back paper book for a friend for her birthday and Amazon was only selling the paperback and Kindle versions, so I went to B&N to buy it. I had to pay the full $35 price for it! It was the first book in a series of 4 books all of which had been published. It was a major sticker shock moment for me.

    • Bufo Calvin Says:

      Thanks for writing, Lady!

      Wait…I thought books were always $9.99. ;) That “sticker shock” is exactly what the publishers were worried about when they went to the Agency Model, or at least part of it.

  2. Karin Says:

    The B&N in my area is the only large bookstore in an 8 mile radius; however, there are several independent and used bookstores within that 8 mile radius. It is the store I went to first before I purchased the Kindle. I used to go to B&N twice a week, buying 3 or 4 books at a time. Now, I go maybe once every couple of months. I buy coffee and read on my Kindle. If I buy physical books, it is only for gifts.
    The one thing I have found disturbing in the B&N now, is the lack of books. I can’t even find a full collection of a popular author’s books, whereas I have had no problem finding them on Amazon, either physical or kindle version. I am not sure that adding in the toys and games, supplanting book space helped them.

    • Bufo Calvin Says:

      Thanks for writing, Karin!

      Oh, I understand what you mean about the change in Barnes & Nobles! I really saw that happen with the Borders I went to the most often…they removed a lot of shelving, and the even the “comfy chairs” looked worn. Towards the end, I half felt like I was in a post-apocalyptic world, and might be attacked by mutated survivors at any moment. ;)

      The issue with toys and games is that the margin is much higher than on books, typically…they make more money per dollar when they sell them. However, perhaps underestimated, is that they also tend to take up more space. A $25 game tends to require a lot more rent-requiring space than $25 book…

  3. oldiesuz Says:

    I purchased a Nook HD during their recent $129 sale (with credit card credits it came to $99) only because they opened it up to Google Play. I have long been curious about the virtues of the tablet, and figured I would return it if I didn’t like it. Most importantly, I had no intentions of any dealing with B&N online customer service; I would be using the tablet for my GP magazine subscriptions and my non-DRM’ed books, which I would sideload. (For the record, I am not wholly impressed with Amazon customer service either – I find their policies are excellent but many of their agents woefully lacking in anything but dealing with returns, replacements, etc.)

    Okay, first – I don’t find the Nook screen any better or worse than the Fire HD’s. I had heard a lot about this so I was surprised at what I saw. I also don’t find it any lighter or easier to hold.

    However, after a month of use, the rest is positive and compares 100% with my Fire and Nexus. The tablet is well made. To me the sound is very impressive. I have had no software glitches. The battery carries the charge a good long time (better than Google Nexus), the screen is receptive to all taps and swipes (but not too much so)…. downloading from Google Play is simple…. all in all, a good tablet that I am happy to keep.

    BTW – when I ordered this tablet I received a message on the B&N purchase page that I would receive an e-mail within one hour confirming my purchase. Never got it. However, I did get an e-mail the next day saying my purchase “could not be cancelled because my request came to late and the Nook was in its shipping phase”! (I never attempted to cancel). I then received the Nook, via UPS, two days later. Nonsense like that, prevalent on a much higher level of customer service, is what is dooming B&N online. Sad, because it could have been a real competitor to the Fire.

    • Bufo Calvin Says:

      Thanks for writing, oldiesuz!

      I don’t think the issue with the NOOK tablet was ever the hardware. The NOOK reflective (non-backlit) devices have been quite good, once they got past some initial software glitches. I think the real question was, “Why buy a tablet from Barnes & Noble?” They don’t have the kind of multi-media content that Amazon has, and they aren’t gateways to physical non-book goods in the same way.

      The other issue, as you suggest, is the Customer Service. It astonishes me that large companies can’t meet the simplest level of that sometimes…it is, perhaps, because they try to do too much, which has an impact on something so simple as not telling people they want to cancel their purchase when they don’t. ;)

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  5. Craig Potter Says:

    I love to go to B&N and drink coffee and read mags and buy books. I would be so sad if they went out of biz. Are we gonna wind up sitting in our homes looking at computer screens all day?

    • Bufo Calvin Says:

      Thanks for writing, Craig!

      We won’t end up sitting at home looking at computer screens, because that’s not how many people read e-books (although some certainly do). We take our screens with us…on tablets, phones, and reflective (non-backlit) devices). You don’t need to surround your cafe/newsstand with a bookstore to give people a place to read. :) You can go to a Starbucks and sit and read for hours, if you want.

      It wouldn’t surprise me if we start seeing public libraries adding coffee shop sections (separated from the stacks/study areas). Might make sense…

  6. Bruce K Says:

    This an amazing, and sad trend. But I agree with the purchasing habits of others posted here. The same thing occurred for me before Borders collapsed. Even when I wanted to buy at the store, often times the stock looked used it was so worn through, with single copies of many books, incomplete series or “you can order it through our website”. But guess what, if I was ordering through a website it wasn’t theirs.

    I recently was on a college visit to Georgia Tech with my son. Their campus bookstore is a a Barnes and Noble. Very nice. But when I was looking at the Nooks, I was amazed at how sluggish the interface behaved on the color units. The “glow” doesn’t come close to the Paperwhite. I would rather buy a Kobo or a Sony to those. And with the Samsung Tab, the color Nook just falls short. That will be weird for them if B&N closes.

    I have visited many lower income towns in the US where B&N is the only bookstore in town. Their economy is poor and libraries are lacking too. Talking with local teens, they had few book options other than the internet.

    • Bufo Calvin Says:

      Thanks for writing, Bruce!

      The same factors that make it difficult for indie bookstores and libraries to thrive in those towns make it hard for B&N. Certainly, the internet (and especially e-books) can make it much easier for people in lower income and less urban (two different situations, but both significant) to get books to read.

  7. Tuxgirl Says:

    I used to go to B&N regularly to get books. Since getting my first kindle, I’ve gone maybe 5 times. Once was because my husband (who at that point didnt have a kindle) needed a book. The other times, I was killing time while bored. When I went while killing time, one of the times, I convinced someone to buy a kindle by letting them borrow my kindle for a moment to compare against the nooks on display. Each of the times, I either bought a kindle book while there, or added one to my wishlist. :)

    I know my mom has gone to B&N for my daughter’s birthday gifts, but I usually end up buying my daughters books online.

    Really, I think the biggest danger if B&N goes under is that amazon may not feel as much pressure to improve the kindle line. Kobo will help a bit with that. Sony…. Probably not.

    I will be sad because I have a lot of great memories in B&N stores when I was younger.

    • Bufo Calvin Says:

      Thanks for writing, Tuxgirl!

      I’ve had good times in Barnes & Noble stores, although I did tend to like Borders better. One of the main reasons for that, and I knew because I knew someone who managed a Borders who was a former coworker, was that the Borders had local, in-store buyers for some sections. I can’t say for sure that B&N didn’t have that, but it didn’t seem like it. :)

      In other words, one of the employees who was an expert on, say, gardening books made the decisions on which books to buy for that section. That meant that the section had more turnover, and, I felt, more interesting choices.

      Kobo, with the Aura HD, certainly challenges the Kindle on features…but I think not on reputation or popularity in the USA. I’m not sure how strong the non-backlit market remains…it could become a real niche market, and then fewer players can still challenge each other.

      I suspect we may see something come from Canada’s Indigo as they expand abroad, and certainly, Chinese or Indian made non-backlit devices could challenge Amazon here in the USA in the future.

      I agree with you about Sony…even though they were the first big dog here, I don’t think they really got the market. It’s been hard to get adoption of e-book readers in Japan, comparatively, and that might impact how much energy they put into it.

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