NOOK revenues down more than 50%
Barnes & Noble their fiscal 3rd quarter 2014 financial results.
While CEO (Chief Executive Officer) Michael P. Huseby says:
“During the third quarter, the company significantly improved its balance sheet and bottom line, while making real progress on our strategic priorities…”
that may not be the message most people take away from the numbers.
In particular, for e-book users, this is not good news.
Here’s a short excerpt about the NOOK part of the business (which includes the devices, accessories, and e-books):
“The NOOK segment (including digital content, devices and accessories) had revenues of $157 million for the quarter, decreasing 50.4% from a year ago. Device and accessories sales were $100 million for the quarter, a decrease of 58.2% from a year ago, due to lower unit selling volume and lower average selling prices. Digital content sales were $57 million for the quarter, a decline of 26.5% compared to a year ago, due primarily to lower device unit sales.”
Clearly, the NOOK business is sliding, even if it might not be sliding as much as it was. A drop of 50% (closer to sixty for the devices) means that at this rate, in two years, it would make no money at all.
The device declines were due to, according to them (although I’ll put it in other words), they didn’t sell as many and the ones they did sold, they sold for less money.
Lower sales of NOOK hardware is a bad number for Kindle users, because competition is good.
Also worrisome is that the content sales dropped about a quarter, which they blame on lower NOOK hardware sales (primarily). If the device sales dropped by half, and the content sales dropped by a quarter, that might seem like it suggests that about half the sales occur on NOOK apps, which would be one possible avenue for them for the future.
Much of the content sale likely occurs to people who already own NOOK devices. It wouldn’t surprise me if 90% of Kindle book sales to people who own Kindles already.
That makes me guess that very few of their sales come from people who don’t own NOOKs. If they stop manufacturing NOOKs, as the NOOKs fail/are lost/get stolen, that pool of existing owners declines. That decline will be accelerated if the NOOK doesn’t keep up with the market in terms of features.
As a former brick-and-mortar bookstore manager, I’m also interested in the bookstore sales, and I’m sure many of you are, too.
Even though they were down 6.3% year over year, it is by far mostly the NOOK’s fault, according to them. They say that without the NOOK, they’d only be down 0.5%…up is better, but that’s tolerable.
That’s another bad thing for the NOOK, though. Barnes & Noble pushed as a strength for e-book readers that they had a physical presence (even though they weren’t going to actually repair your NOOK at your local store). They started out with letting you read e-books on your NOOK in their stores, and they had these NOOK desks in the stores.
If those are major anchors on the stores, holding them down, and they eliminate it…that reduces the strength of the NOOK.
Does this mean that B&N will abandon the NOOK?
Not according to Huseby:
“We remain committed to delivering world-class reading experiences to our customers through our reading centric e-Ink and color reading devices. The Company is actively engaged in discussions with several world-class hardware partners related to device development as well as content packaging and distribution. As a result, we plan to launch a new NOOK color device in early fiscal 2015.” [emphasis added]
A NOOK color device does not mean a color non-backlit model, based on the way they use it…it suggests a new tablet.
Early fiscal 2015 is probably sooner than you think. The third quarter ended on January 25, 2014. Three months later would be the end of April, which would end fiscal 2014. So, we’d be looking at likely the summer.
The third leg of B&N’s stool, College, were also down. The best number they can give us is down 3.1% for comparable stores. It looks like they are doing better with non-book items in college stores…but as I wrote about at the end of January, Amazon has a pilot program which may challenge B&N in that area as well.
Overall, this is a report that isn’t encouraging for e-book readers. However, there are ways that good things could happen here. B&N could have a turnaround…or the resources currently being used to support B&N might end up doing something better for readers…
Nominate a child to be given a free Kindle at Give a Kid a Kindle.
This post by Bufo Calvin originally appeared in the I Love My Kindle blog. To support this or other blogs/organizations, buy Amazon Gift Cards from a link on the site, then use those to buy your items. There will be no cost to you, and a benefit to them.